HomeMy WebLinkAbout841160.tiff RESOLUTION
RE: DENY APPLICATION OF BITTERSWEET PLACE ASSOCIATES FOR MULTI-
FAMILY HOUSING DEVELOPMENT REVENUE BONDS
WHEREAS , the Board of County Commissioners of Weld County,
Colorado, pursuant to Colorado statute and the Weld County Home
Rule Charter, is vested with the authority of administering the
affairs of Weld County, Colorado, and
WHEREAS , the Board of County Commissioners held a public
hearing on the 19th day of September, 1984 , at the hour of 10 : 30
o' clock a.m. in the Chambers of the Board for the purpose of
considering the application from Bittersweet Place Associates
for Weld County to issue $6 ,000 , 000 in Multi-Family Housing De-
velopment Revenue Bonds, and
WHEREAS , said hearing was conducted in accordance with the
1967 County and Municipality Development Revenue Bond Act, Sec-
tion 29-3-101 , et. seq. , CRS, as amended, and
WHEREAS , the Board of County Commissioners , having heard
all of the testimony and statements of those present, and having
studied the request of the applicant and all of the exhibits and
evidence presented in this matter, deemed it advisable to con-
tinue said hearing for further consideration, and
WHEREAS , on September 24 , 1984 , after further study and
review, and having been fully informed, the Board finds that
this request shall be denied.
NOW, THEREFORE , BE IT RESOLVED by the Board of County Com-
missioners of Weld County, Colorado, that the application from
Bittersweet Place Associates for Weld County to issue $6 , 000 , 000
in Multi-Family Housing Development Revenue Bonds be, and hereby
is , denied.
FTot00S
841160
Page 2
RE: DENY BONDS - BITTERSWEET PLACE ASSOCIATES
The above and foregoing Resolution was , on motion duly made
and seconded, adopted by the following vote on the 24th day of
September, A.D. , 1984 .
.{- BOARD OF COUNTY COMMISSIONERS
ATTEST: y� Qttd/b@ ELD COUNTY, COLORADO
�
Weld County lerk and Recorder �A_t-Y�a—_ (NAY)
and Clerk to the Boa Norman Carlson, Chairman
B cc i A � � . _ & \ (AYE)
D puty County Cl rk J4 /eu Z ine o son, Pro-Tem
APPROVE AS TO FORM: �� (AYE)
�� ene R
Bran ner
�5��� �� }fuck /Car (AYE)
ounty Attorney C uck�Carl3on) )
/4r, T //tuj�,9 (AYE)
n T. Martin
NOTICE
PUBLIC HEARING
MULTI-FAMILY HOUSING DEVELOPMENT REVENUE BONDS
FOR BITTERSWEET PLACE ASSOCIATES, LIMITED PARTNERSHIP
Docket 84-54
NOTICE IS HEREBY GIVEN of a hearing before the Board of County
Commissioners of Weld County, Colorado, on the 19th day of September 1984
at the hour of 10:30 A.M. in the Weld County Commissioners hearing room,
first floor, Weld County Centennial Center, 915 10th Street, Greeley,
Colorado, for the purpose of considering the application from Bittersweet
Place Associates for Weld County to issue $6,000,000 in Multi-Family
Housing Development Revenue Bonds. The proposed bond issue is to
construct a housing project between 11th and 12th Streets at 38th Avenue,
Greeley, Colorado. This procedure is in accordance with the 1967 County
and Municipality Development Revenue Bond Act, Section 29-3-101, et.
seq. , CRS 1973 as amended.
Copies of the application for Multi-Family Housing Development Revenue
Bonds are on file in the Office of the Clerk to the Board of County
Commissioners located on the 3rd floor, Weld County Centennial Center,
915 10th Street, Greeley, Colorado and may be inspected during regular
business hours.
Following the close of the public hearing, the Board of County
Commissioners will consider whether or not to proceed with the issuance
of Multi-Family Housing Development Revenue Bonds.
All interested parties under the law will be afforded an opportunity to
be heard at said hearing.
This notice given and published by order of the Board of County
Commissioners, Weld County, Colorado.
DATED: August 22, 1984
THE BOARD OF COUNTY COMMISSIONERS
BY: MARY ANN FEUERSTEIN
COUNTY CLERK AND RECORDER AND
CLERK TO THE BOARD OF COUNTY
COMMISSIONERS
BY: Tommie Antuna, Deputy
PUBLISHED: August 23, 1984 in the LaSalle Leader
/',/,/ <i/`z.
•
Affidavit of Publication .
. . NOTICE #a.
PUBLIC NEARING
r,A- OF ccLORArc. i as.
County al Weld. MULTI-FAMILY HOUSING
DEVELOPMENT REVENUE
BONDS Pelt BtTTflSWEET
Paul Massey LIMIT DPAR PLACE ASSOCIATES,
L al TNiRSHIP
said County at Weld. being duly sworn, say that Docket 04.5•
I am gabi:aner of •
NOTICE IS HEREBY GIVEN of a
La Salle Leader hearing hefortMe Beard et Can
ty
Commissioners of Well County,
•Nat the same is a weekly newspaper al general Colorado,the-hour
h the 19M Of �
YWld County COMmlulemesl�l
ehrulhOron and Fnnud and published in the ng room, first Ileor, Weld County
town of LaSalle Centennial Cater,911 tern Street,
Greeley.Colorado.ror the purpose
in said county and stale: that the notice or cOver of considering the appticatlen from
lament. of which the annexed is a true may. - Bittersweet Place Associates for
Weld County to Issue t&010.000 in
has been published in said weekly newspaper • uIWWFamgy Housing Develoment
One • Revenge Bonds. The proposed
far pnsecWtve bond MOO is to construct a housing
weeirs: that the notice was published in the project, thetwaa 11th and 12th
Streap at Nth Avenue, Greeley,
regular and entire issue of every number of said Comrade. This procedure is In
newspaper dung the paned and lime ci publi• accordanceawin the 19S County
cation at said notice and in to newspaper andlMtMh1A t,Y Development Re-
Pape venue IllOnd Acct,Section 19-3-101,et.
proper and not in a supplement thereof.: that the see.,CRS 1973 as amended.
lint publication of said notice was contained in Copies of the application for multi-
the issue of said, newspaper bearing dote. the Family Housing Development Rev-
•
enue Bends are on me In the Office
30 day et Augus t A: I9 84 of me Clerk to the Board of County
and the last pubic.-anon thereat. in lb issue at Commissioners-looted,WeldtCen on the 3rd
floor,Weill County Centennial Cen-
said newspaper bearing date, the a day of ter,915 IOM Street,Greeley,Colo-
rado and may be inspected during
August , 198-4.: that said the s regular business hours.
Following the close of the public
La. Salle Leader hearing, the Board of County
Commissioners will consider whe-
has been published continuously and unintert• Cher Or not to proceed with the
issuance of Multi-Family Housing
Sly during the period at at least fif y.wa =re Development Revenue Bonds.
eeevnw worts next prior to the first issue thereof All interested sted parties under top tow_
said notice or advertisement above ar en ggsrlumty to
referred to: and that said newspaper was at the • be affordPe be hoard at said hearing.
Ume of each of the publications of said notice. This notice given and published by
duly qualified for that purpose within the mean- order of the Bard of':.CauntY
In; of an act entitled. **An Act Concerning Legal Commissienen.Weld Caleb Cete-
Notices. Advertisements and Publications. and raa.
the Fees of Printers and Publishers thereof. and DATED: August 22. 19N
to Repeal allActs and Parts of Acts is Conflict • ' BOARDOP ._. T with the Provisions of this Act." approved April S
1921. and all amendments thereof. and particle wELDcouNT�Y . •
larty as amended by an cat approved. Marsh 3G. BY:MART ANN FEUERSTEIN
19.."3, cad an act approved May . 1931. COUNTY AND
RECORDER ANDCLERK TO
�/}y ��"J THE BOARD
TJ L'K"�.f. SY:Temmie Antune,Deputy
Of
Published in the IS Salle Leader
Subscribed/��and sworn to before me this Thursday,August 30, all
t."..y ol, C�-ale,C. A.D.p _ l9 l9." --- ---
��i. 1. .0 ) S1 n1.��5C/C
My vommustan e>pires 4 —9-6)e
Notary Public
t
APPLICATION FOR
INDUCEMENT RESOLUTION
WELD COUNTY, COLORADO
JULY 11, 1984
BITTERSWEET PLACE ASSOCIATES
LIMITED PARTNERSHIP
COVER LETTER
WHEELER REALTY COMPANY
Mr. Donald D. Warden
Inducement Resolution Application
July 10, 1984
Page Two
should enhance the local economy. Further we believe that it will be a quality
project that will achieve the desired results of the Multi—Family Housing Bond
Act.
If you have any additional questions or need additional information, please
contact me.
Sincerely,
WHEELER REALTY COMPANY
47
Gary D. Premer
Vice President Commercial
and Syndications Department
COVER LETTER
FIRST INTERSTATE BANK
First Interstate Bank
of Denver, N.A.
r First 633 Seventeenth Street
Denver, Colorado 80270
Interstate 303 293-2211
Bank
July 9, 1984
Mr. Don Warden
Finance Director
Weld County
Box C
Greeley , CO 80632
Re: Weld County Multi-Family Housing Revenue Bond Series 1984
6 ,000 ,000 (Bittersweet Place Project )
Dear Don:
Attached hereto , please find schematics regarding First
Interstate Bank' s FNMA guarantee program and the collateralized
letter of credit program. Also attached is a proposed repayment
schedule on the bonds as well as the cover pages from two
official statements on financings structured similarly to
that contemplated for the above referenced project . In
addition, an inducement resolution and notice of public
hearing pursuant to TEFRA are enclosed for your review.
The legal proceedings have been prepared by Kutak, Rock
& Buie of Omaha, Nebraska, who will render the requisite
opinions regarding tax exemption.
We have examined the financial statements of the general
partners, Wheeler Realty of Greeley, Colorado , and Security
Properties of Seattle , Washington, and their consolidated
financial position is more than adequate to meet the expenses
and debt service on the project. I might point out that
we will arrange for the county ' s bonds to be guaranteed
by third parties which would make the bondholders whole
•
in the unlikely event of default and will qualify for a -
"AAA" rating by either Standard & Poor ' s and Moody 's Investors
Service.
First Interstate Bank of Denver will purchase in a firm
underwriting all of the bonds issued in connection with
the above referenced project . This purchase is subject
to the aforementioned rating by either investor service
and the unqualified opinion of Kutak , Rock & Huie, Omaha,
Nebraska.
We would request the county obtain a Dunn & Bradstreet report
according to its procedures.
Mr. Don Warden
July 9, 1984
Page 2
Would you please be so kind as to consider the application
at your earliest convenience. We will attend any meeting,
at which this matter is considered, to answer any questions
you may have.
- We look forward to working with you on this worthwhile
project .
_ Very truly yours,
"7,41telif-dSkait'L.
Michael S. Kaminski
Public Finance Officer
Attachments
MSK/vf
First Interstate Bank
of Denver, N.A.
•
First 633 Seventeenth Street
r`7 Denver, Colorado 80270
— Interstate 303 293-2211
Bank
FNMA
MULTIFAMILY REVENUE BONDS
BY
FIRST INTERSTATE BANK OF DENVER
FNMA MULTIFAMILY BOND PROGRAM
SUMMARY
First Interstate Bank of Denver is currently working with the
Federal National Mortgage association (FNMA) to structure a
conventional uninsured, unsubsidized multifamily housing bond
program. Permanent financing will be provided by tax exempt revenue
bonds issued by local authorities and underwritten by First
Interstate Bank of Denver. The program will be less costly and
cumbersome than previous collaterized loan-to-lender programs that
have been developed, and should be attractive to developers and
lenders in comparison to- the now-ended FSLIC programs.
The key to this new program is the willingness of FNMA to provide a
Standard & Poor's "AAA" rated credit enhancement to secure the
timely payment of principal and interest on the multifamily bond
issue. In conjunction with local lenders, the program is structured
to allow selected FNMA eligible lenders to originate and service
mortgage loans that have been underwritten in accordance with FNMA
standards. Based upon FNMA' s underwriting, FNMA will issue a
commitment to acquire the loan at the completion of construction
and provide a FNMA pass-through certificate to secure the bond issue.
FNMA will not assume the construction risk. However, FNMA will
provide security for the bond issue during the construction period
in consideration for the local lender indemnifying FNMA -by providing
a letter of credit to FNMA during the construction period. In the
alternative, the bond proceeds can be escrowed loan based upon
FNMA' s commitment to purchase the loan upon completion of the
project and certain other requirements.
In consideration for accepting the liability for the mortgage loan
to the developer during the permanent period, FNMA will charge two
points at closing of the bond issue and an annual fee of 50 basis
points (3/4%) on the principal amount of the mortgage loans. In
addition, the local lender and the FNMA eligible lender/servicer
will receive a fee for both originating and servicing the mortgage
loan. The construction lender will receive a fee for originating
and/or indemnifying FNMA during the construction period.
Under this program, the bonds will be sold with a 12 year maturity.
The loans will provide a 30 year amortization with a 10 year balloon
after an initial 2 year interest only construction /rent-up period .
Depending upon market conditions at the time the bonds are sold, the
program will provide permanent financing at approximately 9 3/4% to
10%, including an estimated 9% bond rate plus 3/4% for the annual
FNMA fee and 1/8% for servicing.
FNMA MULTIFAMILY BOND PROGRAM
HOW THE PROGRAM WORKS
As part of its conventional multifamily program, FNMA has agreed to
provide credit enhancement for multifamily bond issues , the proceeds
of which will be used to fund loans for residential rental
projects . The primary purpose of FNMA' s role will be to provide
-- take out commitments for permanent loans since FNMA will not assume
construction period risk.
Upon closing of the permanent loan, FNMA will purchase the mortgage
and issue a FNMA pass through certificate to secure the bonds.
Pursuant to this pass through certificate, FNMA will guarantee
timely payment of principal and interest on the bonds, regardless
of whether corresponding payments are received on the underlying
mortgage loans (Exhibit I) .
Two options exist to fund the construction loan. First (Exhibit
II) , the bond proceeds can be escrowed, and the developer can obtain
a taxable construction loan from a conventional lender. Upon
completion of construction and rent up, the bond proceeds will be
ussd to retire the construction loan. Second (Exhibit III) , FNMA
will provide credit support for the bonds in the form of collateral
mortgages in exchanged for the local lender/servicer indemnifying
FNMA with a letter of credit for the full amount of the construction
loan. This letter of credit will stay in place until completion of
the construction period.
EXHIBIT I
FNMA MULTIFAMILY BOND PROGRAM
PERMANENT LOAN PERIOD
First Interstate
Bank of Denver
ISSUER BUYS THE BONDS
FNMA PASS-THROUGH
CERTIFICATE
TRUSTEE FNMA
BANK SECURES THE BONDS
LOAN PAYMENTS LESS
$ SERVICING FEES
LENDER/
FNMA 75 BASIS POINTS. '
SERVICER
ANNUAL FEE
$ PAYMENTS ON MORTGAGE
INCLUDING ANNUAL FEES
PROJECT
{ EXHIBIT III
FNMA MULTIFAMILY BOND PROGRAM
CONSTRUCTION PERIOD
CONSTRUCTION LOAN MADE WITH BOND PROCEEDS
First Interstate Bank impi of Denver
ISSUER
BUYS THE BONDS
•
FNMA COLLATERAL OR
OBLIGATION
TRUSTEE FNMA
BANK SECURES THE BONDS
LETTER OF CREDIT OR
PLEDGE OF LENDER
COLLATERAL
LENDER/
SERVICER FNMA 75 Basis Points ,
ANNUAL FEES
•
$ ORIGINATION
FEES
PROJECT
FNMA MULTIFAMILY BOND PROGRAM
FNMA UNDERWRITING CRITERIA
In consideration for FNMA guaranteeing the timely payment of
principal and interest on a multifamily bond issue, FNMA requires
that each loan be processed and approved by FNMA pursuant to its
normal multifamily underwriting standards. The mortgages on each
project must be first lien mortgages that would meet FNMA's
requirements, including the following:
1. Maximum Mortgage Amount
- 80% Loan to Value (as determined by FNMA)
- 110%-115% Debt Service Coverage
2. Mortgage Terms
- 12 Year Bond Term
- 2 Years Interest Only (construction period)
- 30 Year Amortization (10 year balloon)
3. Interest Rate on Loan - 9 . 757-10.0%
- Interest Rate on Bonds (approx. 9 .0%) , PLUS
- 3/4% per Year FNMA Fee
- 1/87 per Year Servicing and Bond Trustee Fees
4. Miscellaneous
- All Fees and costs of issuance must be included in
the loan or paid up front;
- Loan must be originated and serviced by a FNMA
approved seller/servicer;
- All statutory restrictions apply on FNMA ability to purchase
multifamily loans;
- Loan amount must not exceed the limits established under
Section 207 (c) (3) of the National Housing Act.
Upon completion of the construction loan, FNMA shall release any
construction security provided by the lender, acquire the loan and
issue a pass through certificate, based upon the initial FNMA
underwriting, and upon (a) satisfactory completion of construction
on the related project in accordance with approved plans and
specifications and in compliance with the terms of the FNMA
Commitment for such project; (b) issuance of a certificate of
occupancy or comparable approval for the project; and (c) if the
project shall not have achieved "sustaining occupancy" as defined in
the FNMA Commitment, delivery by the lender of a letter of credit in
an amount equal to the difference, if any, between the "floor loan
amount" stated in the FNMA Commitment and the full amount of the
mortgage loan. In addition, initial operating deficits can be
covered by a FNMA approved bank letter of credit .
REFERENCES
Mr. Kenneth A. Puller, President
Puller Mortgage Company
Indianapolis, Indiana
317-842-4800
Ms. Carol Little, President
Security Pacific Corporation
Seattle, Washington
206-623-8313
Ms . Susan Doty
BA Mortgage & Int' l Realty Corporation
San Francisco, California
415-622-8363
John Dunn, President
Investors Mortgage/Columbia Banking Federal
Denver , Colorado
303-377-3877
Mr. Richard Asp
Asp Construction
Fargo, North Dakota
701-235-4031
•
ROLE OF FIRST INTERSTATE BANK OF DENVER
First Interstate Bank of Denver will serve as the underwriter for
the issuance of FNMA Multifamily Housing Revenue Bonds . As
underwriter, First Interstate Bank of Denver will perform the
following functions :
1. Retain a nationally recognized bond counsel;
2. Meet with County and/or City Officials to explain the
project and obtain approval of the Inducement Resolution
and Issuing Resolution;
3. Obtain a bond rating;
4. Print the Official Statement;
5. Print the bonds ;
6. Select and negotiate a contract with a trustee bank;
7. Coordinate and advise on alternative investment
agreements;
8. Purchase the bonds at the market rate prevailing at the
time the bonds are sold .
Because FNMA requires that all of the fees and costs for the bonds
be included in the loan, First Interstate Bank of Denver will be
paid a fee, at closing, from the bond proceeds in consideration for
these services .
FNMA MULTIFAMILY BOND PROGRAM
ESTIMATED FEE STRUCTURE
In structuring the bond issue, FNMA will not permit non-asset bonds
to fund bond issuance expense. As a result, each loan must be
structured to include all points and costs of issuance of the
bonds. In addition to a $1, 500 non-refundable FNMA application fee,
the following are estimates of fees and expenses in a typical bond
transaction:
FNMA Commitment Fee 2.0%
Local Lender/FNMA Lender Origination Fee 1.0 - 2.0%
Construction Lender . 5 -1.0%
Bond Underwriting 2.5%
Costs of Issuance .75%
Total 6. 75 - 8.25%
Estimated Permanent Loan Rate
Assuming a 12-year "AAA" bond rate of approximately 9%, the
permanent loan rate will be approximately 9.75%, not including local
issuer fees, as follows :
Bond Rate 9.00%
FNMA Annual Fee .75%
Servicing/Trustee . 25 .
Mortgage Rate 10.00% .
UNDERWRITING PERSONNEL
•
Michael S. Kaminski , an attorney admitted to the bar in the
States of California and Colorado , has worked in public
finance, oil and gas , venture capital , and equity financing as
well .
He previously served as a public finance specialist with
Kirchner , Moore & Company . Mr . Kaminski joined the Bank after
serving as Vice President and Denver Branch Manager of Woolsey
& Company .
Mr . Kaminski holds a Bachelor of Science of Journalism Degree
from Northwestern University ' s Medill School of Journalism and
a Juris Doctor from the University of Denver College of Law ,
Denver , Colorado.
Walter C. Kane , who currently serves as Vice President, Public
Finance Group, First Interstate Bank of Denver , joined the Bank
in November of 1978 .
He began his position with the Bank after 19 years of service
in local and state government management positions . Prior to
joining the Bank he served as City Manager of Toledo, Ohio.
Mr . Kane came to Toledo from the post of Executive Director of
the Colorado Housing Finance Authority . Prior to that , he was
City Administrator of Lakewood, Colorado; City Manager of Eau
Claire, Wisconsin; City Manager of Loveland , Colorado; and
Assistant City Manager of Springfield , Missouri.
Mr . Kane holds a Master of Public Administration Degree from
the University of Kansas; a Master 's Degree in Business and a
Administration from the University of Northern Colorado;
Bachelor of Arts Degree from the University of Missouri .
First Interstate Bank
of Denver, N.A.
First 633 Seventeenth Street
£ Denver. Colorado 80270
Interstate 303 293-2211
Bank
COLLATERALIZED MULTI-FAMILY
REVENUE BOND SCHEMATIC
BOND Proceeds-3
ISSUER
HOLDER f---Debt Service
•
Loan Lean, Guarantee SURETY
Pays 7- COMPANY
Premium OLLATERA
TRUSTEE
$
Fees &
Income
COLLATERAL
PROVIDER
Loan $
{ Loan
Pays
PROJECT
LOAN
COLLATERALIZED MULTI-FAMILY REVENUE BONDS
FEE STRUCTURE
INSTITUTION AMOUNT HOW PAID
Surety Company 22 1/2 to 25 basis Annual fee, on bond
points of bond amount principal. First
year in advance at
bond closing col-
lected from Develop-
er in upfront fee -
then collected
monthly in markup.
Lender
Savings & Loan 2 - 4 points loan/ Up-front fee on loan
fee and collected from
Developer at Loan
Closing and Commit-
ment.
125 - 150 basis On loan proceeds
per annum disbursed , collected a
monthly in markup.
Trustee 5 basis points On bond amount
collected annually
in markup.
Bond Sales Costs 1. 5 - 2.0 Fee paid to bond
sales personnel,
capitalized and
payable out of
bond discount.
Underwriting/ 1.0 - 1.25 Fee payable for
Syndication costs underwriting risk,
structuring, pri-
cing and rating the
bonds, capitalized
and payable out of
the bond discount.
Costs of
Issuance 1.0 - 1.25 Printed bonds ,
rating, official
statement printing,
bond counsel, mis-
cellaneous .
cOLLATEALIZED MULTI-FAMILY REVENUE BONDS
CONSTRUCTION/PERMANENT LOAN RISK SHARING
INSTITUTION RISK COVERAGE
Surety P & I due on bonds Collateral -
- i .e. , lender PC' s, FNMA, GNMA
defaults Securities 110%
principal marked
to market monthly
Lender (S&L) Risk on con- Developer note
struction perma- secured by mort-
nent financing gage/deed of
collateral 110% trust
*' marked to market
monthly
COLLATERALIZED MULTI-FAMILY REVENUE BONDS
GENERAL TIMETABLE
General
Time
Period Event
Week 1 Issuer adopts (inducement) resolution preliminary
approval project. Developer/syndicator lender agree
on loan commitment . Resolution should be obtained
prior to commitment.
Week 2 Bond counsel distributes preliminary drafts of finan-
cial agreements .
Week 3 Lender , developer underwriter bond counsel and
other counsel hold meeting to disucss financing docu-
ments and conduct due di'l'igence investigations .
Week 4 Bond counsel distributes revised financing documents.
Underwriter submits documents to rating agency.
Week 6 Underwriters counsel mails preliminary official
statement.
Week 7 Issuer passes bond ordinance on first reading.
Parties execute bond purchase agreement.
Week 9 (If required) issuer adopts bond ordinance on
second reading.
Week 10
or 14 Closing.
COLLATERALIZED MULTI-FAMILY REVENUE BONDS
ARBITRAGE INCOME
ITEM AMOUNT HOW PAID
Interest income on Subject to market Credtodevel-
undisbursed bond pi bond and
proceeds . interest account.
Arbitrage or 25 + basis Credited to pay
"float" on Money' s points trustee, then to
held by trustee developer.
due to monthly
payments by dev-
eloper and semi-
' annual payments to
bond holders .
NOTE
The foregoing schematic, risk sharing, fee structure, arbitrage
income and general timetable are for illustrative purposes only
as each financing will be negotiated on an individual basis.
For example, a mortgage company may originate a loan in lieu of
a Savings and Loan. A mortgage be paid a fee up to
may g g
e company ma an com
1% with theS & L receiving 3% on a collaborative underwriting.
An S & L may earn more or less fee income based on the amount
of collateral required, strength of the developer and feasibi-
lity of the project. The underwriter ' s compensation and arbi-
trag
e e income are subject
to the condition of the capital
markets.
NEW ISSUE
In the opinion of Bond Counsel, rendered in reliance upon the opinion of Special Tax Counsel,
assuming compliance with certain covenants in the Land Use Restriction Agreement designed to
meet the requirements of Section 103(b)(4)(A) of the Internal Revenue Code of 1954, as amended,
and the regulations thereunder, under existing laws, regulations, rulings and decisions, interest on
the Bonds is exempt from federal income taxation as indicated and limited under the caption "TAX
EXEMPTION" herein. See the caption "TAX EXEMPTION" herein for a discussion of certain
pending legislation and other matters.
$2,445,000
CITY OF BISMARCK, NORTH DAKOTA
MULTIFAMILY HOUSING REVENUE BONDS
Series 1984A
(FNMA Pass-Through Certificate Program — Hill Park Properties, Ltd. Project)
Dated: April 1, 1984 Due: April 1, 1996
Interest on the Bonds will be payable on October 1, 1984, and thereafter semiannually on April 1
and October 1 of each year. The Bonds are issuable as fully registered bonds in the denomination of
$5,000 principal amount or any integral multiple thereof. Principal of the Bonds will be payable at the
principal corporate trust office of First Interstate Bank of Denver, N.A., as Trustee. Interest on the
Bonds will be payable by check or draft mailed to the person entitled thereto.
The Bonds are being issued by the City of Bismarck, North Dakota (the "Issuer") to provide
moneys to finance a permanent mortgage loan (the "Mortgage Loan") upon completion of construc-
tion, made to a private owner (the "Owner") for the acquisition and construction of a multifamily
rental housing project (the "Project") in the City of Bismarck, North Dakota. The Owner anticipates
that,as soon after the delivery of the Bonds as practicable,the Federal National Mortgage Association
("FNMA") will issue its commitment to purchase the Mortgage Loan (the "FNMA Commitment")
based upon the determination of FNMA that the Project meets FNMA underwriting standards.Upon
completion of construction of the Project and full compliance with the terms and conditions of the
FNMA Commitment, the Mortgage Loan will be delivered to FNMA in exchange for the issuance by
FNMA of a pass-through certificate (the "FNMA Certificate") to the Trustee and the Trustee will
disburse a portion of the Bond proceeds to provide the permanent financing of the Mortgage Loan.
Neither the FNMA Commitment nor the FNMA Certificate has been issued as of the date hereof.
Pursuant to the FNMA Certificate,FNMA will be obligated to make timely payment to the Trustee of
principal and interest on the FNMA Certificate corresponding to the payments due on the Mortgage
Loan regardless of whether such payments are received on the Mortgage Loan.
The Bonds are subject to redemption prior to maturity at the time,under the conditions and at
the prices set forth herein under the caption "THE BONDS."
The Bonds shall be solely the special obligations of the Issuer and are payable out of the income,revenues
and receipts pledged therefor by the Issuer and derived from the FNMA Certificate acquired with Bond
proceeds and from certain reserve funds.The Bonds do not constitute an obligation, either general, special or
moral,of the State of North Dakota within the meaning of any constitutional or statutory provision whatsoever.
Payment of principal and interest on the Bonds is not guaranteed by FNMA.The obligations of FNMA under
the FNMA Certificate are obligations solely of FNMA and are not backed by the full faith and credit of the
United States.
52,445,000 9.75% Term Bonds Due April 1, 1996
-- Price: 100%
The Bonds are offered when, as and if issued and received by the Underwriters, subject to the
approval of validity by Beauclair & Cook, Bond Counsel, the approval of certain matters by Kutak
Rock & Huie and Brownstein Zeidman and Schomer, Co-Counsel for the Underwriters and by Kutak
Rock&Huie,as Special Tax Counsel,and certain other conditions.It is expected that the Bonds will be
available for delivery in Denver, Colorado, on or about May 3, 1984.
F..awl ram
First Interstate Bank Boettcher& Company
Font Interstate Bank of Denver.H A. k,, ,.enf 6ar*ocs Srce 1910
won,— car ..rr,rr.r r. . rrn.rnfr. n nor o .00 ■,
In the opinion of Bond Counsel. assuming compliance with certain provisions of the Financing Documents per-
taining to Section l03(b)(4)(A) of the Internal Revenue Code, as amended(the "Code'), and the regulations thereunder.
under existing statutes, regulations, published rulings and judicial decisions, interest on the Bonds is exempt front federal
income taxation and Colorado income taxation, except that no opinion is expressed as to the exemptions front said taxes
•
of interest on any Bond for any period during which such Bond is held by a "substantial user"of any facili0'financed with
the proceeds of the Bonds or a "related person"as such terms are used in Section I03(b)(13)of the Code.
OFFICIAL STATEMENT
NEW ISSUE RATING:Standard&Poor's:"AAA"
(See"Ratings")
$4,200,000
•
Adams County, Colorado
Multi-Family Housing Revenue Bonds, Series 1984A
(Zuni Square Venture Project)
Dated:May 1, 1984 Due:May 1, 1994
Interest on the Bonds is payable May 1 and November 1 of each year,commencing November I, 1984.The Bonds
are newly issued fully registered negotiable bonds, in the denomination of$5,000 or any integral multiple thereof. The
principal of and premium, if any, on the Bonds is payable at the principal corporate trust office of First Interstate Bank
of Denver, National Association, Denver,Colorado,as Trustee, Bond Registrar and Paying Agent on the Bonds. All in-
terest on the Bonds shall be payable by check or draft mailed to the respective registered owners thereof.
The Bonds are subject to redemption prior to their stated maturities, including both special mandatory redemption
and optional redemption,at prices described herein under"Description of the Bonds—Redemption Prior to Maturity."
The Bonds are being issued for the purpose of obtaining moneys to provide financing for the acquisition and con-
struction of a residential rental project(the "Project") located within Adams County, Colorado(the "Issuer"), which is
_ intended for occupancy by low- and middle-income persons and families, .:..determined by the Issuer,and of which at
least 20%of the dwelling units will be occupied by individuals of low or moderate income within the meaning of Section
103(b)(4)(A) of the Internal Revenue Code of 1954, as amended. The Issuer, The Empire Savings, Building and Loan
Association (the"Lender"), and Zuni Square Venture, as the owner of the Project(the"User"), have entered into a fi-
nancing agreement in connection with the Bonds, dated as of May I, 1984 (the "Financing Agreement"), pursuant to
which (i) the Issuer has agreed to make, and the Lender has agreed to accept,a loan (the"Loan") from Bond proceeds,
which Loan is to be evidenced by a promissory note to be delivered by the Lender to the Issuer(the"Note"),and(ii)the
_ Lender has agreed to make, and the User has agreed to accept, a mortgage loan (the "Mortgage Loan") to provide fi-
nancing to the User for the acquisition and construction of the Project. The Mortgage Loan is to be evidenced by a
promissory note to be delivered by the User to the Lender(the"Mortgage Note").
The Lender has agreed to collateralize its obligations under the Note with certain obligations, including direct,gen-
_ eral obligations of the United States of America, mortgage loan pool participation certificates issued by the Government
National Mortgage Association and the Federal Home Loan Mortgage Corporation, and certain alternative security as
described herein(collectively,the"Eligible Collateral").
The Bonds shall never constitute a debt or indebtedness of the State of Colorado (the "State"). the Issuer or any
other political subdivision of the State within the meaning of any provision or limitation of the Constitution or statutes
of the State,and shall not give rise to any pecuniary liability of the State, the Issuer or any other political subdivision of
the State,or a charge against the general credit or taxing powers of any of them.
9.50%Term Bonds Due May I, 1994; Price 100%
(Accrued Interest to be added)
The Bonds are offered when, as and if issued by the Issuer and received by First Interstate Bank of Denver, Na-
tional Association (the "Underwriter"), subject to the approving legal opinion of Calkins, Kramer, Grimshaw &
Harring, Denver, Colorado, as Bond Counsel, and certain other conditions. It is expected that the Bonds will be
•
available for delivery in Denver,Colorado,on or about May 2, 1984.
First Interstate Bank
First Interstate Bank of Denver,N.A.
This Official Statement is dated April 26, 1984
DRAFT
KR&H
7-10-84
THE COUNTY OF WELD, COLORADO
RESOLUTION NO.
A RESOLUTION DECLARING THE INTENTION OF THE
COUNTY OF WELD, COLORADO TO ISSUE REVENUE
BONDS IN AN AMOUNT PRESENTLY ESTIMATED NOT TO
EXCEED $6,000, 000 FOR THE ACQUISITION AND
CONSTRUCTION OF A MULTIFAMILY RESIDENTIAL
FACILITY AND RELATED EQUIPMENT AND DIRECTING
THE PUBLICATION OF A NOTICE REGARDING A PUBLIC
HEARING CONCERNING THE ISSUANCE OF SUCH BONDS.
WHEREAS, the County of Weld, Colorado (the "County" ) , a
County duly organized and existing under the Constitution and
laws of the State of Colorado, is authorized and empowered by
the provisions of the County and Municipality Development
Revenue Bond Act, Title 29, Article 3, Colorado Revised
Statutes, 1973, as amended (the "Act" ) , to acquire, whether
by construction, purchase, devise, gift, lease or sublease,
or any one or more of such methods, one or more "Projects, "
as that term is defined in the Act, and to issue revenue
bonds for the purpose of paying the cost of acquiring,
rehabilitating, installing or improving a project; and
WHEREAS, Bittersweet Place Associates, a Colorado
limited partnership to be formed (the "Owner" ) , has requested
the County to issue and sell its revenue bonds pursuant to
provisions of the Act for the purpose of providing the
financing for the acquisition, construction and equipping of
a 144-unit multifamily residential facility, all constituting
a "Project, " as that term is defined in the Act (the
"Project" ) ; and
WHEREAS, the County Commissioners of the County wish to
declare their intention to authorize an issue of revenue
bonds of the County for the purpose of providing funding for
a portion of the cost of acquiring, constructing and equip-
ping the Project, when so requested by the Owner, upon such
terms and conditions as may then be agreed upon by the
County, the Owner and the purchasers of the bonds; and •
WHEREAS, before the bonds may be issued, it is necessary
to conduct a public hearing on the proposal to issue the
bonds, all as required and provided by The Federal Tax Equity
and Fiscal Responsibility Act of 1982 .
NOW, THEREFORE, be it resolved by the County Commis-
sioners of the County that it does hereby declare its inten-
tion to authorize the issuance of revenue bonds of the County
under and in accordance with the applicable statutes of the
State of Colorado, and particularly the Act, in such amount,
but not to exceed $6, 000, 000 and upon such terms and condi-
tions as may be agreed upon by the County, the Owner and the
purchasers of the bonds, for the purpose of providing funding
for all or a portion of the cost of acquiring, constructing
and equipping the Project to be located within the County on
5.65 acres on Tract E, Bittersweet North Subdivision, between
11th and 12th Streets at 38th Avenue, Greeley, Colorado, the
issuance of the bonds to be authorized by a Resolution of the
County Commissioners of the County at a meeting to be held
for such purpose upon the approval of the County Attorney;
BE IT FURTHER RESOLVED by the County Commissioners of
the County that a public hearing shall be conducted on the
proposal to issue approximately $6,000, 000 aggregate princi-
pal amount of the County' s revenue bonds pursuant to the
provisions of the Act and federal tax law, for the purpose of
funding all or a portion of the cost of acquiring, construct-
ing and equipping the Project, and all residents within the
County who appear at such hearing shall be given an opportu-
nity to express their views for or against the Project and
the proposal to issue the bonds.
The County Clerk of the County is hereby directed to
publish one time, not less than fifteen ( 15) days prior to
the date fixed for such hearing, in a legal newspaper pub-
lished and having a general circulation within the County, a
Notice of Intention to Issue Multifamily Housing Revenue
Bonds in substantially the following form attached hereto as
Exhibit A.
Passed and approved this day of ,1984.
[SEAL] COUNTY OF WELD, COLORADO
Attest:
By
By
County Clerk
-2-
EXHIBIT A
NOTICE OF INTENTION TO ISSUE
MULTIFAMILY HOUSING REVENUE BONDS
(BITTERSWEET PLACE PROJECT)
Notice is hereby given that a public hearing will be
conducted before the County Commissioners of the County of
Weld (or an authorized representative thereof) , at .m. ,
on , 1984, on the proposal to issue not more than
$6,000, 000 aggregate principal amount of the County of Weld
Multifamily Housing Revenue Bonds (Bittersweet Place Project)
(the "Bonds" ) , pursuant to the provisions of the County and
Municipality Development Revenue Bond Act, Title 29,
Article 3, Colorado Revised Statutes, 1973, as amended, for
the purpose of providing funding for all or a portion of the
. cost of the acquisition and construction of a 144-unit multi-
family residential facility located in the City of Greeley
and to be known as Bittersweet Place (the "Project") . The
Project will be owned by Bittersweet Place Associates, a
limited partnership to be formed under Colorado law (the
"Owner" ) . It is contemplated that a financing agreement will
be entered into between the County and the Owner under which
the County will provide the proceeds from the sale of the
Bonds to the Owner in return for payments from the Owner
sufficient to pay the principal of and interest and premium,
if any, on the Bonds as the same fall due.
The principal and premium, if any, of the Bonds, if
issued, and the interest thereon will be payable solely out
of the revenue derived from the Indenture and shall never
constitute an indebtedness of the County, within the meaning
of any State constitutional provision or statutory limita-
tion, and shall not constitute nor give rise to a pecuniary
liability of the County or a charge against its general •
credit or taxing powers.
The Project is located on 5 . 65 acres on Tract E,
Bittersweet North Subdivision, between 11th and 12th Streets
at 38th Avenue in Greeley, Colorado.
All residents of the County who appear at this hearing
shall be given an opportunity to express their views for or
against the Project and the proposal to issue the Bonds, and
at such hearing, or any adjournment thereof, the County
Commissioners of the County may adopt a Resolution regarding
whether or not to proceed with the issuance of the Bonds.
, COUNTY
CLERK, COUNTY OF WELD, COLORADO
_ a
JOINT VENTURE AGREEMENT
- i
BITTERSWEET PLACE DEVELOPERS
•
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT, made and entered into this 25th
day of June, 1984, by and between SECURITY PROPERTIES DEVELOPMENT.
INC. , a Washington corporation ( "SPDI" ) , and Wheeler Realty
Company, a Colorado corporation ( "Wheeler" ) . SPDI and Wheeler are
hereinafter collectively referred to as the "Parties" .
WITNESSETH
WHEREAS, Wheeler owns a parcel of real property in Greeley.
Colorado (the "Property" ) as more fully described in Exhibit A
attached hereto and made a part hereof: and
WHEREAS, it is anticipated that an apartment complex of
approximately 144 units will be developed on the Property
("Project" ) : and
WHEREAS, the Parties desire to form a joint venture for the
purpose of developing the Project, upon the terms and conditions
hereinafter set forth.
NOW. THEREFORE, for and in consideration of the premises and
the mutual undertakings and agreements of the Parties, it is
hereby agreed as follows:
1 . Formation. Duration. Name and Offices. The Parties
hereto do hereby form a joint venture (the "Venture" ) , to be known
as Bittersweet Place Developers, and to be governed and controlled
by the terms and conditions hereinafter set forth. The Venture
shall continue until 2016, unless sooner terminated or dissolved •
in accordance with this Agreement . To the extent that the rights
and liabilities of the Venturers and other matters concerning the
governance of the joint venture are not defined herein, they shall
be governed and construed in accordance with the Uniform
Partnership Act, as enacted in the state where the property is to
be located ("State" ) . The principal office of the Venture shall
be at c/o Wheeler Realty Company, 1331-8th Avenue, Greeley,
Colorado 80631, or such other place or places as the Parties may
mutually agree.
2. Purpose. The purpose of the Venture is to own, develop.
design, construct, operate and dispose of the Project, and to do
any and all things in furtherance thereof permitted by law and
deemed appropriate by the Parties . In order to accomplish such
purposes, the parties expect to become general partners of a
limited partnership ( "Partnership" ) which they will form and which
will acquire title to the Property and Project . To the extent
possible and applicable, the terms and conditions of this
Agreement will be incorporated into any limited partnership
agreement of the Partnership, and thereafter said agreement will
control as to matters covered by both said limited partnership •
agreement and this Agreement .
3 . Properties . Contemporaneously herewith, Wheeler shall
enter into a Vacant Land Contract to Buy and Sell Real Estate with
the Venture which allows the Venture to acquire any and all right.
title and interest Wheeler may have in and to the Property, which
is attached hereto as Exhibit A and incorporated herein by
reference.
4 . Joint Venture Interests . Except as otherwise expressly
provided herein, all profits and losses shall be allocated on a
daily basis as follows :
Wheeler 50%
SPDI 50%
Profits and losses for all purposes of this Agreement shall be
determined in accordance with the accounting method followed by
the Venture for Federal income tax purposes. Every item of
income, gain, loss, deduction, credit or tax preference entering
into the computation of such profit or loss or applicable to the
period during which such profit and loss was realized, shall be
considered allocated to the Parties in the same proportion as
their percentages set forth above .
5 . Responsibilities of Parties/Limitations on Authority.
The Parties shall have the following general responsibilities with
respect to their services to the Venture:
(a) SPDI shall be primarily responsible for the
formation of the Partnership and for syndication of the
limited partnership interests therein.
(b) Wheeler and SPDI shall be jointly responsible for
securing appropriate and satisfactory architectural (design
and inspection) and construction services for the Project.
Wheeler shall be primarily responsible for obtaining necessary
approvals, permits. etc . from local government . agencies and
for monitoring construction. SPDI shall take part in monthly
inspections .
(c) SPDI shall be primarily responsible for arranging
and securing mortgage financing for the Project, and
maintaining the Venture' s books and records and providing
periodic reports thereon to the Parties .
(d) Wheeler shall be primarily responsible for securing
management services for the project (which it may provide
itself) .
2
• (e) No salary, fees , commissions, overhead expenses, or
other compensation shall be paid by the Venture to any of the
Parties for any of the above services or any other services
rendered to the Venture, except as may be expressly agreed to
in writing by the Parties .
(f) Notwithstanding anything herein contained to the
contrary, the above responsibilities of the Parties to provide
their services to the Venture without compensation is not to
be construed as requiring the Parties to pay third party fees
and costs such as, but not limited to filing fees, syndication '
and brokers fees, architectural fees (unless specifically
agreed to) , permit fees, financing fees and discounts.
management fees, and accounting fees. Such fees shall be paid
by the Venture, if approved by both Parties .
(g) Notwithstanding anything herein contained to the
contrary, neither of the Parties shall enter into a binding
agreement or contract without the consent of the other , for or
with respect to the construction, management, marketing agent.
syndication, or financing, or for the right or option to
purchase any real property or the extension of any such right
or option.
(h) Notwithstanding anything herein contained to the
contrary, except as herein expressly provided otherwise, the
business and affairs of the Venture shall be managed, and all
decisions with respect thereto shall be made, jointly and
mutually by the Parties .
(i) Nothing contained in this Agreement shall be
construed to constitute any Party, the general partner or
agent of the other Parties other than in connection with the
activities within the scope of the Venture.
6 . Capital Contributions . Neither of the Parties shall
have any obligation to make cash contributions to the capital of
the Venture. Each Party will contribute its services to the
Venture in accordance with Paragraph 5 .
7 . j,oans . The Parties shall be obligated to make loans to
the Venture as follows :
(a) All funds required for the purposes of the Venture
which are not otherwise available to it, shall be loaned to
the Venture by the Parties in proportion to their respective
interests in the Venture as set forth in paragraph 4 above.
Provided, however, neither of the Parties shall be obligated
to make any additional loans to the Venture pursuant to this
subparagraph 7(a) unless such additional funds are required
under a contract approved by the Parties pursuant to Paragraph
5 above, or unless the Parties shall otherwise mutually agree
that such loans are necessary and appropriate.
3
(b) In recognition of the probable inability and/or
inconvenience to the Parties of always making simultaneous
loans to the Venture for additional funds required by it, a
reconciliation will be made at the end of each month to cause
total loans of the Parties to be equal .
(c) All loans made by the Parties to the Venture shall
bear interest at a rate computed at fifteen (15%) percent per
annum from the date of each such loan. •
8 . Default. In the event either of the Parties (the
"Defaulting Party" ) shall fail to loan its share of the additional
funds required under Paragraph 7 , the other party (the
"Non-defaulting Party" ) may, but shall not be required to, loan
the Defaulting Party' s share of such funds. If the Defaulting
Party shall fail to advance its share within fifteen (15) days
after delivery of notice that it is in default, the Non-defaulting
Party may, within two (2) days thereafter, elect to either:
(a) Adjust .the Parties ' interests in the Venture so
that their respective interests shall be in the same
proportion as the respective aggregate amounts loaned, or
deemed to have been loaned, to the Venture by them; or
(b) Purchase the Defaulting Party' s interest in the
Venture for a Purchase Price equal to the amount loaned, or
deemed to have been loaned, to the Venture by the Defaulting
Party pursuant to the Agreement.
If the Non-defaulting Party shall fail to make such election
within the period above-provided, then it shall be deemed to have
elected the remedy provided in subparagraph (a) above. In the
event the Non-defaulting Party shall elect the remedy provided in
subparagraph (b) , the purchase shall be consummated .within thirty
(30) days after such election at the offices of the Non-defaulting
Party, or at such other time or place as the Parties may mutually
agree. The Purchase Price shall be payable in cash at the closing.
9 . Repayment of Loans and Distributions .
(a) All proceeds from the financing and/or syndication
of the Project and/or sale of the Project or other property of
the Venture shall be distributed by the Parties in such
amounts and at such times as they shall mutually determine in
the following order of priority:
(i) To the payment of all liabilities and
obligations of the Venture arising out of or with
respect to the Project, to persons or entities other
than the Parties or their respective affiliates:
(ii) To the repayment of the loans made pursuant to
Paragraph 7, plus interest thereon;
4
(iii) To the repayment of any other obligations to
the Parties or their affiliates and incurred in respect
to such Project;
(iv) Any balance shall be distributed to the
Parties in accordance with the percentage interests set
forth in Paragraph 4 , subject to Paragraph 8 .
(b) Any other amounts available to the Venture for
distribution shall be distributed in such amounts and at such
times as the Parties shall mutually determine and shall be
distributed generally in accordance with the provisions of
subparagraph 9(a) above.
10. Buy-Sell Agreement . If at any time either Party shall
desire to terminate the Venture for any reason whatsoever, such
Party (the "Offeror" ) shall deliver written notice to the other
Party (the "Offeree" ) , which notice shall specify the cash
purchase price (the "Purchase Price" ) at which the Offeror values
the Project. Within fifteen (15) days after delivery of such
offer, the Offeree shall notify the Offeror in writing whether the
Offeree elects to purchase or to sell the Project. If the Offeree
elects to purchase, the price therefor shall be the Purchase Price
multiplied by the Offeror ' s percentage interest in the Venture as
specified in Paragraph 4 above, subject to Paragraph 8 ; and if the
Offeree elects to sell, the price thereof shall be the Purchase
Price multiplied by the Offeree ' s percentage interest in the
Venture as specified in Paragraph 4 above, subject to
Paragraph 8 . The closing of the purchase shall take place at
seller ' s offices within thirty (30) days after delivery of
Offeree ' s election, or at such other place or time as the parties
may mutually agree. If the Offeree shall fail to deliver its
election within the time period herein provided, the Offeree shall
be deemed to have elected to sell .
11. Non-Liability of Parties . Except as specified herein,
neither of the Parties shall have any liability or obligation
whatsoever to the other Party for the repayment of any loans made
to the Venture or for the satisfaction of any obligations of the
Venture which cannot be satisfied from the assets of the Venture
or financing or syndication proceeds . It is understood and agreed
that the only obligations of the Parties are those specified
herein.
12 . Notices . Any and all notices permitted or required
hereunder shall be in writing and shall be deemed given if
personally delivered or mailed , postage prepaid. certified or
registered, return receipt requested, or sent by any express
package or mail service with delivery receipt availability, to the
Parties at the addresses set forth below or at such other
addresses as the Parties may from time to time direct by notice
given as herein provided :
5 •
If to SPDI :
Security Properties Development, Inc .
2201 Sixth Avenue
Seattle, WA 98121
Attn: Carol Little. President
If to Wheeler :
Wheeler Realty Company
1331 8th Avenue
Greeley, CO 80631 and David G. Clarkson , President
Attn: Gary D. Premer, Vice President
13 . Accounting and Books of Account .
a The books , records and reporting
( ) r po ting for income tax
purposes shall be kept on the cash basis and by calendar year .
(b) Books of account shall be prepared and maintained
for the Venture by SPDI , and shall reflect therein all monies, •
goods, effects, debits, revenue, purchases, receipts, payments,
and all other transactions , with all correspondence, papers and
other documents held and safeguarded by SPDI at its offices. Each
Party hereto shall at all times have access to the books and
records of the Venture and/or shall be at liberty to have copies
made therefrom and furnished by SPDI at their request .
(c) As a part of the books of account, a checking
account shall be opened in the name of The Venture. Said checking
account shall be used for all receipts and disbursements of the
Venture including capital contributions, except that construction
draws may be paid from a construction lender trustee account or
through a title insurance company directly to payees named therein
as approved by the Venture . Otherwise, all cash received and
disbursed by the Venture shall be done through said Venture
checking account. Each check issued must be signed by all Parties
hereto to be valid. No expenses shall be reimbursed to a Party
hereto unless that Party shall first present an itemized voucher
which is approved by all the Parties hereto and which shall be
retained as a record of the Venture.
4 . SPI shall prepare and file any necessary tax
filings for the Venture.
14. Sale, Dissolution, Liquidation and Distribution,
(a) The Venture shall be dissolved upon:
(i) the withdrawal , bankruptcy, death,
dissolution or adjudication of incompetency of a Party.
if any Party elects to dissolve;
6
(ii) the sale or other disposition of the assets
or substantially all of the assets of the Venture and
collection of all the proceeds therefrom;
(iii) the mutual agreement of the Parties; or
(iv) any other event causing the dissolution of a
general partnership under the laws of the State.
(b) Winding up and distribution of assets shall be
governed as follows :
(i) Upon the dissolution of the Joint Venture
pursuant to subsection (a) of this Paragraph 14, the
business shall be wound up and its assets liquidated as
provided herein and the net proceeds of such liquidation
shall be distributed as provided in Paragraph 9 .
(ii) The Venture shall proceed without
unnecessary delay to sell and otherwise liquidate the
Venture property and assets; provided, however, that if
the Venture shall determine that an immediate sale of
part or all of the property and assets of the Venture
would result in a loss , such property and assets may be
divided and distributed to the Parties , in order to
avoid such loss . The Venture may defer the liquidation '
as necessary to satisfy the debts and liabilities of the
Venture to persons other than the Parties . Upon the
complete liquidation and distribution of the Venture
assets, the Venture shall cease to be to the Venture,
and the Parties shall execute, acknowledge and cause to
be filed all certificates and notices required by the
law to terminate the Venture .
(iii) Upon dissolution of the Venture the Parties
shall direct the accountants for the Venture to promptly
— prepare and furnish to each Party a statement setting
forth the assets and liabilities of the Venture upon its
dissolution. Promptly following the complete
liquidation and distribution of the Venture property and
assets, the Venture shall direct the accountants to
prepare and furnish to each Party, a statement showing
the manner in which the Venture assets were liquidated
and distributed.
15 . Miscellaneous .
(a) This Agreement and the Exhibits hereto set forth
the entire understanding and agreement of the Parties at the
date hereof with respect to the subject matter hereof and
supercede all prior understandings and agreements .
7
( b) This Agreement may only be amended by an instrument
in writing duly executed by the Parties hereto.
Co) Any matters not provided for in this Agreement
shall be governed by the general partnership laws of the state
in which the Project is located.
( d) The Parties may not transfer their interests in the
Venture except as specifically provided for in this Agreement.
( e) Except as otherwise specifically provided, this
Agreement shall be binding upon and inure to the benefit of
the Parties hereto, their heirs, distributees, legal
representatives, transferees and assigns.
16. Arbitration. In the event any controversy or dispute
arises with respect to this Agreement or any of the terms or
conditions hereof, or with respect to any rights arising therefrom
or thereunder, or with . respect to any alleged breech thereof, the
Parties agree that such controversy or dispute shall be settled by
arbitration in the city and state where the Project is located, in
accordance with the rules then in effect for the American
Arbitration Association, and judgment upon award rendered therein
may be entered in any court having jurisdiction thereof .
IN WITNESS WHEREOF, the Parties have caused this Agreement to
be executed as of the day and year first above written.
SECURITY PROPERTIES DEVELOPMENT,
INC. ^G,
By: (-2 l "/car, / ��—
Carol Cordle Little, President
WHEELER/ E LTY COMPANY, INC.
By:
David G. Clarkson, President
•
EXHIBIT WI-IEELER bfiPT' Fort Collins Branch: 030 South College,Ft.Collins.Colorado 00524 (103)464 0720
REA.
1Io' 1€'W� Qreslsy Branch;P.O.Box 519, 1321 8th Avenue,arseley,Colorado 80632 (303)356 1331
Y a arelen• Loveland Brsneh:2525 North Lincoln,Loveland,Colorado 80537 (303)669.561 1
C xuseer otfic.. 1331 61h Av.nw,Gr..a,,,Coluis4.10 WW1 (3k)31 356 1331 WlnJror Winch.P.O.Box 908, 1051 Main,Windsor,Colorado 80550 (303)686.7483
VACANT LAND •
CONTRACT TO BUY AND SELL REAL ESTATE
(Seller's remedy limited to Liquidated Demagog)
The printed portions of this Iona approved by the Colorado Real Estate Connalselon(SC 28.1-81)
THIS IS A LEGAL INSTRUMENT.IF NOT UNDERSTOOD, LEGAL,TAX OR OTHER COUNSEL SHOULD till CONSULTED BEFORE SIGNING.
June 25 , 19 84
1.The undersigned agent hereby acknowledges having received froiu Bittersweet P a e Devel opers
the curs of a 361000 _ , in the form of_ Earnest Monei-Promissory—Note , to be held
by Wheeler Real ty Company broker,lo broker's escrow or treble*account,us earnest money and
part payment for the following described real,stets in the t�0f GirPt:�ey County of -
al co�rtoradu to wit: _ Tract E Bittersweet North—S bdfiifTon. Sard-T"r-adt is
i1 nat approx ely 5.65 acres.
•
•
together with all easements and rights of way appurtenant thereto,and all Improvements lhuruun unit all fixtures of u permanent nature currently on
the premise,except as hereinafter provided. in their present condition, ordine er end tiler u eta(i„ ul heroine fiat cello(' the Property.
2.Subject to the provisions of paragraph 17,the undersigned person(s) ( G tg r5w :.,__r j 4q0 Join. lentt4r9
(as joint tenaille/tenants in common), hereinafter culled Purchaser, hurul,y ugruua to buy Ihu Pr(7perty, anti the undurrigned owner(s). hereinafter
called Sailer, hereby agrees to tell the Property upon the terms and conditions stated herein.
3.The pure r► e�1 au be Us 720 900 ,uy,1 , is f„ib,wd. 36 000 horeb
recelptedfor; '6/.%11 Lgoal tnprQvP fstrfidt1'l'd q ufis5o5$ment to—be-AsUmed-by PA base
subject to additional previsions_ of Paragraph_14._$626,fl28 in Cash or _Certified Funds at
the time of Closing_ Provided huwevi r the_Pur-chaser .r-ice iS_�Ilt>Un ent_t�R t he,�i f
Greeley Council approvjnq a 144A4nitiPtanned Unit Development Apartment Complex on sal
property. and is subject tp addjtignal provisions of Paragraph 19.
4.Price tofncluda; Survey and Soil Reports. if_l , _now_in._p_ zes5iQn.
end the following water rights: maw Water_ Rights Al_required rut red by the City of Greet ey. •
b.If a new loan is to be ubtulied by Purchaser from a third party,i'urcheaur«grits to pruaiply suit diligently(a)apply for such leeen,(h}execute all
documents and furnish all Information and documents required by die hula tar, and lc)pay the i:UStomury coati of uhiuliihig guilt loan.Thin If eut:li
loan la nal approved on or before October 22 _- , to_.84. .ur Jiro approved hut is nut avallebls at time of closing,lids contract •
shall be null end void end all paymenle and things of value received hereunder shell be returned lo Purchaser.
- 8.9tr rs trtractirersrdved ermo(tgegtris ttrberessurresd,"Porebnter are virtu nrertlrMre'hat 11 Ifetrm frtfon i enquired sett-arm nruap m er haft
teatwfass4ee4..1.4eexurwl3+sia:w.a,aa.ie•a•ea,•srr=>re.sfeeetla}et►beieeoe re4o-ni IwNeeyed(aJAWS&WU oar t4-i.i'wrwrus1.•l4/IN 44,0414 h i,srnswte4
twee•yee+i.4u fur ee-Wiereei"spa lytiesyertubta e4ereei-rr4ar-weyer•htAe(nary rnaelHe4IIretmicseliracsnefNis rent vpet).the 4Mmit tee r rev teem sg-sad
euneentng-retiweh-preMe„enerHiterbander+e-oemwnt-te•vieen-eremet,t ten fe-rertat theelventraot.arooratillaresd porrotrttrtreier lush.ee assert
without-ohmage-Ea 41wtome-ewd errelit iewr•ef eieetrls+esr+Meep4 e is Nerds priwlilesk
7. If a note Is to be made payable to Seller as partial or full payment of the purchase price, this contract shall not be a,slgneble by Purchaser
without written consent of Seller, t,
8.Cost of any appraisal for loan purposes to be obtained rifler this ditto shall he pails by _Purchaser
6. Orrrebetreotef-tltiu ie'lbe P(apury, t4,tlf+edie eletv,wr� current commitment for title Insurance policy In an amount tepid' to the purchase
price, at Selter's.epRow-and expense, shell be furnished to Purchaser on or befurt►rQ_.4„VS _prior tQ_G1 4S i nth_�_ _.41-,mist otaawte
itarrerlresieHttle-intranmegrecmrenereenty Seller will deliver the title Insurance policy In Purchaser after closing end pay the premium thereon.
10. The(tale of clueing shall be the date for delivery of deed as provided In paragraph 11.The hour and piece of clotting shall bees designated by
`_purchaser
11.Title shall be merchatlluble in Seller, except as staled in this paragraph and In paragraph, 12 and 13. Soloed to payment or tender as above
provided and comphunre by Purchaser with the other terms and provisions hereof, Seller shall execute and deliver a good and-
sufflclenl General warranty deed to Purchaser on October 22
10 84 ,or, by mutual uyruament, al an earlier dale, convoying the Property free and clear of all taxes, except the venire' lames fur the year of
closing,and except .J`i..olle
free and clear of all liens fur special Imp ovem�yetr installed us ut ilia( i10 of l'uirhusl, 's sty`s tare hereun,whether ys.usly�I or nut free and ,jter of
all liens and encumbrancer except [oc i Inipray.r{nt DL tr1ct ko` 41ll AS.i$ssmenL 1n tile amount o1`
$57.1]2.0(1 suhjPrt to Additional rnvicinns of Paragraph 19.
,except the following rOfilliftiv8 covenants which do nut COlltaiue a right of revurlur: N.Q!?_t~
•
and except the following specific recorded and/or apparent eusemanl6: N0ne__
r
_I
12.Except es stated in paragraphs 11 and 13,if title la not tourch,urtublu and written outs,a of dufori(s)it Wynn I,y t'urchuser or Pun hnrur w.,,uu1
ID Sodas ur Seller'.upset on in before date of closing, Sulfur rhuil into ruuaunui to elite t In,.orrucl suni .tuluci(rl prior to dale of c;lu►lt.4 11 taller Is
unable to correct said duiacl(a}on or before dale of closing, ai Sailor'.option and upon wrttlae butt .w to Port:ltarat'or Puri harur'e*pant un tin betas'
data of closing,the date of closing shall be nxttndel thirty day*fur lha purport,of correcting rant ttufar.11a).Sxorpl ur rolled in paragraph 13,If title u
not rendered merchantable as provided in this paragraph 12,at Purchaser's option,this contract shell be void and of nu effect and each party hereto
shall be released from all obligations hereunder and all paytnunts and thing*of value received hereunder shall he returned to Purchaser.
13. Any encumbrance required to be paid may be paid ul the time of settlement front the prut:eewlr of this transaction ur from any other source.
Provided,however, at the option of either party, If the total lndebtuenners secured by Items on the Property exceeds the purchase prig, this contract
shall be void and of no effect and each party hereto shall be released from ail obligations hereunder end all payments end things of value received
hereunder shall be returned to Purchaser.
14. General taxes for the year of closing,based on the most recent levy and the moat recent assessment, prepaid rents.water rents, sewer eases,
—PHA mortgage Insurance premlwne and interest on encumbrances,If any,end . No n e
16.Possesslun of the Property ahaU be delivered to Purchaser on shall be nppurtluttwe to date of delivery of deed.
pay �ctQber 22, 1484
,subject to the following leases or tenancies; None
- 1n. In the event the Property is subatentialty damaged by fire, flood ur other cuaunity between the dote of this ccmlrect and the dale of delivery of
deed, Purchaser may elect to terminate this contract; In which case all paycnunla and things of value received hereunder shall be returned to
Purchaser.
17. Time I. of the eaaence hereof, If any note or check received as earnest money hereunder or any other peymaut due hereunder Is not paid,
—honored or tendered when due,or if any other obligation hereunder I. not performed as herein provided, there shall be the following remedies;
(a)IP PURCHASER IS IN DEFAULT, than all payments and things of value roceived hereunder shale be forfeiter) by Purchaser and retained on
behalf of Seller and both parties shall thereafter be raieesed front all obligations hereunder.It le agreed that ouch payments and things of value are
LIQUIDATED DAMAGES and ere(except sr provided in subparagraph(c))the SIiLLEH'S SOLE AND ONLY REMEDY Ion the Purchaser's failure to
perform the obligations of tide contract. Seller expressly waive'the remedies of specific performance end additional delimiter.
(b)IP SELLER IS 1N DEFAULT,Purchaser may elect to treat this contract us terminated,in which case all payments and things of value received
hereunder shall be returner! to Purchaser and Purchaser may recover such dantugus as may be proper, or(2) Purchaser may elect to !reel this
contract as being in full force and effect and Purcharer shall have the right to un action fur specific performance or damages, or both.
(c) Anything to the contrary heroin notwithstanding, in the event of any litigation adding out of this contract, the court may award to the
prevailing party all reasonable coats and expense, Including attorneys' fees.
111.Purchaser and Seller agree that In the event of any controversy regarding the earnest money held by Broker,unless mutual written instruction Is
received by Broker,Broker shall not be required to take any action but may await any proceeding,or at Broker's option end discretion,may interplead
any moneys or things of value Into the Court and may recover court costs and reasonable attorneys fees,
16. Additional provlalans;
is contingent upon .eu.rchaser being able to amain coniIruction iJ 11411ci rig
October 22, 1984. In the event that the Construction loan is not closed by
October 22, 1984 this Contract will be renegotiated and extended to the mutual satis-
faction of Purchaser and Seller. . ' . . .
B) This Contract is contingent upoo_Purchasei; .irlg_.Able to obtain City of Greeley Council
approval on a 144 unit Planned halt_.evelopment A tment_LomA1.eX_Dft saillar.0.perty by
City Launri l ap_pr'.a a. is not obtai nad by October
2?, 19R4, this CnntrAr.t..,_wil1 be renegotiated and extended to the mutual satisfaction
- sYVof Purchaser and Seller.
r) The ) oral Imprnuement District_Na.A30 Assessment_nf$52,1J2_M is pa,yfahle to the
Treasurer, City of Greeley, In,Seven_(_2) .equaLannual ioctal l mentc of Pri ncipal_on___._
11-.,.-.coll menci_ng._on October 1, 1 qB,Z, with Lateras t
nn the unpai rid-..insta.11mants_-of_Pr_i.l:lclpal from--the af-facti.ua.adate -.—
Assessmj ,t Ordinance at_the rate of .9..75% -Per_Annum,pavahle annually on Qntaaa i of
— - sac year comfl cing_on Octsiher 1, 1987, bra 1 ed._thati there will Also bp pays Ile an
October 1, 1986, an amount equal to Six mnn.t.hsjnterest,_i.t_such rate an the unpaid
Principal mount_of dish Assessment A schedule of apjiraxim&te Prttipal gild Interest
payments under rho Accr ss)11ent Formula is inrorpnrated by rcferance jS gtachinent A_
•
20.If this proposal Is accepted by Sailer in writing and Purchaser receives r tlieu of such eccuptunce out or before - _ J W18 25
1 D_stz_ ,this Iustrurnent shall twcume a cunlrect between Seller end Purchaser end shall inure to the
benefit of the heirs, succeeeorr and resign§of such parties, except is rested In paragraph 7.
Wheeler Realty
• ' :e .SC/E Broker Better Ho d Gardens
ecu Yty Properties Development, Inc,D;teJoint Ventur
}liWTir Realty Company, Joint Venture' Gary D. remer
Purchaser'aAddress P,Il_ Rnx 519, 1331 8.tb Avenue,JIrs el ey. CS2.1or dQ 80632
(The(ollowtng sectloe to be completed by fieller sad Listing A sat)
21. Seller tic'opts the above proposal this 25 day of June . 19 I4 , and agrees to pay • commission of
GeV %of t purchase price for services in this transaction,and agrees that,in the event of forfeiture of payments end things of value
received *round r,sec ayments d go of lue shell be divided between listing broker end Seller,one-half thereof to Bald broker, but not to
?moused co Mato o Set .
Wheeler Realty Company
S.Usr'.Address...?,.fl Rpy .519, 133Lflth Avenue, Greeley-, fn. 8O612•
-
i.� •,. 1 .r's Name and An drerr WHEFI-FR Rf A I TY COMPANY
P.r ' ry {} Av-'r •1 ,_'r'rpr. ..v f o— !,1753 ' _ _
ATTACHMENT A
To Vacant Land Contract to Buy and Sell Real Estate between Bittersweet •
Place Joint Venture and Wheeler Realty Company, dated May 10, 1984.
Tract E, Bittersweet North, Greeley, Colorado, Local Improvement Dis-
trict No. 430, approximate Assessment:
9.75%PER PRINCIPAL
DATE PAYMENT PRINCIPAL ANNUM INTEREST BALANCE
t',y 10, 1984 • $57,172.00
Oct. 1, 1986 $ 2,787.00 $ -0- $ 2,878.00 57,172.00
I :t. 1, 1987 13,741.00 8,167.00 5,574.00 49,005.00
Oct. 1, 1988 12,945.00 ' 8,167.00 4,778.00 40,838.00
L.A. 1, 1989 12, 149.00 8,167.00 3,982.00 32,671.00
Eft. 1, 1990 11,352.00 8,167.00 3,185.00 24,504.00
Oct. 1, 1991 10,556.00 8,167.00 2,389.00 16,337.00
I :t. 1, 1992 9,760.00 8,167.00 1,593.00 : 8,170.00
Oct. 1, 1993 8,967.00 8,170.00 797.00 -0-
82 257.00 $57,172:00 25 085.00 $ -0-
Fort Collins Branch: 530 South College,Ft.Collins.Colorado 80524 (303)484 6720
WHEELER :�
Better Greeley Branch:P.O.Box 519, 1321 8th Avenue,Greeley,Colorado 80632 (303)356.1331
� l Homes, Loveland Branch:2525 North Lincoln,Loveland.Colorado 80537 (303)669-5611
REALTY 1 and Gardens.® Branch:V.O.Box 908, 1051 Main,Windsor,Colorado 80550 (303)686-7483
aporate Offices: 1331 8th Avenue,Greeley.Colorado 80631 (303)356.1331
EARNEST MONEY
Promissory Note
The printed portions of this form approved by the Colorado Real Estate Commission(EMP 80.2-81)
U.S.$ 36,000.00
Greeley . Colorado____________ Date June 25 ,19-84-
city state
FOR VALUE RECEIVED._ Ri tterswPPt P1 ACP flev.pl npers
nemes(s)of meker(sl
- P.O. Box 519, 1331 8th Avenue, Greeley, Colorado 80637 , jointly and
address
severally.promise to pay to the order of.dheel Pr Real'l'y Company
the sum of Thi ry—Six Thousand and No/100 __—Dollars.
with interest at -0- %from June 25, 1984 until paid.
-- Both principal and interest are payable in U.S.dollars on or before October 22 .19 84
payable at Wheeler Realty Company, P.O. Rox 519, 1311 8th Avenue, Rrec1 ey, CO- 80632
or at such other address as note holder may designate.Presentment,notice of dishonor,and protest are hereby waived.If this note is not paid when
— due.I/we agree to pay all reasonable costs of collection, including attorneys' fees.
Gee--;L tz.
p
reIdo In° Pro rties e lopment, Inc. , 3oint Venturer
rIdola)wfealty Company, Joint Venturer
This note is given as earnest money for the contract on the following property Tract E, Bittersweet North Sutzdi V i s i on,
(reeley, (��1 Q, and ;�xpreScldub' nditions of such-Contract.
DESCRIPTION OF PROJECT
DESCRIPTION OF PROJECT
AND
SUMMARY OF MARKET ANALYSIS
The proposed development is located on the south side of West 10th Street,
and just east of 40th Street. West 10th Street becomes Highway 34 which is the
main road to nearby Windsor and Fort Collins. The site is part of the
Bittersweet planned unit development which includes a mixed use of commercial
and residential. All utilities are available at the site; roads in the PUD
- area complete, as are sidewalks.
In the immediate vicinity of the site are mostly new single-family homes
priced between $80,000 and $100,000. A half mile east, on West 10th, is the
Bittersweet Mall. Commercial and more residential housing is to the north of
the site. Most of the new urban growth in the area is spreading west along
10th Street.
Within easy walking distance of the site is Bittersweet Park. This park
has playgrounds, picnic areas and one of the areas nicest jogging trails. Both
an elementary school and a middle school are within walking distance of the
site. Bus transportation is available along West 10th.
Only two miles west of the site is the new Hewlett-Packard plant which
currently employs about 700. Plans call for an additional 300 employees to be
added over the next several years. Hewlett-Packard owns sufficient land
adjacent to this plant for considerably more expansion.
Overall the site is excellent with its convenience to shopping, employment,
schools, and recreation.
As currently proposed, there will be 52 one-bedroom, one=bath units with
650 square feet of living space; 46 two bedroom, bath-and-a-half units with 860
square feet; and, 46 two-bedroom, two-bath units with 960 square feet.
Attainable rents, excluding electricity and gas, are estimated by the
consultant to be $365, $440, and $485 respectively. The first units will be
available in early 1985.
The proposed development will have 144 units on about six acres. Plans
call for a swimming pool, clubhouse, and exercise room.
Current specifications for the units include, wall-to-wall carpeting, mic-
rowave ovens, draperies, range, refrigerator, dishwasher, disposal, washer
/dryer connection, and combination air conditioning and heating units. The top
floor units in each of the four buildings will have loft units. A fireplace in
each unit, if added as recommended, would add $15 a unit to the attainable
rents. Also, market experience with the top floor loft units may show that
they can command an additional $35 to $45 a month since there is nothing
comparable in the area.
Description of Project and
Summary of Market Analysis
Page Two
- The proposed development includes all of the amenities typically found in
similar developments, plus washer/dryer connections in each unit and an addi-
tional half-bath in the smaller two-bedroom units. The washer/dryer connec-
tions and microwave ovens, included in the proposed development are an in-
creaseingly important amenity in today's market.
The proposed development is well designed to reach a broad non-student
market, particularly small households with two wage earners or households
composed of two unrelated adults sharing a unit.
Anticipated Absorption Rate
The demand for additional rental housing in Weld County was shown to be 350
units a year from June 1984 to June 1985. The proposed development seeks to
capture about one third of the annaul demand, an agressive but attainable
expectation given the location and amenity package. The consultant
anticipate's the rent-up period will be ten months to a year.
A copy of the complete Marketing Analysis is available for review by
request at Wheeler Realty Company, 1331 8th Avenue, in care of Mr. Gary D.
Premer, 356-1331 extension 207.
Description of Project and
Summary of Market Analysis
Page Three
ABOUT THE MARKETING CONSULTANT
Since 1980, Mr. Till has been a consultant specializing in housing market
analysis. His market studies have primarily served private sector clients
involved in real estate acquisition, development, or syndication.
Gilbert Till was an economist for the U.S. Department of Housing and Urban
Development (HUD) for 12 years. During this period, he designed the
Department's first housing market analysis computer model, which has been used
to analyze local employment, population and housing trends.
With his knowledge of data sources and methodology for estimating both
market rate and assisted housing requirements, he trained HUD field economists
for more than a decade. He also directed the preparation and publication of
local housing market studies for HUD, as well as a quarterly economic report.
Northwest and Alaska.
In 1978, he was a member of the U.S. delegation to the United Nations
Economic Commission for Europe (ECE) symposium on "Human Settlements Planning
and Development in the Artie" held in Godthab, Greenland. The symposium's
monograph was a collaborative effort by the representatives from Canada,
Denmark, Norway, Sweden, Iceland, the Soviet Union, and the United States.
Mr. Till earned his degrees from Virginia Polytechnic Institute. He also
is past chairman of the NW Federal Credit Union, one of the largest credit
unions in the Pacific Northwest.
PROJECT VICINITY MAP
_ I
Weld Coun Ro. . 64
GREELEY AREA d
CENSUS TRACTS
INSERT 5 G
In 6
N
F Stree
Colo d 8 7.01
o then
a 13 �•
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1 0 a
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12P2 4.01 2 m
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Parks, Shopping and Schools
3 . Scott Elementary School
. Subject Bittersweet ll 4 . Franklin Middle School
1. CnnnialMall 5. Bittersweet Mall
2 , Centennial Commons Shopping
THE DISTRICT
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(—
WELD COUNTY HOUSING
( SEMIANNUAL DEBT SERVICE FROM 08/01/04
DATE PRINCIPAL RATE INTEREST TOTAL ANNUAL
(— 02/01/85 235,000.00 235,000.00
08/01/85 `.
235,000.00 235,000.00 470,000.00
( 02/01/86 235,000.00 235,000.00 08/01/86
235,000.00 235,000.00 470,000.00
02/01/87 235,000.00 235,000.00
( 08/01/87 30,000 10.000 235,000,00 265,000.00 500,000,00
02/01/88 233,500.00 233,500.00
08/01/88 30,000 10.000 233,500.00 263,500.00 497,000.00
02/01/89 , 232,000.00 232,000.00
08/01/89 30,000 10.000 232,000.00 262,000.00 494,000.00
_
02/01/90 2 30,500.00 230,500.00
�.
( 08/01/90 30,000 10.000 230,500.00 260,500.00 491 ,000.00
02/01/91 229,000.00 229,000.00
08/01/91 30,000 10.000 229,000.00 259,000,00 488,000.00
02/01/92 22'7,500.00 227,500.00
08/01/92 30,000 10.000 227,500.00 257,500.00 485,000.00
02/01/93 2'26,000.00 . 2'26,000.00
08/01/93 30,000 10.000 '2.26,000.00 . '56,000.00 482,000.00
( 02/01/94 224,500.00 224,500.00
08/01/94 30,000 10.000 2'24,500.00 254,500.00 479,000.00
02/01/95 223,000.00 223,000.00
C` 08/01/95 30,000 10.000 223,000.00 253,000.00 476,000.00
02/01/96 221 ,500.00 221 ,500.00
08/01/96 4,430,000 10.000 221 ,500.00 4,651 ,500.00 4,073,000.00
TOTAL 4,700,000 5,505,000.00 10,205,000.00
( ACCRUED THRU 08/01/84 0.00 0.00
NET COST 5,505,000.00 10,205,000.00
( AVERAGE COUPON 10.000
BOND YEARS 55,050.000
AVERAGE LIFE 11 .7:L3
•
COMMAND (06/24) °'_"vo .
l
C-
L.
BITTERSWEET PLACE
ESTIMATE OF INITIAL ANNUAL
OPERATING COST
Gas $ 5,000
Electricity 6,000
Water & Sewer 9,000
Cablevision 9,000
Trash Removal 3,000
Telephone 1 ,000
Fuel 100
Supplies 7,000
Cleaning 4,000
Building Repair &
Maintenance (Gen.) 9,000
Painting 5,000
Roofs 1 ,000
Ground Maintenance 8,000
Parking Area Maintenance 1 ,000
Elevator Maintenance 3,000
Pool Maintenance 1 ,500
Pest Control 1 ,000
Advertising 2,400
Audit 3,500
Other Expenses 5,000
Management Fee 40,000
Resident Manager Fee 20,000
Replacement Reserve 4,000
Property Tax 60,000
Insurance 6,000
$214,500
Per Unit $ 1 ,490
BITTERSWEET PLACE
PROJECT COST AND SOURCE OF FUNDS
Project Cost:
Direct Cost $3,042,400
Architectural Design
& Engineering 100,000
Other Fees 576,000
Construction Period
Interest 388,476
— Taxes during Construction 10,000
Insurance 15,000
Title & Recording 25,000
Origination Fees 329,616
Developers Legal Cost 30,000
Development Fee 235,440
Market Study/Appraisal 10,000
Marketing 100,000
Land Cost 720,000
$5,581 ,932
Source of Funds
Approximate Mortgage
Loan $4,700,000
Approximate Equity thru
Syndication 881 ,932
$5,581 ,932
HISTORICAL STATISTICAL DATA & RESUME
OF APPLICANT
WHEELER REALTY COMPANY
—
WHEELER REALTY COMPANY
Since its beginning in 1915, Wheeler Realty Company has been
active in the real estate brokerage business in northern Colo-
rado. Current activities of the Company include land develop-
ment; residential construction; brokerage of residential, commer-
cial, and farm properties; and property management. The broker-
age function of the Company is conducte under
the
"Be42 tter
Homes
and Gardens" trademark. The Company curd
has
es,
70 sales associates , and four sales offices located in Greeley ,
Fort Collins , Loveland and Windsor , Colorado. The Company's
principal executive offices are located at 1331 Eighth Avenue,
Greeley, Colorado.
Until February, 1982, the Company was owned and controlled
by John R. P. Wheeler . Mr. Wheeler 's father , Charles W. Wheeler
started the Company in 1915, and Mr. Wheeler began to manage the
_ Company during World War II. Shortly after World War II , Mr.
Wheeler caused the Company to expand from the real estate broker—
age business into raw land development in the Greeley area, a
business that has been continued to the present. During the
1960's, Mr. Wheeler sold 20% of ' the Company to Jack L. the Schreiber
and 20% of the Company to David G. Clarkson. In 1979 ,
of Mr. Schreiber were redeemed by the Company , and in February ,
1982, Mr. Wheeler retired and his shares were redeemed by the
Company. At the present, the Company is owned and controlled by
Mr. Clarkson.
Principal source of revenues for the Company are brokerage
commissions, residential land development and commercial develop-
ment. •
The Company has several parr-els of real estate in various
stages of development , both in Greeley and surrounding areas.
Bittersweet North is a 35 acre parcel of undeveloped ground. The
parcel fronts on 10th Street in Greeley and is expected to be
developed for commercial facilities, apartments, and retirement
duplexes. Bittersweet Subdivision, is located just south of Bit-
tersweet North and the Company continues to sell lots in this
area. Two other parcels of developed land in the Greeley area
are Country Club Estates and Fairway Four. In Fort Collins , the
Company is developing Brown Farm in the southwest area of the
city. In Windsor , the Company is developing two residential
subdivisions. Mountain View II is completely developed and the
Company is currently selling lots in the area. The Company also
owns approximately 85 acres as tenanUs , : d 17 Hic`'
• outright in an area in Windsor known as Governor 's Farm. In
Loveland , the Company is selling 20 developed lakeside lots and
_ owns 33 undeveloped acres in an area known as Centennial Shores.
Commercial Development the Company has been involved in
includes four shopping centers, numerous apartment complexes and
the very recent completion of a prestigious rehabilitated of-
fice/retail/restaurant complex in the new Downtown Greeley Mall.
Certain commercial development projects are syndicated via limit-
- ed partnership units through an affiliated entity, Wheeler Secur-
ities Company.
Personal Resume of
DAVID G. CLARKSON
President & Director
Wheeler Realty Company
1331 Eighth Avenue
Greeley , Colorado 80631
A native of Greeley, Mr. Clarkson has extensive business
L experience in northern Colorado. During the last ten years he
has developed numerous housing projects in Greeley, Loveland ,
Fort Collins and Windsor. Specific land development projects
directed by Mr. Clarkson include, among others, Bittersweet and
Virginia Hills in Greeley, Brown Farm in Fort Collins, Northlands
L in Loveland, and Mountain View in Windsor.
Mr. Clarkson's past and present community and professional
affiliations include the Greeley Jaycees , Chamber of Commerce ,
Past Chairman of the Greeley Area Industrial and Business
Development Foundation, Greeley Elks Club, Rotary, Past President
of the Greeley Board of Realtors, Past Director of the Colorado
Association of Realtors, member of Home Builders Association of
Northern Colorado and the First Congregational Church. He has
served on the Board of Directors for both the Greeley National
Bank and the Bank of Windsor during the past several years.
•
Mr. Clarkson is 46 years old and he resides at 1918 26th
Avenue Court, Greeley, Colorado 80631.
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Personal Resume of
GARY D. PREMER
Vice President of Commercial
and Syndications Department
Wheeler Realty Company
1331 Eighth Avenue
Greeley, Colorado 80631
Mr. Premer joined Wheeler Realty Company in May 1982. He
graduated from the University of Northern Colorado with a Bache-
lor of Science degree in 1973 and became a certified public
L accountant licensed in Colorado in 1974. He is a member of the
American Institute of Certified Public Accountants , Colorado
Society of Certified Public Accountants, Greeley Board of Real-
tors, and the Real Estate Securities Institute.
Mr. Premer had nine years of public accounting experience
prior to joining the Company. His experience included three
years with Peat Marwick Mitchell & Company, two years with Newman
& Company, both in Denver, Colorado, and the balance as a partner
L in local Greeley accounting firms with emphasis in commercial
construction, real estate brokerage and land development.
Major projects Mr. Premer has been involved with during his
association with Wheeler Realty Company include the development
L of two Special Improvement District bond issues which provided
tax exempt development financing for residential and commercial
L land development projects of 35 and 100 acres ; a taxable bond
issue which provided land and development financing for a 55 acre
residential land development project. In addition , Mr. Premer
has syndicated or participated in the syndication of a commercial
rehabilitation project and a 48-unit elderly Section 8 housing
project .
Mr . Premer is 35 years old and resides at 4286 West 14th
Street Road, Greeley, Colorado 80631 .
L
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Personal Resume of
EDWIN L. DYER
Vice President Residential
Wheeler Realty Company
1331 Eighth Avenue
Greeley, Colorado 80631
Mr. Dyer has been employed by the Company since 1974. He has
Bachelors and Masters degrees from Colorado State College and is
a member of the Colorado and National Associations of Realtors.
Currently, Mr. Dyer is responsible for all residential brokerage
activities of the Company, and is a loan officer for Wheeler
Mortgage Company, handling loan applications for potential home
buyers.
Mr. Dyer 's address is 734 27th Avenue , Greeley, Colorado
80631 .
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1
1 Personal Resume of
SHARON R . MAYER
Board Secretary
Wheeler Realty Company
1 1331 Eighth Avenue
Greeley , Colorado 80631
1 Ms. Mayer has been employed as closing agent for the Company
since 1977. In that capacity, she supervises and coordinates all
real estate closings. She is also employed as a loan officer for
I Wheeler Mortgage Company , handling loan applications for
potential home buyers. Prior to joining the Company, she was a
commercial loan secretary with United Bank of Greeley and a real
L estate secretary with Manor Vail Associates in Vail , Colorado.
Ms. Mayer has attended classes and seminars to complete
requirements for a real estate salesman 's license .
LMs. Mayer 's address is 2425 Sunset Lane , Greeley , Colorado
80631 .
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Personal Resume of
VONNA S. DOERING-KENT
Board Treasurer
Wheeler Realty Company
1331 Eighth Avenue
Greeley, Colorado 80631
Mrs. Doering-Kent joined the Company in January 1983 as
controller for Wheeler Realty Company , after acting as an ac-
counting consultant to the Company in 1982. Prior to 1982, Mrs.
Doering-Kent was controller of Trans--Mountain Industries, Inc.
and a staff accountant with Deloitte Haskins & Sells in Mine -
polis , Minnesota and Anderson & Whitney in Greeley , Colorado.
Mrs. Doering--Kent is a 1978 graduate of the University of North
Dakota and a member of the American Institute of Certified Public
Accoutants, the Colorado Society of Certified Public Accountants,
and the North Dakota Society of Certified Public Accountants.
Mrs. Doering—Kent's address is 15485 Rist Canyon Read,
Belleview, Colorado 80512.
I—
•
�.
HISTORICAL STATISTICAL DATA & RESUME
OF APPLICANT
SECURITY PROPERTIES, INC.
SECURITY PROPERTIES DEVELOPMENT, INC.
In May of 1981 , the six-year old Development Division of Security Properties,
Inc. was formally incorporated as Security Properties Development,
Inc. , ("SPDI") a real estate development company based in Seattle,
Washington but with national interests. It's affiliate, Security
Properties, Inc. , has syndicated and is general partner of more than
350 apartment communities which represent over 47,000 units and a
billion dollars in replacement value.
The staff competencies developed in these undertakings have assured
the early and rapidly accelerating success of Security Properties
Development, Inc. Specializing in the development of residential
multifamily communities throughout the United States, SPDI has, under
the direction of Carol C. Little, completed more than 2,000 apartment
units. In addition, the company is providing development consulting
services in 38 apartment projects in 15 states on behalf of it's
affiliate, Security Properties, Inc.
Through it's local and national affiliates, SPDI can and does bring
together all the necessary disciplines for all phases of project
development from land acquisition and financing to syndication and
operations management.
In land acquisition, SPDI analyzes sites in the highest demand areas
throughout the United States. If SPDI determines that a potential
area may be suitable for development, professional market studies will
be performed by economists. If apartment demand meets SPDI 's require-
ments, then architectural design will be started following the unit
mix recommendations of the economist's market studies.
SPDI has obtained all types of construction and permanent financing,
again suited to the type of product in development. Such arrangements
have included conventional , FHA insured, (with and without Section 8
rental assistance) and tax-exempt bonds , including loans-to-lenders,
both insured and uninsured.
End buyers of SPDI development product range from public housing
authority turn-key buyers to high tax bracket investors to speculative
condo converters. Wherever there is a strong demand for apartments
and a concurrent suitable financing method, SPDI is ready willing and
very able to meet the changing challenges of multifamily production.
- /security properties development, inc.
FORMERLY UOINE.BUSINESS AS SILUHIl Y PALIUL ULVLLOPMLNI.INC
Security Properties Development, Inc. was formally incorporated in May,
1981 . For the prior six years it had functioned as the Development
Division of Security Properties, Inc.
Because of the integral role as general partner that Security Properties
began to fill in it's syndication business, it was necessary for the
company to create a staff which had the developmental skills to take
over a project at any stage that it became necessary. The creation of
that staff also was desirable so that the company would be in a position
to offer services in those situations where there are no sponsors
willing or able to absorb the financial risk of developing a particular
project. The development and codevelopment of low and moderate income
projects became a natural adjunct to Security Properties' syndication
business.
As indicated by the list of projects developed by Security Properties
attached, development activity has been accelerating at a rapid pace.
Security Properties was one of the first companies to develop- Section
8 projects in the Northwest and continues to be the most active Section
8 developers in that region. As the project list indicates, however,
Security Properties has also been active in other parts of the country
and is sponsoring market rate as well as subsidized housing.
Security Properties Development, Inc. is oriented toward market-rate
FHA insured and conventionally financed projects on a nationwide basis.
Officers and Staff of Security Properties Development, Inc.
PAUL H. PFLEGER, Chairman of the Board/Director, attended Western Reserve
University, Cleveland, Ohio. Prior to organizing Security Properties, Inc.
he had been involved in financial planning and money management, including
securities, insurance, real estate analysis and tax and estate planning.
He served as a registered representative for several securities firms in
the mid-western United States and was a principal in Hunt-Pfleger &
Associates, a financial planning and insurance firm.
2201 6TH AVENUE/SEATTLE WASHINGTON 961211(2061671A113
ROGER A. RIEGER, Vice Chairman and Secretary, and President of Security
Properties, Inc. , obtained a Bachelor of Science in Accounting from the
University of Kansas and a Master of Business Administration from the
University of Michigan. Mr. Rieger is a Certified Public Accountant
in the states of Colorado and Washington. Formerly, he was Treasurer of
Sabra Enterprises, Inc. , an apartment and condominium developer in
Denver, Colorado. From 1968 to 1973 he was associated with the Denver
office of Arthur Andersen & Co. , Certified Public Accountants, where
he was a Tax Manager. He has overall responsibility for the acquisition
and structuring of apartment developments for syndication by Security
Properties, Inc. as a tax shelter investment.
CAROL C. LITTLE, President, is a graduate of Memphis State University
and has done graduate work in finance and real estate. Previously, she
served as Development Manager for UMIC Housing Development Corporation
in Memphis, Tennessee from 1974 to 1978. She is an FHA approved Housing
Consultant. She is responsible for overall administration as well as
initiating new projects, arranging financing, and coordinating joint
venture developments.
COLETTE L. WEBER, Vice President, graduated from Louisiana State
University and did post graduate work at the University of California
at Berkley. She was with the Raymond D. Nasher Company in Dallas, Texas,
and prior to joining Security Properties Development, Inc..-, she was
Development Assistant for American Development Corporation in Denver,
Colorado. She is responsible for monitoring projects during the
construction period and coordinating the processing of construction loans.
Five active affiliated corporations and numerous partnerships provide
a variety of supporting services and programs. The principals and staff
of attorneys, accountants, mortgage bankers, real estate evaluators,
insurance brokers, and management specialists provide the skills and
experience in the areas of project acquisition, investment planning,
project development, and real estate management. A partial list. of
key personnel of the affiliates follows: •
JAMES L. YOUNG, Executive Vice President/Chief Operating Officer,
graduated from Western State College with a Bachelor of Arts Degree in
Education. He spent four years with HUD as Assistant Secretary for
Housing, Federal Housing Commissioner in Washington, D.C. , and as
Regional Administrator in Seattle, Washington. Previously he served as
Chairman of the Northwest Federal Regional Council , as Regional
-Director of the Office of Economic Opportunity, and in various capacities
with Community Action Agencies. He also is President of First Columbia
Managment, Inc.
-2-
KENNETH A. KELLER, Vice President/Finance and Administration, graduated
from Western Oregon State College in 1966 and received an MBA in Finance
from the University of Oregon in 1973. He is a Certified Public Accountant.
He worked with Peat, Marwick, Mitchell & Co. in the Portland office,
leaving in 1981 as a Senior Audit Manager to join Security Properties, Inc.
JOHN J. HANSMAN., Vice President/Syndications, obtained a Bachelor of Arts
Degree in Accounting from the University of Washington and is a Certified
Public Accountant. Formerly he was with the accounting firm of Mark
Ruljancich and Company, Certified Public Accountants, Bellevue, Washington.
MARTIN M. MADSON, Vice President/Acquisitions, obtained a Bachelor of
Science Degree from the University of Arizona and a Masters of Business
Administration Degree from Santa Clara University. Previously he served
as Assistant Vice President for Kaufman and Broad Asset Management, Inc.
where he was responsible for the acquisition of HUD multifamily develop-
ments for syndication. Prior to that, he was engaged in various activites
related to multifamily housing in California, Arizona, and Nevada. He is
responsible for the acquisition of apartment developments for syndication
by Security Properties, Inc. as tax shelter investments.
RUSSELL E. LOMAX, Vice President, attended McCook Junior College, McCook
Nebraska and the University of Washington. He is a Certified Public
Accountant. Formerly, he was associated in the retailing industry with
Weisfield's, Inc. from 1968 to 1973, and Doces Sixth Avenue, Inc. from
1962 to 1968. Prior to that he was affiliated with the natural gas
industry: Cascade Natural Gas Corporation, Pacific Natural Gas Company,
and William P. Harper & Son Company.
RICHARD J. ALLEN, Vice President/Asset Management, received a Bachelor of
Arts Degree from Washington State University in 1956. From 1961 to 1981
he was employed by Sherwood & Roberts, Inc. , most recently as Regional
Vice President for the Northwest Region responsible for all real estate
and financial lending accounts. He holds the Senior Residential Appraisor
designation, Certified Mortgagor Banker designation, and is a licensed
Real Estate Broker in the state of Washington.
•
•
-3-
AFFILIATES OF SECURITY PROPERTIES DEVELOPMENT, INC.
SECURITY PROPERTIES, INC. , was organized in 1969 by Paul H. Pfleger,
currently Chairman of the Board. At its inception the Washington
corporation was used as a personal service corporation for Mr. Pfleger
in his financial planning activities. In 1971, in response to persons
seeking conservative, predictable methods of reducing their tax burden,
Security Properties became active in syndicating real estate underwriting
specializing in tax shelter programs which utilized FHA-insured low
and moderate income apartment projects . -
Security Properties is one of the largest syndicators of FHA-insured nro-
jects in the country. The company has raised over $130 million for more
than 250 projects since 1969. Through the partnerships that it has
formed, the company now controls more than 28,000 units of low and moder-
ate income housing. The projects are located in 38 states. A summary of
syndications by Security Properties is attached.
FIRST COLUMBIA MANAGEMENT, INC. was formed in 1977 by Security Properties
to provide efficient and effective operations management for its com-
pleted projects . The company currently manages projects in 22 states and
continues to expand its operations nationwide. In addition, under the
direction of James L. Young, President, FCMI has begun an aggressive
program of soliciting management of apartment projects not controlled by
Security Properties or it's affiliates. FCMI has two affiliated management
companies: the J. L. Moyer Company, operating in Southern California and
Midwest Multi-Family Management, Inc. , operating in several Midwest states.
FIRST COLUMBIA CORPORATION was formed in 1973 to be the broker-dealer
affiliated of Security Properties. It is now wholly owned by Mr. Pfleger,
Chairman of Security Properties, Inc. It is a member of the National Associa-
tion of Security Dealers, Inc., and is the principal placement agent for
Security Properties' projects.
THE SECURITY PROPERTIES PARTNERSHIPS are a series of General Partnerships
composed of the principals and officers of Security 'Properties, Inc. These
partnerships participate as a general partner in properties syndicated by
Security Properties. The other co-general partner is usually the developer.
FRASER AGENCIES, INC. was formed in 1974 to provide casualty, property, and
liability insurance and is authorized to write all forms of insurance
throughout the United States, including insurance on properties syndicated
by Security Properties. Fraser Agencies, Inc. is the risk management arm of
Security Properties and through it's pooling efforts is able to provide more
extensive underwriting coverage at low premiums.
SP ENERGY DEVELOPMENT CORPORATION was formed in August, 1981 to manage
limited partnerships formed to explore for oil and gas . SP Energy drilled
18 wells in 1981 located in Northern Oklahoma and Western Pennsylvania.
In 1982 the company expects to have a drilling budget of approximately
$12 - $14 million. SP Energy is supported by field operating units located
in Nowata, Oklahoma and Geneva, Ohio.
-2-
PROJECTS DEVELOPED BY SECURITY PROPERTIES DEVELOPMENT, INC. ,
SECURITY PROPERTIES, INC. AND THE SECURITY PROPERTIES PARTNERSHIPS
PROJECT NAME NO. OF TOTAL COST OF
& LOCATION UNITS CONSTRUCTION TYPE CONSTRUCTION
* Security House 107 13 story $ 3,817,291
Seattle, Washington Elderly
-- * Bannock Arms 66 8 story 2,145,400
Boise, Idaho Elderly
* Commencement Terrace 168 15 story 5,016,249
Tacoma, Washington Elderly
* Clifford L. Lund Residence 158 6 story 4,059,205
Superior, Wisconsin Elderly
* Lakehurst Apts Phase II 160 Garden 5,175,000
Waukegan, Illinois Elderly
* Winhaven Apts Phase II 118 8 story 4,025,210
Winona, Minnesota Elderly
* International House 99 8 story 4,132,111
Seattle, Washington Elderly
* Alaska House 105 9 story 3,850,380
Seattle, Washington Elderly
Allison Village 37 Walk-up 1,351,640
Arvada, Colorado Family
North Omaha Homes 48 Detached 1,788,110
Omaha, Nebraska Family Rehab
* The Parkview 63 Garden 2,222,200
Spokane, Washington Family
— * River Oaks Apts 152 Walk-up 3,327,986
Waco, Texas Family Rehab
— * Cypress Apts 268 Walk-up 9,648,057
Lake Charles, Louisiana Family
* 1212 South Michigan 344 34 story 19,399,555
Chicago, Illinois Family/Elderly
* The Quad 120 Walk-up 4,492,181
Everett, Washington Family •
PROJECT NAME NO. OF TOTAL COST OF
& LOCATION UNITS CONSTRUCTION TYPE CONSTRUCTION
The Grandview 48 Walk-up $ 3,250,000
Breckenridge, Colorado Family
* Woodsvilla 50 Townhouse 1 ,621 ,650
Elma , Washington Family
*Lakewind East 372 Walk-up 14,946,116
New Orleans, Louisiana Family
Good Samaritan Village 203 1 & 10 story 8,999,617
Maumelle, Arkansas Elderly
Security Vista 31 Frame, Elevator 1 ,275,000
Seattle, Washington SHA Elderly
Turnkey
Fisherman's Landing 200 Walk-up 7,658,700
Bradenton, Florida Family
Fisherman's Village 280 Walk-up 10,891 ,050
Orlando, Florida Family
Roy Street Apartments 57 Frame, Elevator 2,717,952
Seattle, Washington SHA Elderly
3,253 Turnkey 125,810,685
* Managed by First Columbia Management, Inc. , an affiliate of :
Security Properties Development, Inc.
-2-
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security pacific, inc.
w
Cover clockwise from le_fr:
1212 South:Michigan
Michigan
Chicago,IL
344 Units
Government Programs:221((/)(4) yO3;/ / e�� 8,
Section 8-20% i iy �r //lg;�� ::,.:1:
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Acquired:Aearth.1980 �/
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Long Beach,CA
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palatine.ii de ., .:';3. ,.
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Acquired March,1077 ry [�� �� h e ,_
Inside It It clockwise: 'FIIIIIli Iiii i - x
Ldinbndg< In-7tnk(j Ira I le i 1 5 �� -�>, i
II to lac I� , ' w
rinley ParK IL aw —
309Units :AL - •'.
Consulate
Goternmern Program:II IDA YW. �_
Acquired September 19;4 12 ri.
aims SECURITY PACIFIC,INC.: Volatile interest rates. coupled mortgages insured by the Department of
A PROFILE with a diminishing supply and growing Housing and Urban Development(I HUD—
In today's highly competitive and demand for apartments have further and has always strived to maintain a
attractive real estate market,Security increased the attractiveness of this good working relationship with the
Pacific,Inc.(SPI)operates from a position investment. In order to obtain its goal Department.
of experience and professional depth. of achieving significant returns to its
In the past 13 years,SPI and its investors,SPI shall continue to play an ma THE SPI AFFILIATES
affiliates have provided a full range of active role in all aspects of real estate SPI's team of real estate
services including real estate syndica- management professionals continues to gro\v and
lion, management, and development. As a syndicator,SPI forms has expanded and diversified into area
SPI and affiliates currently provide limited partnerships for the purpose of related interest.The following is an
management services nationwide for 01 directing investor dollars into quality overview of the SPI affiliated organiza-
improved real estate properties valued rental properties located throughout the lions today —
at a cost of nearly 53 billion. United Slates. These rental properties,
Established in 1969 by Chairman which are primarily apartment cum- as First Columbia Management,
Paul 11. I fl(ger.SPI has expanded into plumes,generally enjoy some forrn of Inc.(FCMI)was established by SPI in
a multi-faceted group of companies government assistance. 1977 as its property management
that employs over 1.000 professionals Because the principals of SPI affiliate. The company provides rental
with knowledge and experience in real assume the risks and rewards of being property management,as well as
estate, law tax.property management individual general partners in the limited construction and development super _
and insurance. In recent years.SPI has, partnerships,they share a community vision for SPI investment partnerships
through several of its affiliates.diver- of interest with the limited partners to and other owners of income producing
sified into energy programs, computer ensure that the partnership assets are properties.Property management is one
software systems and satellite cam- properly managed. In addition.they are of the most critical factors in maintainirit
munications. responsible for partnership manage- the value of real estate investments.an
SPI has built a solid reputation merit, partnership record keeping and FCMI has a proven track record in this
based on its experience in the syndtea- reporting to the limited partners on the area of responsibility Through a network
tion of government assisted apartment progress of their investments. of seven regional offices,FCMI currentl—
contmunities. II has chosen this invest- ;As an industry leader in goy manages nearly 40,000 multi-family
meet medium for the tax benefits, high ernment assisted apartments,SPI was rental units in 31 states and the District of
leverage,controlled risk and capital one of the first syndicators to provide Columbia, ranging from luxury coilUv
VV I
9pproeinfinn tkPSP invekcfmonfg otter equity funding for properties with —
�.-r /, coonan xess
Gtr err molt Paurath 22110841
i'11y ,. 1
'l' 'SYx- 'i 95. , s :' .4c quimd June 1976
'9113-I Abi
1:9;}]_x3.
ID:.- - Alpine Slopes 11
�sli�;e, , ay Grand Rapids,AN
.ai 4 , 120 Units
` .. t i • 9. IA Ift -It �I� II 13 Cueemmetit Ping rani 221g be)
'- .i�y *;f Acquired Alarch.1978
r� �"�"- Inside right.clockwise
Atrium Village
Chicago.IL.
Illibli..,.. 205 emits
s. Couernmenl Program:236
°ffi'3 l; Arcittired A log.1977
e
31E NN all �t.� t ` ,/ '` Circlera tt'trsll
■a.'
- yy 444 4, r Fairfax.Va
14\\,, Ot % (O5 UnOs
IP !� t ems.., �� Gorernnlenl Program:2211rU14)
Em W '� ��p��` Bi: p ry Acquired Mk/.1982•rub 0 ■R 5\ W 'y 41 .1 Greenleaf
I ill 13olingbrzxlk,II.
d •
h A a yr , 285 Lints
J4 � ,.*° _ t bp M y `•, Gooernrneirt l'rogram:ll lllA
9Oq n n R
` ,;: au w Ac gtnrz-d Decembe61995
miniums to modest rentals. FCMI, with formed in 197310 act as principal place- agement companies with a special em-
-staff of over900 professionals, is con- meal agent for SP'partnership offerings. phasic on those companies managing
nuing to expand by contracting to man- PCC"s direct sales force consists of over government assisted apartments.
cige additional apartment complexes. 60 registered representatives situated
FC MI:`;ability to use the latest throughout the country, in addition,FCC) s IREMCO&Partnership Ser-
omputc rtechnology and its proven has distribution relationships with over vices,Inc.(PSI)are service companies
putation with I IUD led to the(tom- 100 independent broker/dealers. purchased by an SP1 affiliatein 1981.They
pain's award in 1982 of a major subcon- act as general partner for a series of
tract through an affiliation with l)ata sr Security Pacific Development, partnerships controlling some 65 apart-
rompt a Maryland based data process- Inc.(SI)D1)develops market-rate and meal complexes.SPI has assumed the
ig firm to supply automated property subsidized PHA-insured.tax-exempt and partnership management obligation for
and financial management accounting conventionally-financed apartment those partnerships and FCMI performs
)r HUD's nationwide network of multi- communities nationwide. Retort)incur- the properly management functions on
imily properties. In this capacity PCMI porating in 1981. it functioned as the some of the properties owned by these
. `ill be responsible for paying vendors' Development Division of SPI for six entities.
hills and for the processing and trans- gars.Since the inception of develop-
-,fission of accounting data to the Data metal activity, it has produced 19 apart- s SP Energy Development Com-
'rompt Maryland Center, for approxi- meat complexes comprising nearly pany,formed in 1981, explores for oil and
ma1e1y40,000I ILA D apartment units. 2,770 units, with mortgages totalling gas through controlled drilling in areas of
I C x1t has acquired two Los over S101.5 million. proven reserves within the continental
,ngeles area affiliates, The 1 Mover United Stales Its partnership offerings
tornpanv ,tncl Dahl-Davis Management a Fraser Agencies,Inc.,formed provide a quality investment alternative
CotnpanA:and oversees Iheoperation of in 1981,provides casualty property and tor SI'1 clients.
-Properties managed by them in South- liability insurance for SPI properties, and
rn California. Another affiliate Midwest othet properties owned by independent sr Unlimited Communications,
- lulti-Family Management.Inc_operates parties. formed in June 1982 as a Washington
in several michvestern states. general partnership,is a satellite master
Project Data Systems,Inc. antenna television(SMAlV)firm specif-
a First Columbia Corporation (I'DS).formed in 1980. markets and ser- ically geared to provide high quality
IFCCI,a member of the National Asso- vices property management computer satellite cable television transmission to
ciation of Securities Dealers, Inc., was software systems for real estate man- nom-In-tent col nmunities.
V4 FarlejC
,rg , p+ nI T Queensgate it
d
� } Cincinnati.011 —
.0 238 Units
Government Program:236 Elder)!
' A c . Acquired June,1982
k .,, rv" " ,„_
( 9" 8 Left:
%Oodcreek Apartments
Beaverton.OH
i
_ nl 240 I.
.. Conventional Financing —
)' -' Acquired October,1982
SPI Profile
Ih I dluvl I I II ',ul i nrn,ol«.; nJl„wi,n ul�I h" �qn' I I ':-u ln:�„ I ull,orb,tnrinc�
1 LI III i 'I I1.4_
r• ^err, nl'I 11,cr�u 'n11 IULL I-I p I' I,nr,l _'4t1
if 51'I.Ainnu ) I .mlumlp, Inc nil. inl
no.,,t 'HU, R.li-, iI.
!L l.�vi,.noo
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VI�.Itm lrl AI nac, LI I1v I'�]If A ,iii,
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-SPI CORPORATE OFFICERS Carol C. Little ass,AUDITORS
Vice President/Development
Paul H. Pfleger President,Security Pacific Arthur Andersen&Company
Director and Chairman of the Board Development,Inc. Norton Building
Seattle,Washington 98121
Roger A. Rieger William S.Bennett
President President,SP Energy Development — BANKERS
Company
James L.Young Security Pacific National Bank* _
Executive Vice President Richard J.Allen 2114 Broadway
Chief Operating Officer Vice President/Partnership Management Oakland,California 94612
President,First Columbia
Management, Inc. John J. r lansman aims EXECUTIVE OFFICES —
Vice President/Syndications
Frederick G. Tripp Blanchard Plaza
Senior Vice President Russell E. Lomax Sixth&Blanchard
Chairman of the Board, First Vice President Seattle,Washington 98121
Columbia Corporation (206)623-8313
Martin M. Madson (800)426-9242
Kenneth A. Keller Vice President/Acquisitions —
Measurer,Vice President/Finance and 5515 Security Lane
Administration Orest M.Prockiw Rockville,Maryland 20852
Vice President (301)984-2333
(800)638-7933 —
David King
Secretary/General Counsel Michael C. Moore
General Counsel,First Columbia Vice President/Sales and Marketing azir REGIONAL OFFICES
Management, Inc. FIRST COLUMBIA MANAGEMENT,
John A.Taylor INC.:
John M. Orehek Associate General Counsel
Vice President Atlanta,GA;Chicago, IL;Dallas,TX;Los
President,First Columbia Corporation '(s(curityPaci)ic Inc.has no association with Angeles.CA;San Francisco,CA;Seattle,
seeuloP0008iO atioli,sect ityPugflc'lotiuuui afq:WIShhgton,D.C.
Bank,or any affiliates or subsidiaries thereof.)
FINANCIAL STATEMENTS
OF APPLICANT
WHEELER REALTY COMPANY
•
•
•
•
WINTER REALTY MMPANY •
FINANCIAL STATEMENTS
}OR THE YEAR TIDED
DECEMBER 31, 1979
1331 6YR AVENUE PHONE 13031 336.1331 GREELEY. COLORADO P0631
April 1, 1980
BOARD OF DIRECIORS
WHEELER REALTY COMPANY
Members of the Bnard:
Enclosed are the financial statements of Wheeler Realty Ccapany for the
year ended December 31, 1979.
A brief review of the operating highlights is presented below and on the
following pages.
STATEMENT OF FINANCIAL CONDITION
• The decrease in working capital of $237,847 was largely attributed to
completion of an expansion program during 1979, which had been started in 1978,
to provide better facilities to house the Greeley Branch office. This program
alone cost $485,000, of which only $200,000 was financed with long-tern money.
In addition, the acquisition of 100% of the Greeley Plaza Apartments and
reclassification as an investment resulted in a substantial change in the
utilization of working capital. The Greeley Plaza Apartment complex is presently
under contract for sale and should result in a total recovery of capital.
• A further analysis and explanation of the source and application of
funds is presented on the following pages.
JOHN R. P. WHEELER. REALTOR • MEMBER - AMERICAN INSTITUTE OE REAL ESTATE APPRAISERS - AMERICAN SOCIETY OF REAL ESTATE COUNCILORS
NATIONAL ASSOCIATION of REAL ESTATE BOARDS
SOURCE AND APPLICATION OF FUNDS
FUNDS PROVIDED
Net Profit fran operations 269,273
Plus:
Expenses not requiring current expenditures:
Depreciation 94,652
Treasury Stork contributed to ESOP 100,000 194,652 463,925
Increase in long-teen liabilities 511,893
Decrease in long-term receivables 25,555
Decrease in working capital(See Schedule) 237,847
'AWN, FUNDS PROVIDED 1,239,220
FUNDS APPLIED
Increase in investments 250,159
Increase in fixed assets - net 539,061
Acquire Treasury Stock 450,000
7tIPAL FUNDS APPLIED 1,239,220
•
CHANGLb IN WORKING CAPITAL
• Increase
1979 1978 (Decrease)
CURRENT ASSES
Cash 274,492 439,454 (164,962)
Notes Receivable 77,028 117,474 (40,446)
Accounts Receivable 382,907 267,767 115,140
Inventory 9,877,562 7,294,123 2,583,439
Accrued Interest Receivable 21,110 25,001 (3,891)
Prepaid Expenses 143,913 94,284 49,629
Total Current Assets 10,777,012 8,238,103 2,538,909
TRSS: •
CURRENT LIAF3ILITTES
Notes Payable 7,940,998 4,702,189 3,238,809
Accounts Payable 458,441 704,946 (246,505)
Customer's Deposits 206,842 245,456 (38,614)
Federal and State Income Tax 56,730 399,557 (342,827)
Payroll Taxes 41,841 7,110 34,731
Accrued Expenses
Salaries and Caornissions 6,331 15,533 (9,202)
Property Taxes 36,615 29,053 7,562
Insurance 22,730 23,049 (319)
Interest 285,831 152,710 133,121
Total Current Liabilities 9,056,359 6,279,603 . _ _2,776,756
WORKING CAPITAL 1,720,653 1,958,500 (237,847)
COMPARATIVE STATEMENT OF INCOME AND EXPENSE
1979 1978 1977 1976 1975
Inane 5,527,084 4,526,934 3,901,708 2,462,300 1,781,986
Less:
Expenses 5,179,743 3,522,542 3,161,472 2,105,143 1,581;770
Inane Before Taxes 347,341 1,004,392 740,236 357,157 200,216
Less:
Provision For Taxes 78,068 399,557 295,337 145,641 43,484
NET INCOME 269,273 604,835 444,899 211,516 156,732
Net Income Per Share 3.59 8.06 5.93 2.82 2.08
(Adjusted to 75,000
shares outstanding) -
STATEMENT OF INCOME AND EXPENSES
Fran an operating stand point, 1979 was a very complex year to analyze.
Internal and external factors had an impact on the results of the year's
activities in both positive and negative ways. The overall result was a very
substantial reduction in net incase of 55.5 percent, decreasing fruu $604,835
in 1978 to $269,273 for 1979, a decrease of $335,562.
A summary of the two major divisions of the company is shown below:
Construction &
Total Brokerage Development
Income 5,527,084 1,750,262 3,776,822
Direct Expense 3,763,489 994,099 2,769,390
Divisional Profit 1,763,595 756,163 1,007,432
Gen. and Admin. Expense 1,416,254 820,419 595,835
Net Profit(Loss) Before Taxes 347,341 (64,256) 411,597
Effective January 1, 1979, the company converted all of the Brokerage Sales
Staff from "Independent Contractors" to "Employees." The estimated cost of the
conversion amounted to $200,000 with approximately 75% incurred in 1979. Commissions .
paid to the Sales Staff were reduced to substantially recover the additional cost;
however, overall capany dollars derived fran the sales production for 1979 were
less than anticipated partially due to greater activity within the Multiple
Listing Service, resulting in a smaller share of each commission dollar being
realized by the company. This happens when more MIS sales are made rather than
100% company sales.
The capany share of commissions was considerably below anticipated results
-- for the four Brokerage offices. A comparison of commissions for 1979 with 1978
is shown below.
Increase
1979 1978 (Decreacr )
Greeley 728,845 701,725 27,120
Windsor 147,150 165,014 (17,864)
Fort Collins 362,372 367,231 (4,859)
Loveland 178,209 159,173 19,036
Total Residential 1,416,576 1,393,143 23,433
Other -- 202,537 114,099 88,436
•
Totals 1,619,113 1,507,242 111,871
Considering that, due to the employee conversion, the company received a
- higher portion of each sales dollar during 1979, and closed sales increased
$4,043,454, it must be considered that the Residential Brokerage Division
performed below expectations for 1979. This is further evidenced by the surarary
of divisional profits as shown below.
Increase
1979 1978 (Decrease)
Greeley 379,130 359,441 19,689
Windsor 71,924 111,673 (39,749)
Fort Collins 134,619 193,578 (58,959)
Loveland - 25,801 51,378 " (25,577)
Total Residential 611,474 716,070 (104,596)
Other 144,689 83,982 60,707
Totals 756,193 800,052 (43,889)
Contributing to the'pressure on Brokerage profits for 1979 was the expansion
into new offices in 1979 by the Greeley Branch. Duplicated facilities, supplies
and modernization of cariunications added in excess of $50,000 per year to the
operating cost of that branch. Also bearing heavily on Brokerage profits was an
increase of $104,310 in monies spent for advertising. A further review of this
division can be made by reference to Exhibit C.
Increases in General and Administrative Expenses were concentrated in the
accounts below and included some reclassifications as well as planned increases
in the areas of employee benefits and payroll taxes. Employee benefits included
$100,000 for the company contribution of 2,500 shares of stock to the Employee
Stock Ownership Trust.
Increase
1979 1978 (Decrease)
E ployee Benefits 285,290 92,155 193,135
Payroll Taxes 128,984 39,388 89,596
Depreciation 83,852 37,868 45,984
Interest 132,265 30,762 101,503
Salaries 522,369 403,979 118,390
Totals 1,152,760 604,152 548,608
A bright spot in 1979 activities was in the Development and Construction
Division, which maintained a high level of profit in spite of tremendous outside
pressure on profits in the form of higher financing costs.
Gross Profit Percentages were improved in both development and construction
by adoption of excellent pricing strategies in 1978-1979 resulting in a high
degree of profitability on sales. As a result, gross profit was improved by
$982,557 during 1979, rising from $2,569,466 in 1978 to $3,552,023 in 1979.
Unfortunately, expenses also increased, many not within the ability of the
company to control. A summary of the significant increases, including General
and Administrative Expenses, is shown below.
. Increase
1979 1978 (Decrease)
Loan Discount Fees 411,084 172,285 238,799
Salaries and Wages 400,913 322,514 78,399
Project Expense 80,260 32,771 47,489
Interest 940,432 509,050 431,382
Show House Expense 126,177 25,426 100,751
Totals 1,958,866 1,062,046 896,820
- Salaries and show house expense increases were planned and productivity
oriented. However, increases of $238,799 and $431,382 in financing cost were
the reason this division did not show a growth in profit for 1979. A further '
_ review of this division can be made by reference to Exhibit D.
Respectfully submitted,
WHEELER REALTY COMPANY
Stephen J. Arceneaux, C.P.A.
Controller/Treasurer
• WJIEEIER REALTY O MPANY
STATEMENT OF FINANCIAL CONDITION
Darn :ER 31, 1979
ASSETS
CURRENT ASSETS
. _ Cash 274,492
Notes Receivable: (Note 1) •
Secured 33,223
Unsecured 6,746
Officers/Affiliates/Employees 37,059 77,028
Accounts Receivable: (Note 2)
Officers/Affiliates/Employees 71,026
Refundable utility construction costs 233,693
Other. •
78,188 382,907
Inventory: (Note 3)
Undeveloped land 1,817,139
Land and development costs 4,019,219
Residential construction costs 3,861,051
Other 180,153 9,877,562
Prepaid Expenses 143,913
Accrued Interest Receivable 21,110
Total Current Assets 10,777,012
INVESTMENTS AND LONG-TERM RECEIVAETRS
Notes Receivable: (Note 1)
Secured 49,809 •
Unsecured-Officers/Affiliates • 213,249 263,058
•
Investments: (Cost)
•
814 Corporation `- _ 66,150
1228 Corporation 3,200 . •
Greeley Plaza Apartments (Note 4) 273,070
Land development partnerships 73,211
Total Invest. and Long-Tenn Receivables 415,631
FIXED ASSETS (Note 5) 849,590
•
TOTAL ASSETS 12,305,291
NOTE: See the accompanying notes which form an integral part of the
financial statements.
CURRENT LIABILITIES
Notes Payable: (Schedule A-1) (Note 6)
Secured 7,579,781
Unsecured 200,099
Officers and Affiliates 161,118 7,940,998
Accounts Payable - Trade 458,441
Customer deposits and credit balances 206,842
Federal and State income tax payable 56,730
Payroll Taxes payable 41,841
Accrued Expenses:
• _ Salaries, bonuses and commissions 6,331
Property Taxes 36,615
Insurance 22,730
Interest 285,831
Total Current Liabilities 9,056,359
WORKING CAPITAL 1,720,653
LONG-TERM LIABILITIES
Notes Payable: (Schedule A-i) (Note 6)
Secured 854,660
Unsecured 489,451
Total Tong-Term Liabilities .. 1,344,111
STOC[QIDIDERS' EQUITY
Cacmon Stock, For value $10
Authorized 300,000 shares (Note 8)
Issued 75,000 shares 750,000
Surplus from Treasury Stock Transaction (Note 9) 25,576
Retained Earnings:
Balance January 1, 1979 1,977,472
Plus - Net Profit, Exhibit B 269,273
Less: 2,246,745
Stock Dividend 742,500
Less: 1,504,245
Treasury Stock (12,500) 375,000
• Balance Decenber 31, 1979 1,129,245
Total Stockholders' Equity 1,904,821
'1O1AL LIABILITIES AND STOCKHOLDERS' EQUITY 12,305,291
WHEETPR REALTY COMPANY
NOTES PAYABLE
DECEMBER 31, 1979
Date Date Rate
of Note of
Holder Note Due Interest
- (1) Greeley National Bank/Chase 10/14/77 10/14/82 Prime + 2 3/4%
(1) Greeley National Bank/Chase 1/31/79 1/31/84 Prime + 2 3/4%
(1) Greeley National Bank/Chase 10/29/79 10/29/84 Prime + 2 3/4%
-- (1) Greeley National Bank/Chase 10/29/79 10/29/84 Prime + 2 3/4%
(1) Greeley National Bank/Chase 10/29/79 10/29/84 Prime + 2 3/4%
_ (2) Greeley National Bank/Chase 7/15/77 7/15/80 Prime + 2%
(2) Greeley National Bank/Chase 7/15/77 7/15/80 Prime + 2%
(2) Greeley National Bank/Chase 7/15/77 7/15/80 Prime + 2%
(2) Greeley National Bank/Chase 7/15/77 7/15/80 Prime + 2%
(2) Greeley National Bank/Chase 7/15/77 7/15/80 Prime + 2%
(2) Greeley National Bank/Chase 7/15/77 7/15/80 Prime + 2%
(2) Greeley National Bank/Chase 7/15/77 7/15/80 Prime + 2%
Greeley National Bank 12/19/78 1/01/80 Prime + 1 1/2%
Central Bank of Greeley 2/20/79 2/20/80 Prime + 1 3/4%
(3) Northern Colorado Savings and Loan 6/14/79 Monthly 10%
- (4) Northern Colorado Savings and Loan 11/29/79 Monthly 13 1/2%
(4) Northern Colorado Savings and Loan 2/16/79 2/16/80 10 1/4%
(4) Northern Colorado Savings and Loan 4/17/79 1/16/80 .10 1/4%
- (5) Central Bank of. Greeley 6/04/79 6/04/80 Prime + 1 3/4%
(3) Northern Colorado Savings and Loan 1978 Monthly 10 1/4%
(3) Western Federal Savings and Loan 7/24/79 Monthly 11% -
Virginia Hills Development Co. 1979 Demand Prime + 2 3/4%
Seven Lakes Reservoir Company 3/27/79 3/27/81 N/A
Greeley National Bank 6/25/79 Monthly 11.50%
Cache Investment Company 1979 Demand Prime + 1%
Great Northern Investment Canpany 10/30/79 Demand 15%
(6) Jack L. Schreiber 9/01/79 Quarterly 8.9%
(7) David J. Stephens 1/15/74 10/15/85 9%
- (8) Cameron and Elizabeth Herring 9/01/77 9/01/97 7%
(9) C.C. Chaney and Paul L. Rice 9/14/78 9/15/82 8 1/2%
Platte Valley Investment 1979 1980 -0-
Samuel S. Telep 1/12/79 1/12/83 Prime
Henry H. and Effie Brunner 1/12/79 1/12/86 8%
Burroughs Corporation
Greeley Plaza, Limited Partners
•
Balance
Outstanding ----CLASSIFICATI0N----
12/31/79 Current . Long-Term Collateral
760,685 760,685 Land & Dev. - Country Club
400,000 400,000 Land & Dev. - Mountain View II
270,000 270,000 Land & Dev. - Brown Faun VI
750,000 750,000 Land & Dev. - Northlands
566,000 566,000 Land & Dev. - Bittersweet Nora
405,977 405,977 • Res. Const. - Brown Farm
353,867 353,867 Res. Const. - Virginia Hills
208,942 208,942 Res. Const. - Country Club
499,967 499,967 Res. Const. - Loveland
481,901 481,901 Res. Const. - Bittersweet
361,215 361,215 Res. Const. - Windsor
442,405 442,405 Res. Const. - Encarrpnent
500,000 500,000 Working Capital Tnan-Unsecured
7,000 7,000 Rev. Line utilized in trade prc
244,783 244,783 Three Showhones - Fairway 4
329,085 329,085 Res. Const. - Fairway 4
162,400 162,400 Res. Const. - Fairway 4 •
78,800 78,800 Res. Const. - Fairway 4
150,000 25,000 125,000 Radio Conenunication Network
98,290 98,290 Two Showho:res - Greeley
216,124 -- 216,124 Five Shia/Ames - Griy. & Ft. O
77,000 77,000 Unsecured
101,816 101,816 Lots in Loveland, Colorado
194,445 11,995 182,450 . Building - Greeley, Colorado
146,118 146,118 Unsecured
15,000 15,000 Unsecured
442,550 . 78,099 364,451 Unsecured - Treas. Stock Purch
50,000 13,431 36,569 Land - Greeley, Colorado
225,400 12,527 212,873 Land - Ft. Collins, Colorado
389,025 129,675 259,350 Land - Loveland, Colorado
98,700 98,700 Lots in Evans, Colorado
100,000 25,000 75,000 Land - Windsor, Colorado
80,583 8,180 72,403 Land - Windsor, Colorado .
32,031 16,016 16,015 Burroughs B800 Caputer
45,000 45,000 Unsecured
_ 9,285,109 7,940,998 1,344,111
See Schedule-h-2 for footnotes and comments relative to Schedule A-1,
WHEELER REALTY COMPANY
NOTES PAYABLE
1WiNOPES AND O)NMENTS
December 31, 1979
(1) Three years from the date of execution of the note, the balance remaining
at that time shall be divided by eight (8) to determine the quarterly
principal payments due. Installment payments in the mount determined
shall be due and payable on the first day of the fourth month following
the end of the third year and each quarter thereafter until raid in full.
Borrowers shall be given credit against any principal installment due
during the mandatory repayment period for all payments made to secure
partial releases during the two-year payout period.
During 1977, the company executed a three-year loan agreement with the
Greeley National Bank, Greeley, Colorado, and participated in by the Chase
Manhattan Bank, New York, New York, to provide a revolving line of credit
not to exceed $2,500,000 for acquisition and development of land in Weld
and Tarimer Counties in Colorado. This loan agreement was amended on
November 12, 1979 to increase the amount fran $2,500,000 to $4,000,000.
Not shown in the financial statements of Wheeler Realty Canpany is a note
dated 10/14/77, due 10/14/82, for land and development costs of a sub-
division in Greeley, Colorado. The company is a 50% partner and is the
developer and managing partner of the Partnership, Virginia Hills Development
Canpany. The loan balance and related asset value at December 31, 1979 is
shown below:
Lot values $661,500
Loan balances $478,970
% Iran to Value 72%
(2) Proceeds from these loans are utilized in the construction of single-family
residential houses including payoffs to roll lots out of the individual land
develgxnent loans to these loans. Lots and construction are financed up to
75% of the value of the completed houses. Values are established by contracts .
to purchase, appraisals, and/or values as shown in the certificate of
reasonable value for each development area. .
During 1977, the company executed a three year loan agreement with the
Greeley National Bank, Greeley, Colorado, and participated in by the_Chase
Manhattan Bank, New York, New York to provide a revolving line of credit
not to exceed $2,500,000 for residential construction purposes. This loan
agreement was amended on November 12, 1979 to increase the amount from
$2,500,000 to $4,000,000.
(3) These loans are permanent loans requiring monthly payments. The loans were
established for the purpose of providing financing for showhame complexes
in the various subdivisions. All but two (2) shcwhouses were up for sale
as of December 31, 1979. All loans are assumable.
(4) These loans were originally construction loans that rolled directly to
permanent loans. All of the houses in this group are up for sale in the
regular sales programs of the Company. All loans are assumable.
(5) The loan with Central Bank is renewable at maturity.
(6) On September 1, 1979, the Company enteted into a stock purchase plan with
Jack L. Schreiber, a former officer/stockholder of the Company, to acquire
all of the stock owned by Mr. Schreiber. The total consideration paid for
Mr. Schreiher's 20% interest, and a covenant not to compete, was $500,000.
The balance of $442,500 is payable over an eight-year period in quarterly
installments of $19,525.
(7) The note calls for a 10% payment of principal each year. The deed of •
trust provides that at any time after January 15, 1977, at the options of
the borrower, a certificate of deposit in an amount not less than two
annual principal payments, may be substituted as collateral on the note
to replace the deed of trust. At such time the deed of trust would be fully
released. There is no provision for prepayment.
(8) Principal payments shall be not less than 5% nor more than 30% in any one
calendar year, cormencing September 1, 1978. The deed of trust provides
for release of land on the. basis of $3,150 for each acre requested to be
released. Note may be paid in full anytime after the third anniversary
date without penalty.
(9) The balance of $389,025 is payable in three (3) equal installments on
September 15:of each year. Releases may be obtained upon payment of
$5,000 per acre.
STATEMENT OF INCOME AND EXPENSE
FOR THE YEARS ENDED DECFSIBER 31, 1979 AND 1978
Increase
1979 1978 (Decrease)
INCOME
Ccnnissions - Net to Canpany 1,619,113 1,507,242 111,871
Sale of Real Estate - Gross Profit 3,552,023 2,575,682 976,341
(Exhibit D)
Management Fees and Services 113,076 105,226 7,850
Other 242,872 338,784 (95,912)
Total Inane 5,527,084 4,526,934 1,000,150
DIRECT DIVISIONAL EXPENSES
Advertising 233,161 160,667 72,494
Showhouse Expense 128,028 49,548 78,480
Commissions 724,661 590,471 134,190
Loan Discount Fees 411,084 172,285 238,799
Abstract, Title Policies, etc. 52,365 36,662 15,703
Vehicle Expense 48,273 31,485 16,788
Office Expense 69,984 30,543 39,441
Salaries 601,458 621,909 (20,451)
Interest 859,310 485,093 374,217
Insurance 31,638 45,143 (13,505)
Taxes 41,168 31,476 9,692
Telephone & Utilities 104,363 55,736 48,627
Project Expense 80,260 26,838 53,422
Engineering and Other Professional 25,191 9,945 .15,246
Warranty 109,489 87,017 22,472
loan Carnnitment Fees 30,502 71,311 (40,809)
Dues and Subscriptions 7,606 11,410 (3,804)
Travel 2,088 1,745 343
Rent 79,397 49,228 30,169
Other Costs 123,463 116,850 6,613
Total Divisional Expenses .3,763,489 2,685,362 1,078,127
GENERAL AND ADMINISTRATIVE EXPENSES 1,416,254 837,180 579,074
Total Operating Expenses 5,179,743 3,522,542 1,657,201
NE? INCOME BEFORE TAXES 347,341 1,004,392 (657,051)
Less:
PROVISION FOR INCOME TAXES 78,068 399,557 (321,489)
NEP INCOME TO RETAINED EARNINGS 269,273 604,835 (335,562)
NET INCOME PER SHARE OF STOCK 3.59 8.06 (4.47)
(75,000 shares outstanding)
WFIE• REALTY COMPANY
• OPERATING STATEMENTS •
BROKERAGE AND SERVICE DIVISIONS
FOR THE YEARS ENDED DECEMBER 31, 1979 AND 1978
-'IOIAL-
Increase
1979 1978 (Decrease) Greeley
__ INCOME -
*Conmissions 1,619,113 1,507,242 111,871 728,845
Fees 113,076 105,226 7,850
Trade Program 6,776 6,216 560 8,543
Other 11,297 58,563 (47,266) 1,754
Total Income 1,750,262 1,677,247 73,015 739,142
- DIRECT EXPENSES
Advertising • 233,161 128,851 104,310 103,795
Vehicle Expense 15,014 14,773 241 5,454
— Commissions & Incentives 25,082 2,281 22,801 -16,776
Office Expense 69,984 30,543 39,441 26,602
Rent 79,397 49,228 30,169 30,864 .
Salaries 418,890 477,274 (58,384) 110,305
Telephone & Utilities 65,473 34,773 30,700 29,473
Travel 2,088 1,745 343 377
Dues & Subscriptions 7,606 11,410 (3,804) 907 .
Showhouse Expense 1,851 24,122 (22,271) 997
Loan Ccnmitment Fees 15,502 57,910 (42,408) 6,201
Conferences & Training 4,902 4,902 1,530
Other Expenses 55,149 44,285 10,864 26,731
Total Direct Expenses 994,099 877,195 116,904 360,012
-DIVISIONAL PROFIT 756,163 800,052 (43,889) 379,130
Less:
GENERAL AND ADMINISTRATIVE EXPENSE 820,419 ' 430,622 389,797
NET PROFIT(rn5S) BEFORE TAXES (64,256) 369,430 (433,686)
•
*Brokerage commissions include intra-divisional payments of approximately $454,700 in
1979 and $346,900 in 1978, representing commissions paid by the Construction Division
_ to the Brokerage Division. These commissions are shown as an expense in the Construction -
Division and income in the various brokerage offices. No intra-ccnpany eliminations
have been made since managements considers the preservation of divisional integrity
of prime importance. .
•
Fort Farm & Property
Windsor Collins Loveland Commercial Ranch Appraisal Management
147,150 362,372 178,209 71,124 71,246 60,167
34,220 78,856
(1,767)
291 9,252
147,441 362,372 176,442 71,124 71,246 34,220 148,275
22,909 62,352 33,162 6,203 3,969 771
22 1,650 7,888
4,745 2,427 1,134
6,940 16,124 15,599 452 199 712 3,356
10,368 19,405 18,360 400
20,528 94,323 46,295 6,000 3,600 30,000 107,839
5,005 16,247 14,496 252
320 162 1,092 137
- 222 1,953 2,571 300 1,012 641
371 483
1,860 4,651 2,790
- 403 895 633 1,441
2,217 8,821 14,026 1,356 1,234 208 556
75,517 227,753 150,641 14,011 10,952 . 31,932 123,281
71,924 134,619 25,801 57,113 60,294 2,288 24,994
WHEELER REALTY COMPANY
GENERAL AND ADMINISTRATIVE EXPENSE
FOR THE YEARS ENDED DECEMBER 31, 1979 AND 1978
Increase
1979 1978 (Decrease)
Vehicle Expense 11,044 3,397 7,647
Bad Debts 4,739 (4,739)
Contributions 440 1,000 (560)
Depreciation 83,852 37,868 45,984
Dues and Sub rriptions 6,873 4,571 2,302
Employee Benefits 285,290 92,155 193,135
Insurance 10,800 27,780 (16,980)
Interest - . -- 51,143 6,805 44,338
Legal and Other Professional 6,759 7,010 (251)
Other Costs 19,075 2,244 16,831
Office Expense 40,024 25,820 14,204
Repairs and Maintenance - Equipment 1,546 6,438 (4,892)
Salaries 304,024 226,100 77,924
Taxes - Property 9,426 5,877 3,549
Taxes Payroll 128,984 39,388 89,596
Taxes and Licenses - Other 3,552 923 2,629
Telephone 38,448 47,694 . (9,246)
Travel 11,167 5,566 5,601
Janitorial 9,828 6,207 3,621
Rent 43,625 35,300 8,325
Repairs and Maintenance 10,236 .15,185 - (4,949)
Utilities 12,038 6,021 6,017
Conferences and Training 10,799 -0- 10,799
Management Fee - 3,958 2,768 1,190
Less: •
L1,102,931 610,856 492,075
Recovery (114,512) (51,234) 63,278
Allocated to Development and Construction (168,000) (129,000) 39,000
GENERAL AND ADMINISTRATIVE 820,419 430,622 389,797
• a • REALTY COMPANY
OPERATING STATEMENT
DEVELOPMENT AND CONSTRUCTION •
FOR THE YEARS ENDED DECEMBER 31, 1979 AND 1978
•
. '1ViAL-
Increase
1979 1978 (Decrease)
- INODME
Sales 14,708,822 12,599,937 2,108,885
Less - Cost of Sales 11,156,799 10,030,471 1,126,328
Gross Profit ' 3,552,023 2,569,466 ' ' 982,557
Percentage 24.15% 20.39%
EXPENSES
Commissions 699,579 588,190 111,389
Loan Discount Fees 411,084 172,285 238,799
Abstract, Title Policy, etc. •
A52,365 36,662 15,703
Salaries and Wages 182,568 144,635 37,933
Vehicle Expense 33,259 16,712 16,547
Project Supplies and Expense 80,260 32,771 47,489
Telephone and Utilities 38,890 20,963 17,927
Contract Supervision 27,800 . 28,500 (700)
Insurance 31,638 45,143 (13,505)
Sanitary and Trash Removal 24,696 18,114 6,582
Other Costs 10,916 51,834 (40,918)
Engineering and Restaking 22,417 7,734 14,683
Warranty 109,489 87,017 22,472
Interest Expense - . 859,310 485,093 374,217
Property Taxes 41,168 31,476 9,692
Loan Cannitment Fees 15,000 13,401 1,599
Legal 2,774 2,211 563
Show House Expense 126,177 25,426 100,751
Total Expense 2,769,390 1,808,167 961,223
OPERATING PROFIT 782,633 761,299 21,334
Plus: •
OTHER INCOME
Partnership Income (Loss) (11,684) 81,782 (93,466)
Turnkey & Other Contracts 24,674 149,552 (124,878)
Rents, Discounts and Other 211,809 48,887 162,922
Total Other Incase 224,799 280,221 (55,422)
DIVISIONAL PROFIT 1,007,432 1,041,520 (34,088)
Less:
GENERAL AND ADMINISTRATIVE 595,835 406,558 189,277
NET PROFIT BEFORE TAXES 411,597 634,962 (223,365)
LAND DEVEJDPNEN RBSIDE•NPIAL CONSTRUCTION------
Increase Increase
1979 1978 (Decrease) 1979 1978 (Decrease)
3,149,275 2,768,495 380,780 11,459,547 9,831,442 1,628,105
. 2,180,750 2,155,049 25,701 8,876,049 7,875,422 1,000,627
968,525 613,446 355,079 2,583,498 1,956,020 • 627,478
30.75% . 22.16% 22.54% 19.90%
18,046 9,919 8,127 681,533 578,271 103,262
411,084 172,285 238,799
4,262 5,245 (983) 48,103 31,417 16,686
182,568 144,635 37,933
33,259 16,712 16,547
15,904 7,747 8,157 64,356 25,024 39,332
38,890 20,963 17,927
27,800 28,500 .'(700)
31,638 45,143 (13,505)
24,696 18,114 6,582
1,420 26,923 (25,503) 9,496 24,911 (15,415)
5,422 . 4,431 991 16,995 3,303 13,692
109,489 87,017 22,472
413,680 251,310 162,370 . 445,630 233,783 211,847
15,093 8,295 6,798 26,075 23,181 2,894
7,500 7,500 7,500 13,401 (5,901)
2,774 2,211 563
126,177 25,426 100,751
481,327 313,870 167,457 2,288,063 1,494,297 793,766
487,198 299,576 187,622 295,435 461,723 (166,288)
i.
(11,684) 81,782 (93,466)
18,600 86,500 (67,900) 6,074 63,052 (56,978)
50,219 50,219 161,590 48,887 112,703
57,135 168,282 (111,147) 167,664 111,939 55,725
544,333 467,858 76,475 463,099 573,662 (110,563)
W IM• • • REALTY COMPANY
a• RAL AND ADMINISTRATIVE EXPENSE
D . • •AMENP AND CONSTRUCTION
FOR THE YEARS ENDED DECEMBER 31, 1979 AND 1978
Increase
1979 1978 (Decrease)
Abstract and Recording 12 12
Property Taxes 1,741 (1,741)
— Salaries and Wages 218,345 177,879 40,466
Vehicle Expense 15,336 11,490 3,846
Telephone and Utilities 793 77 716
__ Insurance 3,400 3,000 400
Interest 81,122 23,957 57,165
Legal and Professional 13,551 10,046 3,505
Other Costs 49,257 25,163 24,094
ADP 12,756 8,899 3,857
Than Commitment Fees 2,500 (2,500)
Allocated G & A 168,000 129,000 39,000
Payroll Taxes 23,778 17,403 6,375
Depreciation ' 10,800 2,928 7,872
Office Expense 5,528 7,123 (1,595)
- Travel 5,042 6,713 (1,671)
Dues and Subscriptions 2,202 3,578 (1,376)
Conferences and Training 1,724 1,724
Less 611,646 431,497 180,149
Interest, Fees and Other Income 15,811 24,939 - (9,128)
GENERAL AND ADMINISTRATIVE 595,835 406,558 189,277
i iaoi • • REALTY COMPANY
Notes to Financial Statements
December 31, 1979
NOTE 1: Notes receivable at December 31, 1979 ware reviewed and were
considered collectible.
NOTE 2: All accounts receivable were reviewed at Decanter 31, 1979 and
any accounts considered uncollectible were written off.
Accounts receivable officers/affiliates represented various
purchases and cash advances unpaid at December 31, 1979.
Employee receivables represented amounts advanced to salesmen
against commissions and purchases made by employees through the
company.
NOTE 3: Inventories are shown at cost, which is lacer than market in all
cases. The inventories of Land, Development and Residential
Construction are pledged as collateral against notes payable.
•
Other inventory of $180,153 at December 31, 1979 is summarized
below:
Showhouse furniture $ 30,589
_ • Trade houses 146,558
Materials 3,006
- Total $180,153` •
NOTE 4: During 1979, the Company bought out the interest of all Limited
Partners in the apartment complex known as Greeley Plaza Apartments.
The Company now owns 100% and had the property for sale at
December 31, 1979. It is anticipated by management that a Gale will
result in recovery of all costs plus a profit.
NOTE 5: Fixed assets are shown at cost less depreciation carputed at rates
allowable for incase tax purposes. Computer equipment, costing
$52,774, is pledged as collateral to Burroughs Corp. Leasehold •
improvements and Land costing $358,769 is pledged as collateral
against a note payable with a balance of $194,445, at December 31, 1979.
A summary of fixed assets is presented below:
Cost Depreciation Net
Land 30,000 -0- 30,000
Automotive 17,214 11,935 5,279
Furniture & fixtures 257,983 86,217 171,766
Egmipment 290,048 55,197 234,851
Leasehold Imp. 465,761 58,067 407,694
Totals 1,061,006 211,416 849,590
NOTE 6: Notes payable are detailed in Schedule A-1, with special terms
shown thereon. All notes and interest on all notes are on a
current basis.
— The notes are classified as to current and long-term according
to the nature and terms of the specific notes. All construction
and development notes are classified current regardless of the
_ terms. Land acquisition loans are classified according to the
terms with consideration given to anticipated releases to be
requested during 1980.
— NOTE 7: All accounts payable, payroll taxes, income taxes and other
accrued payables and expenses were current.
All 1979 bills were paid according to billing provisions, and
discounts were taken in all cases, where allowed by vendors.
•
— NOTE 8: On January 26, 1979, the total authorized shares of the company
were increased fran 15,000 to 300,000 shares.
NOTE 9: During 1978 the company formally adopted an Employee Stock
Ownership Plan (ESOP) . During 1979, 2,500 shares of stock valued
at $100,000 was contributed to the plan. This stock was previously
held as treasury stock and had a cost basis to the company of
$75,000. The gain of $25,000 was shown as Surplus from Treasury
Stock Transactions.
FINANCIAL STATEMENTS AND ACCOUNTANTS' REPORT
WHEELER REALTY COMPANY
December 31 , 1981 and 1980
•
•
•
Kosmicki -Prerner-Kurtz
Certified Public Accountants
FINANCIAL STATEMENTS AND ACCOUNTANTS' REPORT
WHEELER REALTY COMPANY
December 31 , 1981 and 1980
CONTENTS
Page
ACCOUNTANTS' REPORT 3
FINANCIAL STATEMENTS
BALANCE SHEETS 4
STATEMENTS OF OPERATIONS 5
STATEMENTS OF CHANGES IN STOCKHOLDERS ' EQUITY 6
STATEMENTS OF CHANGES IN FINANCIAL POSITION 7
NOTES TO FINANCIAL STATEMENTS 8
SUPPLEMENTAL INFORMATION
DIVISIONAL OPERATING STATEMENTS 19
Kosmicki-Premer-Kurtz
Certified Public Accountants
Board of Directors
Wheeler Realty Company
We have reviewed the accompanying balance sheet of Wheeler
Realty Company (a Colorado corporation) as of December 31 , 1981 , and
the related statements of operations, changes in stockholders' equity,
and changes in financial position, and supplemental information for
the year then ended, in accordance with standards established by the
American Institute of Certified Public Accountants . All information
included in these financial statements is the representation of the
management of Wheeler Realty Company.
A review consists principally of inquiries of company
personnel and analytical procedures applied to financial data. It is
- substantially less in scope than an examination in accordance with
generally accepted auditing standards , the objective of which is the
expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modi—
fications that should be made to the accompanying 1981 financial
statements or supplemental information in order for them to be in
conformity with generally accepted accounting principles.
The accompanying balance sheet of Wheeler Realty Company as
of December 31 , 1980 , was previously examined by us and in our report
dated March 6, 1981 , we expressed a qualified opinion on the balance
sheet due to the uncertainties further discussed in Note B to the
financial statements. We have not performed any auditing procedures
since that date. In accordance with your instructions, we did not
examine the statements of operations, changes in stockholders' equity,
changes in financial position, and supplemental- information for the
year ended December 31 , 1980, and therefore we expressed no opinion on
them. lab—
February 18, 1982 p
505 Greeley National Plaza Greeley,Colorado 80631 303-356-3300
Wheeler Re
BALANC
Decern
See Accoun
ASSETS 1981 1980
CASH
Unrestricted $ -- $ 106,873
Escrow and agency funds 374 ,045 182,932
_- 374,045 289,805
ACCOUNTS AND NOTES RECEIVABLE (notes A2 and G)
-- Trade 1 ,372,714 851 ,864
Affiliates, officers and employees 644,868 384,069
Refundable income taxes (note J) 636 ,206 158 ,521
2,653,788 1 ,394,454
REAL ESTATE HELD FOR SALE
(notes A3 , D, E and G)
Undeveloped land 1 ,620 ,112 1 ,420 ,800
Land and land development 2, 197,205 4 , 168,924
Residential construction 441 ,760 1 ,822,238
Resale houses and other 188, 175 217, 574
4 ,447 ,252 7 ,629 ,536
PROPERTY, PLANT AND EQUIPMENT - AT COST
(notes A4 and G)
Buildings 358,769 358,769
Machinery and equipment 299 ,723 337 ,474
Furniture and fixtures 250,675 283, 862
Leasehold improvements 122,440 109 , 546
1 ,031 ,607 1 ,089,651
Less accumulated depreciation and
amortization 335, 159 302 ,544
696 ,448 787 , 107
Land 30,000 30 , 000
726 ,448 817 , 107
OTHER ASSETS
Investments in affiliates (notes A5 and F) 60,423 98, 104
Utility construction deposits 135,786 97 ,486
Covenant not to compete and franchise fee ,
less accumulated amortization of $33 ,770
in 1981 and $ 16,667 in 1980 (note A4 ) 39,947 33,334
Deferred income tax charges (note J) 77 ,000 80 ,000
Real estate under sales contract (note K) 334 ,000 498, 610
647 , 156 807 , 534
$8, 848,689 $ 10 ,938,436
The accompanying notes are an integral part of these statements.
4
y ompany
HEETS
I
ts' Report
1980
LIABILITIES 1981
ACCOUNTS PAYABLE AND BANK OVERDRAFT $ 190,509 $ --
Bank overdraft ! 425 ,380 349,878
Trade 182,932
— Property management and customer deposits 374 ,045 52,932
Affiliates and employees 9998,971 588 975
I 512,000
CUSTOMER LAND CONTRACT DEPOSITS (note /K) 500 ,000
'
ACCRUED LIABILITIES
729,470 497,058
i
NOTES PAYABLE (note G) .
- Collateralized by real estate held 3 ,305,411 5,865,450
for sale 2, 146, 138 1 ,571 ,001
Banks and others 301 ,368 298 ,532
- Affiliates and officers
I 5,752,917 7,734,983
i
C62,000 157,000
DEFERRED INCOME TAX CREDITS (note J)
STOCKHOLDERS' EQUITY
Contributed capital
Common stock - authorized 300,000
shares of $ 10 par value; issued)
750,000 750,000
75,000 shares i 23 ,076 23,076
Capital in excess of par value { 773,076 773,076
{ 407 , 255 1 ,050,344
Retained earnings 1 ,180,331 1 ,823,420
1
Less 12,500 shares of common stock I 375,000 375,000
in treasury - at cost i. 8--05331 1 ,448 ,420
{ $8 ,848 ,689 $10,938,436
Wheeler ty Con[2uy
STATEMENTS OF OPERATIONS
Year ended December 31 ,
See Accountants ' Report
1981 1980
Revenue
Real estate sales $5, 592,026 $9,681 ,299
Cost of real estate sold 4 , 047 , 196 7 ,428 ,636
Gross profit on real estate sales 1 ,544 ,830 2,252,663
Brokerage commissions - net of commission
expense of $ 1 ,352, 543 in 1981 and
$ 1 ,257 , 132 in 1980 747 ,035 693 ,603
Other income 192,492 258,647
Interest income 99•,604 89 ,649
Total revenue 2 ,583,961 3 ,294 ,562
Expenses
Operating 1 ,869,805 2,506,561
General and administrative 577 ,261 536,012
Interest 1 ,373 , 001 829, 254
3,820 ,067 3,871 ,827
LOSS BEFORE INCOME TAX CREDITS ( 1 ,236 ,106) (577 ,265 )
Income taxes
Refund of income taxes resulting
from carryback of operating loss 501 ,017 153,000
Deferred credit (notes A7 and 3) 92 ,000 141,000
593,017 294 ,000
NET LOSS - $ (643 ,089) $ (283 ,265)
The accompanying notes are an integral part of these statements .
5
STATEMENTS OF CHAGES
Year ende
See Accou
Capi
Common exc
stock par
Balances at January 1 , 1980
as previously reported $750 ,000 $2
Adjustment of prior year' s
( ESOP contribution (note H1 ) --
Adjustment to prior year' s
income tax liability (note H2) --
Adjustment to prior year ' s
C amortization of covenant
not to compete (note H3) --
Balances , as restated, at
January 1 , 1980 750, 000 2
( Net loss for year -- -
_ Balances at December 31 , 1980 750,000
Net loss for year -- _
Balances at December 31 , 1981 $750,000 $_
•
•
The accompanying notes are an integral part of these statements .
6
_ Jnpariy
;TOCKHOLDERS' EQUITY
=e ber 31 , .
cs' Report .
F
IA' Treasury
bi Retained Total
se earnings stock
1D $ 1 ,504 ,245 $ ( 375 ,000) $1 ,904 ,821
2,500 -- --
)0, 1
' ( 190 , 136) -- ( 190 , 136)
i
i __ 17 ,000
17 ,000
' (375,000) • 1 ,731 ,685
76 1 ,333,609
( 283,265) ( 28_ ___,265) .
C,_ 1 ,050,344
(375,000) } 1 ,448,420
-- (643,089)
( 643,089)
7- $ 407 .255_
$ (375 0001 $ 805 331 _
i
a
s
. I
.
.
Year ended December 31 ,
See Accountants ' Report
1981 1980
Sources of funds •
From operations
Net loss for the year $ (643 ,089 ) $ (283 ,265 )
Charges (credits) to earnings not
requiring (providing ) cash
Depreciation and amortization (note A4 ) 104,404 113,557
Equity in net losses of affiliates 37 ,681 44 ,455
Provision for deferred taxes (note J) ( 92,000) ( 141 ,000)
• Gain on sale of Greeley Plaza -- ( 145, 376 )
Funds used in operations ( 593,004) (411 ,629 )
Proceeds from sale of Greeley Plaza -- 463 ,043
Proceeds from payments on notes receivable 503,280 627,685
Proceeds from notes payable 2,069 ,768 7 ,085, 103
Decrease in
Inventories 3 , 182,284 2 ,248 ,026
Prepaid expenses and deposits -- 241 , 812
Property, plant and equipment - net 3,358 --
Real estate under sales contract (note K) 164, 610 --
Increase in
Other liabilities - net 260,786 51 ,312
Customer land contract deposits (note K) -- 512,000
5, 591 ,082 10,817,352
Applications of funds
Additions to receivables - net 1 ,284 ,929 1 ,347 ,287
Additions to investments at equity -- 44,595
Payments on notes payable 4 ,051 ,834 8 ,635 ,229
Increase in
Property, plant and equipment - net -- 64 ,408
Refundable income taxes 477,685 153,000
Deposits and other 62,016 -- -
Real estate under sales contract (note K) -- 498,610
Decrease in
Accrued income taxes -- 35, 000
Customer land contract deposits 12,000 --
5, 888,464 10,778, 129
INCREASE (DECREASE) IN CASH (297,382) 39,223
Cash at beginning of year 106 , 873 67 , 650
Cash (overdraft) at end of year $ ( 190, 509 ) $ 106 , 873
The accompanying notes are an integral part of these statements .
7
Haeeier i ca. _y
NOTES TO FINANCIAL STATEMENTS
December 31 , 1981 and 1980
•
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The company is engaged in various aspects of the real estate busi-
ness in Northern Colorado. Construction includes land subdivision
and development and construction of residential properties. Real
estate brokerage activities includes residential, farm, and commer-
cial sales, commercial property leasing and management of proper-
ties. A summary of the company ' s significant accounting policies
applied in the preparation of the accompanying financial statements
follows.
1 . Revenue recognition
Income from sales is generally recorded when title to the property
is conveyed to the buyer subject to the buyer 's commitment being
sufficient to provide recordable economic substance to the trans-
action.
2. Accounts and notes receivable
It is the policy of the company to charge doubtful accounts and
notes receivable directly to expense when deemed by management to be
uncollectible.
3. Real estate held for sale
Real estate is stated at lower of cost or net realizable value . .'
Cost of improved lots are determined by accumulating the costs of
land, land improvements , direct construction costs and related
interest costs (note D) . Land and related costs are allocated
equally to lots within the development.
Construction costs incurred in connection with the construction of
residences are charged to the individual unit on a specific identi-
fication basis.
Resale houses consist primarily of single family houses purchased by
the company . Such house costs include miscellaneous expenditures
incurred while holding the house for resale. Costs are recorded net
of mortgages assumed in the amount of $ 110, 235 in 1981 and $ 131 ,747
in 1980.
8
• NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31 , 1981 and 1980
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
4 . Property, plant and equipment
• Depreciation is provided for in amounts sufficient to relate the
cost of depreciable assets to operations over their estimated
service lives , principally on a straight-line basis , as follows:
Years
Buildings and improvements 20
Machinery and equipment 2-10
Furniture and fixtures 5-10
Leasehold improvements 5-10
The cost of a covenant not to compete is being amortized on a
straight-line basis over a three year period and the franchise fee
is being amortized on a straight-line basis over a forty year
period.
5. Investments in affiliates
Investments in affiliates are recorded at equity, except for the
investment in 1228 Corporation which is recorded at cost - which
approximates equity. ,
6. Pension plan and employee stock ownership plan -
The company had a non-contributory, defined-benefit pension plan
which covered substantially all of its employees. The plan was
funded with annuity policies on the individual level premium
method. In 1982 the plan was terminated as further discussed in
Note I .
•
Tne company also has an employee stock ownership plan which covers
substantially all employees . Contributions are made at the discre-
tion of the board of directors. No contribution was made for 1981
or 1980. _
7. Income taxes and investment tax credits
The company provides for deferred income tax charges and credits
resulting from reporting certain transactions for income tax pur-
poses in different periods than for financial statement purposes.
These timing differences arise from ( 1 ) capitalizing interest costs
on land development and residential construction and, (2) recog-
nizing certain sales transactions as financing arrangements for
financial statement purposes .
Investment tax credits are accounted for t•y the flow-through method
whicn recognizes the credits as reductions of income tax expense in
the year utilized.
9
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31 , 1981 and 1980
NOTE B - REALIZATION OF ASSETS
The accompanying financial statements have been prepared in confor-
mity with generally accepted accounting principles, which contem-
plate continuation of the company as a going concern. However, the
company has sustained substantial losses' from operations in recent
years. In addition, the company has used, rather than provided,
cash in its operations. During 1981 , the company became delinquent
in the payment of approximately $200, 000 of interest on land devel-
opment and residential construction loans (note G1 ) .
In view of the matters described above, recoverability of a major
portion of . the recorded asset amounts shown in the accompanying
balance sheet is dependent upon continued operations of the company,
which in turn is dependent upon the company' s ability to meet its
_ financing requirements on a continuing basis, to maintain present
financing and the success of its future operations. Management
believes the steps it is taking in revising its operating and finan-
cial requirements will provide the company with such ability.
NOTE C - RELATED PARTY TRANSACTIONS
The company, in the normal course of business, purchased construc-
tion materials from a company owned by certain stockholders, pro-
vides property management and accounting services and leases office
space from corporations and partnerships which are controlled by
certain stockholders. Transactions relating to the aforementioned
items were as follows:
•
1981 1980
Purchases of construction materials $113,917 $941 ,752
Property management and accounting
services 106,065 112,422
Leasing of office space 48 ,715 46 ,871
•
During 1980 , the company acquired purchase options on undeveloped
land located in Weld and Larimer counties . These options were
assigned to certain stockholders of Wheeler Realty Company on
January 9 , 1981 and September 4, 1980, respectively. In addition,
the company sold two condominiums to a partnership and purchased
from a partnership, both controlled by certain stockholders, water
rights to satisfy its obligations to municipal governments in
connection with land development activities.
10
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31 , 1981 and 1980
NOTE D - CAPITALIZATION OF INTEREST
•
Effective January 1 , 1980, the company changed its method of
accounting for interest costs to conform with Financial Accounting
Standards Board Statement No. 34. The Statement requires that
interest be capitalized during the development of real estate assets
intended for sale. The company previously followed the policy of
expensing all interest costs as incurred. When development has
ceased, been suspended or land and units are substantially complete,
interest is expensed as incurred. During 1980 total interest costs .
of $ 1 , 196,718 were charged, $338,253 to real estate held for sale,
$29 ,211 to cost of sales, and $829 ,254 to operations. No interest
was capitalized in 1981 because development activity was substan-
tially suspended.
NOTE E - REAL ESTATE HELD FOR SALE
Development and construction costs at December 31 are detailed by
project as follows:
1981
•
Land and land Residential Undeveloped
Project name development construction land Total
Bittersweet $ 69 ,472 $ 95,571 $ -- $ 165,043
• Bittersweet
North 192,270 -- -- 192,270
•
Brown farm 9,954 103,795 147,905 261 ,654
Centennial Shores 515,862 -- -- 515,862
College Green 28,195 -- -- 28,195
Country Club and
Fairway Four 150,010 -- 563,708 713,718
Encampment 26 ,800 69 ,123 -- 95,923
Governors Farm
(Windsor) -- -- 337 ,731 337 ,731
Mountain View II 614 , 111 100,567 -- 714,678
Northlands 582 ,152 39 ,658 570 ,768 1 ,192,578
Virginia Hills 8 ,379 33 ,046 -- 41 , 425
$2, 197 ,205 $441 ,760 $ 1 , 620 , 112 $4,259,077
11
Wheeler Realty Company •
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31 , 1981 and 1980
NOTE E - REAL ESTATE HELD FOR SALE - Continued '
1980
Land and land Residential Undeveloped
Project name development construction land Total
Bittersweet $ 169 ,725 $ 264 ,639 $ -- $ 434 ,364
Bittersweet
North 567 ,538 -- -- 567 ,538
Brown farm 935, 425 333, 555 212,911 1 ,481 , 891
Centennial Shores 591 , 131 -- -- 591 , 131
College Green 55,795 115, 066 -- 170,861
Country Club and
_ Fairway Four 224, 423 159,758 470,695 854, 876
Encampment 58, 116 159 ,757 -- 217 ,873
Governors Farm
(Windsor) -- -- 333 ,599 333 ,599
Mountain View II 717 ,782 156, 356 -- 874 , 138
Northlands 775,797 318 ,040 403,595 1 ,497 ,432
Sherri-Mar 13, 000 61 ,015 -- 74,015
Virginia Hills 60, 192 254 ,052 -- 314 ,,244
$4 , 168 ,924 $ 1 ,822 ,238 $ 1 ,420 ,800 $7 ,411 ,962
NOTE F - INVESTMENT IN AFFILIATES
A summary of investment in affiliates follows :
1981 1980
814 Corporation
Common stock, 6, 615 shares ( 50%) $57,223 $66, 150
1228 Corporation _
Common stock, 3,200 shares (25%) 3, 200 3,200
Virginia Hills Development Company
(50%) -- 28 ,754
$60 ,423 $98 , 104
12
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31 , 1981 and 1980
NOTE G - NOTES PAYABLE
1 . Notes payable - collateralized by real estate held for sale
A summary of notes payable collateralized by real estate held for
sale follows:
1981
Land and land Residential Undeveloped
Project name development construction . _ land Total
Bittersweet $ • 48 ,000 $112,216 $ • -- $ 160,216
Bittersweet
North 127 ,500 . -- -- 127,500
Brown farm -- - ` 112, 913 -- 112,913
Centennial Shores 582 ,469 -- -- 582,469
-- College Green -- -- -- --
Country Club and
Fairway Four 49, 100 -- 575,030 624, 130
Encampment -- 79 ,000 -- 79 ,000
Governors Farm
(Windsor) -- -- 122,402 122,402
Mountain View II 516,000 109 ,888 -- 625, 888
Northlands 654 ,000 -- 124 ,663 778 ,663
Virginia Hills — 92(230 . -- 92,230
$1 , 977, 069 $506 ,247 $822 ,095 $3,305,411
1980
Land and land Residential Undeveloped
Project name development construction land Total
Bittersweet $ 132,000 $ 262,990 $ -- $ 394 ,990
Bittersweet
North 480 ,000 -- -- 480 ,000
Brown farm 198, 000 - 339,014 212,800 749,814
Centennial Shores 582,469 -- -- 582,469
College Green -- 113,928 -- 113,928
Country Club and
Fairway Four 140, 200 125,000 575,030 840,230
Encampment -- 212, 142 -- 212, 142
Governors Farm
(Windsor) -- -- 155,583 155,583
Mountain View II 582, 000 115, 203 -- 697,203
Northlands 750 ,000 269 ,950 249 ,325 1 ,269 ,275
Sherri-Mar -- 76, 190 -- 76, 190
Virginia Hills -- 293 , 626 -- 293, 626
$2 ,864 ,669 $ 1 ,808 ,043 $ 1 , 192 ,738 $5,865 ,450
13
•
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS CONTINUED
December 31 , 1981 and 1980
NOTE G - NOTES PAYABLE - Continued
Land and land development
Bank, due November 1982, with interest at 2.75% over a prime
lending rate. The unpaid principal balances at December 31 ,
1981 and 1980, were $ 1 ,731 , 369 and $2,618,969, respectively. A
note receivable is also pledged as additional collateral.
Corporation, payable in minimum per lot payoffs of $2,700 plus.
interest at 25% of defined gross profit per lot. The unpaid
principal was $245 ,700 at December 31 , 1981 and 1980.
Residential construction
Bank, due November 1982, with interest at 2% over a prime
lending rate. The unpaid principal balances at December 31 ,
1981 and 1980, were $408 , 534 and $1 ,532,377, respectively.
Financial institutions, payable in minimum monthly installments
of $179 ,336 plus interest at 7% to the prime lending rate. The
unpaid principal balances at December 31 , 1981 and 1980, were
$97 ,713 and $275 ,666, respectively.
Undeveloped land
Individuals, payable in minimum annual installments of $179,336
plus interest at 7% to the prime lending rate. The unpaid
principal balances at December 31 , 1981 and 1980, were $247,065
and $617 ,708 , respectively.
Bank, due November 1982, with interest at 2.75% over a prime
lending rate. The unpaid principal balance was $575,030 at
December 31 , 1981 and 1980. A note receivable is also pledged
as additional collateral.
14
Wheeler Realty Company
• NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31 , 1981 and 1980
NOTE G - NOTES PAYABLE - Continued
2. Banks and others
Notes payable to banks and others consist of :
1981 1980
Operating credit line $200 ,000,
interest at 1 % over prime lending
rates, unsecured $ 196 ,500 $ 174 ,000
Operating credit line $ 1 ,000,000 ,
interest at 1 . 5% over prime
lending rates, unsecured 951 ,000 500 ,000
Bank, due June 1982, plus inter-
est at bank prime, secured by
certain equipment 100 ,000 125,000
Bank, due through July 1984 in
monthly installments of $2, 812
plus interest at 11 .5%, collater-
alized by certain real estate 170,234 183,555
Banks, due January 1982, plus
interest at 22 .5% and bank prime ,
respectively, unsecured 258, 155 --
Individual, due through October
1987 in quarterly installments of
$ 19,525 with interest at 8. 9%,
unsecured 356,627 406 ,626
Various, consists primarily of
wrap-around mortgages and
installment loans on certain
equipment 113 ,622 181 ,820
$2, 146 . 138 $1 ,571 ,001
The prime lending rate was 15 .75% to 17 .75% and 20% to 21 .5% on the
above loans from various financial institutions at December 31 , 1981
and 1980, respectively.
3. Affiliates and officers
Notes payable at December 31 , 1981 and 1980, were $51 ,750 and
$113, 914 due affiliates and payables to officers were $249 ,618 and
$184 ,618, respectively. These notes bear interest at rates of 12%,
18% , and prime plus 2%.
15
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31 , 1981 and 1980
NOTE H - CORRECTION OF PRIOR YEAR' S RETAINED EARNINGS
1 . Adjustment to prior year 's ESOP contribution
The final valuation report on Wheeler Realty Company' s December 31 ,
1979, ESOP stock plan indicated a market value of $39 per share at
which the transaction was recorded. The original contribution value
of $40 per share has been reduced by $1 per share for the 2 ,500
shares contributed.
2. Adjustment to prior ,year 's income tax liability
Through December 31 , 1979 , the company did not record, for financial
statement purposes, equity in net losses in a former partnership
investment. This resulted in an income tax effected reduction to
retained earnings in the amount of $144 ,400.
In 1979 the company recorded, for income tax purposes, a contribu-
tion to the pension plan which was applicable to 1980. For finan-
cial reporting purposes, in 1979 , deferred taxes resulting from the
timing differences were not recognized. Correction of the trans-
action resulted in an income tax effected reduction to retained
earnings in the amount of $73, 600.
At December 31 , 1979 , the company' s provision for federal income
taxes was overstated to the extent of available investment tax
credits. Correction of the transaction resulted in an increase to
retained earnings in the amount of $27 ,864.
3. Adjustment to covenant pot to compete
During 1979, the company agreed to pay a former stockholder $50 ,000
in exchange for his promise not to compete in the company' s market
area during the three years beginning January 1 , 1980. The company
erroneously charged $ 17,000 of the covenant to 1979 operations.
Accordingly, an adjustment has been made to reflect the amortization
of the covenant in equal installments over the three years beginning
in 1980.
NOTE I - PENSION PLAN
In February, 1982, the company terminated its employee pension
plan. Total pension plan expense for the year ended December 31 ,
1980, was approximately $ 153,403. No contribution was made to the
Plan in 1981 . The Internal Revenue Service and the Pension Benefit
Guaranty Corporation have approved the termination.
16
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31 , 1981 and 198O
NOTE J - INCOME TAXES
The income tax benefit of $593 ,017 in 1981 and $294 ,000 in 1980
resulted principally from carryback refunds generated from the net
operating losses and the reduction of deferred taxes (note A7 ) . The
sources of the deferred tax timing differences and the tax effect of
each follows:
1981 1980
Deferred charges, ( credits)
Capitalized interest (note D) $ (95,000) $ 157 ,000
Real estate under sales contract
(note K) 3 ,000 (80 ,000 )
Losses of former partnership (note H2) -- ( 144,400)
Pension costs (note H2) -- , (73,60(?)
$ (92 ,000) $ ( 141 ,000 )
NOTE K - REPURCHASE ARRANGEMENTS
During 1980, the company entered into certain sales agreements which
contained either an option to repurchase or a possible future joint
venture development of the subject property. Although legal title
to the property was transferred to the buyer, the revenue
recognition rules promulgated by the American Institute of Certified
Public Accountants in its industry accounting guide Accounting for
Profit Recognition on Sales of Real Estate prohibit recognition of
income until final disposition of the repurchase option or joint
venture interest is determined. Accordingly, the cost of the
properties involved remains on the balance sheet as real estate
under sale contract. The customer land contract deposits liability
consists of the contract amounts of the repurchase option
transactions.
During 1981 , the joint venture transaction was voided. The property
is reclassified as real estate held for sale. The terms of the
option agreements callfor exercise of the options by May, 1982.
NOTE L - SUBSEQUENT EVENT
On January 8, 1982, the company acquired a one-third interest in
each of two joint ventures, Northlands I and II for $ 155,024 and
$216 ,804, respectively. In addition, the company sold certain real
estate held for sale for $1 ,240, 000 to the joint ventures. The
venture will be accounted for under the equity method. '
17
SUPPLEMENTAL INFORMATION •
' DIVISIONAL
Year en
(
Brokerage Construction
Division Division
Revenue
( Real estate sales $ -- $2,726,176
Cost of real estate sold -- 2,237,908
Gross profit on real estate sales -- 488,268
Brokerage commissions 2,213,440 --
( Other income 419 ,139 92,397
Interest income -- 115,415
Total revenue 2,632,579 696,080
Expenses
(— Operating expenses
Salaries and wages 454,319 116,262
Advertising 120 ,275 --
Closing and listing costs 114,563 24,934
Commissions 1 ,276 ,636 160,623
Depreciation - 17,235 4,800
L_ Employee benefits 42,470 7, 165
Loan discount fees -- 147,091
Office expense 139,683 5,269
Payroll taxes 52,518 6,929
Property taxes 9 ,340 26,655
Repairs and maintenance 33,971 96,049
Show house 907 59,098
Unclassified 135, 160 54,450
Utilities 129 ,328 16,319
Rent 68, 178 --
2,594 ,583 " 725,644
C General and administrative 353,586 168,582
Interest -- 344,251
Total expenses 2,948, 169 1 ,238 ,477
( Income (loss) before income tax credits $ ( 315,590) $ ( 542 ,397)
r
19
= Iy_Company k
TI 3 STATEMENTS
Ecember 31 ,
and Intra-company
10 ment eliminations Combined Combined
vi ion Unallocated Total debit (credit ) 1981 , 1980
21 850 $ -- $ 6 ,048 ,026 $ 456 ,000 $ 5,592,026 $9 ,681 ,299
.65,288 -- 4 , 503 , 196 (456, 000) 4 ,047 , 196 7,428,636
i5E 562 -- 1 ,544,830
1 ,544 ,830 2,252,663
-- 2,213, 440 1 ,466,405 747 ,035 693,603
#55 505 416 ,837 987 ,878 795,386 192,492 258,647
( 15,811 ) 99, 604 -- 99,604 89,649
x11 .067 401 ,026 4 ,845,752 2,261 ,791 2,583,961 3,294,562
-- -- 570 ,581 -- 570,581 829,091
-- -- 120 ,275 -- 120 ,275 90,255
0,040 -- 145,537 i -- 145,537 145,383
i2 ,146 -- 1 ,466 ,405 ( 1 ,466 ,405)
__ -- 22,035 -- 22,035 41 ,800 _
-- 49 ,635 -- 49 ,635 216 ,393
,500 -- 149 ,591 I -- 149 ,591 207, 153
-- 144 ,952 -- 144 ,952 151 ,734
-- 59 ,447 I -- 59 ,447 106,680
1 ,651 -- 53,646 . -- 53 ,646 64,105
899".
8 -- 130,919 --
130 ,919 273,302
-- 60 ,005 1 -- 60 ,005 99,204
- 829 -- 190,439 i (38,082) 152,357 111 ,302
-- 145 ,647 1 -- 145 ,647 137 ,780
-- 68 , 178 1 ( 3,000) 65, 178 32,379
: 51,065 -- 3 ,377 ,292 ( 1 ,507 ,487) 1 ,869 ,805 2,506,561
50,576 758 ,821 1 ,331 ,565 (754 ,304) 577 ,261 536 ,012
502,997 425,753 1 , 373 ,001 i -- 1 ,373, 001, 829,254
7iu,638 1 , 184 ,574 6 ,081 ,858 ( 2,261 ,791 ) 3,820 ,067 3,871 ,827
'4( 1,429 $ (783, 548) $ ( 1 ,236 , 106) $ -- $ ( 1 ,236 , 106) $ (577 ,265)
• 1
• 1
I
es
FINANCIAL STATEMENTS AND AUDITORS' REPORT
WHEELER REALTY COMPANY
December 31 , 1983 and 1982
•
KOSMICKI ( � ')COMPANY
Certified Public Accountants
FINANCIAL STATEMENTS AND AUDITORS' REPORT
WHEELER REALTY COMPANY
December 31 , 1983 and 1982
CONTENTS
Page
•
AUDITORS' REPORT 3
FINANCIAL STATEMENTS
BALANCE SHEETS 4
STATEMENTS OF EARNINGS 5
STATEMENTS OF STOCKHOLDERS' EQUITY 6
STATEMENTS OF CHANGES IN FINANCIAL POSITION 7
NOTES TO FINANCIAL STATEMENTS - 8
KOSIV .CFM () COMPANY
Quilled Public Accountants
Board of Directors
Wheeler Realty Company
We have examined the balance sheets of Wheeler Realty
Company (a Colorado corporation) as of December 31 , 1983 and
1982, and the related statements of earnings, stockholders'
equity and changes in financial position for the years then
ended• Our examinations were made in accordance with generally
accepted auditing standards and, accordingly, included such tests
of the accounting records and such other auditing procedures as
we considered necessary in the circumstances.
In our opinion, the financial statements referred to
above present fairly the financial position of Wheeler Realty
Company as of December 31 , 1983 and 1982 , and the results of its
operations and changes in its financial position for the years
then ended, in conformity with generally accepted accounting
principles applied- on a consistent basis.
February 23, 1984
505 Greeley National Plaza •Greeley, Colorado 80631
(303) 356-3300
Wheeler
BALA
• Dec
ASSETS 1983 1982
CASH
( Unrestricted $ 36,477 $ 76,891
Escrow and agency funds 311 ,702 233,872
Construction funds held in trust 36,098 --
384,277 310,763
ACCOUNTS AND NOTES RECEIVABLE (note A2)
- ( Trade 413,677 372,405
Affiliates, officers and employees 569,051 408,675
• Refundable income taxes (note I) -- 30,453
982,728 811,533
REAL ESTATE HELD FOR SALE
(notes A3, C, D and F)
_ ( Undeveloped land 622,389 1,592,142
Land and land development costs 5,567,304 2,265,378
Residential construction -- 372,138
6,189,0g 4,229,658
•
Resale houses and other 33,208 56,503
6,222,901 4,286,161
C PROPERTY, PLANT AND EQUIPMENT - AT COST
(notes A4 and F)
Buildings 358,769 358,769
Machinery and equipment 379,580 301 ,793
Furniture and fixtures 249,219 257,075
Leasehold improvements 96,775 123,360
t 1,084,343 1 ,040,997
Less accumulated depreciation and -
amortization 489,641 418,664
594,702 622,333
Land 30,000 30,000
624,702 652,333
• (, OTHER ASSETS
Prepaid expenses 13,098 9,574
Utility construction deposits 54,282 64,659
Investments in affiliates (notes A5
and E) 444,625 461 ,246
Deferred charges from bond offerings
• (, and franchise fee, less accumulated
amortization of $30,914 in 1983 and
$1 ,018 in 1982 (note A4) 341 ,697 22,257
Sinking fund for the redemption of bonds 102,550 —
956,252 557,736
1 $9,170,860 $6,618,526
The accompanying notes are an integral part of these statements.
( 4
Company
•
HE TS
v
LIABILITIES 1983 1982
„I OUNTS PAYABLE
trade $ 124,171 $ 353,175
Property management and customer deposits 311 ,702 233,872
affiliates and employees -- 7,727
435,873 594,774
•
: ACCRUED LIABILITIES 237,717 216,519
t TES PAYABLE (note F)
Collateralized by real estate held
for sale 4,854,672 3,246,801
Banks and others 2,140,103 2,413,723
Officer •
O39,148 28,000
7,033,923 5,688,524
SPECIAL IMPROVEMENT DISTRICT TAX ASSESSMENTS
•
- (note J) 1,311 ,125 --
i
LOMMITMENTS AND CONTINGENCIES (note K) -- --
i
POCKHOLDERS' EQUITY
•
Contributed capital
Common stock- authorized 300,000 shares
of $10 par value; issued 75,000 shares 750,000 750,000
Capital in excess of par value 23,076 23,076
773,076 773,076
- Retained earnings 928,810 866,453 ,
1,70f:E6 1,639,529
•
- Less common stock in treasury -
at cost, 60,000 shares in 1983
and 58,781 shares in 1982 (notes G and H) 1 ,549664 1520,820
152,222 118,709
•
$9,170,860 $6,618,526
Wheeler Realty Company
_ STATEMENTS OF EARNINGS
Years ended December 31 ,
•
1983 1982
Revenue
Real estate sales (note G) $2,433,258 $ 4,352,412
Cost of real estate sold 1,479,655 2,357,504
Gross profit on real
estate sales 953,603 1,994,908
Brokerage commissions — net of
commission expense of $1 ,755,425
in 1983 and $1,371 ,025 in 1982 1,023,309 676,451
Other income 358,684 342,312 •
Interest income 101 ,002 120, 105
•
Total revenue 2,436,598 3,133,776
Expenses
Operating, general and administrative 1,881 ,209 1,855,051
Interest (note C) 493,032 834,980
2,374,241 2,690,031
Earnings before income
taxes and extraordinary item 62,357 443,745
Income taxes (note I)
Refund of income taxes resulting
.from carryback of operating loss -- 30,453
Deferred credit ( 11,950) ( 15,000)
( 11,950) 15,453
Earnings before extraordinary item 50,407 459,198
Extraordinary item
Income tax benefit arising from carry-
forward of prior years net operating
loss (note I) 11 ,950 --
NET EARNINGS $ 62,357 $ 459, 198
The accompanying notes are an integral part of these statements.
5
:y_Company
"I ; STATEMENTS
?cember 31 ,
and Intra-company
to ment eliminations Combined Combined
;9n
vi ion Unallocated Total debit (credit) 1981
21 850 $ -- $ 6 ,048 ,026 $ 456 ,000 $ 5,592,026 $9 ,681 ,299
65,288 -- 4 , 503, 196 (456 ,000) 4,047 , 196 7 ,428,636
5E 562 -- 1 ,544 ,830 -- .
1 ,544 ,830 2,252,663
-- 2,213,440 1 ,466,405 747 ,035 693,603
795,386 192,492 258,647
15S 505 416 ,837 999 , 604 i 99,604 89,649
( 15,811 ) 99 , 604 --
i1i,067 401 ,026 4,845,752 2 ,261 ,791 2,583,961 3,294,562 •
• -- -- 570 ,581 -- 570, 581 829,091
-- -- 120 ,275 -- • 120 ,275 90 ,255
C-,040 -- 145,537 V -- 145,537 145,383
i2 ,146 -- 1 ,466 ,405 ( 1 ,466 ,405) 22,035 41 ,800
__ 22,035 --
_ -- 49 ,635 -- 49 ,635 216 ,393
,500 -- 149, 591 I 149 ,591 207, 153
--
-- 144 ,952 144 ,952 151 ,734
-- -_ 59 ,447 I -- 59 ,447 106,680
1 ,651 -- 53,646 , -- 53 ,646 64,105
899 -- 130 ,919 -- 130 ,919 273,302
-- 60 ,005 I -- 60 ,005 99 ,204
829 -- 190,439 ( (38,082) 152,357 111 ,302
-- 145 ,647 I -- 145 ,647 137 ,780
-- --
68 , 178 1 ( 3,000) 65, 178 32,379
5fl,065 -- 3 ,377 ,292 ( 1 ,507 ,487 ) 1 ,869 ,805 2,506 ,561
: 50,576 758 ,821 1 ,331 ,565 (754 ,304) 577 ,261 536 ,012
502,997 425,753 1 , 373 ,001 I 1 ,373, 001, 829,254
71 ,638 1 , 184,574 6 ,081 ,858 ( 2,261 ,791 ) 3,820 ,067 3 ,871 ,827
'4( .,429 $ (783 548) $ ( 1 ,236 , 106) $ -- $ ( 1 ,236 , 106) $ (577,265)
I
• 1
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FINANCIAL STATEMENTS AND AUDITORS' REPORT
WHEELER REALTY COMPANY
December 31 , 1983 and 1982
KOSMICKI (;.(:)COMPANY
Certified Public Accountants
FINANCIAL STATEMENTS AND AUDITORS' REPORT
WHEELER REALTY COMPANY
December 31 , 1983 and 1982
CONTENTS
Page
•
AUDITORS' REPORT 3
FINANCIAL STATEMENTS
BALANCE SHEETS 4
STATEMENTS OF EARNINGS 5
STATEMENTS OF STOCKHOLDERS' EQUITY 6
STATEMENTS OF CHANGES IN FINANCIAL POSITION 7
NOTES TO FINANCIAL STATEMENTS 8
Kasmicw
• V
COMPANY
Cntificd Public Accountants
Board of Directors
Wheeler Realty Company
We have examined the balance sheets of Wheeler Realty
Company (a Colorado corporation) as of December 31 , 1983 and
1982, and the related statements of earnings, stockholders'
equity and changes in financial position for the years then
ended. Our examinations were made in accordance with generally
accepted auditing standards and, accordingly, included such tests
of the accounting records and such other auditing procedures as
we considered necessary in the circumstances.
In our opinion, the financial statements referred to
above present fairly the financial position of Wheeler Realty
Company as of December 31 , 1983 and 1982, and the results of its
operations and changes in its financial position for the years
then ended, in conformity with generally accepted accounting
principles applied on a consistent basis.
February 23, 1984
505 Greeley National Plaza •Greeley, Colorado 80631
(303) 356-3300
t
. Wheeler I
BALM
( Dec(
ASSETS 1983 1982
CASH
Unrestricted $ 36,477 $ 76,891
Escrow and agency funds 311 ,702 233,872
Construction funds held in trust 36,098 --
384,277 310,763
ACCOUNTS AND NOTES RECEIVABLE (note A2)
— ( Trade 413,677 372,405
Affiliates, officers and employees 569,051 408,675
• Refundable income taxes (note I) -- 30,453
982,728 811,533
REAL ESTATE HELD FOR SALE
(notes A3, C, D and F) 1 ,592,142
_ ( Undeveloped land 622,389
Land and land development costs 5,567,304 2,265,378
Residential construction -- 372,138
6,189,69-1. 4,229,658
Resale houses and other 33,208 56,503
6,222,901 4,286,161
( ' PROPERTY, PLANT AND EQUIPMENT - AT COST
(notes A4 and F)
Buildings 358,769 358,769
Machinery and equipment 379,580 301 ,793
Furniture and fixtures 249,219 257,075
Leasehold improvements 96,775. 123,360
i 1,084,343 1,040,997
Less accumulated depreciation and
amortization 489,641 418,664
594,702 622,333
. Land 30,000 30,000
624,702 652,333
(, - OTHER ASSETS
Prepaid expenses 13,098 9,574
Utility construction deposits 54,282 64,659
Investments in affiliates (notes A5
and E) 444,625 461 ,246
Deferred charges from bond offerings
. ( and franchise fee, less accumulated
amortization of $30,914 in 1983 and
$1 ,018 in 1982 (note A4) 341 ,697 22,257
Sinking fund for the redemption of bonds 102,550 —
956,252 557,736
t $9,170,860 $6,618,526
• The accompanying notes are an integral part of these statements.
( 4
Company
Hi TS
LIABILITIES 1983 1982
Ai :OUNTS PAYABLE
trade $ 124,171 $ 353,175
Property management and customer deposits 311 ,702 233,872
Iffiliates and employees 7,727
435,873 —3-9-47T-14
: ACCRUED LIABILITIES 237,717 216,519
1 TES PAYABLE (note F) •
Collateralized by real estate held 4,854,672 3,246,801
for sale 2,140,103 2,413,723
Banks and others 39,148 28,000
Officer
7,033,923 5,688,524
SPECIAL IMPROVEMENT DISTRICT TAX ASSESSMENTS
- (note J) 1,311 ,125 --
i
LOMMITMENTS AND CONTINGENCIES (note K) -- --
IOCKHOLDERS' EQUITY
Contributed capital
Common stock- authorized 300,000 shares
of $10 par value; issued 75,000 shares 750,000 750,000
000
Capital in excess of par value 23,076
773,076 773,076
— Retained earnings 928,810 866,453 j 866,553 ,
1 ,7017$56 ,
— Less common stock in treasury - `
at cost, 60,000 shares in 1983
and 58,781 shares in 1982 (notes G and H) 1 ,54964 1520,820
152,222 118,709
$9,170,860 $6,618,526
•
• Wheeler Realty Company
STATEMENTS OF EARNINGS
Years ended December 31 ,
•
1983 1982
Revenue
Real estate sales (note G) $2,433,258 $ 4,352,412
Cost of real estate sold 1,479,655 2,357,504
Gross profit on real
estate sales 953,603 1,994,908
Brokerage commissions — net of
commission expense of $1 ,755,425
in 1983 and $1,371 ,025 in 1982 1 ,023,309 676,451
Other income 358,684 342,312 •
Interest income 101 ,002 120,105
Total revenue 2,436,598 3,133,776
Expenses
Operating, general and administrative 1 ,881 ,209 1,855,051
Interest (note C) 493,032 834,980
2,374,241 2,690,031
Earnings before income
taxes and extraordinary item 62,357 443,745
Income taxes (note I)
Refund of income taxes resulting
from carryback of operating loss -- 30,453
Deferred credit ( 11,950) ( 15,000)
( 11 ,950) 15,453
Earnings before extraordinary item 50,407 459,198
Extraordinary item
Income tax benefit arising from carry-
forward of prior years net operating
loss (note I) 11,950 --
NET EARNINGS $ 62,357 $ 459, 198
The accompanying notes are an integral part of these statements.
5
Wheeler Re.
STATEMENTS OF ST(
Deceml
Co
si
Balances at January 1 , 1982 $75(
Exchange of real estate for
treasury stock (note G)
L Purchase of treasury stock in
connection with partial termination
of Employee Stock Ownership Plan
•
(note H)
Net income for the year
Balances at December 31 , 1982 75C
Purchase of Treasury Stock in
connection with complete
termination of Employee Stock
C , Ownership Plan (note H)
Net income for the year
Balances at December 31 , 1983 $751
The accompanying notes are an integral part of these statements.
l
6
Company
LC 2S' EQUITY
1, -
Capital in
excess of Retained Common stock
par value earnings in treasury Total
$23,076 $407,255 $( 375,000) $ 805,331
(1 ,125,000) (1,125,000)
•
( 20,820) ( 20,820)
-- 459, 198 -- . 459, 198
23,076 866,453 (1 ,520,820) 118,709
( 28,844) ( 28,844)
62,357 -- 62,357
3 $23,076 $928,810 $(1 ,549,664) $ 152,222
Wheeler Realty Company
STATEMENTS OF CHANGES IN FINANCIAL POSITION
Years ended December 31 ,
1983 1982
Sources of cash
From operations
Net income for the year $ 62,357 $ 459,198
Charges to earnings not requiring
cash
Depreciation and amortization (note A4) 127,272 91,173
Equity in net losses of affiliates 16,621 19,266
Provision for deferred taxes (note I) -- 15,000
— Cash provided by operations 206,250 584,637
Proceeds from sale of receivables (note G) -- 1,259,795
Proceeds from notes payable 5,252,019 3,795,532
Special Improvement District tax assess-
ments (note J) 1 ,311 ,125 -- '
Proceeds from assets sold 29,846 --
Decrease in
Escrow and agency funds -- 140,173
Accounts and notes receivable -- 582,460
Inventories -- 63,378
Prepaid expenses and deposits 6,853 75,305
Real estate under sales contract -- 334,000
6,806,093 6,835,280
Applications of cash
Purchase of treasury stock (notes G and H) 28,844 1,145,820
Bond offering costs 349,336 --
Additions to investments at equity (note E) -- 420,089
• Purchase of property, plant and equipment 99,591 13,120
Payments on notes payable 3,949,039 3,762,212
Increase in •
Accounts and notes receivable 171,195 --
Inventories 1 ,894,321 --
Sinking fund for the redemption of bonds 102,550 --
Trust, escrow and agency funds 113,928 --
Decrease in
Other liabilities 137,703 726,639
Customer land contract deposits -- 500,000
6,846,507 6,567,880
INCREASE (DECREASE) IN CASH ( 40,414) 267,400
Cash (overdraft) at beginning of year 76,891 ( 190,509)
Cash at end of year $ 36,477 $ 76,891
The accompanying notes are an integral part of these statements.
7
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
December 31 , 1983 and 1982
NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company engages in various aspects of the real estate business in North-
ern Colorado.' Construction projects include residential properties and land
subdivision and development. Real estate brokerage activities include resi-
dential, farm, and commercial sales, commercial property leasing and property
management.
A summary of the Company's significant accounting policies applied in the
preparation of the accompanying financial statements follows.
1. Revenue recognition
•
Sales income is generally recognized when title to the property is conveyed
to the buyer and the buyer's commitment is sufficient to provide economic
substance to the transaction.
2. Accounts and notes receivable
The Company considers accounts receivable to be filly collectible; accord-
ingly, no allowance for doubtful accounts has been established. Accounts,
when determined to be uncollectable, are charged to operations.
3. Real estate held for sale
Real estate is valued at the lower of its cost or net realizable value.
Subdivision development costs include the accumulated cost of land, land
improvements, direct construction and related capitalized interest (note C).
Development costs are allocated equally to lots within each subdivision.
Residential construction costs incurred are charged to the individual unit on
a specific identification basis.
Resale houses consist primarily of single family houses purchased by the
Company. Such house costs include miscellaneous expenditures incurred while .
holding the house for resale. Costs are recorded net of mortgages assumed in
the amount of $125,099 in 1983 and $167,615 in 1982.
4. Property, plant and equipment
Depreciation is provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives, princi-
pally on a straight-line basis, as follows:
8
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
• December 31 , 1983 and 1982
NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
4. Property, plant and equipment (Continued)
Years
Buildings and improvements 20
Machinery and equipment 2-10
Furniture and fixtures 5-10
Leasehold improvements 5-10
5. Amortization •
Deferred bond offering charges are amortized on a straight-line basis over.
the term of the bond issues. Franchise fees are amortized on a straight-line
basis over a forty-year period.
6. Investments in affiliates
Investments in affiliates are recorded at the Company's cost less distribu-
tions plus equity in undistributed earnings or losses since acquisition.
7. Investment tax credits
Investment tax credits are accounted for by the flow-through method which
recognizes the credits as reductions of income tax expense in the year uti-
lized. .
8. Reclassification
Certain December 31, 1982, financial statement items have been reclassified
for comparitive purposes.
NOTE B - RELATED PARTY TRANSACTIONS
The Company provides property management and accounting services to, and
leases office space and equipment from entities controlled by a stockholder.
Transactions relating to the aforementioned items were as follows:
9
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
December 31 , 1983 and 1982
NOTE B - RELATED PARTY TRANSACTIONS (Continued)
1983 1982
Property management and accounting
services $57,799 $16,389
Leasing office space and equipment 39,502 51,810
The Company was reimbursed for personnel services, facilities and general
operating and overhead expenses by an affiliate. Such reimbursement was
$37,092 for 1983.
Additionally, the Company sold developed inventory lots and a home to stock-
holders, officers and affiliates. Total revenue realized on sales was
$335,034 during 1983.
The Company purchased an 83 acre tract of land in October, 1983 from an
affiliated partnership. The land purchase price was $1,279,935.
In May 1983, a shareholder of the Company purchased a certain tract of land
from the Company and outside parties for $110,000. The land purchased from
the Company continues to be pledged as additional security on a land develop-
ment loan.
During 1982 the Company sold property to two joint ventures in which the
Company has a one-third interest in each (note E). The Company recognized a
$76,277 profit on this sale.
NOTE C - CAPITALIZATION OF INTEREST
The Company follows the policy of capitalizing interest costs during the
development stage of real estate projects intended for sale. When develop-
ment has ceased, been suspended or land and units are substantially complete,
interest is no longer capitalized. During 1983 total interest cost incurred
was $831 ,283 of which $338,251 was capitalized as cost of real estate held
for sale. During 1982 total interest cost incurred was $948,613 of which
$113,633 was capitalized.
10
' Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
December 31 , 1983 and 1982
NOTE D — REAL ESTATE HELD FOR SALE
l Development and construction costs at December 31 are detailed by project as
follows:
1983
— Undeveloped Land and land Residential
Project name land development Construction Total
Bittersweet $ — $ 79,283 $ -- $ 79,283
Bittersweet North -- 1 ,354,023 -- 1,354,023
Brown Farm 35,783 91,163 -- 126,946 •
Centennial Shores 247,445 200,702 — 448,147
College Green -- 7,192 -- 7,192
Country Club III -- 3,981 -- 3,981
Country Club V -- 1,204,517 -- 1,204,517
Fairway Four -- 14,838 -- 14,838
Fairbrooke -- 2,148,982 -- 2,148,982
Governors Farm 339,161 -- -- 339, 161
Mountain View II -- 462,623 -- 462,623
$ 622,389 $5,567,304 $ -- $6,189,693
1982
Undeveloped Land and land Residential -
Project name land development Construction Total
Bittersweet $ -- $ 288,144 $ 35,971 $ 324,115
Bittersweet North 905,910 -- -- 905,910
Brown Farm 100,126 171,014 -- 271,140
Centennial Shores 247,445 269,811 -- 517,256
College Green -- 14,385 -- 14,385
Country Club III -- 7,650 -- 7,650
Country Club V -- 903,713 -- 903,713
Fairway Four -- 68,308 -- 68,308
Encampment -- -- 113,752 113,752
Governors Farm 338,661 -- -- 338,661
Mountain View II -- 542,353 43,317 • 585,670
Northlands -- -- 61,515 61 ,515
Virginia Hills -- -- 117,583 117,583
$1 ,592,142 $2,265,378 $372, 138 $4,229,658
11
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
( December 31, 1983 and 1982
NOTE E — INVESTMENT IN AFFILIATES
A summary of investment in affiliates follows:
1983 1982
Northlands I Joint Venture,
33% interest $ 151,570 $ 152,099
Northlands II Joint Venture,
33% interest 260,045 261,898
814 Corporation, Common stock,
6,615 shares, 50% interest 55,351 56,381
1228 Corporation, Common stock, •
3,200 shares, 25% interest -- 3,200
6440 Company, 1 .9% interest ( 5,814) ( 3,514)
6339 Company, 12.8% interest ( 16,527) ( 3,370)
George Fell Construction,
50% interest -- ( 5,448)
$ 444,625 • $ 461 ,246
NOTE F - NOTES PAYABLE
1. Notes payable - collateralized by real estate held for sale
A summary of notes payable collateralized by real estate held for sale fol-
lows:
• 1983
Undeveloped Land and land Residential
Project name land development Construction Total
Bittersweet North $ -- $1,019,577 $ -- $1 ,019,577
Brown Farm -- 47,000 -- 47,000
Centennial Shores 245,700 281,158 -- 526,858
Country Club V -- 1 ,600,000 -- 1,600,000
Fairbrooke -- 1,279,935 -- 1,279,935
Governors Farm 70,101 -- -- 70,101
Mountain View II -- 311,201 -- 311,201
$ 315,801 $4,538,871 $ -- $4,854,672
12
• Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
December 31, 1983 and 1982
NOTE F - NOTES PAYABLE (Continued)
1. Notes payable - collateralized by real estate held for sale (Continued)
' 1982
Undeveloped Land and land Residential
Project name land development Construction Total
Bittersweet $ -- $ 420,800 $ -- $ 420,800
Bittersweet North 500,000 -- -- 500,000
Brown Farm -- 173,000 -- 173,000
Centennial Shores 245,700 336,769 -- 582,469 -
Country Club V -- 790,209 -- 790,209
Encampment -- -- 95,028 95,028
Governors Farm 89,173 -- -- 89,173
Mountain View II -- 445,800 43,777 489,577
Northlands -- -- 54,745 54,745
Virginia Hills -- -- 51,800 51 800
$ 834,873 $2,166,578 $245,350 $3,246,801
Undeveloped land
Corporation due October 1990, non-interest bearing, payable in minimum pay-
offs of $2,700 plus 25% of defined gross profit per lot. The unpaid princi-
pal was $245,700 at December 31, 1983 and 1982.
Individual, payable in minimum annual installments of $14,021, including
interest at 8%. The unpaid principal balances at December 31, 1983 and 1982,
were $55,101 and $64,173, respectively.
Bank, due July 1984, with interest at a prime lending rate. The unpaid
principal was $15,000 at December 31, 1983.
Individual, due July 1983, with interest at a prime lending rate. The unpaid
principal was $25,000 at December 31, 1982.
Savings and loan, due September 1985, with interest at 15% plus equity parti-
cipation of 4% of gross sales price of each lot sold. The unpaid principal
balance at December 31, 1982 was $500,000.
13
•
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
December 31 , 1983 and 1982
NOTE F - NOTES PAYABLE (Continued)
Land and land development
Bank, due December 1984, with interest at 2% over a prime lending rate. The
unpaid principal balance was $950,895 at December 31, 1983.
Bank, due December 1984, with interest 2.50% over a prime lending rate. The
unpaid principal was $68,682 at December 31, 1983.
First Mortgage Bonds, due March 1988, with interest at 14%. The unpaid
principal balance was $1,600,000 at December 31, 1983.
Partnership, due October 1993, with interest at 10%. The unpaid principal
was $1,279,935 at December 31, 1983 (note B).
Bank, due August 1984, with interest at 2.75% over prime lending rate. The
unpaid principal balances at December 31, 1983 and 1982, were $592,359 and
$782,269, respectively.
Bank, due April 1984, with interest a 2% over prime lending rate. The unpaid
principal balances at December 31, 1983 and 1982 were $47,000 and $173,000,
respectively.
Savings and loan, due January 1985, with interest at 15% plus equity parti-
cipations of 4% and 10.2% of gross sales price of each lot sold. The unpaid
principal balance at December 31, 1982 was $1,211,009.
Residential construction
Bank, with interest at .50% over a prime lending rate in 1982. The unpaid
principal balance at December 31, 1982 was $245,350.
14
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
December 31 , 1983 and 1982
NOTE F - NOTES PAYABLE (Continued)
2. Banks and others
Notes payable to banks and others consist of:
1983 1982
Operating credit line of $1 ,000,000,
due April, 1984, interest at 1 .5%
over prime lending rate, unsecured $ 875,000 $ 929,000
Partnership, due through January,
1987, with annual payments of •
$200,000, including interest at
9%, unsecured. Annual payments
if extended, bear interest at
2% over a prime lending rate 647,944 817,295
Individual, due through October,
1987, in quarterly installments
of $19,525 with interest at 8.9%,
unsecured 246,534 312,278
Bank, due through July, 1984, in
monthly installments of $2,812
plus interest at 11.5%, secured
by office building 138,632 154,079
Individual, due on demand, with
interest at 12.5% and a prime
lending rate in 1983 and 1982, •
respectively, unsecured 143,458 113,164 '
Bank, due June, 1984, with in-
terest at 1.50% over a prime
lending rate. Secured by cer-
tain equipment • 65,000 75,000
Various, consists of installment
loans on certain equipment 23,535 12,907
$2, 140,103 $2,413,723
The prime lending rate was 11% to 13% on the above loans from various finan-
cial institutions at December 31, 1983 and 1982, respectively.
15
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
December 31 , 1983 and 1982
•
NOTE F — NOTES PAYABLE (Continued)
3. Affiliates and officers
The notes payable to an officer are due on demand, with an interest rate of
13%. The unpaid principal balances were $39,148 and $28,000 at December 31,
1983 and 1982, respectively.
4. Debt maturities
Aggregate maturities of notes payable for the five years following December
31, 1983 are as follows:
1984 $3,141,436
1985 234,284
1986 250,576
1987 269,889
1988 1,612,103
1989 and thereafter 1,525,635
• $7,033,923
NOTE G — EXCHANGE OF REAL ESTATE FOR COMMON STOCK
In February, 1982, the Company exchanged real estate for all of the outstand-
ing common stock owned or controlled by its then president and major stock-
holder. In exchange for the real estate, valued at $1,500,000, the Company
received 45,177 shares of common stock plus a note for $375,000. Addition •
-
ally, the former shareholder purchased accounts and notes receivable of the
Company for cash in the amount of $1,260,000.
For financial reporting purposes, the Company reported a gain on this trans-
action of $1,395,000. This gain is only taxable to the extent of the note
received.
NOTE H - EMPLOYEE STOCK OWNERSHIP PLAN AND PENSION PLAN
In 1981, the Company terminated a part of its Employee Stock Ownership Plan.
During 1982, the plan distributed 1,104 shares of the Company's common stock
to the participants covered by the partial termination. The plan was termi—
nated in 1983, and the remaining 1 ,219 shares of the Company's stock were
distributed to participants. All 2,323 distributed shares were purchased
16
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
December 31, 1983 and 1982
NOTE H — EMPLOYEE STOCK OWNERSHIP PLAN AND PENSION PLAN (Continued)
from the plan participants by the Company. There were no contributions to
the plan in 1983 or 1982.
During 1982, the Company terminated its employee pension plan and distributed
the plan assets to the participants.
NOTE I - INCOME TAXES
The Company provides for deferred income tax charges and credits resulting
from reporting certain transactions for income tax purposes in different
periods than for financial statement purposes. These timing differences
arise from (1) capitalizing interest costs on land development and (2) recog-
nizing certain sales transactions as financing arrangements for financial
statement purposes. The sources of the deferred tax timing differences and
the tax effect of each follows:
1983 1982
Deferred credits (charges)
Capitalised interest (note C) $ '11,950 $ 50,000
Real estate under sales contract
(note K) -- 6,000
Carryback of net operating loss -- (41 ,000)
$ 11 ,950 $ 15,000
At December 31, 1983, the Company had net operating loss carryforwards of
$500,000 for financial reporting purposes and $643,000 for Federal income tax
purposes. These carryforwards can be used to offset future taxable income.
These carryforwards expire in 1997 and 1998.
In 1982, income tax expense does not bear a normal relationship to net income
_ before taxes because of an exchange of real estate for common stock of the
Company which resulted in a larger recognized gain for financial reporting
purposes than for income tax purposes (note G).
The 1982 income tax benefit of $30,453 resulted principally from carryback
refunds generated from the net operating losses occurring in 1982.
17
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
December 31 , 1983 and 1982
NOTE J — SPECIAL IMPROVEMENT DISTRICTS
In December, 1983, the Cities of Fort Collins and Greeley issued, in aggre-
gate, $1,755,000 of Special Improvement District Bonds (the Bonds) petitioned
by the Company.
The Bond proceeds will acquire construction improvements to the Fairbrooke
subdivision in Fort Collins and acquired improvements constructed by the
Company in the Bittersweet North subdivision in Greeley. Additionally, three
years, or $443,875, of interest will be paid from Bond proceeds.
Coupon rates of interest on the bonds range from 8.25% to 11%. They will be
retired through special property tax assessments on the developed property
payable in the years 1987 through 1993 as follows:
1984-1986 $ --
1987 235,000 •
1988 250,000
1989 and thereafter 1,270,000
$1 ,755,000
Less interest included
in bond proceeds 443,875
$1,311 , 125
NOTE K - COMMITMENTS AND CONTINGENCIES
1. Litigation
A claim has been asserted against the Company alleging that the Company, as
escrow agent, proceeded with a sale of property without the sellers' consent.
The sellers have demanded that the Company purchase notes from them in the
amount of $360,750. These notes are secured by the subject property. The
Company has denied the assertions and will defend any action, if commenced.
It is not practical to predict the outcome of this matter at the present
time.
In February, 1984, a summons and complaint were served on the Company, an
affiliate, and a former affiliate. Generally, the complaint alleges the
defendents intentionally interferred with a contractual relationship for
business advantage. The Company's management believes the complaint is with—
out substance; it has taken the action and the appropriate response under
advisement. It is not practical to predict the outcome of this matter at the
present time.
18
Wheeler Realty Company
NOTES TO FINANCIAL STATEMENTS
December 31, 1983 and 1982
NOTE K — COMMITMENTS AND CONTINGENCIES (Continued)
2. Operating leases
The Company conducts a portion of its operations in leased facilities under
operating leases (note B). Rent expense was $75,620 and $92,212 for 1983 and
1982, respectively.
The following is a schedule of future annual minimum rental payments required
under those leases having lease terms in excess of one year as of December
31 , 1983:
1985 $ 38,200 •
1986 45,600
1987 20, 100
$103,900
19
FINANCIAL STATEMENTS
OF APPLICANT
SECURITY PROPERTIES, INC.
•
SECURITY PACIFIC, INC.
AND
AFFILIATED COMPANIES
Report on Examination of Combined Financial Statements
For the Years Ended April 30, 1982, and 1981
MARK S. RUWANCICH & COMPANY
canTIPIa° PUBLIC ACCOUNTANT/
•
Board of Directors
Security Pacific, Inc.
Seattle, Washington
We have examined the combined balance sheets of Security Pacific, Inc. and
affiliated companies,, ,as of April 30, 1982 and 1981, and the related combined
statements of earnings, stockholders' equity, and changes in financial position
for the years then ended. Our examinations were made in accordance with generally
accepted auditing standards and accordingly included such tests of the accounting
records and such other auditing procedures as we considered necessary in the
circumstances.
In our opinion, the aforementioned combined financial statements present fairly
the financial position of Security Pacific, Inc. and affiliated companies, at
April 30, 1982, and 1981, and the results of their operations and changes in their
financial position for the years then ended, in conformity with generally accepted
accounting principles which, except for the changes, with which we concur, in the
method of recognizing syndication fee and commission revenues and commission
expenses as described in Note 2 to the financial statements, have been applied on
a consistent basis.
August 10, 1982
(September 27, 1982 for Note 9)
•
Page 1
stirs 010•0NB PLAZA• 10000 KS.8TH smut• OPI1.amt.WASHINGTON *0004- TELEPNONB 1/001 460-woes
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Combined Balance Sheets
Assets •
April 30,
1982 1981
Current assets:
Cash, including $96,423 restricted deposits in 1982
(Note 15) $ 1, 106,802 $ 347,080
Certificate of deposit (Note 14) 1,000,000 —
Current portion of development costs and estimated
earnings in excess of billings (Notes 14 and 17) 1,141,000 1,020,000
Current portion of syndication fees receivable
(Notes 4, 14 and 17) 3,950,441 3,709,189•
Current portion of syndication commissions receivable 1,965, 151 41,495
Property management fees receivable 312,046 405,600
Current portion of accounts and notes receivable 1,447 ,372 951 ,877
Current portion of advances to projects (Note 5) 642,027 581,707
Insurance commissions receivable 228,273 -
Other 475,964 111,839
Total current assets 12,269,076 7,168,787
Development costs and estimated earnings in excess of
billings, net of current portion and discounts
of $109,000 and $200,617 (Notes 14 and 17) 2,048,498 1,688,404
Syndication fees receivable, net of current portion
and discounts (Notes 3, 4, 14 and 17) 3,592,898 4,538,413
Syndication commissions receivable, net of current
portion and discounts of $528,792 and $-0 •
-
(Note 10) 1,938,479 -
Accounts and notes receivable, net of current portion
and allowance for losses of $690,220 and $12,148 5 ,703,225 1,752,375
Advances to projects, net of current portion,
allowance for losses of $107,716 and $104,999
and discounts of $115,923 and $-0- (Note 5) 355,990 451,977
Furniture, equipment and leasehold improvements,
at cost, less accumulated depreciation and
amortization of $586,197 and $361,330 992,265 677,124
Receivable from stockholders (Note 6) 4,703,979 -
Investment in projects developed, at cost (Note 7) 1,497 ,694 1,036,047
Other assets 474,458 451 ,364
Total assets $33.576.56% $17 .764,491
Liabilities and Stockholders' Equity
April 30,
1982 1981
Current liabilities:
Accounts payable $ 337,574 $ 148,185
Accrued bonuses payable 89,035 37,641
Interest payable 869,107 778,206
Current portion of syndication commissions payable 1,659,116 41,495
Insurance commissions payable 249,293 -
Other commissions and' accrued expenses 323,518 530,897
Current portion of notes and contracts
payable (Note 14) 3,525,914 2,883,459
Current portion of advance syndication fees (Note 4) 781,352 621 ,424
Dividends payable - 387,487
Insurance claims payable (Note 15) 96,423 -
Total currant liabilities exclusive
of current portion of deferred revenue 7,931,332 5,428,794
Current portion of deferred revenue 1,305,321 1,324,356
Total current liabilities 9,236,653 6,753,150
Syndication commissions payable, net of current
portion and discounts of $437,037 and $-0-
(Note 11) 1,602,308 -
Notes and contracts payable, net of current portion
(Note 14) 5,795,746 2,802,562
Deferred compensation payable 153,017 137,192
Advance syndication fees, net of current portion
(Note 4) 228,312 1,150,702
Deferred revenue, net of current portion 1,739,000 586,486
Payable to stockholder - 788,370
Deferred income taxes 1,651,191 - _
Other - 52 193
Total liabilities 20,406,227 12,27O55
Stockholders' equity (Note 12):
Common stock (Note 13) 267,135 50,135
Additional paid-in capital 8,285,738 2,364
Incentive compensation committed to purchase
of stock (Note 9) - 1,226,421
Retained earnings 4,617 ,462 4,214,916
Total stockholders' equity 13,170,335 5,493,836 .
Contingencies and commitments (Note 17)
Total liabilities and stockholders'
equity $33.576,562 $17 .764.49;
The accompanying notes are an integral part of these financial statements.
Page 2
MARK S. 1<1TL.IANCICH Sc COMPANY CENTIME)NMI,c AccOUNTAHrs
SECURITY PACIFIC, INC. F
and
AFFILIATED COMPANIES
Combined Statements of Earnings
Year Ended April 30,
1982 1981
Revenue:
Syndication fees $ 2,870,263 $4,097,540
Development fees 1,084,617 493,620 •
Property management fees • 3,645,517 1,994,224
Syndication commissions 1,741,985 1,012,972
Insurance commissions 251,833 —
Project monitoring fees 511 ,632 500,351
Interest 496,714 259,171
Amortization of discounts 296,370 , 253,490
Other 1,014,126 452,149
11,913,057 9,063,517
Expenses:
Salaries, wages and bonuses 4,112,491 2,826,394
Incentive compensation (Note 9) (1,154,790) 974,521
Payroll taxes and employee benefits 462,928 312,617
Occupancy and office 1,144,027 808,637
Depreciation and amortization 206,405 157,897
Travel and entertainment 612,655 365,389
Market studies 41,094 62, 112
Commissions 1,358,937 1,001,727
Interest 1,461,489 1,087,502
Professional fees 601,423 257,954
Business, property and other taxes 83,806 70,414
Filing, registration and escrow fees 76,012 61 ,332
Provision for doubtful accounts 259,542 2,712
Loss on discontinued development projects 626,152 -
Other 360,337 192,849
10,252,508 8,182,057
Net earnings before federal and state income taxes
and cumulative effect of changes in accounting
principles 1,660,549 881 ,460
Provision for federal and state income taxes (Note 8) 77,000 20,000
Net earnings before cumulative effect of changes in
accounting principles 1,583,549 861,460
Cumulative effect on prior years (to April 30, 1981)
of changes in accounting principles (Note 2) (653,692) -
Net earnings $ 929.857 861 460
Pro forma net earnings - Although prior years were not •
restated for the changes in recognition of syndication
fee and commission revenues and commisson expenses,
these amounts indicate what net earnings would have
been if the methods had been used in prior years $ 1 .583.549 $ 766,600
The accompanying notes are an integral part of these financial statements.
Page 3
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Combined Statements of Stockholders' Equity
Incentive
Compensation
Common Committed
Stock Paid-in to Purchase Retained
(Note 13) Capital of Stock Earnings
Balance April 30, 1980 $ 50,135 $ 2,364 $ 251,900 $4,009,340
Increase in incentive compensation
committed to purchasf of stock
(Note 9) - - 974,521 -
Dividends paid and payable - - - (655 ,884)
Net earnings - - - 861,460
Balance April 30, 1981 50,135 2,364 1,226,421 4,214,916
•
Decrease in incentive compensation
committed to purchase of stock
(Note 9) - - (1,154,790) -
Incentive compensation committed
to purchase of stock transferred
to notes and contracts payable
resulting from termination of
agreement (Note 9) - - (71,631) -
Stockholders' equity of companies
purchased by stockholders
(Note 16) :
Interfinancial Real Estate
Management Company .104,000 4,745,530 - 477,091
Partnership Services, Inc. 100,000 1,060,400 - 107,367
Dahl-Davis Management Co. , Inc. 1,000 - - 8,935
Capital contributions from
stockholder - 2,477,444 - -
Stock issued in new companies formed
during year:
Fraser Agencies, Inc. 500 - - -
SP Energy Development Corporation 1,000 - - -
Security Pacific Development, Inc. 500 - - -
Project Data Systems, Inc. 10 ,000 - - -
Dividends paid - - - (1,120,704)
Net earnings - - - 929 ,857
Balance April 30, 1982 $267.135 $8.285.738 $4.617 .461
The accompanying notes are an integral part of these financial statements.
Page 4
MARK S.RULJANCICH & COMPANY airman rum tc ACCOUNTANTS
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Combined Statements of Changes in Financial Position
Year Ended April 30,
1982 1981
SOURCES OF WORKING CAPITAL
Net earnings $ 929,857 $ 861,460
Items which do not use or (provide) working capital:
Depreciation and amortization 206,405 157,897
Increase in noncurrent deferred revenue 1,152,514 172,291
Increase (decrease) in incentive compensation
committed to purchase of stock (1,154,790) 974,521
Working capital provided by operations 1,133,986 2,166,169
Working capital provided by companies purchased by
stockholders, at date of purchase (Note 16) 9,503 -
Proceeds from issuance of notes and contracts payable 7 ,849,174 1,285,493
Decrease in development costs and estimated earnings
in excess of billings - 573,885
Decrease in syndication fees receivable 945,515 -
Capital contributions from stockholders 2,487,444 -
Increase in syndication commissions payable 1,602,308 -
Decrease in advances to projects 95,987 -
Other 39,000 124,324
14,162,917 4,149,871
APPLICATIONS OF WORKING CAPITAL
Repayments of notes and contracts payable and current
maturities 4,947,121 268,769
Increase in accounts and notes receivable 460,850 226,176
Increase in development costs and estimated earnings
in excess of billings 360,094 -
Decrease in payable to stockholder 788,370 455,707
Repayments of advance syndication fees and current
maturities 922,390 367,457'
Increase in syndication fees receivable - 733,771
Increase in investment in projects developed 461 ,647 1,036,047
Increase in syndication commissions receivable 1,938,479 -
Purchase of furniture equipment and leasehold
improvements 482,196 97 ,439
Dividends 1,120,704 655,884 -
Other 64,280 181 ,780
11 ,546,131 4,023,030
Increase in working capital $ 2.616,786 $ 126.84k
kr .,.,r c DD,,, e r. ...,. ,•.•
I
Year Ended April 30,
1982 1981
CHANGES IN WORKING CAPITAL COMPONENTS
Increase (decrease) in current assets:
Cash and certificate of deposit $ 1,759,722 $ (466,626)
Current portion of development costa and estimated
earnings in excess of billings 121,000 291,000
Current portion of syndication fees receivable 241,252 1,089,013
Current portion of syndication commissions receivable 1,923,656 (41,495)
Property management fees receivable (93,554) 328,614
Current portion of accounts and notes receivable 495,495 503,576
Current portion of advances to projects 60 ,320 350,707
Insurance commissions receivable 228,273 —
Other current assets 364, 125 122,505
5,100,289 2,177,294
Increase (decrease) in current liabilities:
Accounts payable 189,389 (20,289)
Accrued bonuses payable 51,394 19,476
Interest payable 90,901 350,899
Current portion of syndication commissions payable 1 ,617,621 (20,096)
Insurance commissions payable 249,293 —
Other commissions and accrued expenses (207,379) (262,216)
Current portion of notes and contracts payable 642,455 964,854
Current portion of advance syndication fees 159,928 249,548
Dividends payable (387,487) 184,099
Insurance claims payable 96,423 —
Current portion of deferred revenue (19 ,035) 584,178
2,483,503 2 ,050 ,453
_ Increase in working capital 2.616 ,786 3 126,841
•
The accompanying notes are an integral part of these financial statements.
Page 5
MARK S. R111..JANCICH Rr CfM1PANY rxymnnn nrm„r.rrry rvr.,m
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Notes to Combined Financial Statements
For the Years Ended April 30, 1982, and 1981
1. Summary of Significant Accounting Policies
(a) Combined Financial Statements
The combined financial statements include the accounts of Security Pacific, Inc.
and affiliated companies. Combined financial statements have been prepared because
the companies are subject to common ownership and management and because they are
related in their operations. All significant accounts and transactions between
affiliated companies have been eliminated. The following is a listing of the
companies comprising the combined financial statements:
Company Name Principal Business Activity
Security Pacific, Inc. Real estate syndication and development -
primarily FHA insured low and moderate
income housing projects
Interfinancial Real Estate Real estate syndication - primarily FHA insured
Management Company low and moderate income housing projects
Partnership Services, Inc. Consulting and management services for real
estate limited partnerships
First Columbia Corporation Broker/dealer - primarily limited partnership
interests in FHA insured low and moderate
income housing projects
First Columbia Management, Inc. Management of apartment projects - primarily
FHA insured low and moderate income housing
projects
J. L. Moyer Co. Management of condominiums
Dahl-Davis Management Co. , Inc. Management of condominiums
Fraser Agencies, Inc. Insurance brokerage
SP Energy Development Corporation Oil and gas exploration and drilling, including
syndication and management of drilling
limited partnerships
Security Pacific Development, Inc. Real estate development - FHA insured and
conventionally financed housing projects
Project Data Systems, Inc. Computer hardware and software sales
_ 1
•
Contribution to Combined
Net Earnings
Date of Year Ended April 30,
Affiliation 1982 1981
May 6, 1969 $ 146,277 $225,887
June 24, 1981 93,328 -
June 24, 1981 (1,480) -
•
Aug. 28, 1972 638,396 (467)
May 18, 1977 1,184,724 590,305
March 31, 1979 100,729 45,735
Feb. 1, 1982 (6,661) -
May 1, 1981 56,264
Oct. 12, 1981 (185,757) -
May 29, 1981 (904,612) -
July 14, 1981 (191 ,351) -
929 857 861 460
Page 6
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Notes to Combined Financial Statements
For the Years Ended April 30, 1982, and 1981 •
1. Summary of Significant Accounting Policies (continued)
(b) Syndication Fees
Security Pacific, Inc. receive■ syndication fees from each partnership out of the
capital contributions of limited partners, for legal , accounting and
administrative services provided. Fees are received over a period of four to
seven years. Revenue derived from the various syndication fees is recognized as
services are performed as follows: 55 percent at the time of syndication; 15
percent over the estimated construction period of the project; 15 percent during
the first year following completion of construction; and 5 percent per year over
each of the following three years. Long-term syndication fees receivable are
discounted to present value at 15 percent per annum. See Note 2 regarding change .
in accounting principle.
(c) Development Fees, Costs and Estimated Earnings in Excess of Billings
As developer on certain projects, Security Pacific, Inc. and Security Pacific
Development, Inc. receive development fees from the partnerships out of capital
contributions of limited partners as compensation for services performed. Fees
are received over a period of four to seven years. Development fees to be
received after a project has achieved final loan closing are discounted at 15
percent per annum. Development fee revenue, after deduction of estimated
development costs and discounts, is recognized 50 percent upon syndication and 50
percent upon final loan closing. Estimated losses on uncompleted projects are
recognized in the period in which losses are determined. •
(d) Furniture, Equipment and Leasehold Improvements
Depreciation is computed using straight-line or accelerated methods over the
estimated useful lives of the assets. Amortization of leasehold improvement is
computed using straight-line or accelerated methods over the shorter of the.
estimated useful lives of the assets or the term of the related 1
(a) Amortization
The cost of management contracts purchased from other managing agents is being
amortized over a 5-year period.
Amortization of the amount paid for a non-competition agreement made between the
previous owner of J. L. Moyer Co. and the current owners was being amortized over
12 years. As of April 30, 1982 the asset and related liability, consisting of a
note payable to the former stockholder, were transferred to the stockholders.
Page 7
Rf�rw• C PITT ie •..r'r•,, 2. r.n n n, _.._ .�_...
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Notes to Combined Financial Statements
For the Years Ended April 30, 1982, and 1981
1. Summary of Significant Accounting Policies (continued)
(f) Reclassifications
Certain reclassifications have been made in the financial statements for the year
ended April 30, 1981 in order to conform to the classifications adopted for the
year ended April 30, 1982.
(g) Discounting of Commissions
Long—term commissions receivable on sales of limited partnership interests are
discounted to present value at a rate of 15 percent per annum. Related long—term
commissions payable are discounted to present value at the same rate.
2. Changes in Accounting Principles
Security Pacific Inc. :
During the year ended April 30, 1982, syndication fees have been recognized as_
revenue as follows: 55 percent at the time of syndication; 15 percent over the
estimated construction period; 15 percent during the first year following
completion of construction; and 5 percent per year over the following three
years. Previously, syndication fees were identified by type and were recognized j
as revenue as follows: (a) Fees relating to the acquisition of a project and the
initial organization of a partnership were recognized as revenue at the time of
syndication; (b) Construction monitoring fees were recognized over the estimated
construction period of the project; (c) Fees relating to the general management
of the partnership were recognised 40 percent at the time of syndication, -45
percent over the estimated construction period of the project, and 15 percent.
over the three years following completion of construction.
The new method was adopted to more closely match the recognition of revenue with
the manner and time frame in which the related costs are incurred. Over the
years, the nature of services provided to the various partnerships has changed as
has the structure and timing of fees charged for these services. As such,
management has concluded that it was necessary to adopt a revenue recognition
policy which more accurately reflects the changes which have taken place.
The new revenue recognition principle has been applied retroactively. The effect
of the change in 1982 was to decrease net earnings by $630 ,089. The cumulative
effect of this change on prior years, amounting to $1,277,911 has been included
as a decrease in net earnings for 1982.
Page 8
Mine Q Pin r•nfrlrtt R, rnMP•wy r.ennnnm,irsrrrw!wrum
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Notes to Combined Financial Statements
For the Years Ended April 30, 1982, and 1981
2. Changes in Accounting Principles (continued)
First Columbia Corporation:
Effective May 1, 1981, First Columbia Corporation changed its method of
recognizing commission revenues and expenses. Previously commissions earned on
sales of limited partnership interests were recorded upon the receipt of
partnership capital contributions, subject to the meeting of certain conditions
specified in the respective partnership agreements. Related commission expenses
were recognized to coincide with the recognition of commission revenues.
Because the sales effort is completed upon the sale of all limited partnership
interests of a partnership and the admission of limited partners into that
respective partnership and because First Columbia Corporation has no influence or
control over events in the life of • partnership, management believes that
commission revenues and expenses should be recognized upon completion of the
sales effort. Further, management has concluded that revenue and expense
recognition at that point reflects a more widely accepted accounting principle
which results in the financial statements being more comparable to other
companies engaged in similar sales activities. -
The net effect of this change, for the year ended April 30, 1982, was to increase
net earnings by $14,576. The cumulative effect of this change on prior years,
amounting to $624,219, has been included as an increase in net earnings for 1982.
3. Syndication Fees Receivable
The non-current portion of syndication fees receivable is due .as follows:
Year Ended April 30,
Year Ending April 30, 1982 1981
1983 $ - $2,277,522
1984 2,293,120 1,883,888
1985 1,458,481 1,202,227
1986 684,043 392,933
1987 80,528 16,528
4,516,172 5,773,098
Less discount 923,274 1,234,685
$3.592.898 4 538 4 3
Page 9
A4.n,e C Din r. .,r.r.. P. r,.vn.%ry
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Notes to Combined Financial Statements
For the Years Ended April 30, 1982, and 1981
4. Advance Syndication Fees
In certain circumstances, limited partners were given the option of paying the
syndication fee portion of their future capital contributions in advance with a.
15 percent discount applied to the advance payment. Interest is compounded at 15
percent and the advance payments plus interest are paid to the respective
partnerships, on behalf of the electing limited partners, at the due dates of the
capital contributions. ' At April 30, 1982 and 1981, syndication feu receivable
of approximately $1,438,000 and $2,077,000, respectively, were assigned as
collateral for repayment of advance syndication fees.
5. Advances to Projects
Advances to projects represent amounts paid to, or on behalf of, apartment
projects which have been syndicated by Security Pacific, Inc. , in order that the
projects may meet certain current obligations. Repayment■ are made from cash
flow of the projects or in some instances, from the proceeds of refinancing or
eventual disposition of the projects.
6. Receivable from Stockholders
The receivable from stockholders is comprised principally of two promissory notes
amounting to $4,620,834 arising from the acquisition by a stockholder of
Interfinancial Real Estate Management Company and Partnership Services, Inc.
(See Note 17)
7. Investment in Projects Developed
Security Pacific, Inc. , as developer and co-general partner, has invested cash in
certain projects. Such investments are normally made to protect the Company's
original investments and its interests in the cash flow and residual values of
the projects. Recovery of the investments normally comas from cash flow of the
projects or from the proceeds of refinancing or eventual disposition of the
projects.
Page 10
1
1 SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
1 Notes to Combined Financial Statements
For the Years Ended April 30, 1982, and 1981 •
8. Federal and State Income Taxes
1 The provision for federal and state income taxes is comprised of the following:
1 Year Ended April 30,
1982 1981
Current:
Federal $ $ -
9tate 40 ,000 20 ,000
Deferred:
1 Federal 37,000 -
Provision for federal and state income taxes $77.000, laall
1 The stockholders of Security Pacific, Inc. , First Columbia Management, Inc. , J.
L. Moyer Co. , First Columbia Corporation, and Fraser Agencies, Inc. have elected
1 to be taxed under the provisions of Subchapter S of the Internal Revenue Code
wherein the income is taxable to the stockholders and not to the corporations.
The provision for federal and state income taxes in the current period does not
include a tax benefit for net operating losses of $(1,281,720) incurred by SP
Energy Development Corporation, Security Pacific Development, Inc. and Project
Data Systems, Inc. These companies were formed during the year ended April 30,
1982 and losses were incurred in their first year of operations. Although not
1 reflected in the combined financial statements, a tax benefit exists and can be -
carried forward to offset taxes on earnings during the next 15 years. The
provision does include the income tax expense relating to earnings deemed earned
l in states which do tax Subchapter S corporations and relating to the net earnings
of Interfinancial Real Estate Management Company. If the Subchapter 8 elections
had not been made and if a consolidated tax return were to be filed, the
1 provision for federal and state income taxes would approximate $408,500 and
$394,000 for the years ended April 30, 1982, and 1981, respectively.
9. Incentive Compensation
In May, 1979, the President of Security Pacific, Inc. entered into an agreement
with the Company and its sole stockholder whereby he earns deferred incentive
1 compensation calculated according to a formula specified in the agreement. Such
compensation was to be utilized only as a credit toward the purchase of stock of
the Company and of affiliated companies. The results of applying the formula may
1 increase or, under certain circumstances, decrease the compensation accrued.
During the year ended April 30, 1982, the amount due, according to the agreement,
as amended, was reduced by $1, 154,790 and such amount has been included in the
financial statements in arriving at net earnings.
1
Page 11
I
Maui: R Pill TAvrTrl7IL rnamsvv n.,..,.,.am,ir.rr„anan-.a
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Notes to Combined Financial Statements
For the Years Ended April 30, 1982, and 1981
9. Incentive Compensation (continued)
At April 30, 1982 the president of Security Pacific, Inc. and Security Pacific,
Inc. had agreed to terminate the agreement. Documents were subsequently drafted
and signed on September 27, 1982. After giving effect to the decrease in
incentive compensation of $1,154,790, $71 ,631 remained of the $1,226,421 accrued
as of April 30, 1981. Such amount has been reclassified to notes and contracts
payable in accordance with the termination conditions.
10. Syndication Commissions Receivable
The non—current portion of syndication commissions receivable is due as follows:
Year Ending April 30,
1984 $1 ,128,054
1985 870,015
1986 366,578
1987 102,624
2,467,271
Less discount 528,792
$1 .938,479
11. Syndication Commissions Payable
The non—current portion of syndication commissions payable is due as follows:
Year Ending April 30,
_ 1984 $ 932,471 •
1985 719,230
1986 303,007
1987 84 637•
2,039,145
Less discount 437 ,037
$1 .602.308
Page 12
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Notes to Combined Financial Statements
For the Years Ended April 30, 1982, and 1981 '
12. Capital Requirements
Pursuant to the net capital provisions of Rule 15c3-1 of the Securities Exchange
Act of 1934, as amended, First Columbia Corporation is required to maintain'
— minimum net capital, as defined under such provision, of $5,000. Net capital may
fluctuate on a daily basis. The Company's net capital was $33,150 and $33,549 at
April 30, 1982 and 1981, respectively. .
13. Common Stock
The following is a listing of the common stock of the companies included in the
combined financial statements:
Shares Issued
Par Value Shares and
Company Per Share Authorized Outstanding Amount
Security Pacific, Inc. $ 1 50,000 15,635 $ 15,635
— Interfinancial Real Estate
Management Company 1 225,000 104,000 104,000
Partnership Services, Inc. 1 100 ,000 100 ,000 100,000
_ First Columbia Corporation 1 50,000 30,000 30,000
First Columbia Management, Inc. 1 50,000 500 500
J. L. Moyer Co. 10 7,500 400 4,000
Dahl-Davis Management Co., Inc. - 25,000 100 1,000
Fraser Agencies, Inc. 1 50,000 500 500
SP Energy Development Corporation - 1,000 100 1,000
Security Pacific Development, Inc. 1 100,000 500 500
— Project Data Systems, Inc. 1 100 ,000 10,000 10,000 •
$267 .135
Page 13
Muni c Rrn i»rirH h r4-MPANY crxnnenflThUCACCOITHTA n
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Notes to Combined Financial Statements
For the Years Ended April 30, 1982, and 1981
14. Notes and Contracts Payable
Notes and contracts payable include the following:
April 30,
1982 1981
Notes payable to bank; interest at prime to prime plus
1/4 percent, due at'various dates through 1984,
partially secured by $1,000,000 certificate of
deposit $2,881 ,258 $
Note payable to insurance company; interest at 14
percent, due June 30, 1987 (see Note 17) , secured by
development and syndication fees receivable and
stockholder assets 2,800,000
Development loans payable; interest at 15 percent, due
at various dates through 1987, secured by development
and syndication fees receivable 1,806,225 1,784,376
Notes payable to officers and employees; interest at
18 percent, partially secured by development and
syndication fees receivable 634,294 498,241
Notes payable to others, principally short-term;
interest at 12 to 24 percent, secured by development
and syndication fees receivable 32,570 2,036,598
Notes payable to trusts of current and former
stockholders; interest at 15 percent, principally due
one year and ono day after demand, secured by
development and syndication fees receivable 389,389 335 ,389 _
Other notes and contracts payable at various rates
and maturities, partially secured 777 ,924 1 ,031 ,417
9,321,660 5,686,021
Less current portion 3,525 ,914 2 ,883 ,459
55 .795 .746 *2 .802 .562
The notes payable to bank and the note payable to insurance company require, .
among other things, maintenance of certain levels of debt to equity, working
capital and stockholders' equity. At April 30, 1982 such requirements had been
met.
Page 14
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Notes to Combined Financial Statements
For the Year■ Ended April 30, 1982, and 1981
14. Notes and Contracts Payable (continued)
The notes payable to bank are part of a line of credit to Security Pacific, Inc. •
of $4,500,000. Such line is composed of a $1,000,000 short term working capital
line at the prime interest rata and a $3,500,000 extended working capital line (2
years) at prime plus 1/4 percent.
Certain notes and contracts shown above are secured by development and
syndication fees receivable. At April 30, 1982 and 1981 such fees amounted to
approximately $4,181,200 and $5,122,010, respectively.
15. Insurance Claims Payable
During the year ended April 30, 1982 First Columbia Management, Inc. and J. L.
Moyer Co. changed their employee benefits plan from a standard insurance program
to a Net Retention Plan. Under the new plan premiums are deposited into a'
restricted cash account. From this account, the insurance carrier is paid an
amount to cover commissions and servicing of the plan. Remaining amounts are
left on deposit to pay claims. Claims exceeding the amount of cash available in
the account are borne by the insurance carrier. If, on a specified settlement
date, excess cash is available after claims are paid, such excess is returned to
the Companies.
16. Companies Purchased by Stockholders
During the year ended April 30, 1982 the stockholders purchased Interfinancial
Real Estate Management Company, Partnership Services, Inc. and Dahl-Davis
Management Co. , Inc. Assets acquired and liabilities assumed by the stockholders
are as follows:
Dahl-Davis Interfinancial
Management Partnership Real Estate
Co. , Inc. Services, Inc. Management Co.
Total assets $45,794 $1 ,415,366 ' $7,777,476
Total liabilities 35,859 147,599 2,450,855
•
Total stockholders' equity 9,935 1,267 ,767 ' 5,326,621
Earnings (losses) of the companies, after the date of purchase by the
stockholders , have been included in the combined financial statements. See
Note 1.(a) regarding amounts.
Page 15
SECURITY PACIFIC, INC.
and
AFFILIATED COMPANIES
Notes to Combined Financial Statements
For the Years Ended April 30, 1982, and 1981
17. Contingencies and Committments
Security Pacific, Inc. is a guarantor of a $1 ,500,000 loan to Security Pacific -
Old Tacoma City Hall, Ltd. , a Washington limited partnership, whose majority
owner is also the sole shareholder of Security Pacific, Inc. Although payments
are current on the loan, the project has had financial difficulties which have
created the need for cash in order for the partnership to meet its obligations.-
- During the years ended April 30, 1982, and 1981, these cash requirements have
been fulfilled through advances from the Company to the partnership.
Certain current and former officers and employees of Security Pacific, Inc. are
partners in partnerships which are the general partners in substantially all of
the limited partnerships syndicated by the Company. The Company has occasionally
indemnified certain of these individuals in their partnership capacities.
Additionally, the Company is general partner in a small number of the limited
partnerships. In the instances described, the Company is contingently liable for
costs and liabilities (other than the nonrecourse mortgages on the projects).
incurred by the partnerships.
At April 30, 1982 and 1981, development and syndication fees receivable of
approximately $5,235,000 and $4,244,000, respectively, were assigned as
collateral for repayment of certain third party loans to limited partnerships
syndicated by Security Pacific, Inc.
In 1981, Security Pacific, Inc. and its sole stockholder entered into an
agreement with the stockholder of Interfinancial Real Estate Management Company
and Partnership Services, Inc. whereby the Company's stockholder acquired all of
the outstanding stock of those corporations. Concurrent with this agreement, the
previous stockholder made a loan of $2,800,000 to Security Pacific, Inc.
Providing the terms of the agreements are complied with, including indemnifying
the former stockholder against losses arising from certain legal actions, the
loan will be extinguished at its maturity in 1987 by offset with a loan from
Interfinancial Real Estate Management Company to the previous stockholder.
First Columbia Management, Inc. is a guarantor on an obligation of a stockholder
of the Company in the amount of $250,000 due June 16, 1982.
Page 16
SECURITY PACIFIC , INC .
AND
AFFILIATED COMPANIES
COMBINED FINANCIAL STATEMENTS
FOR THE YEAR ENDED APRIL 30 , 1983
TOGETHER WITH AUDITORS ' REPORT
To the Board of Directors
Security Pacific, Inc. s
We have examined the combined balance sheet of
Security Pacific , Inc . and affiliated companies as of
April 30 , 1983, and the related combined statements of
income , stockholders ' investment and sources and uses of
cash for the year then ended. Our examination was made in
accordance with generally accepted auditing standards and,
accordingly, included such tests of the accounting records
and such other auditing procedures as we considered neces-
sary in the circumstances .
In our opinion, the financial statements referred
to above present fairly the combined financial position of
Security Pacific, Inc. and affiliated companies as of
April 30, 1983 , and the results of their operations and the
changes in their financial position for the year then ended,
in conformity with generally accepted accounting principles
which, except. for the changes (with which we concur) to the
method of recognizing syndication fee revenues , and of
imputing interest in the discounting of syndication fees,
development fees and partnership syndication commissions as
described in Note 1 to the financial statements , have been
applied on a basis consistent with that of the preceding
year. /�
Seattle , Washington, " ' � As uca 4 a ,
August 29 , 1983 .
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SECURITY PACIFIC, INC.
AND
AFFILIATED COMPANIES
COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED APRIL 30, 1983
1983
REVENUES (NOTE 1) :
Syndication fees $ 4, 017, 571
Development fees and profits 1, 767, 007
Property management fees 4, 851, 039
Syndication commissions 2, 732, 165
Insurance commissions 335, 557
Project monitoring fees 837, 060
Interest 1, 070, 866
Amortization of discounts, net 1,506, 501
Other 1, 975, 733
19,093, 499
EXPENSESs
Salaries, wages and bonuses 5, 882, 646
Payroll taxes and employee benefits 1, 013,761
Occupancy and office 1, 778, 330
Commissions 2,436,723
Interest 2, 161, 395
Depreciation 519,412
Travel and entertainment 809, 693
Professional fees 612, 291
Business, property and other taxes 222, 227
Provision for bad debts 193,841
Other 818, 851
16, 449,170
Income from operations before
income taxes 2, 644, 329
Provision for Federal and state income
taxes (Note 7) 105, 000
Net income before cumulative effect
of changes in accounting principles 2, 539, 329
Cumulative effect on prior years of
changes in accounting
principles (Note 1) (840, 592)
Net income $ 1, 698, 737
The accompanying notes are an integral
part of this statement.
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SECURITY PACIFIC, INC .
AND
AFFILIATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
APRIL 30 , 1983
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES :
Combined Financial Statements
The combined financial statements include the
accounts of Security Pacific, Inc. (the Company) and affil-
iated companies (the Companies) which are listed below.
Combined financial statements have been prepared because the
Companies are subject to common ownership and management and
are related in their operations. The primary operations of
the Companies involve the syndication , development , sale and
management of real estate limited partnerships , and apart-
ment management. These partnerships have generally been
regarded as tax-advantaged investments , and the Companies '
syndication activities may be significantly affected by
changes to the tax laws. The operations of the Companies
are coordinated and certain companies in the affiliated
group are dependent upon the continuing operations of others
in the group.
The revenues , net income and stockholders ' invest-
ment of the Companies ' syndication and property management
operations for the year ended April 30 , 1983 , were approx-
imately as follows:
Revenues $18 ,460, 000
Net income 2, 370,000
Stockholders' investment 10, 300, 000
The operations of affiliates not involved in these activ-
ities are not significant to the total operations of the
Companies.
-2-
•
The following is a listing of the companies included
in the combined financial statements :
Date of Principal
Company Name Affiliation Business Activity
Security Pacific, Inc. May 6 , 1969 Real estate syndication
and development
Interfinancial Real June 24 , 1981 Real estate syndication
Estate Management
Company
First Columbia August 28, 1972 Securities broker/
Corporation dealer - primarily
limited partnership
interests
First Columbia May 18 , 1977 Management of apartments
Management, Inc. and condominiums
J.L. Moyer Co . March 31, 1979 Management of apartments
and condominiums
Dahl-Davis Management February 1 , 1982 Management of condo-
Co . , Inc. - miniums
Condominium Services , May 1, 1982 Management of condo-
Inc. miniums (inactive during
fiscal 1982)
Partnership Services , June 24 , 1981 Administrative services
Inc. for real estate limited
partnerships
Security Pacific May 29 , 1981 Real estate development
Development, Inc.
Fraser Agencies, Inc. May 1 , 1981 Insurance brokerage
SP Energy Development October 12 , 1981 Oil and gas exploration
Corporation and drilling, including
syndication and manage-
ment of drilling limited
partnerships (liquidated
April 22, 1983 )
Project Data Systems , July 14 , 1981 Computer hardware and
Inc. software sales
-3-
In addition to the above corporations , the majority
stockholders of the Companies also have interests in various
partnerships , including Unlimited Communications and SP
Energy Development Company, which have not been combined.
The financial statements of the SP Properties partnerships ,
which are the general partners to the limited partnerships
sponsored by Security Pacific, Inc. , are also not combined
in the accompanying financial statements . The principal
stockholders of the Companies have partnership interests in
the SP Properties partnerships .
The accompanying combined financial statements
reflect the assets, liabilities and stockholders ' investment
of the Companies based upon their historical cost as of the
date of affiliation. Retained earnings prior to affiliation
is included as a component of stockholders ' investment and
totaled $593,393 at April 30, 1983 . All significant
accounts and transactions between affiliated companies have
been eliminated in combination.
The results of operations and loss upon liquidation
of SP Energy Development Corporation were not material .
Revenue Recognition
During fiscal year 1983, there have been changes in
accounting principles concerning the revenue recognition of
syndication fees , development fees and profits and syndi-
cation commissions. A summary of the cumulative. effects of
changes in accounting principles , together with a descrip-
tion of the Companies ' previous and new policies are
described below:
Cumulative Effects of Changes in
Accounting Principles for -
Syndication fees $ (507, 029 )
Development fees and profits (265,621)
Syndication commissions (67 , 942)
$ (840,592)
-4-
The Companies receive their syndication fees,
development fees and profits , and syndication commissions
from each partnership out of the capital contributions of
the limited partners. Fees and commissions are received
from the partnerships over a period of three to seven
years . These revenues are recognized after the initial
closing of each limited partnership in proportion to the
estimated costs incurred and at such time as their collec-
tion is reasonably assured.
Discounting of Fees and Commissions
The Companies discount syndication fees receivable ,
development fees receivable and partnership syndication
commissions receivable and payable which are noninterest
bearing, to their present value based upon their bank
borrowing rate at the time of syndication. The resulting
discounts are amortized to income or expense based upon the
unpaid balance of the receivable or payable . The rate used
prior to May 1, 1982, was 15% . The rates used in fiscal
1983 ranged from 10. 75% to 16. 75% .
Syndication Fees
Security Pacific, Inc. receives syndication fees
from each partnership for legal, accounting and adminis-
trative services provided.
For the year ended April 30 , 1983 , the Company
changed its method of recognizing syndication fee revenue .
Under the previous method, all of the revenue to be recog-
nized for the year was recorded in the month in which the
scheduled limited partnership installment fee was received.
For the year ended April 30, 1983 , the Company recognized
revenue evenly over the twelve months prior to scheduled
receipt of the installment. This change in method was made
in order to match revenues with estimated costs as they were
incurred.
Further, the Company changed its method of
discounting to present value the related receivable
balances . This change was made in order to give effect to
the individual scheduled cash flows of the syndication fees
receivable. Previously, no discounts were imputed for
installments due within one year and installments in later
years were discounted in the aggregate by year of maturity.
Under the new method, all installments , including those due
within one year , are discounted by date of scheduled receipt.
-5-
The computations involved in the recognition of
syndication fees revenue in fiscal 1983 and 1982 are complex
and performed on a detail basis by partnership. Pro forma
effects have not been determined because it is impractical
to do so. However , the cumulative effect on prior years of
retroactively applying the change amounted to $507,029 and
is included as a decrease in net income for the .year ended
April 30 , 1983 .
Development Fees and Profits ••
As the developers of certain properties , Security
Pacific, Inc. and Security Pacific Development , Inc . receive
development fees from the partnerships as compensation for
services performed. Development fees receivable were
discounted to present value for the years ended April 30 ,
1983 and 1982 , using the same methods during each year as
described above for syndication fees. The net effect of the
change in the method of computing discounts on the year
ended April 30, 1983 , is not significant. The cumulative
effect on prior years of retroactively applying the change
amounted to $265, 621 and is included as a decrease in net
income for the year ended April 30 , 1983 .
Development profits, which are the net of develop-
ment fees , costs incurred and accrued , and discounts , are
recognized upon syndication and upon final loan closing in
proportion to the estimated related cost incurred. Esti-
mated losses , if any, are recognized in full in the period
in which losses are determined.
Syndication Commissions
First Columbia Corporation receives commissions on
sales of limited partnership interests , and pays commissions •
on such sales to its registered representatives and other
broker/dealers . The Company' s sales effort is completed
upon the sale of all limited partnership interests of a
partnership and the admission of limited partners into that
• respective partnership. Commission revenues and expenses
are recognized upon completion of the sales effort.
First Columbia Corporation discounted commissions
receivable and payable for the year ended April 31 , 1983 and
1982, using the same methods during each year as described
above for syndication and development fees and profits. The
net effect of the change on the year ended April 30 , 1983 ,
is not significant. The cumulative effect on prior years of
retroactively applying this change amounted to $67 , 942 and
is included as a decrease to net income for the year ended
April 30, 1983 .
-6-
Furniture , Equipment and Leasehold Improvements
Depreciation is computed using straight-line or
accelerated methods over the estimated useful lives of the
assets, generally three to five years . Amortization of
leasehold improvements is computed using straight-line or
accelerated methods over the shorter of the estimated useful
lives of the assets or the term of the related leases.
Deferred Offering Costs
As of April 30, 1983, the Company had various
syndications in progress . Direct costs incurred for
offerings in progress as of this date have been capitalized
in the accompanying financial statements as deferred
offering costs . These costs include salaries , printing and
legal costs. Direct costs incurred for property site loca-
tion and acquisition are also included in deferred offering
costs .
(2 ) LONG-TERM RECEIVABLES:
Long-term fees and commissions receivable consisted
of the following as of April 30 , 1983 :
Development Syndication Syndication
Total Fees Fees Commissions
Gross amounts
receivable $18 ,834,492 $3 , 673 , 000 $10, 409 , 174 $4 , 752 ,318
Less dis-
count (3, 819, 491) (710 , 507) (2 ,125 , 637) (983 , 347)
Net 15, 015, 001 2 ,962 ,493 8,283 , 537 3, 768 , 971
Less current
portion (6,138, 546) (1,241 ,658) (3 , 332 ,648) (1,564 , 240 )
Long-term
portion $ 8 ,876,455 $1, 720, 835 $ 4 , 950 , 889 $2 ,204 , 731
A substantial portion of long-term development and syndi-
cation fees are pledged as security for long-term debt and
guarantees.
•
-7-
(3) RELATED PARTY BALANCES :
As of April 30, 1983, the financial statements
reflect the following outstanding balances with related
parties:
Notes Receivable Notes Payable
Current Noncurrent Current Noncurrent
Officers a employees $175,999 $ 356, 893 $ 394 ,262 $ -
Stockholders 94 ,866 8 , 353 263, 410 71 , 631
Other related parties 221,461 3,461 ,505 684,958 942 , 946
Total $492 ,326 $3,826,751 $1 ,342 ,630 $1 , 014 , 577
The above related party notes receivable and
payable range widely in interest rates and repayment terms .
None are individually significant, with the exception of the
items discussed below.
Included in notes receivable - other related
parties , is a note bearing interest at 12% and due no later
than November 30, 1988, from a partnership whose majority
owner is the majority stockholder of Security Pacific , Inc.
The loan balance was $2 ,654 , 566 as of April 30 , 1983 , plus
accrued interest thereon of $279,327 . The loan is secured
by a second deed of trust and security agreement on the
assets of the partnership, and is personally guaranteed by
the Companies ' majority stockholder .
Included in notes payable - other related parties ,
are notes payable to trusts of the majority stockholder
_ amounting to $902,438 including interest thereon. The notes
payable bear interest at 18% , and are partially secured by
development and syndication fees receivable . The notes are
primarily due one year and one day after demand.
Included in notes receivable - other related
parties , are advances of approximately $700 , 000 to Unlimited
Communications and SP Energy Development Company. Interest
is charged on these advances at the Companies' borrowing
rate. Repayment will be made from the cash flows of the
partnerships, either through future operations or their
ultimate disposition.
-8-
(4 ) ADVANCES TO PROJECTS AND INVESTMENT IN PROJECTS
DEVELOPED:
Advances to projects represent amounts paid to, or
on behalf of , apartment properties which have been syndi-
cated by Security Pacific, Inc. , in order that the proper-
ties may meet certain current obligations . Repayments are
made from cash flow of the properties or in some instances ,
from the proceeds of refinancing or eventual disposition of
the properties . As of April 30 , 1983 , advances to projects
were $2 ,788,.752.
Security Pacific , Inc. , as developer and co-general
partner , has made developer advances to certain properties .
Such advances are normally made to protect the Company ' s
original investments and its interests in the cash flow and
residual values of the properties . Recovery of .the invest-
ments normally comes from cash flow of the properties or
from the proceeds of refinancing or eventual disposition of
the properties . As of April 30 , 1983 , investment in
projects developed was $1,983 , 244 .
As of April 30 , 1983 , the Company has advanced
approximately $1,100, 000 to a property which has experienced
substantial operating deficits and low occupancy in its
initial period of operations . The mortgage on this property
is currently in default , and the partnership has requested a
restructuring of repayment terms from the Department of
Housing and Urban Development (HUD) . Assuming that a
restructuring of the mortgage is successfully obtained ,
additional advances of approximately $2 , 000, 000 may be
required before the property becomes self-supporting . ' In
the opinion of management, the Company is reasonably assured
of realization of its advances to this property, regardless
of the outcome of the mortgage negotiations .
-9-
(5) LONG-TERM DEBT:
Notes and contracts payable consisted of the
following as of April 30 , 1983 :
Bank line of credit, $6 , 500 , 000 , interest
primarily at prime plus ' .25% , partially
secured by $1,000 , 000 certificate of
deposit, due at various dates through 1987 $ 4 ,698, 955
Note payable to insurance company, interest
due quarterly at 14% , due June 30 , 1987 ,
partially secured by syndication and
development fees receivable 2 ,800,000
Development loans payable, interest at
various rates ranging from 13 . 5% to 23 . 5%
with a portion at prime plus 2% due at
various dates through 1988 , partially
secured by syndication and development
fees receivable 3 ,155 , 247
Obligations under capitalized leases 916, 735
All other notes and contracts payable , at
various interest rates and maturities ,
partially secured 2 , 005, 516
13,576 , 453
Less- current portion (7,990,774 ) '
Long-term debt S 5, 585, 679
The Company has agreed to certain loan covenants in
connection with the line of credit, including not pledging
certain syndication and development fees receivable , mainte-
nance of certain levels of debt to equity, working capital
and stockholders ' investment among other covenants made . As
of April 30, 1983 , the Company was in compliance with, or
had received waivers for , all such requirements. The bank
line of credit includes a $1,700 , 000 working capital line
bearing interest at prime which must remain paid in full for
30 consecutive days each calendar year . The stockholders of
Security Pacific, Inc . , have personally guaranteed repayment
of the bank line of credit.
The note payable to insurance company has been
classifed as a current obligation in the accompanying finan-
- cial statements as it is anticipated to be redeemed early
under the mutual release agreement discussed in Note 11.
-10-
Minimum future rental payments under leases capi-
talized are as follows for fiscal years ending April 30 :
. 1984 $ 331 ,348
1985 318 , 899
1986 276,207
1987 185, 965
1988 97 , 110
Total 1 ,209 ,529
Less- amount repre-
senting interest (292 ,794 )
Obligation under
capital leases $ 916 , 735
(6 ) PARTNERSHIP SYNDICATION COMMISSION PAYABLE:
Partnership syndication commissions payable
consisted of the following as of April 30 , 1983 :
Current portion $1 , 548 ,180
Less- discount (116, 873)
$1,431,307
Noncurrent portion $2 , 540 ,158
Less- discount (717 , 426)
$1, 822 ,732
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(7) FEDERAL AND STATE INCOME TAXES:
The stockholders of Security Pacific , inc . , First
Columbia Management, Inc. , J .L. Moyer Co. , Dahl-Davis
Management Co . , Inc. , First Columbia Corporation and Fraser
Agencies , Inc. have elected to be taxed under the provisions
of Subchapter S of the Internal Revenue Code wherein the
income is taxable to the stockholders and not to the corpo-
rations . In addition, effective January 1 , 1983 , the stock-
holders of Interfinancial Real Estate Management Company
(IREMCO) received approval from the Internal Revenue Service
of their election to be taxed as a Subchapter S
corporation . Accordingly, IREMCO' s deferred tax liability
of $1 , 607 , 187 as of April 30 , 1982 , was assumed by the
stockholders . The deferred tax obligation has been
reflected as a credit to retained earnings in the accom-
panying financial statements.
SP Energy Development Corporation , Project Data
Systems , Inc. , and Partnership Services , Inc . , incurred
losses . As of April 30, 1983 , these companies had combined
net operating loss carry-forwards of approximately $800,000 .
Taxes have been provided in the accompanying finan-
cial statements on the income of Security Pacific Develop-
ment, Inc. and Condominium Services , Inc. in the amount of
$50 ,000 for the year ended April 30 , 1983 . The remainder of
the provision for income taxes relates to state income taxes
on income of Subchapter S corporations , which are taxable in
certain states.
If the Subchapter S elections had not been made and
if a consolidated tax return were to be filed , the total
provision for Federal and state income taxes would approxi-
mate $800 ,000 for the year ended April 30 , 1983 . This
provision includes an income tax credit of approximately
$400,000 for the tax benefit of the cumulative effect of
changes in accounting principles.
(8 ) CONTINGENCIES AND COMMITTMENTS:
Guarantees
As described in Note 3, there is a note receivable
of $2 , 654 , 566 plus interest from a partnership whose
majority owner is also the majority stockholder of Security
Pacific, Inc . In addition to the note , Security Pacific ,
Inc . is a guarantor of a $1, 550 , 000 loan to the partnership.
•
•
• -12-
At April 30, 1983 , Security Pacific, Inc. had guar-
anteed approximately $5, 380 , 000 of financing of properties
owned by limited partnerships sponsored by Security Pacific,
Inc.
Contingent Liabilities
Under the terms of an employee benefits plan agree-
ment, in the event of termination of the plan , the Companies
are contingently liable for any claims which have been
incurred but not reported as of the termination date . As of
April 30 , 1983 , management does not intend to terminate the
employee benefits agreement.
Certain current and former officers and employees
of Security Pacific, Inc. , are partners in partnerships
which are the general partners in substantially all of the
limited partnerships syndicated by the Company. The Company
has occasionally indemnified certain of these individuals in
their partnership capacities. Additionally , the Company is
general partner in a small number of the limited partner-
ships . Accordingly, the Company is contingently liable for
costs and liabilities (other than the nonrecourse mortgages
on the projects) incurred by the partnerships .
Due to the nature of the Companies ' business , they
are involved from time to time in various lawsuits and
claims . Management believes the liabilities , if any,
resulting from the ultimate disposition of these matters ,
will not be material to the Companies ' financial position.
Commitments
The Companies have entered into various operating
leases for office space and equipment. Minimum required
rentals under these leases for the next five years are as
follows :
Minimum •
Year Ending April 30 Rentals
1984 $805 , 000
1985 934 , 00C
1986 933,000
1987 863 , 000
1988 771,000
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In connection with the syndication of limited
partnerships for new construction projects , the• commitment
to pay developer fees is a liability of the partnership.
However in some cases , Security Pacific , Inc. agrees to
advance the limited partnership sufficient funds to pay the
developer until the limited partnership obtains sufficient
capital contributions . The obligation ends when the limited
partnership interests have been sold. Additionally, in
connection with the syndication of limited partnerships to
purchase existing apartment complexes , Security Pacific ,
Inc. enters into conditional purchase agreements with the
sellers of the properties and assigns such agreements to the
limited partnership upon final closing of the sale. These
purchase commitments and contingent liabilities can be
significant at any point in time but are limited to
partnerships in the process of being sold.
(9 ) COMMON STOCK:
The •following is a listing of the common stock of
the Companies included in the combined financial statements
as of April 30 , 1983 :
Shares
Par Value Shares Issued and
Company Per Share Authorized Outstanding Amount
Security Pacific , Inc. $ 1 50,000 _ 15, 635 $ 15 , 635
Interfinancial Real
Estate Management
Company 1 225, 000 104, 000 104 , 000
Partnership Services ,
Inc. 1 100, 000 100, 000 100 , 000
First Columbia
Corporation 1 50 , 000 30, 000 30 , 000
First Columbia Manage-
ment, Inc. 1 50 , 000 500 500
J .L. Moyer Co . 10 7,500 400 4 , 000
Dahl-Davis Management
Co . , Inc. - 25, 000 100 1 , 000
Condominium Services ,
Inc. _ 10 7 , 500 100 1 , 000
Fraser Agencies , Inc . 1 50 , 000 500 500
Security Pacific
Development Corporation 1 100, 000 500 500
Project Data Systems , Inc . 1 100, 000 10, 000 10 , 000
$267 ,135
•
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(10 ) RECEIVABLE FROM STOCKHOLDERS:
Certain receivables from stockholders arose
primarily from the initial capitalization of the Companies .
At April 30 , 1983 , these were comprised principally of four
promissory notes amounting to $4 , 680 , 834 relating to Inter-
financial Real Estate Management Company, Security Pacific
Development, Inc. , Project Data Systems , Inc. , and Partner-
ship Services , Inc . The notes are noninterest bearing , and
have been classified as a reduction of stockholders ' invest-
ment.
(11) MUTUAL RELEASE AGREEMENT:
In connection with the purchase of Interfinancial
Real Estate Management Company (IREMCO) , the previous stock-
holder made a loan to Security Pacific, Inc , in the amount
of $2 ,800 , 000 bearing interest at 14% . Included in IREMCO' s
financial statements was a $3 ,500,000 note receivable from
the previous shareholder bearing interest at 8% . IREMCO
retroactively discounted this note to its present value as
of the date of affiliation. See Note 12 .
Subsequent to year-end, the parties had reached
agreement to provide for repayment of these obligations and
release of certain conditions of the initial agreement. The
previous stockholder will pay $2 ,920 , 000 in satisfaction of
the IREMCO note receivable and Security Pacific , Inc. , will
pay the previous stockholder the $2 ,800 , 000 balance of its
note payable .
As of April 30 , 1983 , the $3 , 500 ,000 note receiv-
able has been recorded at its net realizable value of
$2 ,920 , 000 , and both obligations are classified as current
in the accompanying financial statements .
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(12) RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS:
The balance of retained earnings as of April 30 ,
1982 , has been adjusted to reflect the application of
certain correcting entries . A reconcilation of retained
earnings as previously reported to retained earnings as
reflected in the accompanying financial statements is as
follows (rounded to 000 ' s) :
As of
April 30 , 1982
Retained earnings , as previously reported $4 , 617,000
Restatement entries-
To adjust discount on development fee
receivables as of April 30, 1982 (399 , 000)
Other , net 5, 000
Retained earnings , as reported herein $4 ,223, 000
As described in Note 11, the Company retroactively
discounted a $3 , 500 , 000 note receivable to $2 ,800 , 000 , its
present value as of inception. The note was acquired as
part of the affiliation of Interfinancial Real Estate
Management Company (IREMCO) . The $700,000 discount was
_ reflected as a reduction of the additional paid-in capital
of IREMCO as of the date of affiliation .
Hello