DS9 Document EFTA01119010

• • iTalkIng Points ..i • i .! 1 We are currently reviewing Mr Epstein ownership structure of assets Understanding of this deal, like handful of other RE deals we have done in the past, was that we were 50 / 50 owners on all cash flow including any fees .1 It is only now as we look at books almost 6 years later to find out otherwise 2 Fees In Management Agreement are very unfair under current structure i 4i 7.5% management i • 5.0% leasing 5.0% development how fuel is handled 4i • 1 3 IGY has received approximately 4,400,000 more in cash flow from this deal than Mr Epstein i I 1 No addback for management fees and leasing commission on bad debt expense . 4'Leasing commissions - 5% I I I , Is AYH paid a fee even if an outside broker leases space I J I Past three years there were 307,918 in writeoffs 1 .I. ..J. 5 EDC Company which requires 24 employees yet we have 28 employees i I am concerned that there may be overlap between employee functions and management company . 7 1 i .• ! ......-.......7 .1 i6 Capital Improvements over past three years totaled 206,318 I ;Property is tired looking Is insufficient cash flow reason no work is being done? Please explain 1 I 4 7 Concerned that when interest rates eventually increase instead of receiving distributions we will having capital calls i i -- i i --t— + 8 What is end game for investors to get their money back - sale of asset / refinance ?? r EFTA01119010 5/29/07 CASH FLOW TO PARTNERS Jeffrey Epstein • « I 4 ! T : * ! IGY • .• !Orip,inal Investment 1Z976,977.85 12,976,977.85 8/29/07 : Finders Fee (1%) ._...4._—_. 8/23/07) (7,508,968.68) 1 ; is (259,539.56) (743,071.00) (7,508,968.68) Interest Paid to IGY (1/18/07 - Permanent Financing 12/31/07 Management Fee 7.5% - i (484,563.00) 12/31/08 Management Fee L5%µ Free Slip P-1 Barge (0.86 x 72' x 365 days) ' . (22,600.80t ; I I (534,806.00) — 12/31/09; 12/31/10 Management Fee 7.5% - (582,783.00) 4 :Free Slip P-1 Barge (0.86 x 72' x 365 days) Management Fee 7.5% (22,600.80) - L i 4 « . ! (502,657.00) -4- i . • Leasing Commissions (20,719.00) 11/9/11 Free Slip P-1 Barge 0.86 x 72' x 365 days) Distribution (22,600.80) (250,000.00)! (250,000.00) 12/31/11 Management Fee 7.5% 4 : Leasing Commissions ? Free Slip P-1 Barge ; (0' 96 x 72' x 365 days) , . (25,228.80) (549,733.00) (156,896.00) 12/31/12; Management Fee 7.5% :Free Shp P-1 Barge ;(0.86 x 72' x 365 days) Leasing Commissions .4 (25,228.80)! (663,711.00) (99,328 00) !Adjusted Cash In Deal 5,099,749.17 I i 719,530.61 !Difference between partners Management Fee : ; I am not sure why this deal 4,380,218.56 :Industry Standard is 5%, therefore was set up at 7.5% 7 EFTA01119011 FUEL ANALYSIS 2011 ; 2012 Fuel Revenue % of total revenue 2,607,472.00 37.38% 2,659,357.00 i 36.52% Cost 1,943,383.00 1 978 275.00 Profit on Fuel 664,089.00 681,082.00 Split between partners IGY @ 7.5% 195,560.40 199,451.78 IGY - Remainder of Profit 50/50 234,264.30 240 815.11 Total IGY Share of Fuel Profit 429,824.70 440,266.89 64.72% 64.64% Epstein Share of Fuel Profit 234,264.30 240,815.11 35.28%. 35.36% Fuel contract which was inherited from purchase of property requires 65,000 gallons per month average or 780,000 gallons per year Based on average cost of 3.25 the total volume purchased was: 2011 2012 802,299.08 (gallons 818,263.69 gallons Those figures barely meet quota or 780,000 yet Epstein, who consumes approximately 40,000 gallons per annum was offerred to purchase fuel at cost EFTA01119012 From: "Jeanne Brennan" <I Subject: Date: March 6, 2013 11:31:33 AM EST To: "'Richard Kahn"' P. 1 Attachment, 59.7 KB Tenant Write-Offs American Yacht !lather Dam Tenant Write-off Amount 12/1/2010 Peach Tree wme-off $29,845.52 12/1/2010 Peach Tree ante-off S8,88185 12/1/2010 Peach Tree write-off 365,696.13 6/30/2011 A Raves $54,367.03 6/30/2011 CM Enter. S16,29150 6/30/2011 Sun I leaven $2.73t66 7/31/2011 Off the hook 514,272.80 7/31/2011 Burrito Hay $68,975.00 9/30/2012 Dukshin Dreams $46,847.28 Total $307.917.77 Annual Summary 2010 wme.offs 5104,424.50 2011 wrae-offs S156,645.99 2012 write-offs $46,847.28 Total 5307,917.77 )(I S cra :"A23,ocpv EFTA01119013 AYH- 2013 Payroll 2013 Budget Position Ome Wages Fuel Supervisix 48,483 % Dock Staff 20,862 3 Dock Staff 17,568 9 Fuel Attendant 26,907 S' Fuel Attendant 23,054 4 Dock Minter 60,020 TOTAL MARINA 196,870 7 Security 22,509 a Security 17,568 9 Security 19,761 SD Security 9,882 1a Security 19,215 1. Security 23,566 TOTAL SECURITY 112,503 "S Geneva Manager 85,000 n Accounting Administration/Pay:09 28,824 if Upland Tenant Lease AdnilnkiiiitIon/CDC/HR 44,290 TOTAL MANAGEMENT & OFFICE ADMINISTRATION 158,114 4 Long Inn' Marina Customers/in/at Desk SuPelYGOi 25,709 17 Marina Front Desk 19,282 4 Marina Front Desk 19,282 g Maine Front Desk 19,282 TOTAL MARINA ADMINISTRATION 43,554 g, • Matte enance/La ndscapingitIonsekeePOI8 Z./ mainterunceftandsimpingiNousekee0ite LL Maintenanceilanduaping//fousekeePing ; Mall crane/ andsopIng/Housekeeinnit gy MainlenanceDandscapIngThousekneping LS MakiteaanceDandscapingplisusekeeping tG MaInteanceSupeivIsor c a Maintenance/landscapiriefilousekeeping LTi Maintenance/Landscaping/Housekeeping 29,645 24,156 29,645 29,645 20,862 11,529 30.749 9,882 20,313 TOTAL MAINTEANCE/SECURITY 206,425 TOTAL 757,46$ EFTA01119014 From: "Jeanne Brennan" Subject: Date: March 6, 2013 11:53:22 AM EST To: "'Richard Kahn"' .: => ► 1 Attachment, 64.8 KB Capital Expenditures by Project American Yacht Harbor For the Year Ending December 31, : Sum of Amount Column Labels Row• Labels 2010 2011 2012 Grand Total Hem< timers $18,747.93 $18,747.93 Weems-al $28,500.00 $28,50000 Mentors 536.871.60 $36,871.60 Miscelbneaus $8,371.12 $8,371.12 Painting $392.78 $392.78 Plumbing $6,900.00 56,900.00 Pollution control 52,000.00 $2,000.00 Roof $57,183.32 $33,672.89 $90,856.21 Security Cameras $6,725.00 $6,725.00 Striate $114.00 $114.00 Utility man $6,839.31 $6,839.31 Grand Total 8140 '427 82 832,67229 $32,312.24 $206.317.95 EFTA01119015 1GY-AYH ST. THOMAS HOLDINGS, LIC (A Limited Liability Company) Notes to Financial Statements December 31, 2008 and 2007 (4) Related-Party Transactions (a) The Company cams marina revenue from six slips leased by a passive member on an annual basis. The Company also leases two office spaces totaling approximately 3,200 square feet to the passive member. The following is a summary of related-party transactions for the years ended December 31, 2008 and 2007: 2008 2007 Included in revenues: Marina facilities revenue earned from passive member S 190,742 89,756 Upland facilities revenue earned from passive member 172,393 89,444 Included in costs and expenses: Management fees incurred to IGY S 534,806 St 484,563 V Interest expense on loan from Parent — 743,0711,./ (b) Due to Parent of $608,177 at December 31, 2008 consists primarily of accrued management fees of $576,900 and professional fees paid by the Parent on the Company's behalf. Due to Parent of SI 16,170 at December 31, 2007 consists of payables for operation advances, management fee, and accrued interest, net of a receivable for prepaid long-term slip fees transferred as deferred revenue from Parent. Included in accounts receivable are 395,662 and $19,675 due from the passive member as of December 31, 2008 and 2007, respectively. (c) The Company borrowed $25,271,765 from its Parent to purchase the assets of American Yacht e_____>Harbor in 2007. Interest incurred on the loan accrued at LIBOR plus 2.5% and totaled $743,071 in 007. Accrued interest on the loan of S330,946 at December 31, 2007 is presented net in due from Parent in the balance sheet. The intercompany loan was partially converted to equity nn May 29, 2007 with the remainder being convened to a note payable to bank on August 23, 2007. (5) Acquisition On January 18, 2007, the Company acquired substantially all of the assets of American Yacht Harbor, consisting of tangible and intangible assets such as land, buildings, marina docks and related equipment, rights, leases, and slip agreements. The results of American Yacht Harbor's operations have been included in the financial statements since that date. The aggregate purchase price was S25,238,326, consisting of $25,006,665 in cash paid and acquisition costs of $231,661. 11 (Continued) EFTA01119016 (I) IGY-AYH St THOMAS HOLDINGS, LW (A Limited Liability Company) Notes to Financial Statements December 31, 2008 and 2007 Description of Business and Organization IGY-AYH St. Thomas Holdings, LLC (AYH or the Company) was formed as a wholly owned subsidiary of Island Global Yachting Ltd. (IGY or the Parent) on December 5, 2006. The Company had no activities until its January 18, 2007 acquisition of American Yacht Harbor (note 5). The Company is primarily engaged in the business of owning and operating a marina and retail facility located in St. Thomas, United States Virgin Islands (USVI). It comprises a 128-slip marina and seven buildings with 47,344 square feet of rentable retail space. AYH is managed by an affiliate. The marina is located on 3.2 acres of submerged land leased from the St. Thomas Department of Planning and Natural Resources (DPNR). The retail complex is located on 2.12 acres of adjacent waterfront land. On May 29, 2007, a 50% passive member interest in the Company was sold to one of the Parent's investors. The Company is controlled by the Parent and the members' liability is limited to their respective capital investments in the Company. (2) Summary of Significant Accounting Policies fe) Cash At various times throughout the year, the Company maintains cash balances in excess of federally insured limits. The Company's management believes it mitigates this risk by banking with major financial institutions. As of December 31, 2008 and 2007, $327,940 and $242,037, respectively, of the Company's cash is restricted under the terms of its loan agreement (note 8). (b) Accounts Receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. Amounts collected on accounts receivable are included in net cash flows from operating activities in the statement of cash flows. The allowance for doubtful accounts is management's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company determines the allowance based on specific account analysis. Past-due balances over 90 days and over specified amounts are reviewed individually for collectibility. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers. At December 31, 2008 and 2007, the allowance for doubtful accounts is $275,586 and $48,233, respectively. As of December 31, 2008 and 2007, $473,443 and $423,022, respectively, of the Company's accounts receivable served as collateral for the loan outstanding. (c) Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of prepaid rent, insurance, and security deposits. (d) Inventories Inventories arc stated at the lower of cost or market. Cost is determined using the first-in, first-out method (FIFO) for all inventories. 6 (Continued) EFTA01119017