ITEM 1. Description of Business
Forward Looking Statements
This annual report on Form 10-K includes certain “forward-looking statements”. These statements are usually identified by the use of words such as “believe”, “will”, “anticipate”, “estimate”, “expect”, “project”, “plan”, “intend”, “should”, “could”, or similar expressions. These statements are based on management’s current expectations and assumptions and are subject to uncertainty and changes in circumstances. Although we believe that the assumptions underlying the forward looking statements contained in this report are reasonable, actual results may differ materially from these expectations due to changes in global, economic, business, competitive, market and regulatory factors. We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future.
General
Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a California Limited Partnership (the “Partnership”), is a publicly held limited partnership organized on January 6, 1988 under the California Revised Limited Partnership Act. Commencing August 4, 1988, 12,000 units (including options) of limited partnership interest (the “Units”) were offered 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.
The general partners of the Partnership (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. Our limited partners have no right to participate in the management or conduct of the Partnership’s business and affairs.
The term of our Partnership Agreement is until the property has been sold and, in any event, not later than December 31, 2038.
A management agreement has been entered into with Westrec Marina Management, Inc. (“WMMI”), a California corporation and a wholly-owned subsidiary of Westrec Financial, whereby WMMI has agreed to manage our property 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.
The Partnership 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 our income is derived from the rental of wet and/or dry boat storage facilities and related facilities, such as boat trailer storage facilities.
Our principal investment objectives are to (1) preserve and protect invested capital; (2) provide cash distributions from property operations; and (3) maximize the potential for appreciation in value of the property.
The General Partner or an affiliate supervises the construction of improvements to the property.
As of December 31, 2009 and 2008, the Partnership leased one property, known as Tower Park Marina. Reference is made to Item 2 for additional information about this property.
Competition
We compete in the operation of this property with other entities, some of which may have greater resources than we do. The primary factors upon which competition is based are location, the manner in which the property is managed and marketed, the nature and quality of facilities and rental rates. Our property may encounter competition from other marinas which are located near it, and no assurance can be given that additional competing marinas will not be developed in the vicinity of the property. Affiliates of
the General Partners operate a marina in the vicinity of our marina, and the General Partners or their affiliates may organize future partnerships or other entities to own and operate marinas which may compete with our property. The General Partners and their affiliates, including in particular WMMI, may also manage marinas owned by unaffiliated third parties which may compete with our property.
Governmental Approvals
A portion of Tower Park Marina is operated under a lease (the “CSLC Lease”) with the California State Lands Commission (“CSLC”). Our assignment or sublease of its rights under this agreement required the consent of the CSLC. Effective January 1, 1999 the CSLC Lease was extended until December 31, 2023. In connection with the March 27, 2007 sale of Tower Park Marina to KOA, the Registrant also sold its leasehold interest in the lease between the California State Land Commission (as landlord) and the Registrant (as tenant), dated as of January 14, 1999. Pursuant to the new lease with KOA, the Partnership is required to make payments of approximately $40,000 to KOA to satisfy their obligation under the CSLC lease.
Governmental Regulations and Compliance with Environmental Laws
Marinas are subject to numerous governmental regulations, particularly environmental regulations, such as water pollution and water quality control regulations, and other miscellaneous regulatory requirements. Failure to comply with those regulations would constitute grounds for revocation of the CSLC Lease when such failure affects the leased property. Any of our licensees or subtenants are also required to comply with such regulations.
We are subject to certain reporting requirements relating to any water pollution caused by their operations, such as the California Safe Drinking Water and Toxic Enforcement Act of 1986 (“California Proposition 65”). California Proposition 65 contains a prohibition on discharging specified toxic chemicals into water or land where such chemicals pass (or probably will pass) into any source of drinking water. Civil penalties have been established for violations of California Proposition 65 and actions may also be brought. We must comply with applicable laws concerning the lawful handling and disposal of certain products used in and generated by the operation of its marina, such as oil, paint, sewage and fuel.
We must also comply with applicable federal, state and local laws concerning aboveground storage tanks. If any leaks from storage tanks or spillage or disposal from other operations (such as the loading of gasoline into boats or the disposal of paint, oil and other products used in the repair of boats) causes or has caused contamination of the soil or the water, we will be required to comply with federal, state and local laws relating to “hazardous waste” clean-up and we may have to incur expenses to dispose of the hazardous waste in a lawful manner. If other parties contribute or have contributed to water or soil contamination at Tower Park Marina, we would be able to seek reimbursement from such other parties in connection with our payment of any expenses to comply with such regulations.
Tower Park Marina is also subject to a variety of federal, state and local laws affecting the development or improvement of the property, including laws and regulations relating to environmental factors. Difficulties or failures in obtaining required approvals could delay or prevent any future improvement at the property.
Seasonal Aspects of Our Business
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.
Personnel
There are 8 persons who render service on our behalf on a full-time basis, and 4 persons who render services on a part-time basis. These persons include managers, assistant managers, area managers, accounting, administrative and clerical personnel, construction, and dock personnel. The persons rendering services on a part-time basis may also render services on behalf of one or more of WMMI, Westrec Financial, other partnerships organized by Westrec Financial and other persons or entities owning properties managed by WMMI.
ITEM 1A.
ITEM 1A. Risk Factors
In addition to the other information in this Form 10-K, the following factors should be considered in evaluating our partnership and our business.
WMMI has significant influence over the Partnership.
At December 31, 2009, Westrec Marina Management, Inc. (“WMMI”), a subsidiary of the General Partner, owned 34.78% of the outstanding limited partnership units. Consequently, WMMI has the ability to significantly influence all matters submitted to a vote of our Limited Partners, dissolving and approving other extraordinary transactions such as mergers, and all matters requiring the consent of the Limited Partners. WMMI’s interest in such matters may differ from other Limited Partners. In addition, WMMI’s ownership may make it more difficult for another party to take over our Partnership without WMMI’s approval. However, as an affiliate of the general partner of the Partnership, WMMI is required to protect the interests of the Limited Partners.
Real estate risks associated with the Partnership’s lease and operation of Tower Park:
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the national, state and local economic climate and real estate conditions, such as oversupply of or reduced demand for space and changes in market rental rates;
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how prospective customers perceive the attractiveness, convenience and safety of our property;
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our ability to provide adequate management, maintenance and insurance;
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our ability to collect rent from customers on a timely basis;
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the expense of periodically renovating, repairing and re-leasing slips;
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environmental issues;
•
compliance with the Americans with Disabilities Act and other federal, state, and local laws and regulations;
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increasing operating costs, including real estate taxes, insurance and utilities, if these increased costs cannot be passed through to customers;
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changes in tax, real estate and zoning laws;
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competition from new marina properties in our market;
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customer defaults and bankruptcies;
Certain significant costs, such as, real estate taxes, insurance and maintenance, generally are not reduced even when a property’s rental income is reduced. In addition, environmental and tax laws, interest rate levels, the availability of financing and other factors may affect real estate values and property income.
We may encounter significant delays and expense in re-leasing vacant slips, or we may not be able to re-lease space at existing rates, in each case resulting in the loss of income.
Customer defaults and bankruptcies may reduce our cash flow: We may have difficulty in collecting from customers in default, particularly if they declare bankruptcy. This could affect our cash flow.
We may be adversely affected if casualties to Tower Park Marina are not covered by insurance: We carry insurance on the property that we believe is comparable to the insurance carried by other operators for similar properties. However, we could suffer from uninsured losses or losses in excess of policy limits for such occurrences such as earthquakes that adversely affect us or even result in loss of the property.
We may be adversely affected by changes in laws: Increases in income and service taxes may reduce our cash flow. Tower Park Marina is also subject to various federal, state and local regulatory requirements, such as state and local fire and safety codes. If we fail to comply with these requirements, governmental authorities could fine us or courts could award damages against us. We believe Tower Park Marina is in compliance with all current significant legal requirements.
We may incur significant environmental remediation costs: Under various federal, state and local environmental laws, an operator of real estate may have to clean spills or other releases of hazardous or toxic substances on or from a property. Certain environmental laws impose liability whether or not the operator knew of, or was responsible for, the presence of the hazardous or toxic substances. In some cases, liability may exceed the value of the property. The presence of toxic substances, or the failure to properly remedy any resulting contamination, may make it more difficult for the Partnership to operate the marina. We believe Tower Park Marina complies with all significant environmental laws; however, future environmental laws may impose additional material liabilities on us.
We depend on key personnel.
We depend on our key personnel, including William W. Anderson, our President and Jeffrey K. Ellis, Chief Financial Officer. The loss of Mr. Anderson, Mr. Ellis or other key personnel could adversely affect our operations. We maintain no key person insurance on our key personnel.
Terrorist attacks and the possibility of wider armed conflict may have an adverse impact on our business and operating results and could decrease the value of our assets.
Terrorist attacks and other acts of violence or war, such as those that took place on September 11, 2001, could have a material adverse impact on our business and operating results. There can be no assurance that there will not be further terrorist attacks against the United States or its businesses or interests. Attacks or armed conflicts that directly impact our property could significantly affect our ability to operate this property and thereby impair our operating results. Further, we may not have insurance coverage for all losses caused by a terrorist attack. Such insurance may not be available, or if it is available and we decide to obtain such terrorist coverage, the cost for the insurance may be significant in relation to the overall risk. In addition, the adverse effects that such violent acts and threats of future attacks could have on the U.S. economy could similarly have a material adverse effect on our business and results of operations. Finally, further terrorist acts could cause the United States to enter into a wider armed conflict, which could further impact our business and operating results.
ITEM 2.
ITEM 2. Description of Property.
As of December 31, 2009, the Partnership leased Tower Park Marina, which is located in San Joaquin County, California. The property was acquired on February 1, 1988. The portion of property leased and operated as Tower Park Marina is situated on 12 acres, which are leased from the CSLC. Tower Park Marina consists of the following: (a) 211 covered slips contained in 17 covered sheds; (b) 93 open slips; (c) a gas dock facility; (d) two covered dry boat storage areas with capacity for approximately 58 boats; and (e) additional dry storage areas with capacity for approximately 83 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.
On March 27, 2007, the Partnership completed the sale of substantially all of the assets of Tower Park Marina and RV Park to Kampgrounds of America (“KOA”) for $13,500,000 in cash. The assets sold included the land and improvements known as Tower Park Marina, the Registrant’s 51% interest in the Little Potato Slough Mutual Water Company, the Registrant’s leasehold interest in the lease between
the California State Land Commission (as landlord) and the Registrant (as tenant), dated as of January 14, 1999, approximately 100 acres of undeveloped land, and certain personal property associated with the foregoing.
In connection with the sale, the existing lease agreement between KOA and the Partnership, under which the Partnership had leased the RV Park and retail store at Tower Park Marina to KOA, was terminated. Pursuant to a new lease, KOA leased back to the Partnership the marina facilities and dry storage buildings that make up a portion of the property that was sold. As of February 22, 2010, the permanent wet slip facilities (consisting of 211 slips) were approximately 91.5% 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, 2009, rent expense for the CSLC Lease was $45,000.
ITEM 3.
ITEM 3. Legal Proceedings
None.
ITEM 4.
ITEM 4. Reserved
PART II
ITEM 5.
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Smaller reporting company Purchases of Equity Securities.
The Partnership has no common stock.
The Units of Limited Partnership Interests (“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 a 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, 2009, WMMI had acquired 1568 Units in the Partnership, representing 34.78% of the outstanding units at an average price of $230 per unit.
Exclusive of the General Partners’ interests in Partnership, as of December 31, 2009, there were approximately 687 Unit holders of record.
If applicable, the Partnership makes quarterly distributions of all “Cash Flow from Operation” and of all “Cash from Sales or Refinancing”, subject to the provisions described below. Cash Flow from Operations, as defined in the Partnership Agreement, is the total cash receipts from the operations of the Partnership’s business, which includes, but is not limited to, cash receipts from the rental of the 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 the Partnership from all sales, exchanges and refinancing of the Partnership’s properties, less payment of indebtedness relating to such properties and adequate cash reserves from such net proceeds for other obligations of the Partnership for which there is no provision; however, Cash from Sales or Refinancing does not include any proceeds reinvested in properties.
See Items 6 and 7 for a more detailed discussion of the Partnership’s operating results. In April of 2007, the Partnership made a distribution of $3,642,000 to its partners.
ITEM 6.
ITEM 6. Selected Financial data
A smaller reporting company is not required to provide the information in this Item.
ITEM 7.
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Tower Park Marina was purchased in February 1988 and as of March 27, 2007, (date of sale of property to Kampgrounds of America, (“KOA”) see “Results of Operations” below) $11,662,000 in capital costs had been incurred as part of its acquisition and subsequent improvement.
The operations of our 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 ongoing business in the slip rental, dry storage, and fuel sales segments.
Critical Accounting Policies
The application of accounting principles requires the use of assumptions, estimates and judgments which are the responsibility of management. Management makes estimates and judgments based on, among other things, knowledge of operations, markets, historical trends and likely future changes, similarly situated businesses and, when appropriate, the opinions of advisors with relevant knowledge and experience. The Partnership has identified one critical accounting estimate used in the financial statements, the allowance for accounts receivable. This estimate primarily affects the slip rental and dry storage segments. The fuel service segment revenues are primarily generated from cash and credit card point-of-sale transactions, and subsequently do not have collectability issues. Reported results could have been materially different had the Partnership used a different set of assumptions, estimates and/or judgments.
Accounts receivable allowance: The Partnership uses the allowance method to reserve for its estimate of uncollectible receivables. A percentage of the accounts receivable with balances past due over 60 days are estimated to eventually prove uncollectible. Consequently, the amount estimated is charged to bad debts each month and a credit is made to an allowance for doubtful accounts. In addition to a general reserve estimate, any accounts identified as problematic-including accounts in bankruptcy or placed for collection are added to the allowance amount. When specific accounts are written off, they are charged to the allowance account. Management reviews the allowance each quarter and at year end, and evaluates any accounts over 60 days past due. Factors such as subsequent payments and value of boats occupying the slips are considered when determining collectability. If, in the judgment of management, it is “not likely” that the account is collectible, the allowance will be increased, thereby reducing income from these segments. For these reasons and since changes in estimates can materially affect net profits, management believes the accounting estimate related to accounts receivable allowances is a “critical accounting estimate.”
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. On March 27, 2007, the Partnership completed the sale of substantially all the assets of Tower Park Marina and RV Park to Kampgrounds of America (“KOA”) for $13,500,000 in cash. Net cash received was reduced to $13,459,000 due to $41,000 of property taxes and closing costs borne by the Partnership. The assets sold included the land and improvements known as Tower Park Marina, the Partnership’s 51% interest in the Little Potato Slough Mutual Water Company, the Partnership’s leasehold interest in the lease between the California State Land Commission (as landlord) and the Partnership (as tenant), dated as of January 14, 1999, approximately 100 acres of undeveloped land, and certain personal property associated with the foregoing. The gain was further reduced by $416,000 of maintenance repairs identified by KOA. The Partnership will make these repairs over the next several years.
The Partnership recognized a gain of $8,117,000 and deferred gain of $2,152,000 from the sale.
The proceeds from the sale were used to repay the Partnership’s note payable and the payable to affiliates. In April of 2007, the Partnership made a distribution of $3,642,000 to its partners.
In connection with the sale, the existing lease agreement between KOA and the Partnership, under which the Partnership had leased the RV Park and retail store at Tower Park Marina to KOA, was terminated. Pursuant to a new lease agreement, KOA leased back to the Partnership the marina facilities and dry storage buildings that make up a portion of the property that was sold. The lease has a ten-year term with three five year options. Basic rent will be $25,000 per month for the first five years.
2009 Compared to 2008
For the year ended December 31, 2009, gross revenue for Tower Park decreased $78,000 to $1,174,000. This was the result of a decrease in dry storage, fuel service and interest revenue.
The Partnership’s income of $139,000 for the year ended December 31, 2009 is a decline of $30,000 from the previous year. The decline was due to various factors, primarily due to a decline in net operating profits in the slip rental and dry storage segments which were offset by only modest improvement in the fuel service segment and a slight decrease in overall operating costs.
Tower Park Marina’s slip rental revenues remained stable at $779,000 in 2009. The marina’s dry storage revenues declined $11,000 to $168,000. The dry boat storage market is more sensitive to economic conditions, as customers who might otherwise choose to store their boats at a marina in good economic times elect to store their vessels in their driveway or garage in an effort to save money. In spite of the stable revenues, net operating profits for the slip rental segment decreased $14,000 due to increases in payroll. Likewise, net operating profits for the dry storage segment also decreased $22,000, due in part to the declining revenues discussed previously and in part due to increases in payroll.
Fuel sales decreased $41,000 to $205,000 due to lower fuel prices and slightly lower sales volume; however margins from fuel sales remained stable. Net operating profits for this segment improved slightly due to reductions in operating costs.
2008 Compared to 2007
For the year ended December 31, 2008, gross revenue from continuing operations for Tower Park decreased $14,000 to $1,252,000. This was the result of a decrease in fuel service and interest revenue, partially offset by an increase in slip rental revenue.
The Partnership’s income from continuing operations of $169,000 for the year ended December 31, 2008 is an improvement of $90,000. The improvement was due to various factors, primarily due to the amortization of the deferred gain of $215,000, which is reported as a reduction of cost of operations. Excluding the effect of deferred gain amortization of $215,000 and $161,000 respectively for 2008 and 2007, the Partnership’s results of continuing operations before depreciation improved $49,000 to a loss of $22,000 from a $71,000 loss during the same period a year ago. The improvement was due to a $17,000 increase in slip rental income as detailed below, a $16,000 decrease in dry storage expenses, and a $22,000 decrease in general operating costs.
Tower Park Marina’s slip rental revenues increased $17,000 to $779,000 in 2008, which is attributable to both an increase in wet slip occupancies and an increase in rates. The marina’s dry storage revenues remained stable. Net operating profit for the slip rental segment increased $17,000 and the dry storage segment increased $16,000.
Fuel sales decreased $25,000 to $246,000 due to lower sales volume; however margins from fuel sales remained stable despite rising fuel costs. Net income for the segment increased $1,000.
Liquidity and Capital Resources
The Partnership had a net profit from operations at December 31, 2009 of $139,000, and is projecting operating profits going forward.
On March 27, 2007, the Partnership completed the sale of substantially all the assets of Tower Park Marina and RV Park to Kampgrounds of America (“KOA”) for $13,500,000 in cash. The sale requires the Partnership to make approximately $400,000 in repairs to the property and resulted in a gain of approximately $8,117,000 and deferred gain of $2,152,000. The proceeds from the sale were used to repay the Partnership’s note payable and the payable to affiliates. In April of 2007, the Partnership made a distribution of $3,642,000 to its partners.
As part of the sale, the Partnership agreed to lease back the marina and dry storage facilities that comprise a portion of the property. The lease has an initial term of ten years and three five (5) year options to extend. The lease requires minimum monthly payments of $25,000 for the first five years. The Partnership will also be required to reimburse KOA approximately $40,000 for its annual obligations with respect to the CSLC lease. In addition, the Partnership is required to spend a minimum of $50,000 per year on maintenance repairs and improvements. These contractual obligations are summarized below:
Tabular Disclosure of Contractual Obligations
With the sale completed, the Partnership was able to repay all of its debt and the negative cash flow from discontinued operations has been eliminated. The Partnership had a remaining cash balance of $988,000 as of December 31, 2009. Because of these factors, we believe the Partnership is in a position to meet its financial obligations going forward.
Off-Balance Sheet Arrangements
Partnership has no off-balance sheet arrangements and has not entered into any transactions involving unconsolidated, limited purpose entities.
ITEM 7A.
ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. All Partnership transactions are payable in U.S. dollars. The Partnership holds most of its cash in a money market account. We do not consider the effects of interest rate movements to be a material risk to our financial condition. We do not hold any derivative instruments and do not engage in any hedging activities.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data.
The Consolidated Financial Statements required in response to this Item 8 are submitted as part of Item 15(a) of this annual report on Form 10-K.
ITEM 9.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
ITEM 9A.
ITEM 9A. Controls and Procedures
Item 9A(T). Controls and Procedures
Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, the Company has evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of its disclosure controls and procedures (as defined in such rules) as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.
Our management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of the year ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company continues to review its disclosure controls and procedures, including its internal controls over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that the Company’s systems evolve with its business.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States (“GAAP”) and includes those policies and procedures that:
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pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
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provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
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provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on its financial statements.
Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified.
Our management conducted an evaluation of the effectiveness of the system of internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our system of internal control over financial reporting was effective as of December 31, 2009.
This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.
ITEM 9B.
ITEM 9B. Other Information
None
PART III.
ITEM 10.
ITEM 10. Directors and Executive Officers
The Partnership has no directors or executive officers.
Partnership’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 the Partnership. The Partnership’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 perform significant policy-making or operational functions for the Partnership, 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 the Partnership Agreement, a copy of which is included in the Partnership’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.
Audit Committee Financial Expert.
The Partnership is not a listed issuer and does not have a board of directors, nor does it have any audit committee financial expert within the meaning of Reg. S-K, Item 407(d)(5). This is due to the small size of Partnership and the nature of its business. The General Partner, in its capacity, effectively serves as the audit committee.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Partnership’s General Partners, and the directors and executive officers of the Corporate General Partner, and persons who own more than ten percent of the Partnership’s Units, to file with the Securities and Exchange Commission (the “SEC”) initial reports of ownership and reports of changes in ownership of Units.
To our knowledge, based solely on review of the copies of such reports furnished to the us and written representations that no other reports were required, during the fiscal year ended December 31, 2009, 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 Partnership were complied with.
Code of Ethics.
Due to the small size of the Partnership and the nature of its business, we do not have a formal code of ethics within the meaning of Reg. S-K, Item 406.
ITEM 11.
ITEM 11. Executive Compensation.
Partnership has no directors or officers. See Item 12
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Except as specified below, as of the date hereof, no person is known by Partnership to own beneficially more than 5% of the Units of limited partnership interest.
The Partnership has no officers or directors.
As of December 31, 2009, the General Partners had contributed an aggregate of $1,000 to the capital of Partnership. None of the directors and officers of the Corporate General Partner own any Units of limited partnership interest of the Partnership. The Corporate General Partner is a wholly-owned subsidiary of Westrec Properties, which is a wholly-owned subsidiary of Westrec Financial.
Westrec Financial (which may be deemed a parent of the Partnership) has two classes of authorized stock, Common Stock and Convertible Participating Preferred Stock (the “Preferred Stock”), which vote together as a class, except with respect to the election of directors. Michael M. Sachs, an officer and director of both Westrec Financial and the Corporate General Partner, owns 100% of the Common Stock of Westrec Financial. As of December 31, 2009, there was no Preferred Stock outstanding.
Changes in Control. We know of no contractual arrangements, the operation of the terms of which may at a subsequent date result in a change in control of the Partnership, except for Articles 16, 17 and 21.1 of our Partnership Agreement. 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 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 the Partnership, 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, 2009 totaled $1,719,000, ($4,000 of which was paid in 2009).
2. A “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, 2009 totaled $96,000 (none of which was paid in 2009).
3. The Corporate General Partner made advances to the Partnership during 1998 through 2006 to cover operating deficits and capital expenditures. In connection with the March 27, 2007 sale of Tower Park Marina, the Partnership was able to repay the outstanding principal and interest owed to the Corporate General Partner. Accordingly, no interest was paid or accrued to the Corporate General Partner for the year ended December 31, 2009 or 2008.
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 that their share of any future distributions is 1%. The General Partners received $26,000 of such distributions in 2007. No distributions were received in 2009 or 2008.
The Partnership and WMMI, a subsidiary of Westrec Financial, have entered into a management agreement pursuant to which 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) 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 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 the Partnership). The management fee will cover, without additional expense to the Partnership, 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 the Partnership’s accounts payable. During 2009, $62,000 was paid or accrued by the Partnership to WMMI pursuant to the management agreements.
ITEM 14.
ITEM 14. Principal Accountant Fees and Services
The following audit services were provided by Vasquez & Company LLP during fiscal 2009 and 2008:
(1) Audit Fees
Audit fees were billed for the audit of the annual financial statements and reviews of quarterly reports on Form 10-Q.
Pre-Approval Policy
We do not have an audit committee and as a result our General Partner, in its capacity, effectively serves as the audit committee. Our management evaluates the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. The Partnership’s external auditor cannot be engaged to provide any audit or non-audit services to the Partnership unless the engagement is pre-approved by management in compliance with the Sarbanes-Oxley Act of 2002.
PART IV
ITEM 15.
ITEM 15. Exhibits, Financial Statement Schedules
a.
1.
Financial statements
The financial statements listed in the accompanying Index to Financial Statements and Schedule 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 are filed as part of this report.
3.
Exhibits
The exhibits listed in the Index to Exhibits are filed with or incorporated by reference in this report.
b.
Exhibits
The exhibits listed in the Index to Exhibits are filed with or incorporated by reference in this report.
c.
Financial Statement Schedules
Not applicable.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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 Partnership and in the capacities and on the dates indicated.
Signature
Capacity
Date
Principal Executive Officer
/s/ Michael M. Sachs
President, Secretary and Director of Westrec Investors,
March 30, 2010
Michael M. Sachs
Inc., the Corporate General Partner of the Partnership
Principal Operating Officer
/s/ William W. Anderson
Director of Westrec Investors, Inc., the Corporate
March 30, 2010
William W. Anderson
General Partner of the Partnership.
Principal Financial and Accounting Officer
/s/ Jeffrey K. Ellis
Vice President and Chief Financial Officer of Westrec Investors, Inc., the Corporate General Partner of the
March 30, 2010
Jeffrey K. Ellis
Partnership
TOWER PARK MARINA INVESTORS, L.P.,
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
Index to Financial Statements and Schedules
(Item 15 (a))
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 REGISTERED PUBLIC ACCOUNTING FIRM,
VASQUEZ & COMPANY, LLP
The Partners
Tower Park Marina Investors, L.P.,
(formerly PS Marina Investors I),
a California Limited Partnership
and Subsidiary
We have audited the accompanying balance sheets of Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a California Limited Partnership (the Partnership), as of December 31, 2009 and 2008, and the related statements of operations, changes in partners’ deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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. The Partnership is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tower Park Marina Investors, L.P. (formerly PS Marina Investors I), a California Limited Partnership as of December 31, 2009 and 2008, and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
/S/ Vasquez & Company LLP
Los Angeles, California
March 26, 2010
TOWER PARK MARINA INVESTORS, L.P
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
BALANCE SHEETS
December 31, 2009 and 2008
See accompanying notes to consolidated financial statements.
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
STATEMENTS OF OPERATIONS
For the years ended December 31, 2009 and 2008
See accompanying notes to consolidated financial statements.
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT
For the years ended December 31, 2009 and 2008
See accompanying notes to consolidated financial statements.
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
STATEMENTS OF CASH FLOWS
For the years ended December 31, 2009 and 2008
See accompanying notes to consolidated financial statements.
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2008
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 $27,000 of such deferrals remain outstanding.
Basis of Presentation
The financial statements of Tower Park Marina Investors, LP at December 31, 2009 and for the year ended December 31, 2009 and 2008 are presented in accordance with accounting principles generally accepted in the United States of America for annual financial information and have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and with the instruction to Form 10 and Rule 8-03 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the years presented have been included.
Tower Park Marina
Tower Park Marina is stated at cost to the Partnership. Provision for depreciation and amortization is calculated using the straight-line method. Depreciable lives for the major asset categories are as follows:
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2008
1. Summary of Significant Accounting Policies and Partnership Matters (continued)
Revenue Recognition
Revenue from slip rentals and dry storage are recognized over the length of the contract term. Fuel service revenues are recognized at point of sale.
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.
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 Refinancing (as defined) is 1%.
Allocations of Net Income or Loss
As set forth in the Partnership Agreement, net income and net loss shall be allocated 99% to the Limited Partners and 1% to the General Partners.
Earnings Per Unit
Per unit data is based on the weighted average number of the Limited Partnership units outstanding during the years ended December 31, 2009 and 2008; 4,508.
Taxes Based on Income
Taxes based on income are the responsibility of the individual partners and, accordingly, are not reflected in the accompanying consolidated financial statements.
Cash and Cash Equivalents
Cash and cash equivalents consist of all amounts on deposit in interest bearing and non-interest bearing demand deposit accounts as well as highly liquid investments purchased with an original maturity of three months or less.
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2008
1. Summary of Significant Accounting Policies and Partnership Matters (continued)
On January 1, 2008, the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, became effective for the Partnership. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
Level 1
Quoted prices in active markets for identical assets or liabilities.
Level 2
Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At each reporting period, we perform a detailed analysis of our assets and liabilities that are measured at fair value. All assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3.
The Partnership has segregated all financial assets and liabilities that are measured at fair value into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below. The Partnership has no non-financial assets and liabilities that are measured at fair value.
The following table sets forth the Company’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The table below sets forth a summary of the fair values of the Company’s financial assets as of December 31 , 2009.
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2008
1. Summary of Significant Accounting Policies and Partnership Matters (continued)
The Partnership believes that the carrying value of its cash, accounts receivable, accounts payable and accrued liabilities as of December 31, 2009 and 2008 approximate their fair values because of the short term nature of those instruments.
Concentration of Credit Risk.
Financial instruments that potentially subject the Company to concentration of credit risk are cash and cash equivalent deposits in excess of federally insured limits. From time to time the Company may have bank deposits in excess of federally insured limits. The Company evaluates these excess deposits, and transfers amounts to other banks if it considers such transfers necessary.
Recently Issued Accounting Standards
In February 2010, the FASB issued Accounting Standards Update 2010-09, Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements. ASU 2010-09 removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP. The FASB also clarified that if the financial statements have been revised, then an entity that is not an SEC filer should disclose both the date that the financial statements were issued or available to be issued and the date the revised financial statements were issued or available to be issued. The FASB believes these amendments remove potential conflicts with the SEC’s literature. In addition, the amendments in the ASU requires an entity that is a conduit bond obligor for conduit debt securities that are traded in a public market to evaluate subsequent events through the date of issuance of its financial statements and must disclose such date. All of the amendments in the ASU were effective upon issuance (February 24, 2010) except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The provisions of ASU 2010-09 did not have a material impact on the Partnership’s financial statements.
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2008
1. Summary of Significant Accounting Policies and Partnership Matters (continued)
Recently Issued Accounting Standards (continued)
In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends Codification Subtopic 820-10 to add two new disclosures: (1) transfers in and out of Level 1 and 2 measurements and the reasons for the transfers, and (2) a gross presentation of activity within the Level 3 roll forward. The proposal also includes clarifications to existing disclosure requirements on the level of disaggregation and disclosures regarding inputs and valuation techniques. The proposed guidance would apply to all entities required to make disclosures about recurring and nonrecurring fair value measurements. The effective date of the ASU is the first interim or annual reporting period beginning after December 15, 2009, except for the gross presentation of the Level 3 roll forward information, which is required for annual reporting periods beginning after December 15, 2010 and for interim reporting periods within those years. Early application is permitted. The Partnership is currently assessing the impact that the adoption will have on its financial statements.
There were no other new accounting pronouncements that are expected to have a material impact or have potential material significance to the Partnership.
2. Tower Park Marina
On March 27, 2007, the Partnership completed the sale of substantially all the assets of Tower Park Marina and RV Park to Kampgrounds of America (“KOA”) for $13,500,000 in cash. Net cash received was reduced to $13,459,000 due to property taxes and closing costs borne by the Partnership amounting to $41,000. The assets sold included the land and improvements known as Tower Park Marina, the Partnership’s 51% interest in the Little Potato Slough Mutual Water Company, the Partnership’s leasehold interest in the lease between the California State Land Commission (as landlord) and the Partnership (as tenant), dated as of January 14, 1999, approximately 100 acres of undeveloped land, and certain personal property associated with the foregoing. The gain was further reduced by $416,000 of maintenance repairs identified by KOA. The Partnership will make these repairs over the next several years.
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2008
2. Tower Park Marina (continued)
The Partnership recognized a gain of $8,117,000 and deferred gain of $2,152,000 from the sale. The proceeds from the sale were used primarily to repay the Partnership’s note payable and the payable to affiliates, and in April 2007, the Partnership made a distribution of $3,642,000 to its partners.
In connection with the sale, the existing lease agreement between KOA and the Partnership, under which the Partnership had leased the RV Park and retail store at Tower Park Marina to KOA, was terminated. Pursuant to a new lease, KOA leased back to the Partnership the marina facilities and dry storage buildings that make up a portion of the property that was sold. In accordance with ASC Topic 840, Leases, $2,152,000 of the gain from the sale was deferred and will be amortized as a reduction in rent expense over the ten-year term of the lease agreement. The amount of the gain that was deferred was based on the Partnership’s ten year lease commitment, discounted at 10%. For the year ended December 31, 2009 and 2008, $215,000 of the deferred gain from the sale was amortized for each year, and is reflected in cost of operations.
At December 31, the remaining assets related to Tower Park Marina that remain as part of the Partnership are composed of the following:
3. Other Assets
Other assets at December 31, are composed of the following:
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 FINANCIAL STATEMENTS
December 31, 2009 and 2008
4. 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 marina’s monthly gross revenues (as defined). Management fees for the years ended December 31, 2009 and 2008 were $62,000 and $63,000, respectively.
In connection with their services in negotiating and obtaining permanent financing from an unaffiliated lender, the General Partners or their affiliates are entitled to receive an amount equal to 1% of the principal amount of the financing or refinancing, less any fees paid to other loan brokers. No loan brokerage fees were paid to the General Partners or their affiliates for the year ended December 31, 2009.
5. 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 period.
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”). As mentioned in Note 2 above, the Partnership’s leasehold interest in the CLSC lease was sold to KOA on March 27, 2007. Simultaneously with the sale of Tower Park Marina, the Partnership leased back a portion of the property consisting of the marina facilities and dry storage buildings. The marina operations will include all areas currently operated as part of the marina operations and approximately 7 acres of additional land for a future dry storage building, boat repair area and maintenance yard. The lease has a ten-year term with three (3) 5-year options to extend. Basic rent will be $25,000 per month for the first five years. Included in lease expense in cost of operations is $300,000, paid to KOA for each of the years ended December 31, 2009 and 2008. The basic rent will be increased 3.5% per each lease year, adjusted every five years. The Partnership will be required during each year of the lease (i) to make payments of approximately $40,000 to KOA with respect to KOA’s obligation under the CSLC lease and (ii) to expend at least $50,000 for capital expenditures and/or major repair/maintenance projects. Included in lease expense in cost of operations is $45,000 and $40,000, respectively, related to the CSLC lease for the years ended December 31, 2009 and 2008, and approximately $142,000 has been spent on maintenance projects.
TOWER PARK MARINA INVESTORS, L.P.
(formerly PS MARINA INVESTORS I)
a California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2008
5. Commitments and Contingencies (continued)
Disclosure of Contractual Obligations
6. Segment Reporting
The Partnership has been aggregated into three reportable business segments (Slip rental, Dry storage and Fuel service): Slip rental reports the water-based boat slip rentals and Dry storage reports the land based boat storage operations 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 Partnership evaluates the performance of its operating segments based on income from operations before depreciation and amortization.
Summarized financial information concerning the Partnership’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 FINANCIAL STATEMENTS
December 31, 2009 and 2008
6. Segment Reporting
(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 costs include general and administrative, repairs and maintenance, taxes, utilities and other 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.
7. 401(k) Plan
The Partnership sponsors a 401(k) Plan (the Plan) which is a qualified defined contribution plan under section 401(k) of the Internal Revenue Code. Full time employees who are at least 21 years of age and have completed one year of service, are eligible to participate in the Plan. Participants of the Plan may choose to contribute up to 50% of their compensation per year, as defined by the Plan, up to a maximum $15,500 for each of the calendar years ended 2009 and 2008. The Partnership may match up to 50% of the employee’s quarterly contribution up to $1,250 per year. The Partnership’s matching contribution for the years ended December 31, 2009 and 2008 was $900, for each year.
“Rollover Contributions” from other qualified plans are accepted by the Plan. The Partnership does not match contributions of this type
8. Subsequent Events
In May 2009, the FASB issued subsequent events guidance, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. The Partnership has evaluated subsequent events for recognition or disclosure through the time of filing these financial statements on Form 10-K with the SEC on March 26, 2010 and no events, other than those described in these notes, have occurred that require disclosure pursuant to such guidance.
INDEX TO EXHIBITS