Item 1. Business. The registrant is a North Carolina limited partnership formed in July 1986 (hereinafter referred to as the "Partnership"). The Partnership engaged in a "blind pool offering," the proceeds of which were used to purchase income-producing real property. During the year ended December 31, 1988, the Partnership received the minimum investment required to remove subscribers' funds from escrow. The Partnership's offering terminated with a total subscription of $3,195,000 from investor limited partners. The net proceeds were used to purchase the properties described in Item 2
Item 2. Properties. On June 23, 1989, the Partnership purchased the EastPark Executive Center, an office complex comprised of two buildings located in Charlotte, North Carolina with net leasable area of 45,300 square feet, for a purchase price of $3,155,138 of which $1,500,000 was provided by a first mortgage loan bearing interest at 10.5% per annum and having a term of 10 years. The lender, United of Omaha Life Insurance Company ("United Omaha"), is not affiliated with the Partnership.
On November 30, 1989, the Partnership acquired the BB&T Bank Building, a three-story office building in Greenville, South Carolina with net leasable area of 39,138 square feet, for a purchase price of $4,202,544 of which $3,110,000 was provided by a first mortgage loan from United Omaha. The debt is currently financed with First Union. (See Item 7, "Liquidity and Capital Resources" for description of loan terms.)
In connection with the office building purchases, $26,312 of acquisition costs were capitalized.
No further purchases of real property are projected and no funds are available for that purpose. (See Item 7 below, "Status of Sales Efforts" for recent developments regarding the properties.)
Item 3.
Item 3. Legal Proceedings. The Partnership is not involved in any legal proceedings and was not so involved during the year ended December 31, 1997.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders. Not applicable.
PART II
Item 5.
Item 5. Market for the Partnership's Common Equity and Related Stockholder Matters. There is no established public trading market for the Partnership's securities. The Partnership has approximately 535 limited partners. Cash distributions made to the limited partners during the past years are set out in the Statements of Cash Flow included in the Financial Statements included in Part II, Item 8 of this Report.
Item 6.
Item 6. Selected Financial Data.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Liquidity and Capital Resources
During the year ended December 31, 1997, the Partnership continued to fund working capital requirements. The working capital deficiency increased from ($864,930) at December 31, 1996 to ($3,581,543) at December 31, 1997. The decrease in the working capital is primarily a result of the reclassification of the loan on the BB&T Bank building to current liabilities from long-term debt due to the balloon payment of approximately $2,722,700 that is due in December 1998. This loan was refinanced in the form of a line of credit for $2,840,000 through First Union Bank of North Carolina. The line of credit carries an interest rate at the 3-month LIBOR rate plus 1.75% and is repayable in monthly payments of accrued interest only until December 1, 1998 when all remaining principal and interest shall be due. The General Partners anticipate selling the BB&T Building before maturity.
An additional increase in current liabilities can be attributed to a $1,000,000 line-of-credit note payable by the Partnership for the EastPark Executive Center GSA upfit, of which $1,000,000 and $942,483 were outstanding at December 31, 1997 and 1996 respectively. The line of credit is unsecured and is payable on demand.
The cumulative unpaid priority return to the unit holders increased from $1,924,049 at December 31, 1996 to $2,166,833 at December 31, 1997. This increase resulted from no distributions being made to partners during the year and the pro rata share due partners pursuant to the Limited Partnership Agreement. Based on current and projected commercial real estate market conditions, the General Partners believe that it is reasonably unlikely that a sale of the Partnership properties would produce net sale proceeds sufficient to pay any of such priority return. Furthermore, the General Partners believe that it is reasonably unlikely that the Partnership's operating income or any refinancing of Partnership debt would generate sufficient funds to pay the priority return.
During the year ended December 31, 1997, the Partnership had net (loss) of ($51,497) compared to the net income of $40,561 and $29,787 in 1996 and 1995, respectively. Rental income, operating expenses, and interest expense for the years ended December 31, 1997 and 1996 resulted exclusively from the operations of the Partnership's commercial real estate properties. The EastPark Executive Center buildings, purchased June 23, 1989, were 96 % leased at December 31, 1996 and were 99% leased at December 31, 1997. The BB&T Bank Building (formerly the United Carolina Bank Building,), purchased November 30, 1989, was 96% leased at December 31, 1996 and 100% in 1997. In March 1997, Metlife signed a sublease with United Health Care for approximately 1,400 square feet expiring July 31, 1999.
The Partnership entered into a Loan Extension and Modification Agreement dated as of May 12, 1993 with Internet Services Corporation, a North Carolina corporation (formerly International Network Services Corporation) owned equally by three trusts, the beneficial interests of which inure respectively to the benefit of three children of Dexter Yager, the sole General Partner of DRY Limited Partnership, which limited partnership is one of the two general partners of the Partnership. Pursuant to the Agreement, the Partnership agreed to pay Internet $91,275 over a five-year period, with annual principal payments of $18,255 each, together with interest at the rate equal to the prime rate of NationsBank of North Carolina N.A., determined on an annual basis, plus two percent (2.0%). This loan was paid off one year early in January 1997, saving the Partnership approximately $1,400 in interest expense.
See Item 13 (Certain Relationships and Related Transactions) for a discussion regarding leasing commissions paid to FSK Properties, LLC, a General Partner of the Partnership.
In the event that funds derived from operations are insufficient to meet the Partnership's working capital needs, the General Partners have agreed to fund the shortfall.
Results of Operations
Comparison of 1997 results with 1996.
Operating results decreased from an operating income of $449,277 during the year ended December 31, 1996 to an operating income of $355,399 for the comparable year 1997. Operating income expressed as a percentage of rental income decreased from 39.0% for the year ended December 31, 1996 to 31.0% for the comparable year 1997. While common area maintenance ("CAM") charges were down $22,000 at the BB&T facility, rental escalations and increased occupancy at both facilities compensated for this decrease. This resulted in rental income increasing by approximately $8,000 from the prior year. Operating expenses were higher overall in 1997 by approximately $102,000. Increased depreciation relating to the IRS upfit comprised the greatest increase in the expenses. The remaining expense increase can be attributed to increased repairs and maintenance. Nonoperating expenses for the year ended December 31, 1997 decreased 0.4% from the comparable year 1996.
Comparison of 1996 results with 1995.
Operating results increased slightly from an operating income of $444,916 during the year ended December 31, 1995 to an operating income of $449,277 for the comparable year 1996. Operating income expressed as a percentage of rental income increased from 37.9% for the year ended December 31, 1995 to 39.0% for the comparable year 1996. While the overall occupancy rate for 1996 was comparable to 1995, rental income nevertheless decreased by approximately $22,000. This decrease of rental income in 1996 can be attributed to the decrease in Common Area Maintenance ("CAM") reimbursements provided by the Metropolitan Life Insurance Company lease at the BB&T facility. Operating expenses were lower overall in 1996 by approximately $26,000. Decreased professional fees incurred in 1995 relating to the potential sale of the properties, comprised the greatest decrease in the expenses. The remaining expense decrease can be attributed to decreased contract labor
and miscellaneous expenses. Nonoperating income and expenses for the year ended December 31, 1996 decreased 1.5% from the comparable year 1995.
Status of Sales Efforts; Future Matters
The General Partners entered into separate listing agreements for both properties with a Charlotte-based commercial real estate broker at the beginning of the third quarter, 1996. The BB&T Bank Building is now under contract to be sold to Highwoods/Forysth Limited Partnership, a North Carolina limited partnership ("Highwoods"), for a sale price of $3,600,000. As a result of Highwoods' due diligence investigation of the BB&T building, parties have settled on a $90,000 price reduction. The General Partners anticipate the closing on the sale to occur in April 1998. The General Partners also anticipate selling the EastPark Executive center in 1998.
Item 8.
Item 8. Financial Statements and Supplementary Data. The financial statements are attached hereto.
INDEPENDENT AUDITOR'S REPORT
To the Partners Yager/Kuester Public Fund Limited Partnership Charlotte, North Carolina
We have audited the accompanying balance sheets of Yager/Kuester Public Fund Limited Partnership as of December 31, 1997 and 1996, and the related statements of operations, partners' equity and cash flows for each of the three years in the period ended December 31, 1997. 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 generally accepted auditing standards. 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 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 Yager/Kuester Public Fund Limited Partnership as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
Charlotte, North Carolina February 13, 1998, except for the last paragraph in Note 4 as to which the date is March 30, 1998
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
BALANCE SHEETS DECEMBER 31, 1997 AND 1996
See Notes to Financial Statements.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
See Notes to Financial Statements.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
See Notes to Financial Statements.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
See Notes to Financial Statements.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
Note 1. NATURE OF BUSINESS AND ORGANIZATION, PARTNERSHIP AGREEMENT AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business and organization: The Partnership is a North Carolina limited partnership formed in July 1986. The purpose of the Partnership is to acquire, operate, hold for investment and sell commercial rental property. Properties currently held are located in Charlotte, North Carolina and Greenville, South Carolina.
The general partners of the Partnership are DRY Limited Partnership, a North Carolina limited partnership in which Dexter R. Yager, Sr. is the general partner and FSK Limited Partnership, a North Carolina limited partnership in which Faison S. Kuester, Jr. is the general partner.
Partnership agreement: Under the terms of the partnership agreement, all taxable income, tax losses and cash distributions from operations are to be allocated 99% to the limited partners and 1% to the general partners until the limited partners receive a return of their initial capital contributions and a "Priority Return". The Priority Return is a sum equal to 8% per annum cumulative, but not compounded, (prorated for any partial year) of the adjusted capital contributions of the limited partners, calculated from the last day of the calendar quarter in which each limited partner is admitted to the Partnership to the date of payment. Thereafter, taxable income, tax losses and cash distributions from operations will be allocated 75% to the limited partners and 25% to the general partners.
Upon the sale or refinancing of any future partnership properties, the partnership agreement specifies certain allocations of net proceeds and taxable gain or loss from the transaction.
A summary of the Partnership's significant accounting policies follows:
Use of management's estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents: For purposes of reporting the statements of cash flows, the Partnership includes all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with an original maturity of three months or less as cash and cash equivalents on the accompanying balance sheets. At various times throughout the year, the Partnership may have cash balances at financial institutions which exceed federally-insured amounts.
Investments: Properties on operating leases and leased properties held for sale are stated at the lower of cost less accumulated depreciation or fair market value. Depreciation is computed by the straight-line method over 40 years for buildings and over 15 years for building improvements.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
NOTE 1. NATURE OF BUSINESS AND ORGANIZATION, PARTNERSHIP AGREEMENT AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Investment in securities available for sale and accounting change: Statement No. 115 requires that management determine the appropriate classification of securities at the date individual investment securities are acquired, and that the appropriateness of such classification be reassessed at each balance sheet date. Since the Partnership neither buys securities in anticipation of short-term fluctuations in market prices nor can commit to holding debt securities to their maturities, the investment in debt and marketable equity securities have been classified as available for sale in accordance with Statement No. 115. Available for sale securities are stated at fair value, and unrealized holding gains and losses are reported as a separate component of partners' equity. Realized gains and losses, including losses from declines in value of specific securities determined by management to be other-than-temporary, are included in income. Realized gains and losses are determined on the basis of the specific securities sold.
Deferred charges: Deferred charges are related to prepaid fees which are amortized over the length of the related loans, 1 to 10 years, on a straight-line basis.
Deferred leasing commissions: Deferred leasing commissions related to obtaining specific leases are amortized using the straight-line method over the noncancelable lease terms which range from three to seven years.
Revenue recognition: Rental revenue is recognized evenly over the term of the lease. In connection with negotiating and obtaining leases, the Partnership's management may at times grant concessions, such as free rent for a specific number of months during the lease. These costs are amortized over the life of the lease.
Disclosures about the fair value of financial instruments: Financial Accounting Standards Board Statement No. 107, Disclosures About Fair Value of Financial Instruments, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. Statement 107 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. At December 31, 1997 and 1996 the carrying values of the Partnership's financial instruments, including accounts receivable which are due on demand and the mortgage payable which bears interest at market rates, approximate their fair values.
Partnership equity: Financial Accounting Standards Board issued Statement No. 128, Earnings Per Share. The Statement specifies the computation, presentation, and disclosure requirements for earnings per share. Management believes that statement No. 128 is not analogous to limited partnership units. Accordingly, no additional disclosures for partnership units are presented in the accompanying financial statements.
Income taxes: Under current income tax laws, income or loss of the Partnership is included in the income tax returns of the partners. Accordingly, the Partnership will make no provision for federal or state income taxes.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
Note 2. WORKING CAPITAL RESERVE
Per the Partnership Agreement, a minimum cash and cash equivalents reserve of $94,500 must be maintained to fund any expenditures that the cash flow generated from properties on operating leases is insufficient to meet. The Partnership did not meet the minimum requirement by $1,956 at December 31, 1997, and exceeded the minimum requirement by $8,536 at December 31, 1996.
Securities available for sale may be sold in order to fund future operating cash flow expenditures.
Note 3. SECURITIES AVAILABLE FOR SALE
The following is a summary of the Partnership's securities available for sale as of December 31, 1997 and 1996:
At December 31, 1997, the Partnership did not have trading or held to maturity securities.
A summary of investment earnings included in nonoperating income (expense) in the accompanying Statements of Operations for the years ended December 31, 1997, 1996 and 1995 is as follows:
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
NOTE 3. SECURITIES AVAILABLE FOR SALE (CONTINUED)
The amortized cost and fair values of securities available for sale as of December 31, 1997 by contractual maturity are shown below. The "other securities" consists of equity securities. Equity securities have no maturity date.
Proceeds from sales of securities available for sale during the years ended December 31, 1997, 1996 and 1995 are as follows:
Dividend income included in nonoperating income (expense) in the accompanying Statements of Operations totaled $5,132, $6,980 and $7,778 for the years ended December 31, 1997, 1996 and 1995, respectively.
The changes in the net unrealized gain (loss) on securities available for sale during the years ended December 31, 1997 and 1996 were $265 and $(6,410), respectively, which have been included in the separate component of partners' equity.
Note 4. PROPERTIES ON OPERATING LEASES AND LEASED PROPERTIES HELD FOR SALE
The Partnership leases office facilities under various lease agreements. The following schedule provides an analysis of the Partnership's investment in properties held for lease by major classes as of December 31, 1997 and 1996, respectively.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
NOTE 4. PROPERTIES ON OPERATING LEASES AND PROPERTIES HELD FOR LEASE (CONTINUED)
The following is a schedule by years of all minimum future rentals on noncancelable operating leases as of December 31, 1997:
The Partnership properties are currently contracted with a real estate broker. It is the intention of the General Partners to market and sell the properties. The sales proceeds will be used to return partners' equity.
The Partnership reached an agreement on March 26, 1998, for the sale of one of its rental properties. The agreement calls for a purchase price of $3,510,000 in cash. The Partnership anticipates a loss of approximately $120,500 when the sale is completed in fiscal 1998. The net cash proceeds from the sale, after related costs and debt payoff, are expected to approximate $530,500. The carrying value of the building was approximately $3,425,000 at December 31, 1997.
Note 5. NOTE PAYABLE, BANK, LONG-TERM DEBT AND PLEDGED ASSETS
The Partnership has a $1,000,000 line-of-credit with an outstanding balance of $1,000,000 and $942,483 at December 31, 1997 and 1996, respectively. The line-of-credit allows borrowings and repayments to be made on a daily basis. Outstanding balances on the line-of-credit bear interest at a variable rate tied to the bank's prime rate (prime rate was 8.50% at December 31, 1997). The line-of-credit is unsecured and is payable on demand.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
NOTE 5. NOTE PAYABLE, BANK, LONG-TERM DEBT AND PLEDGED ASSETS (CONTINUED)
Long-term debt and pledged assets consists of the following at December 31, 1997 and 1996:
Future maturities of long-term debt at December 31, 1997 and 1996 are as follows:
Interest expense to Internet Services Corporation, for the years ended December 31, 1997, 1996 and 1995 was $669, $3,834 and $5,476, respectively.
Note 6. PRIORITY RETURN
The cumulative unpaid priority return to the limited partners is $2,166,833 and $1,924,049 at December 31, 1997 and 1996, respectively. There were no cash distributions to the limited partners for the priority return for the years ended December 31, 1997, 1996 and 1995. Based on the pending sale and current and projected real estate market conditions, the General Partners believe that it is reasonably unlikely that a sale of the Partnership properties would produce sufficient net sales proceeds to pay the priority return.
Note 7. MANAGEMENT AND ADMINISTRATIVE EXPENSES Management expenses paid to a General Partner and to Internet Services Corporation in connection with day-to-day operations of the Partnership amounted to $60,796, $53,845, and $50,981 for the years ended December 31, 1997, 1996 and 1995, respectively.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
Note 8. MAJOR TENANTS
Rental income for the years ended December 31, 1997, 1996 and 1995, respectively, included approximate rentals from the following major tenants each of which accounted for 10% or more of the total rental income of the Partnership for those years:
Accounts receivable from each of the major tenants identified above were as follows at December 31, 1997 and 1996, respectively:
Note 9. FUTURE REPORTING REQUIREMENTS
The FASB has issued SFAS No. 130, Reporting Comprehensive Income, which the Partnership has not been required to adopt as of December 31, 1997. The Statement, which is effective for fiscal years beginning after December 15, 1997, establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. This statement requires that all items that are recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements.
Note 10. YEAR 2000
At the turn of the century, computer-based information systems will be faced with the problems potentially affecting hardware, software, networks, processing platforms, as well as customer and vendor interdependencies. The Partnership is in the process of assessing the effect of Year 2000 on its operating plans and systems. The Partnership is developing a plan for identifying, renovating, testing and implementing its systems for Year 2000 processing and internal control requirements. The cost for becoming Year 2000 compliant has not been determined, however, management feels it will not be material to the Partnership's financial statements.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. Not applicable.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Partnership. The Partnership has no executive officers and directors. The General Partners of the partnership are DRY Limited Partnership, the sole General Partner of which is Dexter R. Yager, Sr., and FSK Limited Partnership, the sole General Partner of which is Faison S. Kuester, Jr.
Following is a brief discussion of the background and experience of Messrs. Kuester and Yager.
Faison S. Kuester, Jr., 52, graduated from the University of North Carolina at Chapel Hill with a Bachelor of Arts Degree in History in 1967. He is a resident of Charlotte, North Carolina. After three years service in the United States Army as a Lieutenant, Mr. Kuester joined Independence Development Corporation in 1972 serving as a director of leasing and management for a period of three years. In 1974, Mr. Kuester formed his own company, Kuester Realty and Management, in order to lease and manage commercial properties in Charlotte, North Carolina and surrounding communities. In addition to leasing and managing various commercial properties, Kuester Realty had developed two medical clinics in the Charlotte area. In 1980, Kuester Properties, Inc. ("KPI") was formed to specialize in on-site management of apartment communities in the southeastern United States. The following year Cauble and Kuester Company, Inc. was organized to lease and manage commercial properties in the metropolitan Atlanta area. This partnership brought together Cauble and Company, experienced mortgage lenders and leasing agents in the Atlanta market, and Kuester Realty and Management. Finally, in 1983, Kuester Development Corporation was formed to allow the Kuester companies to engage in selective real estate development projects in the southeastern United States.
Through Kuester Development Corporation, a wholly-owned subsidiary of KPI, Mr. Kuester has been directly involved with the development of several commercial real estate properties in North and South Carolina and Georgia. These include the First United National Bank Building in Wilmington, North Carolina, two retail office showroom projects, two medical office buildings and residential condominiums in Charlotte, North Carolina, an office building in Savannah, Georgia, and an office building in Greenville, South Carolina. Kuester Development Corporation also has developed over 700 apartment units throughout Charlotte, North Carolina since 1983.
In October 1996, Mr. Kuester formed FSK Properties, LLC to provide management, leasing and brokerage services to his clients. FSK Properties, LLC serves as property manager of the Partnership property.
Dexter R. Yager, Sr., 58, is the President and founder of D&B Yager Enterprises, Inc., Mr. Yager's Amway distributorship business. Through D&B Yager Enterprises, Inc., Mr. Yager has been an independent distributor for Amway Corporation for over 30 years during which time he has achieved the status of Crown Ambassador, which is the highest level attainable as an Amway distributor. The Amway Corporation is one of the largest manufacturers of home care products in the world. He is also a former member and past president of the Amway Distributor Association Board of Directors. Mr. Yager has many other family-owned businesses and is responsible for the development of several businesses, including the following: Yager Personal Development, Inc., which handles Mr. Yager's services as a speaker at Amway events, Yager Construction Company, Inc., which is a general building contractor; and Dexter and Birdie Yager Family Limited Partnership, which owns various real estate investments and manages real estate for the Yager family.
Mr. Yager has significant experience in real estate investment for his own account. Mr. Yager personally, and through partnerships in which he and his wife own a majority interest, has made investments in raw land, office buildings, a shopping center, and other commercial and residential real estate having a market value in excess of $10,000,000. He has made substantial additional real estate investments through partnerships in which he does not own a majority interest.
Item 11.
Item 11. Executive Compensation. The Partnership does not employ any executive officers or directors and no compensation is paid to any person for performing services typically provided by such an officer or director. Dexter R. Yager, Sr. and Faison S. Kuester have policy making functions with regard to Partnership operations. See Item 10 for the relationship of such persons to the Partnership. See Item 13 for a description of payments made to FSK Properties, LLC for property management services and to Internet Services Corporation, Inc. for accounting and management services.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management. The General Partners initially contributed a total of $2,500 to the capital of the Partnership, consisting of a $1,600 contribution from DRY Limited Partnership and $900 from FSK Limited Partnership. The General Partners own a 1% interest in all items of Partnership income, gain, loss, deductions or credits including 1% of net cash from operations. The General Partners also own a residual 25% interest in net cash from a sale or refinancing of the Partnership Property, subordinated to the receipt by the Limited Partners of the return of their capital contributions and their priority return and to the payment of any subordinated real estate commissions due to affiliates of the General Partners.
The General Partners do not own any Limited Partnership interest in the Partnership.
Item 13.
Item 13. Certain Relationships and Related Transactions. During the fiscal year ended December 31, 1997, FSK Properties, LLC received management fees of $40,196 for management of the Partnership property. Internet Services Corporation, Inc. received $20,600 for providing accounting/management services. See Item 7 for a description of a loan to the Partnership by Internet Services Corporation, a corporation owned equally by three trusts, the beneficial interests of which inure to the benefit of three children of Dexter R. Yager, Sr., the sole General Partner of DRY Limited Partnership, which limited partnership is one of the two general partners of the Partnership. Janitorial services for the EastPark Executive Center are provided by Marquis Cleaning Services, which is operated and owned by Dexter R. Yager's nephew.
The General Partners believe that the terms for the above mentioned services are as favorable as those the Partnership might have obtained from unaffiliated parties.
PART IV
Item 14.
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K.
(a)(1) The following financial statements of the Partnership are included in Part II, Item 8 hereof.
(i) Independent Auditor's Report (ii) Balance Sheets as of December 31, 1997 and 1996 (iii) Statements of Operations for years ended December 31, 1997, 1996 and 1995 (iv) Statements of Partners' Equity for years ended December 31, 1997, 1996 and 1995 (v) Statements of Cash Flows for years ended December 31, 1997, 1996 and 1995 (vi) Notes to Financial Statements
(a)(2) All schedules have been omitted because they are inapplicable, not required, or the information is included elsewhere in the financial statements or notes thereto.
(a)(3) Exhibits:
(4) Instrument defining rights of securities holders set forth in the Limited Partnership Agreement which is contained in the Prospectus incorporated herein by reference.
(10.1)* Limited Partnership Agreement
(10.2)**Exclusive Leasing and Management Agreement dated October 1, 1994 (EastPark Executive Center).
(10.3)**Exclusive Leasing and Management Agreement dated October 1, 1994 (BB&T Building).
(10.4) Contract of Sale and Purchase by and between the Partnership and Highwoods/Forsyth Limited Partnership dated January 23, 1998, as amended by Amendment to Contract of Sale and Purchase dated March 9, 1998.
(10.5) First Amendment to Lease and Sublease by and between the Partnership, BB&T, and BB&T Insurance Services dated March 18, 1998.
(23) Consent of Independent Auditor
(27) Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K: None.
(c) Exhibits: The exhibits listed in Item 14(a)(3) above and not incorporated herein by reference are filed with this Form 10-K.
(d) Financial Statement Schedules: There are no financial statement schedules included in this Form 10-K report.
- --------------------------------------------------------------------------------
* Incorporated by reference to Exhibit A of the Partnership's Prospectus dated December 1, 1987, Registration Number 33-07056-A.
** Incorporated by reference to Exhibit 3 and 4 of the Partnership's Form 10-K for the year ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of 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.
YAGER/KUESTER PUBLIC FUND LIMITED PARTNERSHIP
By: FSK Limited Partnership
March 30, 1998 By: /s/ Faison S. Kuester, Jr. -------------------------------- Faison S. Kuester, Jr. General Partner (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 30, 1998 by the following persons on behalf of the Partnership and in the capacities and on the dates indicated.
/s/ Jerry R. Haynes /s/ Faison S. Kuester - ------------------------------ ----------------------------------- Faison S. Kuester, Jr., General (Principal Accounting Officer) Partner of FSK Limited Partnership, General Partner of the Partnership
Date March 30, 1998 Date March 30, 1998 ------------------------- --------------------
/s/ Dexter R. Yager, Sr. ----------------------------------- Dexter R. Yager, Sr., General Partner of DRY Limited Partnership, General Partner of the Partnership
Date March 30, 1998 --------------