ITEM 1. Business. --------
Forward Looking Statements --------------------------
This 10-K Report includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations due to changes in global economic, business, competitive, market and regulatory factors.
General -------
Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a California Limited Partnership ("Registrant"), is a publicly held limited partnership organized on January 6, 1988 under the California Revised Limited Partnership Act. Commencing August 4, 1988, Registrant offered 12,000 units (including options) of limited partnership interest (the "Units") to the public at $5,000 per Unit in an interstate offering. The offering was terminated on November 27, 1989, with limited partners purchasing 4,508 Units for an aggregate purchase price of $22,540,000.
Registrant's general partners (the "General Partners") were originally Westrec Investors, Inc., (formerly PS Marina Investors, Inc.) a California corporation (the "Corporate General Partner") and B. Wayne Hughes ("Mr. Hughes"). Effective March 1, 1997 Tower Park Marina Operating Corporation, a wholly-owned subsidiary of Westrec Financial, Inc., a California corporation ("Westrec Financial") was substituted for Mr. Hughes. The Corporate General Partner is a wholly-owned subsidiary of Westrec Properties, Inc., a California corporation ("Westrec Properties"), which is a wholly-owned subsidiary of Westrec Financial. The limited partners of Registrant have no right to participate in the management or conduct of Registrant's business and affairs.
Registrant has entered into a management agreement with Westrec Marina Management, Inc. ("WMMI"), a California corporation and a wholly-owned subsidiary of Westrec Financial, whereby WMMI has agreed to manage Registrant's properties for monthly fees generally equal to 6% of gross revenues from the operation of Tower Park Marina. The management agreement is cancelable on 60 days' notice by either party with or without cause. WMMI also manages marina properties for other entities
affiliated with the General Partners and for unaffiliated third parties.
Registrant was formed to acquire and improve existing marinas and related facilities and, to a lesser extent, to develop marina facilities. Marina facilities typically contain wet and/or dry boat storage facilities, gasoline sales facilities and may contain one or more related facilities such as a recreational vehicle ("RV") or campground facilities, boat trailer storage facilities, boat rental and sales facilities, restaurants or similar facilities, and boat supply and sundries stores. Substantially all of the Registrant's income is derived from the rental of wet and/or dry boat storage facilities and related facilities such as R.V. facilities and boat trailer storage facilities, and from the receipt of rental payments under leases or subleases.
Registrant's principal investment objectives are to (1) preserve and protect Registrant's invested capital; (2) provide cash distributions from property operations; (3) maximize the potential for appreciation in value of Registrant's property; and (4) build up equity through the reduction of the mortgage loan on Registrant's property.
The General Partners or an affiliate supervise the construction of improvements to Registrant's property.
As of December 31, 2001 and 2000, Registrant owned one property, known as Tower Park Marina. Reference is made to Item 2
ITEM 2. Property. --------
As of December 31, 2001, the Registrant owned Tower Park Marina, which is located in San Joaquin County, California. The property was acquired on February 1, 1988. Tower Park Marina is situated on 44.5 acres, of which 14 acres are leased from the California State Lands Commission (the "CSLC Lease"). Tower Park Marina improvements and operations currently consist of the following: (a) 205 covered slips contained in 17 covered sheds; (b) 145 open slips; (c) end ties for approximately 17 boats; (d) an RV facility containing approximately 390 existing spaces; (e) a gas dock facility; (f) three warehouse buildings utilized as a restaurant and bar, store, boat sales offices, and maintenance shop containing three covered dry boat storage areas with capacity for approximately 65 boats; and (g) additional dry storage areas with capacity for approximately 67 boats. The covered boat slips at Tower Park Marina are typically rented on a month to month basis. Most of the open boat slips and the lineal boat dockage at Tower Park Marina are rented on a monthly, weekly or daily basis. The RV facility consists of permanent (rented on an annual basis) RV camping and transient RV camping. As of March 25, 2002, the permanent wet slip facilities (consisting of 205 slips) were approximately 68.8% leased and the permanent RV spaces (consisting of 136 spaces) were approximately 79.4% leased.
The CSLC Lease provides for annual rent based on gross receipts, with minimum annual rent of $40,000. For the year ended December 31, 2001, rent expense for the CSLC Lease was $40,000.
The acquisition of Tower Park Marina was financed through a note secured by a deed of trust secured by the property. This note was purchased by an affiliate of Mr. Hughes, formerly a general partner of the Registrant, in January 1995. The Registrant entered into an option agreement (which expired on April 10, 1996) to purchase the note from Mr. Hughes' affiliate at its cost ($1,700,000) plus carrying costs. Effective March 1, 1997 the Registrant entered into a new option agreement to purchase the note which expired on February 28, 1998. The Registrant paid $50,000 in February 1998 to extend the option period until February 28, 1999, and an additional $50,000 in February 1999 to extend the option period until February 28, 2000. The extension payments were applied as reductions in the principal amount due under the note. The principal and interest outstanding on the note at December 31, 1998 totaled $9,869,000. On July 1, 1999 the Registrant completed the refinancing of Tower Park Marina and exercised its option to
repay the note payable for $1,600,000. As a result, the Registrant recognized a gain of $8,515,000 from the forgiveness of debt for the year ended December 31, 1999. For additional details see Note (5) of the Notes to Financial Statements included in Item 14(a).
ITEM 3.
ITEM 3. Legal Proceedings. -----------------
None. ----
ITEM 4.
ITEM 4. Submission of Matters to a Vote of Security Holders ---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth quarter of 2000.
PART II
ITEM 5.
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters. ---------------------------------------------------------------------
Registrant has no common stock.
The Units are not listed on any national securities exchange or quoted on the NASDAQ System, and there is no established public trading market for the Units. Secondary sales activity for the Units has been limited and sporadic. The General Partners monitor transfers of the Units because the admission of the transferee as a substitute limited partner requires the consent of the General Partners under the Partnership Agreement. However, the General Partners do not monitor or regularly receive or maintain information regarding the prices at which secondary sales transactions in the Units have been effectuated. Various organizations offer to purchase and sell limited partnership interests (including securities of the type such as the Units) in secondary sales transactions. Various publications such as Investment Advisor summarize and report information (on a monthly, bi-monthly or less frequent basis) regarding secondary sales transactions in certain limited partnership interests, including the prices at which such secondary sales transactions are effected.
As of December 31, 2001, WMMI has acquired 422 Units in the Registrant, representing 9.4% of the outstanding units at an average price of $215 per unit.
Exclusive of the General Partners' interest in Registrant, as of December 31, 2001, there were approximately 936 Unit holders of record.
If applicable, Registrant makes quarterly distributions of all "Cash Flow from Operations" and of all "Cash from Sales or Refinancing", subject to the provisions enumerated below. Cash Flow from
Operations, as defined in the Registrant's Partnership Agreement, is the total cash receipts of the Registrant from the operations of the Registrant's business, which includes, but is not limited to, cash receipts from the rental of the Registrant's properties, and which excludes Cash from Sales or Refinancing, less: (i) all operating expenses other than non-cash expenses such as depreciation and amortization; (ii) all principal and interest payments on any loans or advances; (iii) any sums expended for capital improvements or replacements (excluding amounts paid from funds provided by capital contributions); and (iv) a cash reserve for working capital or other purposes, the amount of which shall be determined by the General Partners. Cash from Sales or Refinancing, as defined in the Partnership Agreement, is the net proceeds to Registrant from all sales, exchanges and refinancing of Registrant's properties, less payment of indebtedness relating to such properties and adequate cash reserves from such net proceeds for other obligations of Registrant for which there is no provision; however, Cash from Sales or Refinancing does not include any proceeds reinvested in properties.
As a result of Registrant's continued operating deficits, distributions have been suspended since June 30, 1991. See Item 6
ITEM 6. Selected Financial Data. -----------------------
The data set forth below should be read in connection with the Consolidated Financial Statements and Notes thereto appearing elsewhere herein, and Management's Discussion and Analysis of Financial Condition and Results of Operations.
(In thousands of dollars, except per unit information)
__________________________
(1) Per unit data is based on the weighted average number of Units outstanding during each year, 4,508. (2) The years ended December 31, 1999, 1998 and 1997 have been restated to reflect the consolidation of Little Potato Slough Mutual Water Company (LPSMWC) and the effect of discontinued operations. See Notes 1 and 8 to the consolidated financial statements contained herein.
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations. ---------------------
In August 1988 the Registrant commenced an offering of up to 12,000 Units of limited partnership interest to the public at a price of $5,000 per Unit. The offering was terminated on November 27, 1989 after the sale of 4,508 Units.
Tower Park Marina was purchased in February 1988 and as of December 31, 2001, $10,911,000 had been incurred in capital costs associated with its acquisition and subsequent improvement.
The operations of the Registrant's marina are influenced by factors affecting the marina and boating industries nationally, as well as by local market and weather conditions.
Presentation of Financial Statements ------------------------------------
The financial statements of the Partnership reflect the Partnership's ongoing business in the slip rental, RV parking, retail sales, fuel sales and other segments and the discontinuance of its restaurant and boat service segments. The restaurant and boat service segments are now classified as discontinued operations. Financial statements of prior periods have been restated to reflect the Partnership's decision to discontinue the restaurant and boat service operations.
Results of Operations ---------------------
Historically, the Partnership's revenues were generated primarily from slip rentals. RV parking, retail sales, fuel sales and the restaurant and boat service segments.
As discussed in Note 10 to the consolidated financial statements, during the first quarter of 2001 the Partnership made the decision to discontinue its restaurant and boat service operations and to seek to identify potential operators to lease these facilities. Consequently, the Partnership's restaurant and boat service operations are classified as discontinued operations. The restaurant was leased to an independent restaurant operator effective May 1, 2001.
2001 Compared to 2000 ---------------------
For the year ended December 31. 2001, the Registrant reported a net loss before extraordinary item of $463,000, a decline of $35,000 over 2000. The decline is the net result of increased operating costs, offset by a $53,000 decline in interest expense. The savings in interest are the result of
lower interest costs on advances from affiliates. Included in the net loss of $463,000 is $238,000 of depreciation and amortization. Excluding these non-cash items, the Registrant incurred a cash flow deficit of $225,000. This deficit was covered by additional advances from the General Partner and by the deferral of interest and management fee payments due to the General Partner and/or its affiliates.
For the year ended December 31, 2001, the net operating cash flow (Tower Park's operating income before debt service, depreciation and partnership administrative costs) for Tower Park Marina was $339,000, compared to $304,000 in 2000. Tower Park Marina's slip rental revenues (which includes both wet slip and dry storage revenues) declined $14,000 to $696,000 in 2001, which is attributable to a slight decline in occupancies.
RV park revenues increased $145,000 to $957,000 in 2001, due to higher occupancies and increased rates.
In response to numerous customer complaints during 1999, management implemented a program to increase the operating hours of the restaurant and bar at Tower Park Marina. Due to the disappointing results of the changes the restaurant operations were significantly curtailed beginning January 1, 2001.
Retail store revenues declined $29,000 to $423,000, with net operating income from retail sales declining $38,000 to $65,000 in 2001.
Fuel sales declined $9,000 to $243,000 due to lower costs and lower retail prices. Operating income from fuel sales rose $8,000 to $44,000 as a result of improved margins.
Water and sewer revenues increased $24,000, which was primarily due to increased usage and demand. Water and sewer expenses increased $54,000 partially in response to the increase in usage and also as a result of increased administrative costs.
Lease income increased $37,000. The Registrant has entered into a five year lease with an independent restaurant operator that commenced May 1, 2001. The lease requires payments of 4% of gross revenues (escalating to 7% by year four) with a minimum of $2,000 per month.
Boat service revenue declined $27,000 to $46,000, due to Registrant limiting the level of service it offers to customers to a minimum, while it continues its attempt to secure an operator to lease the
facility. Although revenues declined, the net operating deficit incurred improved $5,000 to $16,000. These operations are included as part of discontinued operations.
Other income increased $16,000 due primarily to a $10,000 payment received from a cellular service provider for leasing space for a cell tower.
Cost of operations increased $144,000, which was primarily the result of a $60,000 increase in maintenance costs and a $49,000 increase in utility costs.
Interest expense declined $53,000, which was primarily the result of a $49,000 decline in interest paid to affiliates because of lower interest rates.
Depreciation and amortization increased $31,000 in 2001 due to the amortization of new improvements at Tower Park Marina.
Management fees declined $14,000 in 2001 due primarily to the leasing of the restaurant.
2000 Compared to 1999 ---------------------
For the year ended December 31, 2000, the Registrant reported a net loss before extraordinary item of $428,000, an improvement of $153,000 over 1999. The improvement is primarily due to a $149,000 decline in interest expense. The savings in interest are the net result of completing the refinancing of Tower Park Marina in July 1999, offset by higher interest costs on advances from affiliates. Included in the net loss of $428,000 is $207,000 of depreciation and amortization. Excluding these non-cash items, the Registrant incurred a cash flow deficit of $221,000. This deficit was covered by additional advances from the General Partner and by the deferral of interest and management fee payments due to the General Partner and/or its affiliates.
For the year ended December 31, 2000, the net operating cash flow (cash flow before debt service, depreciation and partnership administrative costs) for Tower Park Marina was $304,000 compared to $309,000 in 1999. Tower Park Marina's slip rental revenues (which include both wet slip and dry storage revenues) increased $32,000 to $710,000 in 2000, which is attributable to higher levels of occupancies.
RV park revenues increased $105,000 to $812,000 in 2000, due to higher occupancies and increased rates.
In response to numerous customer complaints during 1999, management implemented a program to increase the operating hours of the restaurant and bar at Tower Park Marina. The increased level of operations resulted in a $105,000 increase in revenues in 2000 to $595,000, with net operating income from the restaurant improving $36,000 to $19,000. Due to the disappointing increase in revenues and operating income the restaurant operations were significantly curtailed beginning January 1, 2001. The Registrant has entered into a five year lease with an independent restaurant operator that commenced May 1, 2001. The lease requires payments of 4% of gross revenues (escalating to 7% by year four) with a minimum of $2,000 per month.
Retail store revenues increased $51,000 to $452,000, with net operating income from retail sales increasing $15,000 to $103,000 in 2000.
Fuel sales increased $43,000 to $252,000 due to higher costs and retail prices. Operating income from fuel sales rose $19,000 to $36,000 as a result of improved margins.
Water and sewer revenues and expenses remained stable.
Lease income decreased $54,000, due to the loss of the tenant that operated the boat repair facility. The Registrant is limiting the level of service it offers to customers to a minimum while it attempts to secure an operator to lease the facility. For the year the boat repair operation generated $73,000 in revenue and incurred a net operating deficit of $21,000.
Other income declined $48,000 due primarily to a $33,000 decline in special event income.
Cost of operations increased $1,000, which was the net result of a $34,000 increase in insurance costs offset by reduced administrative costs.
Interest expense declined $149,000, which was the net result of a $268,000 decline in interest on the note secured by Tower Park Marina, offset by a $119,000 increase in interest paid to affiliates because of higher outstanding balances and increased interest rates.
Depreciation and amortization increased $44,000 in 2000 due to the amortization of new improvements at Tower Park Marina and a full year of amortization of capitalized financing costs.
Management fees increased $16,000 in 2000 due to the increased revenues at Tower Park Marina.
Liquidity and Capital Resources -------------------------------
Since its inception in 1988 the Registrant has operated at a deficit. These deficits have been partially covered by advances from the General Partners ($4,236,000 through December 31, 2001) and cash reserves. In addition, the Registrant had previously discontinued making debt service payments on substantially all of its notes payable.
Between September 1991 and June 1999, no payments were made on the note payable secured by Tower Park Marina. During 1991, 1992, 1993 and 1994, the Registrant was involved in various negotiations with the lender, a financial institution, and its successor, Resolution Trust Corporation ("the RTC"), to restructure or otherwise settle the note. In February 1994, the RTC foreclosed on Chandlers Landing Marina (also collateral for the note) by bidding $2,038,000 on its note at a foreclosure sale. In January 1995, the RTC sold the note to a third party. The note was then purchased by an affiliate of Mr. Hughes. The Registrant entered into an option agreement to purchase the note from the affiliate at its cost ($1,700,000) plus carrying costs, which expired on April 10, 1996. In connection with the substitution of a new general partner (Tower Park Marina Operating Corporation) for Mr. Hughes, the option agreement was extended until February 28, 1998. Registrant paid $50,000 in February 1998 to extend the option period until February 28, 1999 and an additional $50,000 in February 1999 to extend the option period until February 28, 2000 (see Item 3 above for additional details). Both extension payments were applied as reductions to the principal amount due.
On July 1, 1999 the Registrant completed the refinancing of Tower Park Marina and exercised its option to repay the note payable for $1,600,000. As a result, the Registrant recognized a gain of $8,515,000 from the forgiveness of debt in 1999.
The refinancing allowed the Registrant to repay liabilities and also provided up to $500,000 ($2,500,000 less the $2,000,000 originally funded under the note) for improvements to the property. An initial $100,000 of the $500,000 available for improvements was drawn in 1999, with the balance available to be drawn by January 31, 2001. During 2000, an additional $200,000 of improvements scheduled to be financed by the loan were made. However, due to the Registrant not meeting the financial requirements specified in the loan, the request for funding was denied and the period for making additional construction
draw requests expired on January 31, 2001. The cost of making the improvements was covered by advances from an affiliate of the Corporate General Partner.
Although the Registrant has spent in excess of $800,000 for capital improvements over the last three years, the operating results for Tower Park Marina remain virtually unchanged. Management believes that the leasing of the restaurant will have an immediate positive impact on the financial results of the property.
The CSLC Lease requires minimum quarterly payments of $10,000 and the note secured by Tower Park requires monthly payments of $23,000.
Tower Park's 2001 net operating cash flow of $339,000 reflects $132,000 of management fees paid to an affiliate of the Corporate General Partner. As payments to the Corporate General Partner or its affiliates can be deferred, as necessary, the amount available for making the Registrant's annual debt service payments of $276,000 was approximately $471,000. As expenditures for capital improvements are discretionary, the amount and timing of these expenditures can be adjusted based on the operating results and cash flow of the Registrant.
Registrant's ability to continue to operate through 2002 and beyond is contingent on, among other factors, the improvement in Tower Park Marina operations and either continued advances from the General Partners or the deferral of payments to the General Partners or their affiliates for management fees and interest. There can be no assurance that these conditions will be met or that the Registrant will be able to continue as a going concern.
ITEM 7A.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk ----------------------------------------------------------
The Registrant is exposed to changes in interest rates from its financing arrangement with its General Partners. The Registrant's mortgage note payable bears interest at a fixed rate. See Note 5 to the Financial Statements for terms, valuations, and principal maturity of the mortgage note as of December 31, 2001. Based on the market rate of the mortgage note, its fair value at December 31, 2001 is deemed to be the carrying value, $2,008,000.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data. -------------------------------------------
Registrant's financial statements are included elsewhere herein. Reference is made to the Index to Financial Statements and Financial Statement Schedule in Item 14(a).
ITEM 9.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and --------------------------------------------------------------- Financial Disclosure. --------------------
See Item 14b.
PART III
ITEM 10.
ITEM 10. Directors and Executive Officers of Registrant. ----------------------------------------------
Registrant has no directors or executive officers.
Registrant's General Partners are Westrec Investors, Inc. formerly ("PS Marina Investors, Inc.") and Tower Park Marina Operating Corporation (substituted for B. Wayne Hughes in 1997). The Corporate General Partner, acting through its directors and executive officers, is responsible for the day-to-day operations of Registrant. Registrant's properties are managed and operated by Westrec Marina Management, Inc. ("WMMI"), a wholly-owned subsidiary of Westrec Financial.
The names and ages of all directors and executive officers of the Corporate General Partner, and the executive officer of WMMI who performs significant policy-making or operational functions for Registrant, the offices held by each of them, the dates of their elections to such offices, and their business experience during the past five years are set forth below.
Pursuant to Articles 16 and 17 of Registrant's Partnership Agreement, a copy of which is included in Registrant's prospectus included in SEC Registration No. 33-21021, each of the General Partners continues to serve until (i) death, insanity, insolvency, bankruptcy or dissolution, (ii) withdrawal with the consent of the other General Partner and a majority vote of the limited partners, or (iii) removal by a majority vote of the limited partners.
Each director of the General Partners serves until he resigns or is removed from office by Westrec Properties or Westrec Financial, and may resign or be removed from office at any time with or without cause. Each officer of the General Partners serves until he resigns or is removed by the board of directors of that General Partner. Any such officer may resign or be removed from office at any time with
or without cause. No such officer was selected as such pursuant to any arrangement or understanding between such officer and any other person.
Compliance with Section 16(a) of the Securities Exchange Act of 1934 --------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the Registrant's General Partners, and the directors and executive officers of the Corporate General Partner, and persons who own more than ten percent of the Registrant's Units, to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of Units. General Partners, officers, directors and greater than ten-percent Unitholders are required by SEC regulation to furnish the Registrant with copies of all Section 16(a) forms they file.
To the Registrant's knowledge, based solely on review of the copies of such reports furnished to the Registrant and written representations that no other reports were required, during the fiscal year ended December 31, 2001, all Section 16(a) filing requirements applicable to its General Partners, the executive officers and directors of the Corporate General Partner and greater than ten-percent beneficial owners of the Registrant were complied with.
ITEM 11.
ITEM 11. Executive Compensation. ----------------------
Registrant has no directors or officers. See Item 13 for a description of certain transactions between Registrant and its General Partners and their affiliates.
ITEM 12.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management. --------------------------------------------------------------
(a) As of the date hereof, no person is known by Registrant to own beneficially more than 5% of the Units of limited partnership interest, other than those units acquired by WMMI as disclosed in item (b) below.
(b) Registrant has no officers or directors.
As of December 31, 2001, the General Partners have contributed an aggregate of $1,000 to the capital of Registrant. None of the directors and officers of the Corporate General Partner own any Units of limited partnership interest of Registrant. The Corporate General Partner is a wholly-owned subsidiary of Westrec Properties.
Westrec Financial (which may be deemed a parent of Registrant) has
two classes of
stock outstanding, common stock and Convertible Participating Preferred Stock (the "Preferred Stock") which votes together with the common stock, except for the election of directors. Michael M. Sachs, an officer and director of Westrec Financial and the Corporate General Partner owns 100% of the common stock of Westrec Financial. As of December 31, 2001 there was no preferred stock outstanding.
To date, WMMI has acquired 432 units (422 units at December 31, 2001) in the Registrant, representing 9.6% of the outstanding units. WMMI's business address is 16633 Ventura Boulevard, 6/th/ Floor, Encino, California, 91436.
(c) Registrant knows of no contractual arrangements, the operation of the terms of which may at a subsequent date result in a change in control of Registrant, except as described above and except for Articles 16, 17 and 21.1 of Registrant's Partnership Agreement, a copy of which is included in Registrant's prospectus included in SEC Registration Statement No. 33-21021. Those articles provide, in substance, that the limited partners shall have the right, by majority vote, to remove a general partner and that a general partner may designate a successor with the consent of the other general partner and a majority of the limited partners.
ITEM 13.
ITEM 13. Certain Relationships and Related Transactions. ----------------------------------------------
The Registrant's prospectus included in SEC Registration Statement No. 33-21021 discloses that the General Partners and their affiliates are entitled to the following compensation:
1. Acquisition and Development Fees to be paid to the General Partners or their affiliates for their services in connection with the analysis, research, negotiation, documentation, acquisition, construction and development related to investments for Registrant, in an amount equal to 6% of the purchase price or the cost of construction of the properties. Cumulative Acquisition and Development Fees paid to the General Partners and their affiliates through December 31, 2001 totaled $1,639,000, ($22,000 of which was paid in 2001).
2. Loan Brokerage Fee to be paid to the General Partners or their affiliates for their services in negotiating and obtaining permanent financing on properties from an unaffiliated lender, in an amount equal to 1% of the principal amount of the financing or refinancing, which would be reduced to the extent any other loan brokerage fee is paid to any other loan broker in connection with the transaction.
Loan Brokerage Fees paid to the General Partners and their affiliates through December 31, 2001 totaled $96,000 (none of which was paid in 2001).
3. The Corporate General Partner made advances to Registrant during 1998, 1999, 2000 and 2001 to cover operating deficits and capital expenditures. At December 31, 2001, these advances totaled $4,236,000 and accrue interest at prime plus 1% (5.75% at December 31, 2001). Interest paid or accrued to the Corporate General Partner for 2001 totaled $307,000.
4. The General Partners are entitled to receive a percentage of distributions of Cash Flow from Operations and Cash from Sales and Refinancing with respect to any fiscal year. The General Partners have agreed to reduce their share of any future distributions to 1%. No such distributions were made during 2001 and none are expected in 2002.
Registrant and WMMI, a subsidiary of Westrec Financial, have entered into management agreements, a copy of the form of which is included as an exhibit to Registrant's Registration Statement, SEC Registration Statement No. 33-21021. Under the terms of those agreements, WMMI is entitled to receive as compensation for its management services a property management fee, payable monthly, in an amount equal to the sum of (i) 6% of the "Gross Revenue" from operations of the properties and (ii) 6% of the "Net Sales Revenue" from operations of the properties. The term "Gross Revenue" means all receipts (net of security deposits returned to the tenants) of Registrant from the operations of the properties, including without limitation, rental payments of lessees of space in the marinas, vending machine or concessionaire revenues, maintenance charges, if any, paid by the tenants of the marinas in addition to basic rent, parking fees, if any, revenues from boat rentals or campground rentals, if any, and rental payments received under any subleases, but excluding all revenues from the sale of goods or merchandise (other than vending machine and concessionaire revenues), including gasoline. The term "Net Sales Revenue" means all receipts of Registrant from the properties from the sale of goods or merchandise (other than vending machine and concessionaire revenues), including gasoline, minus the direct cost of the goods sold (not including any overhead costs of Registrant). The management fee will cover, without additional expense to Registrant, the time WMMI's executive officers expend on project management and WMMI's overhead costs such as its expenses for rent, utilities and servicing of Registrant's accounts payable. During 2001,
$132,000 was paid or accrued by Registrant to WMMI pursuant to the management agreements.
PART IV
ITEM 14.
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ---------------------------------------------------------------
a. 1. Financial statements
The financial statements listed in the accompanying Index to Financial Statements and Schedule hereof are filed as part of this report.
2. Financial statements schedule
The financial statements schedule listed in the accompanying Index to Financial Statements and Schedule hereof are filed as part of this report.
3. Exhibits
See Index to Exhibits contained herein.
b. Reports on Form 8-K
The Registrant filed a Current Report on Form 8-K dated February 23, 2001 (filed March 1, 2001) as amended by Form 8-K/A dated March 1, 2001 (filed March 7, 2001), each pursuant to Item 4, which disclosed the dismissal of the Registrant's previous accountants and the engagement of new accountants. Also filed as Exhibits to the Form 8-K/A were letters from the Registrant's former and newly engaged accountants regarding their concurrence with certain statements made by the Registrant.
c. Exhibits
See Index to Exhibits contained herein
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TOWER PARK MARINA INVESTORS, L.P., (formerly PS MARINA INVESTORS I), a California Limited Partnership
Dated: April 19, 2002 By: Westrec Investors, Inc., ------------------------ (formerly PS MARINA INVESTORS, INC.) ------------------------------------ General Partner
By: /s/ Michael M. Sachs ----------------------- President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Capacity Date --------- -------- ----
/s/ Michael M. Sachs President, Secretary and Director April 19, 2002 - -------------------- of Westrec Investors, Inc., the Michael M. Sachs Corporate General Partner of the Registrant (principal executive officer)
/s/ William W. Anderson Director of Westrec Investors, Inc., April 19, 2002 - ----------------------- the Corporate General Partner of William W. Anderson the Registrant.
/s/ Jeffrey K. Ellis Vice President and Chief Financial April 19, 2002 - -------------------- Officer of Westrec Investors, Inc., Jeffrey K. Ellis the Corporate General Partner of the Registrant (principal financial officer and principal accounting officer)
TOWER PARK MARINA INVESTORS, L.P., (formerly PS MARINA INVESTORS I) a California Limited Partnership
Index to Financial Statements and Schedules (Item 14 (a))
Page Reference ---------
Report of Vasquez & Company LLP, Independent Auditors
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets at December 31, 2001 and 2000
Consolidated Statements of Operations for the years ended December 31, 2001, 2000 and 1999
Consolidated Statements of Changes in Partners' Deficit for the years ended December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements to
Schedule
III - Real Estate and Accumulated Depreciation to
All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information is included in the financial statements or the notes thereto.
REPORT OF INDEPENDENT AUDITORS
The Partners Tower Park Marina Investors, L.P., (formerly PS Marina Investors I), a California Limited Partnership and Subsidiary
We have audited the accompanying consolidated balance sheet of Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a California Limited Partnership, and Subsidiary (the Partnership), as of December 31, 2001 and 2000, and the related consolidated statements of operations, partners' deficit, and cash flows for the years ended December 31, 2001 and 2000. Our audits also included the financial statement schedule as of December 31, 2001 listed in the accompanying index at Item 14(a). These consolidated financial statements and schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. The financial statements of Tower Park Marina Investors, L.P. for the year ended December 31, 1999, were audited by other auditors whose report dated March 25, 2000 (except for Note 8 for which the date is September 27, 2001) on those statements included an explanatory paragraph that described substantial doubt about the Partnership's ability to recover the carrying value of its assets and to continue as a going concern discussed in Notes 2 and 7 to the financial statements.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 2001 and 2000 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a California Limited Partnership, and Subsidiary as of December 31, 2001 and 2000, and the results of their operations and cash flows for the years ended December 31, 2001 and 2000, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion the related financial statement schedule as of December 31, 2001 and 2000, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth thereon.
The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Notes 2 and 7, the Partnership's property is not generating a satisfactory level of cash flow and cash flow projections do not indicate significant improvement in the near term. These circumstances raise substantial doubt about the Partnership's ability to recover the carrying value of its assets (notwithstanding the writedown of the marina facility to its net realizable value) and to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Partnership to continue as a going concern.
/s/ Vasquez & Company LLP
Los Angeles, California March 8, 2002
REPORT OF INDEPENDENT AUDITORS
The Partners Tower Park Marina Investors, L.P., (formerly PS Marina Investors I), a California Limited Partnership
We have audited the accompanying balance sheet of Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a California Limited Partnership, as of December 31, 1999, and the related statement of operations, partners' deficit, and cash flow for the year ended December 31, 1999. Our audit also included the financial statement schedule listed in the accompanying index at Item 14 (a). These financial statements and schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly, in all material respects, the financial position of Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a California Limited Partnership, at December 31, 1999 and the results of its operations and its cash flows for the year ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. Also, in our opinion the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth thereon.
The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Notes 2 and 7, the Partnership's property is not generating a satisfactory level of cash flow and cash flow projections do not indicate significant improvement in the near term. These circumstances raise substantial doubt about the Partnership's ability to recover the carrying value of its assets (notwithstanding the write-down of the marina facility to its net realizable value) and to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Partnership to continue as a going concern.
/s/ Ernst & Young LLP
Los Angeles, California March 25, 2000, except for Note 8, which date is September 27, 2001.
TOWER PARK MARINA INVESTORS, L.P (formerly PS MARINA INVESTORS I) a California Limited Partnership
CONSOLIDATED BALANCE SHEETS
See accompanying notes and report of independent auditors.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2001, 2000 and 1999
See accompanying notes and report of independent auditors.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
For the years ended December 31, 2001, 2000 and 1999
See accompanying notes and report of independent auditors.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2001, 2000 and 1999
See accompanying notes and report of independent auditors.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
1. Summary of Significant Accounting Policies and Partnership Matters ------------------------------------------------------------------
Description of the Partnership ------------------------------
Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a California Limited Partnership (the "Partnership"), was organized under the California Revised Limited Partnership Act, pursuant to a Certificate of Limited Partnership filed on January 6, 1988 to acquire, own, and operate and to a lesser extent, develop marina facilities.
The General Partners in the Partnership are Westrec Investors, Inc. (formerly PS Marina Investors, Inc.), a wholly-owned subsidiary of Westrec Properties, Inc. ("Westrec"), and B. Wayne Hughes, a shareholder of Westrec until June 1990. Effective March 1, 1997, the limited partners approved the substitution of Tower Park Marina Operating Corporation, a wholly owned subsidiary of Westrec Financial, Inc., for Mr. Hughes.
The Partnership was formed to sell a maximum of 12,000 units of limited partnership interest at $5,000 per unit ($60,000,000). The General Partners have contributed a total of $1,000. On November 27, 1989, the Partnership's offering was terminated with 4,508 units issued, resulting in $22,540,000 of limited partner funds being raised (before commission discount of $3,000 granted to an investor). Half of each Limited Partner's total capital contribution was deferred. The final installment was due on August 1, 1990, and $76,000 of such deferrals remain outstanding.
Principles of Consolidation ---------------------------
The accompanying consolidated financial statements include the accounts of Tower Park Marina Investors, L.P. and its majority-owned subsidiary, Little Potato Slough Mutual Water Company, ("LPSMWC"). All significant inter-company transactions and balances have been eliminated in the consolidation. Certain reclassifications of prior year amounts have been made to conform to the presentation adopted for 2000.
Tower Park Marina Investors, L.P. was organized on January 6, 1988 and elected a December 31 year end for tax reporting and financial reporting purposes. Little Potato Slough Mutual Water Company was organized on March 8, 1982 and elected a February 28 year end for tax reporting and financial reporting purposes. The Company acquired a majority interest in Little Potato Slough Mutual Water Company. The Subsidiary's February 28 financial statements are consolidated with the December 31 financial statements of the Company since the difference in reporting periods is not more than 93 days. There are no intervening events which may materially affect the financial position or results of operations.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
1. Summary of Significant Accounting Policies and Partnership Matters ------------------------------------------------------------------ (continued) ----------
Reserve Fund ------------
The bylaws of LPSMWC require a reserve fund to be established for the replacement of its existing facilities and any expansion. This reserve is funded by monthly water and sewer charges assessed to all the shareholders. At December 31, 2001 and 2000 the reserve fund balance were $253,000 and $233,000, respectively.
Use of Estimates ----------------
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
Revenue Recognition -------------------
Revenue from slip rentals and RV Parking are recognized over the length of the contract term. Restaurant, retail and fuel service revenues are recognized at point of sale.
In 2000, the Partnership adopted the Securities and Exchange Commission's Staff Accounting Bulletin (SAB) No. 101, which establishes guidelines for applying generally accepted accounting principles to revenue recognition in financial statements. The adoption of SAB No. 101 did not affect the results of operations or financial position of the Partnership.
Net Realizable Value Reserve ----------------------------
As of December 31, 2001 the Partnership owns Tower Park Marina. A net realizable value reserve of $2,193,000 was established at December 31, 1995 to reduce the carrying value of Tower Park Marina to its then estimated net realizable value. No addition to this reserve has been considered necessary since the Partnership has determined that, based on current cash flows, estimated future cash flows will be sufficient to recover the carrying value of the marina. The reserve represents an aggregate cost adjustment to individual assets in compliance with SFAS 121 and no restoration of this previously recognized reserve is permitted in accordance with paragraph 11 of this guidance.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
1. Summary of Significant Accounting Policies and Partnership Matters ------------------------------------------------------------------ (continued) -----------
Offering and Organization Costs -------------------------------
Costs incurred in preparing Partnership documents, prospectuses and any other sales literature, costs incurred in qualifying the units for sale under federal and state securities laws and costs incurred in marketing the units have been charged to the limited partners' equity to the extent the total does not exceed 5% of the gross proceeds of the offering. The amount by which these organization and registration costs exceeded 5% of the gross proceeds of the offering were borne by Westrec Investors, Inc.
Cash Distributions ------------------
The General Partners interest in Cash Flow from Operations (as defined) and Cash from Sales or Refinancings (as defined) is 1%.
Allocations of Net Income or Loss ---------------------------------
As set forth in the Partnership Agreement, net loss shall be allocated 99% to the Limited Partners and 1% to the General Partners. Net income shall generally be allocated to Partners in proportion to their cash distributions.
Earnings Per Unit -----------------
Per unit data is based on the weighted average number of the Limited Partnership units outstanding during the period; 4,508.
Tower Park Marina -----------------
Tower Park Marina is stated at cost to the Partnership less a net realizable value reserve. Depreciation is calculated on a straight-line basis. Depreciable lives for the major asset categories are as follows:
Asset Category Depreciable Life -------------- ----------------
Buildings 20 years Improvements 20 years Floating docks 7 years Furniture, fixtures and equipment 7 years Leasehold interest life of lease
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
1. Summary of Significant Accounting Policies and Partnership Matters ------------------------------------------------------------------ (continued) -----------
Taxes Based on Income ---------------------
Taxes based on income are the responsibility of the individual partners and, accordingly, are not reflected in the accompanying financial statements. The difference between the tax basis and the reported amounts of the Partnership's assets and liabilities is attributable to the net realizable value reserve of $2,193,000 and accumulated depreciation of $744,000.
Segment Reporting -----------------
Effective January 1, 1998, the Partnership adopted the Financial Accounting Standards Board's (FASB) Statement of Financial Accounting Standards ("SFAS") No. 131 "Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports and requires restatement of prior year information. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision makers in assessing performance. SFAS No. 131 also establishes standards for related disclosures about products and services, geographic areas, and major customers. The adoption of SFAS No. 131 did not affect the results of operations or financial position but did affect the disclosure of segment information, as presented in Note 9.
New Accounting Pronouncements -----------------------------
FASB issued on June 2001, SFAS No. 142, Goodwill and Other Intangible Assets. This Statement addresses the financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB 17, Intangible Assets. The provisions of this Statement are required to be applied starting with fiscal years beginning after December 15, 2001. This Statement is not expected to affect the Partnership's financial statements.
FASB issued on June 2001, SFAS No. 143, Accounting for Asset Retirement Obligations. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement shall be effective for financial statements issued for fiscal years beginning after June 15, 2002. The effect of SFAS 143 on the Partnership's financial statements is not yet known.
FASB issued on August 2001, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. This Statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement shall be effective for financial statements issued for fiscal years beginning after December 15, 2001. This Statement will require the Partnership to test its marina facilities for recoverability because of current period operating or cash flow loss combined with a history of operating or cash flow losses. An impairment loss shall be recognized if the carrying amount is greater than the sum of undiscounted cash flows expected to result from the use and eventual disposition of its marina facilities. The Partnership reduced the carrying value of its marina facilities to its net realizable value in 1995 in accordance with SFAS 121. The amount of impairment loss, if any, that will result from SFAS 144 is not yet known.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
2. Tower Park Marina -----------------
Tower Park Marina, located in the Sacramento - San Joaquin Delta near Sacramento, California, includes the purchase price of the property and related acquisition and closing costs. The Partnership pays an acquisition fee of 6% of the contract purchase price of the marina facility, plus a development fee of 6% of the cost of improvements made. Capitalized as a cost of Tower Park Marina were development fees paid to Westrec of $22,000 and $16,000 for the year ended December 31, 2001 and 2000, respectively. At December 31, Tower Park Marina comprised the following:
2001 2000 ----------- -----------
Land $ 1,040,000 $ 1,040,000 Buildings 2,264,000 2,125,000 Improvements 2,241,000 2,237,000 Floating docks 3,107,000 3,048,000 Furniture, fixtures and equipment 1,318,000 1,252,000 Leasehold interest 941,000 941,000 ------------ ----------- 10,911,000 10,643,000 Less accumulated depreciation and amortization (6,007,000) (5,808,000) ----------- ----------- 4,904,000 4,835,000
Net realizable value reserve (2,193,000) (2,193,000) ----------- -----------
$ 2,711,000 $ 2,642,000 =========== ===========
The Partnership's marina is not generating satisfactory levels of cash flows and cash flow projections do not indicate significant improvement in the near term. These matters raise substantial doubt about the Partnership's ability to recover the carrying value of its assets, (not withstanding the write-down of the marina facility to its net realizable value) and to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Partnership to continue as a going concern.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
3. Water and sewer facilities --------------------------
Water and sewer facilities at December 31, consist of the following:
2001 2000 ---------- ----------
Water and sewer equipment $ 169,000 $ 169,000 Less accumulated depreciation (76,000) (68,000) ---------- ----------
$ 93,000 $ 101,000 ========== ==========
4. Other Assets ------------
Other assets at December 31, consist of the following:
2001 2000 ---------- ----------
Inventory $ 152,000 $ 207,000 Capitalized financing costs 152,000 152,000 Other 41,000 75,000 ---------- ---------- 345,000 434,000 Accumulated amortization (71,000) (43,000) ---------- ----------
$ 274,000 $ 391,000 ========== ==========
Capitalized financing costs were incurred during 1999 in connection with the refinancing of Tower Park Marina. These costs are amortized over the loan term, five years.
Inventory is stated at the lower of cost (average cost method) or market (replacement or net realizable value).
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
5. Notes Payable -------------
Notes payable at December 31, consist of the following:
2001 2000 ----------- ----------- Note payable secured by a deed of trust on Tower Park Marina $ 2,008,000 $ 2,048,000
Other 15,000 8,000 ----------- -----------
$ 2,023,000 $ 2,056,000 =========== ===========
At December 31, 2001 future principal payments are as follows:
Year ----
2002 $ 51,000 2003 55,000 2004 1,911,000 2005 4,000 2006 2,000 ----------
$2,023,000 ==========
Between September 1991 and June 1999, no payments had been made on the note collateralized by Tower Park Marina. Throughout 1991, 1992, 1993 and 1994, the Partnership was involved in various negotiations with the lender, a financial institution, and its successor, Resolution Trust Corporation ("RTC"), to restructure or otherwise settle the note. In January 1995, the RTC sold the note as part of a sales initiative to a third party. The note was immediately sold to an affiliate of the individual general partner. The Partnership entered into an option agreement to purchase the note from its then current holder for its cost ($1,700,000) plus carrying costs which expired on April 10, 1996. In connection with the substitution of Tower Park Marina Operating Corporation for Mr. Hughes as General Partner, the affiliate of Mr. Hughes which held the note, entered into a new option agreement with the Partnership, which allowed the Partnership to purchase the note collateralized by Tower Park Marina, for the affiliate's cost, $1,700,000, plus $68,000 of accrued unpaid interest.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
5. Notes Payable (continued) -------------------------
As of December 31, 1998, the note was reflected on the Partnership's balance sheet at its face value of $6,665,000 with an additional $3,199,000 being shown as accrued unpaid interest. The option was initially for a one-year period expiring on February 28, 1998. The Partnership extended the option agreement for one year in February 1998 by paying the affiliate $50,000, which was applied as a reduction in the principal amount due. The Partnership extended the option agreement for one additional year by making an additional $50,000 principal payment in February 1999. On July 1, 1999 the Partnership completed the refinancing of Tower Park and exercised its option to repay the note payable for $1,600,000. As a result, the Partnership recognized a gain of $8,515,000 from the forgiveness of debt.
The new note payable was for an initial amount of $2,000,000, with an additional $500,000 available to make improvements to the property. As of December 31, 2000, $100,000 had been borrowed for capital improvements. The period of time to borrow the remaining $400,000 for capital improvements expired on January 31, 2001 with no additional amounts being drawn. The loan accrues interest at 9.34% and requires monthly principal and interest payments of $23,000. The loan is due on July 1, 2004.
Interest paid on these notes for the year ended December 31, 2001, 2000, and 1999 was $193,000, $196,000, and $147,000, respectively.
In connection with the refinancing of the Partnership's note payable during 1999 the General Partner was paid a loan brokerage fee of $25,000.
Based on the market rate of the mortgage note, the fair value at December 31, 2001 is deemed to be the carrying value, $2,008,000.
6. Related Party Transactions --------------------------
The Partnership has an agreement with Westrec Marina Management, Inc., an affiliate of Westrec, to manage the day-to-day operations of the marinas for a fee equal to 6% of the marinas' monthly gross revenues (as defined). Management fees for the year ended December 31, 2001, 2000 and 1999 were $132,000, $146,000 and $130,000, respectively.
In connection with funding operating deficits and with the acquisition of marina facilities, funds have been borrowed from Westrec. These borrowings accrue interest at the prime rate plus 1% (5.75% at December 31, 2001). Total interest accrued to Westrec for the year ended December 31, 2001, 2000, and 1999 was $307,000, $356,000 and $237,000, respectively.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
7. Commitments and Contingencies -----------------------------
The operations at Tower Park Marina are influenced by factors that affect the boating industry both locally and nationally, with activity at Tower Park Marina increasing seasonally during the period April through October of each year.
In November 1991, contamination was discovered in the area surrounding a fuel storage tank at Tower Park Marina. Currently, the Partnership is required to perform quarterly groundwater sampling and monitoring. Environmental consultants have been engaged to perform this sampling to determine the extent of the contamination. Presently, sufficient data has not been obtained to estimate the cost of remediation; consequently no loss accrual has been made in the financial statements. To date the Partnership has incurred $101,000 in monitoring fees. Included in cost of operations at December 31, 2001 is $16,000 of monitoring fees.
The Partnership operates a portion of Tower Park Marina on approximately 14 acres of waterfront property under a lease with the California State Land Commission (the "CSLC Lease"). Effective January 1, 1999 the CSLC Lease was extended until December 31, 2023. The CSLC Lease provides for an annual rent based on gross receipts, with a minimum annual rent of $40,000, payable in advance in quarterly installments of $10,000. Rent expense associated with the CSLC Lease is included in cost of operations and was $40,000 for each of the years ended December 31, 2001, 2000 and 1999.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
7. Commitments and Contingencies (continued) -----------------------------------------
Future minimum lease payments under this lease are as follows:
Year ----
2002 $ 40,000 2003 40,000 2004 40,000 2005 40,000 2006 40,000 Thereafter 684,000 ----------
$ 884,000 ==========
The Partnership's ability to continue to operate through 2002 and beyond is contingent on, among other factors, the improvement in Tower Park Marina operations and continued advances from the General Partners. Management's plans include the expenditure of approximately $150,000 (unaudited) in additional repairs and capital improvements during 2002, which management believes will continue to improve the operations of the property. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Partnership to continue as a going concern.
8. Prior Period Adjustment -----------------------
The Partnership has a 51% ownership interest in Little Potato Slough Mutual Water Company ("LPSMWC"). LPSMWC supplies and distributes water to its shareholders and operates a sewer system and drainage canals for use by its shareholders. The 51% interest was accounted for as an investment under the equity method in prior years and not consolidated. Additionally, the Partnership had expensed capital assessments paid to LPSMWC. As a result of the error, the balance sheet as of December 31, 1999 and the related statement of operations for the year ended December 31, 1999 has been restated to consolidate LPSMWC and to adjust net income (loss) and Partners' Equity.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
8. Prior Period Adjustment (continued) -----------------------------------
9. Segment Reporting -----------------
The Partnership has been aggregated into four reportable business segments, (Slip rentals, RV parking, Retail sales, and Fuel services): Slip rentals comprise the wet boat slip rentals and dry boat storage operations at the marina. RV parking represents both long term and transient recreational vehicle parking at the campgrounds adjacent to the marina. Retail sales segment consists of the operations of the retail boat supply and sundries store at the marina. The Fuel service segment reports the operations of the fuel dock at the marina.
The accounting policies of the reportable segments are the same as those described in summary of significant accounting policies. The Company evaluates the performance of its operating segments based on income from operations before depreciation and amortization.
Summarized financial information concerning the Company's reportable segments is shown in the following table. The "other" line item includes results of insignificant operations and as it relates to segment profit (loss), income and expenses not allocated to reportable segments.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
(1) These items are not provided to management on a segment basis and are not used by management to measure segment profit or loss. These include general and administrative expenses. (2) Information about assets is not included in the measure of segment profit or loss that is reviewed by management. However, certain information is provided to management and is thus provided here.
TOWER PARK MARINA INVESTORS, L.P. (formerly PS MARINA INVESTORS I) a California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2001
10. Discontinued Operations -----------------------
The Partnership discontinued the restaurant operations and boat service effective January 1, 2001. The Partnership still owns the assets of the restaurant operations and boat service. Concessionaires are now operating the restaurant and boat service under operating leases, including the assets of the restaurant operations and boat service.
TOWER PARK MARINA INVESTORS LP a California Limited Partnership
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
TOWER PARK MARINA INVESTORS LP a California Limited Partnership
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (continued)
REAL ESTATE RECONCILIATION
ACCUMULATED DEPRECIATION RECONCILIATION
The aggregate cost for Federal income tax purposes is $ 10,911,000.
INDEX TO EXHIBITS -----------------
Exhibit No. ----------
(4) (A) Amended and Restated Agreement of Limited Partnership (form included as Exhibit A to the Prospectus of Registrant dated August 4, 1988, contained in Amendment No. 2 to Registration Statement No. 33-21021, of Registrant filed July 29, 1988, and is incorporated herein by reference).
(B) Amended form of execution copy of Subscription Agreement/Promissory Note (filed as pages A-1 through A-6 to Post-Effective Amendment No. 1 to Registration Statement No. 33-21021 of Registrant filed February 14, 1989, and is incorporated herein by reference).
(10) (A) Form of Property Management Agreement between Registrant and PS Marina Management, Inc. (filed as Exhibit 10.1 to Registration Statement No. 33-21021 of Registrant and is incorporated herein by reference).
(B) Copy of Purchase Agreement together with certain documents, leases and the CSLC Lease relating to the purchase of Tower Park Marina (filed as Exhibit 10.3 to Registration Statement No. 33-21021 of Registrant and is incorporated herein by reference).
(C) Copy of Purchase Agreement together with certain documents, subleases and the Concession Agreement relating to the purchase of Chandlers Landing Marina (filed as Exhibit 10.4 to Registration Statement No. 33-21021 of Registrant and is incorporated herein by reference).
(D) Copy of lease between Registrant and Marine Ventures Limited relating to restaurant/bar, general store and pontoon boat rental operation at Tower Park Marina (filed as Exhibit 10.5 to Registration Statement No. 33-21021 of Registrant and is incorporated herein by reference).
(E) Copy of Purchase Agreement together with certain documents relating to the purchase of ThunderBoat Marina (filed as Exhibit 28A to the Registrant's Current Report on Form 8-K filed December 28, 1989, and is incorporated herein by reference).
(F) Copy of Purchase Agreement together with certain documents relating to the purchase of Banyan Bay Marina (filed as Exhibit 28B to the Registrant's Current Report on Form 8-K filed December 28, 1989, and is incorporated herein by reference).
(G) Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 (incorporated herein by reference).
(H) Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 (incorporated herein by reference).