-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FQFhKawmjb/svmQpH3s8nDeCYgIPl5dQWgsmadeIqq/398fe6KtpX/OtFgq64nnF jelPBj96iJQYsvZjNz8adg== 0000719184-97-000004.txt : 19970520 0000719184-97-000004.hdr.sgml : 19970520 ACCESSION NUMBER: 0000719184-97-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREFERRED PROPERTIES FUND 80 CENTRAL INDEX KEY: 0000312903 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 942599964 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-09508 FILM NUMBER: 97607140 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P O BOX CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 4049169090 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: P O BOX CITY: GREENVILLE STATE: SC ZIP: 29602 FORMER COMPANY: FORMER CONFORMED NAME: MONTGOMERY PROPERTIES FUND 80 DATE OF NAME CHANGE: 19791024 10QSB 1 FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT (As last amended by 34-32231, eff. 6/3/93.) U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from.........to......... Commission file number 0-9508 PREFERRED PROPERTIES FUND 80 (Exact name of small business issuer as specified in its charter) California 94-2599964 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) (864) 239-1000 Issuer's telephone number Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports ), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) PREFERRED PROPERTIES FUND 80 CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) March 31, 1997
Assets Cash and cash equivalents $ 167 Receivables and deposits 138 Other assets 70 Investment property: Land $ 1,059 Buildings and related personal property 4,286 5,345 Less accumulated depreciation (1,897) 3,448 $ 3,823 Liabilities and Partners' Deficit Liabilities Accounts payable $ 1 Tenants' security deposit 28 Other liabilities 113 Notes payable 5,336 Promissory notes: Principal 231 Deferred interest payable 168 Partners' Deficit: General partner's $ (901) Limited partners' (19,997 units issued and outstanding) (1,153) (2,054) $ 3,823 See Accompanying Notes to Consolidated Financial Statements
b) PREFERRED PROPERTIES FUND 80 CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 1997 1996 Revenues: Rental income $ 180 $ 189 Other income 25 29 Total revenues 205 218 Expenses: Operating 39 29 Interest 135 137 Depreciation 40 28 General and administrative 28 51 Total expenses 242 245 Net loss $ (37) $ (27) Net loss allocated to general partner (5%) $ (2) $ (1) Net loss allocated to limited partners (95%) (35) (26) $ (37) $ (27) Net loss per limited partnership unit $ (1.76) $ (1.30) See Accompanying Notes to Consolidated Financial Statements c) PREFERRED PROPERTIES FUND 80 CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner's Partners' Total Original capital contributions 19,997 $ 100 $ 19,997 $ 20,097 Partners' deficit at December 31, 1996 19,997 $ (899) $ (1,118) $ (2,017) Net loss for the three months ended March 31, 1997 -- (2) (35) (37) Partners' deficit at March 31, 1997 19,997 $ (901) $ (1,153) $ (2,054) See Accompanying Notes to Consolidated Financial Statements
Three Months Ended March 31, 1997 1996 Cash flows from operating activities: Net loss $ (37) $ (27) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation 40 28 Amortization of lease commissions and loan costs 4 4 Change in accounts: Receivables and deposits (16) (44) Other assets (18) (2) Accounts payable (60) -- Tenant's security deposits -- (28) Other liabilities 52 80 Net cash (used in) provided by operating activities (35) 11 Cash flows from investing activities: Net cash provided by investing activities -- -- Cash flows from financing activities: Notes payable principal payments (16) (15) Net cash used in financing activities (16) (15) Net decrease in cash and cash equivalents (51) (4) Cash and cash equivalents at beginning of period 218 608 Cash and cash equivalents at end of period $ 167 $ 604 Supplemental disclosure of cash flow information: Cash paid for interest $ 135 $ 137 See Accompanying Notes to Consolidated Financial Statements
e) PREFERRED PROPERTIES FUND 80 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited financial statements of Preferred Properties Fund 80 (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of NPI Equity Investments II, Inc. ("NPI Equity" or the "Managing General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the year ended December 31, 1996. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The general partner of the Partnership is Montgomery Realty Company - 80 ("MRC- 80"), a limited partnership. The general partner of MRC-80 is Fox Realty Investors ("FRI"). Pursuant to a series of transactions which closed during the first half of 1996, affiliates of Insignia Financial Group, Inc. ("Insignia") acquired control of NPI Equity, the managing general partner of FRI, and National Property Investors, Inc. ("NPI"). In connection with these transactions, affiliates of Insignia appointed new officers and directors of NPI Equity. The following transactions with affiliates of Insignia, NPI and affiliates of NPI were charged to expense during the three month periods ended March 31, 1997 and 1996 (dollar amounts in thousands): For the Three Months Ended March 31, 1997 1996 Reimbursement for services of affiliates (included in general and administrative expenses) $ 15 $ 35 For the period from January 19, 1996, to March 31, 1997, the Partnership insured its property under a master policy through an agency and insurer affiliated with the Managing General Partner. An affiliate of the Managing General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the Managing General Partner who received payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations is not significant. NOTE C - LEGAL PROCEEDINGS The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In August 1995, a former holder of the Partnership's Promissory Notes who tendered its Promissory Notes to Wheatley Ventures, Inc. ("Wheatley") pursuant to Wheatley's tender offer (see Part II, "Item 1. Legal Proceedings"), brought a purported class action lawsuit against, among others, the managing general partner of the Partnership. Pursuant to the terms of the partnership agreement, the Managing General Partner is entitled to seek indemnification from the Partnership for any liability, including its costs in defending this action. ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership has one investment property, Creekside Business Park, located in Milpitas, California. The property has been fully occupied throughout 1997 and 1996. The Partnership's net loss for the three months ended March 31, 1997, was approximately $37,000 versus a net loss of approximately $27,000 for the same period of 1996. The increase in the net loss for the three month period is primarily attributable to a decrease in rental income and increases in operating and depreciation expenses. These changes are partially offset by a decrease in general and administrative expenses. Rental income decreased as a result of a tenant renewing its lease at Creekside Business Park in February 1996 at a lower rental rate. This reduction was necessary in order to bring this tenant's rent in line with the current market rental rates. Operating expenses increased due to an increase in administrative costs such as printing and mailing charges. Depreciation expense increased due to the capitalization and depreciation of the buyout of a joint venture interest from an unrelated third party. General and administrative expenses decreased due to an decrease in General Partner reimbursements for services of affiliates. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expense. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. At March 31, 1997, the Partnership had unrestricted cash of $167,000 as compared to $604,000 at March 31, 1996. Net cash used in operating activities increased primarily as a result of the decrease in accounts payable and other liabilities due to changes in timing of payments. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The first mortgage indebtedness of $4,036,000 matured on April 1, 1997, at which time a balloon payment was due. On March 15, 1997, the Partnership entered into a forbearance agreement with the lender which extends the maturity date to July 1, 1997. The Managing General Partner is currently marketing the property. If the Partnership's first mortgage is not refinanced or modified, or the property not sold, the Partnership could lose this property through foreclosure. Also included in the Partnership's notes payable is a $1,300,000 ground lease obligation. The ground lease is accounted for as a loan and calls for payments equal to 12 percent interest on the principal until April 1, 1998, when the lease terminates. The ground lease provides an option to purchase the land at a purchase price of $1,300,000. Future cash distributions will depend on the level of net cash generated from a property sale. No cash distributions were made during the three month periods ended March 31, 1997 and 1996. In addition, the Partnership's cash has been adversely affected by the lawsuit brought by former promissory note holders of the Partnership against, among others, the Partnership's general partner, MRC-80 (see discussion of Kaufman et al. v. Northern Trust Bank of California, N.A. et al. contained in "Part II - Other Information, Item 1. Legal Proceedings"). PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Dorothy M. Kaufman and Deanne R. Erickson, Trustees of the Kaufman Family 1981 Trust, dated October 21, 1981, on behalf of themselves and all others similarly situated v. Northern Trust Bank of California, N.A.; Montgomery Realty Company- 80, a California limited partnership; Fox Realty Investors, a California general partner, et. al., Superior Court of California, County of Santa Clara (Case No. CV 51777). The plaintiff in this action is a former holder of the Partnership's 10 percent non-recourse Promissory Notes due June 30, 1994, (the "Notes") who tendered its Notes to Wheatley Ventures Inc. ("Wheatley") pursuant to Wheatley's tender offer for the Notes in August 1993. The plaintiff purports to represent itself and all other tendering noteholders. The complaint was filed in August 1995 and alleges, among other things, that MRC-80 and FRI breached their fiduciary duty to the tendering noteholders and interfered with their prospective economic advantage if they continued to hold the Notes. In February and March 1997, the Partnership and NPI Equity were named as cross- defendants in this action on cross-complaints filed by several defendants. The cross-complaints assert claims for expenses, implied indemnity and declamatory relief. The Partnership was only recently served with the complaints and is evaluating its position. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended March 31, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto, duly authorized. PREFERRED PROPERTIES FUND 80 By: MONTGOMERY REALTY COMPANY - 80, Its General Partner By: FOX REALTY INVESTORS, Managing General Partner of the General Partner By: NPI EQUITY INVESTMENTS II, INC., Its Managing General Partner By: /s/William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director By: /s/Ronald Uretta Ronald Uretta Vice President and Treasurer Date: May 15, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Preferred Properties Fund 80 1997 First Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000312903 PREFERRED PROPERTIES FUND 80 1,000 3-MOS DEC-31-1997 MAR-31-1997 167 0 0 0 0 0 5,345 (1,897) 3,823 0 5,336 0 0 0 (2,054) 3,823 0 205 0 0 242 0 135 (37) 0 (37) 0 0 0 (37) (1.76) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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