-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, TGIKIIRXR/9ezZ5OL7A+YaFUjvIaoa1/NGAZYE+OZUT79fi8KgPAOyRlFvsNcJm/ hQjZ0SnKwA+oAyFqwXXFQg== 0000889812-95-000420.txt : 19950814 0000889812-95-000420.hdr.sgml : 19950814 ACCESSION NUMBER: 0000889812-95-000420 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PREFERRED PROPERTIES FUND 80 CENTRAL INDEX KEY: 0000312903 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 942599964 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09508 FILM NUMBER: 95562026 BUSINESS ADDRESS: STREET 1: 5665 NORTHSIDE DR NW STREET 2: STE 370 CITY: ATLANTA STATE: GA ZIP: 30328 BUSINESS PHONE: 4049169090 MAIL ADDRESS: STREET 1: POST & HEYMANN STREET 2: 5665 NORTHSIDE DR NW CITY: ATLANTA STATE: GA ZIP: 30328 FORMER COMPANY: FORMER CONFORMED NAME: MONTGOMERY PROPERTIES FUND 80 DATE OF NAME CHANGE: 19791024 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 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 Registrant as specified in its charter) California 94-2599964 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 5665 Northside Drive N.W., Ste. 370, Atlanta, Georgia 30328 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (404) 916-9090 N/A Former name, former address and fiscal year, if changed since last report. Indicate by check mark whether 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 _____ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes _____ No ______ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date __________________. 1 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. Consolidated Balance Sheets June 30, December 31, 1995 1994 (Unaudited) (Audited) Assets Cash and cash equivalents $ 774,000 $ 2,498,000 Other assets 56,000 140,000 Real Estate: Real estate 5,345,000 4,620,000 Accumulated depreciation (1,691,000) (1,635,000) ----------- ----------- Real estate, net 3,654,000 2,985,000 Deferred costs, net 20,000 25,000 ----------- ----------- Total assets $ 4,504,000 $ 5,648,000 =========== =========== Liabilities and Partners' Deficit Notes payable $ 5,444,000 $ 5,476,000 Accrued expenses and other liabilities 133,000 203,000 Promissory notes: Principal 288,000 514,000 Deferred interest payable 209,000 373,000 ----------- ----------- Total liabilities 6,074,000 6,566,000 ----------- ----------- Minority interest in joint venture -- (706,000) ----------- ----------- Partners' Deficit: General partner's (deficit) (877,000) (874,000) Limited partners' equity (deficit) (19,997 units outstanding at June 30, 1995 and December 31, 1994) (693,000) 662,000 ----------- ----------- Total partners' deficit (1,570,000) (212,000) ----------- ----------- Total liabilities and partners' deficit $ 4,504,000 $ 5,648,000 =========== =========== See notes to consolidated financial statements. 2 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 Consolidated Statements of Operations (Unaudited) For the Six Months Ended June 30, 1995 June 30, 1994 Revenues: Room revenue $ -- $ 1,442,000 Food and beverage revenue -- 740,000 Other operating revenue -- 105,000 Commercial operations 439,000 2,001,000 Interest income 53,000 58,000 Disposition of rental properties -- 13,899,000 ---------- ----------- Total revenues 492,000 18,245,000 ---------- ----------- Expenses: Room expenses -- 270,000 Food and beverage expenses -- 596,000 Other operating expenses -- 831,000 Commercial expense 80,000 780,000 Interest 273,000 1,557,000 Depreciation 56,000 558,000 General and administrative 140,000 329,000 Provision for impairment of value -- 1,444,000 ---------- ----------- Total expenses 549,000 6,365,000 ----------- ----------- (Loss) income before minority interest in joint ventures' operations and extraordinary item (57,000) 11,880,000 Minority interest in joint ventures' operations -- 190,000 ----------- ----------- (Loss) income before extraordinary item (57,000) 12,070,000 Extraordinary item: Gain on extinguishment of debt -- 5,163,000 ----------- ----------- Net (loss) income $ (57,000) $17,233,000 =========== =========== Net (loss) income per limited partnership unit: (Loss) income before extraordinary item $ (3) $ 574 Extraordinary item -- 245 ----------- ----------- Net (loss) income $ (3) $ 819 =========== =========== See notes to consolidated financial statements. 3 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 Consolidated Statements of Operations (Unaudited) For the Three Months Ended June 30, 1995 June 30, 1994 Revenues: Commercial operations $ 240,000 $ 849,000 Interest income 14,000 36,000 ----------- ----------- Total revenues 254,000 885,000 ----------- ----------- Expenses: Other operating expenses -- 63,000 Commercial expense 59,000 263,000 Interest 139,000 528,000 Depreciation 28,000 172,000 General and administrative 72,000 200,000 ----------- ----------- Total expenses 298,000 1,226,000 ----------- ----------- Loss before minority interest in joint ventures' operations (44,000) (341,000) Minority interest in joint ventures' operations -- 163,000 ----------- ----------- Net loss $ (44,000) $ (178,000) =========== =========== Net loss per limited partnership unit $ (2) $ (8) =========== =========== See notes to consolidated financial statements. 4 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 1995 June 30, 1994 Operating Activities: Net (loss) income $ (57,000) $ 17,233,000 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Disposition of rental properties -- (13,899,000) Extraordinary gain on extinguishment of debt -- (5,163,000) Depreciation and amortization 61,000 1,014,000 Minority interest in joint ventures' operations -- (190,000) Interest payable to joint venture partner added to principal -- 3,000 Deferred interest on nonrecourse promissory notes -- 368,000 Provision for impairment of value -- 1,444,000 Deferred costs paid -- (27,000) Interest payable to affiliates of the general partner -- (3,001,000) Changes in operating assets and liabilities: Other assets 84,000 456,000 Accrued expenses and other liabilities (70,000) (2,384,000) ---------- ----------- Net cash provided by (used in) operating activities 18,000 (4,146,000) ---------- ----------- Investing Activities: Proceeds from sale of properties -- 28,393,000 Restricted cash -- 238,000 ---------- ----------- Cash provided by investing activities -- 28,631,000 ---------- ----------- Financing Activities: Payments on notes payable to affiliates of the general partner -- (6,373,000) Satisfaction of notes payable -- (12,566,000) Notes payable principal payments (32,000) (43,000) Joint venture partner distributions (9,000) (319,000) Retirement of promissory notes (390,000) (3,553,000) Purchase of minority interest in joint venture (10,000) (860,000) Cash distributions to limited partners (1,301,000) -- ---------- ----------- Cash (used in) financing activities (1,742,000) (23,714,000) ---------- ----------- (Decrease) Increase in Cash and Cash Equivalents (1,724,000) 771,000 Cash and Cash Equivalents at Beginning of Period 2,498,000 2,378,000 ------------ ------------ Cash and Cash Equivalents at End of Period $ 774,000 $ 3,149,000 ============ ============ Supplemental Disclosure of Cash Flow Information: Interest paid in cash during the period $ 437,000 $ 4,636,000 ============ ============ Supplemental Disclosure of Non-Cash Financing and Investing Activities: Mortgage assumed on property sale $ -- $ 1,231,000 ============ ============
See notes to consolidated financial statements. 5 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. General The accompanying consolidated financial statements, footnotes and discussions should be read in conjunction with the consolidated financial statements, related footnotes and discussions contained in the Partnership's Annual Report for the year ended December 31, 1994. Certain accounts have been reclassified in order to conform to the current period. The financial information contained herein is unaudited. In the opinion of management, however, all adjustments necessary for a fair presentation of such financial information have been included. All adjustments are of a normal recurring nature, except for the transaction discussed in Note 4. The results of operations for the six and three months ended June 30, 1995 and 1994 are not necessarily indicative of the results to be expected for the full year. 2. Transactions with Related Parties An affiliate of MGP received reimbursement of administrative expenses amounting to $80,000 and $123,000 during the six months ended June 30, 1995 and 1994, respectively. These reimbursements are included in general and administrative expenses. 3. Promissory Notes Payable During the six months ended June 30, 1995 and 1994, the Partnership paid $390,000 and $3,553,000, respectively, including accrued and deferred interest, for the redemption of promissory notes. 4. Purchase of Minority Interest (a) On January 3, 1995, a newly formed, wholly-owned subsidiary of the Partnership acquired the 40% minority interest in the joint venture which owned Creekside Business Park for $10,000. The carrying value of the property was increased by $725,000. The basis increase in the real estate is comprised of the receivable from the joint venture partner of $706,000 (as of December 31, 1994), $9,000 of distributions to the joint venture partner and the $10,000 cash purchase price. (b) In January 1994, the Partnership acquired the 40% minority interest in the joint venture which owned the Plaza San Antonio for $860,000 (including accrued interest). The book value of the minority interest at the time was $542,000. The carrying value of the property, prior to the sale of Plaza San Antonio, was increased by $318,000 as a result of the purchase of the minority interest. 5. Distributions On February 15, 1995, the Partnership distributed $1,301,000 ($65 per unit) to the limited partners from the proceeds of the sale of Winding Creek Village Apartments in December 1994. 6 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. Disposition of Rental Properties (a) On February 23, 1994, Valley View Apartments was sold for $6,500,000. Net proceeds, after repayment of the existing loan, deferred interest, closing costs and adjustments, received by the Partnership were approximately $1,069,000. The sale resulted in a gain of $2,216,000. (b) On March 18, 1994, Plaza San Antonio was sold for $22,300,000. Net proceeds, after repayment of existing loans, notes payable and accrued interest to affiliates of the general partner, closing costs and adjustments, received by the Partnership were approximately $13,258,000. The sale resulted in a gain of $11,938,000. (c) On March 18, 1994, Corporate Center Business Park was sold for $1,500,000, subject to a $1,231,000 mortgage. Net proceeds, after repayment of the existing loan, notes payable and interest to affiliates of the general partner, closing costs and adjustments, received by the Partnership were approximately $130,000. The sale resulted in a loss of $255,000. 7. Extraordinary Gain on Extinguishment of Debt and Provision for Impairment of Value (a) In February 1994, the mortgage securing Winding Creek Village Apartments was modified. The resulting reduction in principal of $818,000 has been recorded as an extraordinary gain on extinguishment of debt. Simultaneous with the mortgage modification, the Partnership recorded a provision for impairment of value of $1,444,000 on Winding Creek Village Apartments to reflect a write down of the property to the level of its related mortgage indebtedness. (b) In 1993, Wheatley Ventures, Inc. ("Wheatley"), an affiliate of MGP, commenced a tender offer to purchase up to 75 percent of the Promissory Notes at a cash price of $75 per $333.86 outstanding principal balance of the Promissory Notes. Pursuant to the tender offer, Wheatley acquired approximately 51% of the outstanding Promissory Notes. The Partnership paid $1,189,000 to Wheatley to satisfy the Promissory Notes it had previously acquired. The resulting discount of approximately $4,345,000 on retiring the Promissory Notes has been recorded as an extraordinary gain on extinguishment of debt. 8. Commitment and Contingency A tenant's lease, which had been scheduled to expire on January 31, 1996, was extended for approximately five years, with lease payments beginning at approximately $265,000 per annum. As part of the agreement, the tenant was granted an option to purchase Creekside Business Park Building #1 for $2,777,000. The option expires on April 1, 1996. 7 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This item should be read in conjunction with the Consolidated Financial Statements and other Items contained elsewhere in this Report. Liquidity and Capital Resources Registrant's remaining real estate property, Creekside Business Park, is leased to two tenants. One tenant's lease, which had been scheduled to expire on January 31, 1996, was extended, for approximately five years, with lease payments beginning at approximately $265,000 per annum. As part of the agreement, the tenant was granted an option to purchase Creekside Business Park Building #1 for $2,777,000. The option expires on April 1, 1996. The second tenant's lease expires on September 30, 1997. The property is located in Milpitas, California. Registrant receives rental income from its property and is responsible for operating expenses, administrative expenses, capital improvements and debt service payments. As of August 1, 1995, nine of the ten properties originally purchased by Registrant were sold or otherwise disposed. Registrant's remaining property generated positive cash flow from operations during the six months ended June 30, 1995. Registrant uses working capital reserves provided from any undistributed cash flow from operations, refinancing and sales of properties as its primary source of liquidity. There has been no excess cash from operations available for distribution to the limited partners during 1995. Registrant did, however, distribute $1,301,000 ($65 per unit) to limited partners in February 1995 from proceeds received from the December 16, 1994 sale of Winding Creek Village Apartments. It is not currently anticipated that Registrant will make distributions from operations in the near future. Working capital reserves will be used to satisfy Registrant's remaining Promissory Note obligations and other expenses. The level of liquidity based upon cash and cash equivalents experienced a $1,724,000 decrease at June 30, 1995, as compared to December 31, 1994. Registrant's $18,000 of cash provided by operating activities was more than offset by $1,742,000 of cash used in financing activities. Registrant's cash used in financing activities consisted of $32,000 of note payable principal payments, $390,000 of cash used to retire Promissory Notes, $10,000 of cash used for the purchase of a minority interest in a joint venture, $9,000 of distributions to a joint venture partner and $1,301,000 of cash distributions to the limited partners. All other increases (decreases) in certain assets and liabilities are the result of the timing of receipt and payment of various operating activities. On January 3, 1995, a newly formed, wholly-owned subsidiary of the Partnership acquired the 40% minority interest in the joint venture which owned Creekside Business Park for $10,000. The carrying value of the property was increased by $725,000. The basis increase in the real estate is comprised of the receivable from the joint venture partner of $706,000 (as of December 31, 1994), $9,000 of distributions to the joint venture partner and the $10,000 cash purchase price. Working capital reserves are invested in a money market account or in repurchase agreements secured by United States Treasury obligations. The Managing General Partner believes that, if market conditions remain relatively stable, cash flow from operations, when combined with working capital reserves, will be sufficient to fund required capital improvements and regular debt service payments until September 30, 1997. The mortgage encumbering Registrant's Creekside property matures in 1998, however, a tenant's lease, representing 58% of leasable space, expires prior to the mortgage due date. Registrant 8 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources (Continued) does not expect to be able to continue its debt service payments unless this lease is either extended or replaced. In that case, if the loan is not refinanced or modified, or the property sold, Registrant could lose this property through foreclosure. At this time it appears that the investment objective of capital growth will not be attained and that limited partners will not receive a return of a substantial portion of their invested capital. The extent to which invested capital is returned to limited partners is dependent upon the performance of Registrant's remaining property and the market in which the property is located and on the sales price of the remaining property. The ability to hold and operate this property is dependent upon the Registrant's ability to obtain refinancing or debt modification as required. It is anticipated that the Promissory Note holders will not receive any payment of residual interest income. Real Estate Market The California real estate market has suffered from the effects of the real estate recession including, but not limited to, a downward trend in market values of existing properties. In addition, the bailout of the savings and loan associations and sales of foreclosed properties by auction reduced market values and caused a further restriction on the ability to obtain credit. As a result, Registrant's ability to refinance or sell its remaining property may be restricted. These factors caused a decline in market property values and serve to reduce market rental rates and/or sales prices. Despite the weak rental market, management anticipates that increases in revenue will exceed increases in expenses during 1995. Furthermore, management believes that the emergence of new institutional purchasers, including real estate investment trusts and insurance companies should create a more favorable market value for Registrant's remaining property in the future. Results of Operations Six Months Ended June 30, 1995 vs. June 30, 1994 Operating results (before minority interest in joint ventures' operations and extraordinary gain on extinguishment of debt) declined by $11,937,000 for the six months ended June 30, 1995, as compared to 1994, due to a decrease in revenues of $17,753,000 which was only partially offset by a decrease in expenses of $5,816,000. Operating results declined due to the $13,899,000 gain on sale of properties. With respect to the remaining property, commercial operation revenues decreased by $4,000 for the six months ended June 30, 1995, as compared to 1994. Commercial operations remained relatively constant. Interest income increased by $4,000 for the six months ended June 30, 1995, as compared to 1994, due to a slight increase in average working capital reserves available for investment and the effect of higher interest rates. 9 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Six Months Ended June 30, 1995 vs. June 30, 1994 (Continued) The decrease in expenses, with respect to the remaining property, for the six months ended June 30, 1995, as compared to 1994, is due to decreases in interest expense (on the note payable) of $5,000 and commercial property expense of $25,000. Interest expense on the note payable declined due to mortgage principal amortization. Commercial property expense declined due to lower repair and maintenance expense at Creekside Business Park. Depreciation expense remained constant. In addition, interest expense on Promissory Notes declined by $425,000 due to the redemption of Promissory Notes and general and administrative expenses declined by $189,000 due to a reduction in asset management costs. Three Months Ended June 30, 1995 vs. June 30, 1994 Operating results (before minority interest in joint ventures' operations) improved by $297,000 for the three months ended June 30, 1995, as compared to 1994, due to a decrease in revenue of $631,000 which was more than offset by a decrease in expenses of $928,000. Operating results improved due to the disposition of Registrant's Winding Creek Village Apartments in December 1994 and the redemption of Promissory Notes in 1994. With respect to the remaining property, commercial operating revenues increased by $15,000 for the three months ended June 30, 1995, as compared to 1994, due to an adjustment of estimated billbacks at Creekside Business park in the prior year comparative period. Interest income decreased by $20,000 for the three months ended June 30, 1995, as compared to 1994, due to a decrease in average working capital reserves available for investment which was slightly offset by an increase in interest rates. The decrease in expenses, with respect to the remaining property, for the three months ended June 30, 1995, as compared to 1994, is due to a decrease in commercial property expense of $21,000. Commercial property expense declined due to lower repair and maintenance expenses at Creekside Business Park. Depreciation expense and interest expense on the note payable remained constant. In addition, interest expense on Promissory Notes decreased by $148,000 due to the redemption of Promissory Notes and general and administrative expenses declined by $128,000 due to a reduction in asset management costs. 10 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Properties A description of the properties in which Registrant has an ownership interest during the period covered by this Report, together with occupancy and room rate data, follows: PREFERRED PROPERTIES FUND 80 OCCUPANCY AND ROOM RATE SUMMARY Average Occupancy Rate (%) ----------------------------- Six Months Three Months Date Ended Ended of June 30, June 30, Name and Location Size Purchase 1995 1994 1995 1994 - ----------------- ---- -------- ---- ---- ---- ---- Commercial Buildings: Creekside Business Park (1) 79,300 10/80 100 100 100 100 Buildings #1 and #2 sq. ft. Milpitas, California (1) On January 3, 1995, Registrant acquired the 40% minority interest in the joint venture which owns the property. 11 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. No reports on Form 8-K were required to be filed during the period. 12 of 13 PREFERRED PROPERTIES FUND 80 - FORM 10-Q - JUNE 30, 1995 SIGNATURE 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, the managing general partner of the General Partner By: NPI Equity Investments II, Inc., managing partner /S/ARTHUR N. QUELER Secretary/Treasurer and Director (Principal Financial Officer) 13 of 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 The schedule contains summary financial information extracted from Preferred Properties Fund 80 and is qualified in its entirety by reference to such financial statements. 1 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 774,000 0 0 0 0 0 5,345,000 (1,691,000) 4,504,000 0 5,941,000 0 0 0 (1,570,000) 4,504,000 0 439,000 0 136,000 0 0 273,000 (57,000) 0 (57,000) 0 0 0 (57,000) (3) (3) Bonds includes deferred interest payable of $209,000.
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