-----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, CaAutJyee+qj6NOh8w+YU6fjljZPgUTVAy+IeKlaEktZrbTgeGrmpFa3MsYOkaeW 2BDo+8+7nbf7VcVpJYuL7g== 0000726995-98-000005.txt : 19980518 0000726995-98-000005.hdr.sgml : 19980518 ACCESSION NUMBER: 0000726995-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CLUSTER HOUSING PROPERTIES CENTRAL INDEX KEY: 0000726995 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 042817478 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13556 FILM NUMBER: 98621911 BUSINESS ADDRESS: STREET 1: 57 RIVER ST CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 BUSINESS PHONE: 6172370544 MAIL ADDRESS: STREET 1: 57 RIVER STREET CITY: WELLESLEY HILLS STATE: MA ZIP: 02181 FORMER COMPANY: FORMER CONFORMED NAME: BERRY & BOYLE CLUSTER HOUSING PROPERTIES DATE OF NAME CHANGE: 19920703 10-Q 1 10-Q FOR THE QUARTER ENDED MARCH 31, 1998 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [ 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 No. 0-13556 Cluster Housing Properties (A California Limited Partnership) (formerly Berry and Boyle Cluster Housing Properties) (Exact name of registrant as specified in its charter) California 04-2817478 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5110 Langdale Way, Colorado Springs CO 80906 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (719) 527-0544 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interests Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 and 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 CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS --------------- ASSETS ............................................. March 31, 1998 December 31, (Unaudited) 1997 Assets held for sale/Property, at cost (Note 8) Land ............................................................................. $ 1,242,061 $ 1,242,061 Buildings and improvements ....................................................... 6,063,055 6,063,055 Equipment, furnishings and fixtures .............................................. 643,757 642,239 ----------- ----------- 7,948,873 7,947,355 Less accumulated depreciation .................................................... (2,152,207) (2,152,207) ----------- ----------- 5,796,666 5,795,148 Cash and cash equivalents .......................................................... 395,748 421,580 Real estate tax escrows ............................................................ 36,430 24,037 Deposits and prepaid expenses ...................................................... 100,709 133,285 Accounts receivable ................................................................ 1,400 Deferred expenses, net of accumulated amortization of $208,788 and $205,147 ............................................ 4,247 7,888 ----------- ----------- Total assets .............................................................. $ 6,333,800 $ 6,383,338 =========== =========== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) Mortgage notes payable ............................................................. $ 3,044,542 $ 3,058,800 Accounts payable ................................................................... 37,188 83,637 Accrued expenses ................................................................... 76,989 131,588 Due to affiliates (Note 7) ......................................................... 49,541 16,076 Rents received in advance .......................................................... 1,984 Tenant security deposits ........................................................... 36,450 33,555 ----------- ----------- Total liabilities ......................................................... 3,244,710 3,325,640 General Partners' deficit .......................................................... (126,277) (127,847) Limited Partners' equity ........................................................... 3,215,368 3,185,545 ----------- ----------- Total liabilities and partners' equity ..................................... $ 6,333,800 $ 6,383,338 =========== =========== CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ------------- Three Months Ended March 31, 1998 1997 -------- -------- Revenue: Rental income ............................................................................ $261,865 $657,818 Interest income .......................................................................... 4,977 10,897 -------- -------- Total Revenue ............................................................................... 266,842 $668,715 Expenses: Operations ............................................................................... 101,603 280,058 Interest expense ......................................................................... 69,671 195,002 Depreciation and amortization ............................................................ 3,640 107,780 General and administrative ............................................................... 60,535 42,234 -------- -------- Total Expenses .............................................................................. 235,449 625,074 -------- -------- Net income (loss) ........................................................................... $ 31,393 $ 43,641 ======== ======== Net income (loss) allocated to: General Partners ............ $1,570 $2,182 Basic and diluted per unit Net income (loss) allocated to Investor Limited Partner interest: 32,421 units issued .............. $ 0.92$ 1.28 CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) ------------- Investor Total General Limited Partners' Partners Partners Equity Balance at December 31, 1996 .................................................. ($ 192,294) $ 6,896,994 $ 6,704,700 Cash distributions ............................................................ (15,358) (5,641,254) (5,656,612) Net loss ...................................................................... 79,805 1,929,805 2,009,610 ----------- ----------- ----------- Balance at December 31, 1997 .................................................. (127,847) 3,185,545 3,057,698 Cash distributions ............................................................ -- -- -- Net income .................................................................... 1,570 29,823 31,393 ----------- ----------- ----------- Balance at March 31, 1998 ..................................................... ($ 126,277) $ 3,215,368 $ 3,089,090 =========== =========== =========== CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, Cash flows from operating activities: ........................................................... 1998 1997 ----------- ----------- Interest received ............................................................................. $ 4,977 $ 10,897 Cash received from rental income .............................................................. 262,776 653,423 General and administrative expenses ........................................................... (48,188) (104,433) Operations expense ............................................................................ (192,572) (253,449) Interest paid ................................................................................. (69,671) (195,002) ----------- ----------- Net cash provided by operating activities ....................................................... (42,678) 111,436 Cash flows from investing activities: Capital improvements .......................................................................... (2,261) (72,054) Deposit with escrow agent ..................................................................... 33,367 -- ----------- ----------- Net cash provided by investing activities ....................................................... 31,107 (72,054) Cash flows from financing activities: Distributions to partners ..................................................................... -- (97,263) Deposits ...................................................................................... -- (9,725) Principal payments on mortgage notes payable .................................................. (14,260) (35,805) ----------- ----------- Net cash used by financing activities ........................................................... (14,260) (142,793) ----------- ----------- Net increase (decrease) in cash and cash equivalents ............................................ (25,832) (103,411) Cash and cash equivalents at beginning of the period ........................................... 421,580 1,065,855 ----------- ----------- Cash and cash equivalents at end of the period .................................................. $ 395,748 $ 962,444 =========== =========== CLUSTER HOUSING PROPERTIES (a California Limited Partnership) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ------------- Reconciliation of net income (loss) to net cash provided by operating activities: Three Months Ended March 31, 1998 1997 --------- --------- Net income (loss) ................................................................................. $ 31,393 $ 43,641 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization ................................................................... 3,640 107,780 Change in assets and liabilities net of effects of investing and financing activities: Increase in real estate tax escrows ........................................................... (12,393) (28,457) Increase prepaid expenses ..................................................................... (48) (2,337) Decrease (increase) in accounts receivable .................................................... 1,400 (9,725) (Decrease) in accounts payable and accrued expenses ........................................... (101,046) (2,070) Increase in due to affiliates ................................................................. 33,465 6,999 Decrease in rent received in advance .......................................................... (1,984) (4,538) Increase in tenant security deposits .......................................................... 2,895 143 --------- --------- Net cash provided by operating activities ......................................................... ($ 42,678) $ 111,436 ========= =========
CLUSTER HOUSING PROPERTIES (A California Limited Partnership) AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ---------- 1. Organization of Partnership: Cluster Housing Properties (a California Limited Partnership) (the "Partnership"), formerly Berry and Boyle Cluster Housing Properties, was formed on August 8, 1983. The Partnership issued all of the General Partnership Interests to three General Partners in exchange for capital contributions aggregating $2,000. Stephen B. Boyle and GP L'Auberge Communities, L.P., (a California Limited Partnership), formerly Berry and Boyle Management, are the General Partners. In September, 1995, with the consent of Limited Partners holding a majority of the outstanding Units, as well as the consent of the mortgage lenders for the Partnership's three properties, Richard G. Berry resigned as a general partner of the Partnership. A total of 2,000 individual Limited Partners owning 32,421 units have contributed $16,210,500 of capital to the Partnership. At March 31, 1998, the total number of Limited Partners was 1,902. Except under certain limited circumstances, as defined in the Partnership Agreement, the General Partners are not required to make any additional capital contributions. The General Partners or their affiliates will receive various fees for services and reimbursement for various organizational and selling costs incurred on behalf of the Partnership. The Partnership will continue until December 31, 2010, unless terminated earlier by the sale of all, or substantially all, of the assets of the Partnership, or otherwise in accordance with the provisions of Section 16 of the Partnership Agreement (See Note 8.) 2. Significant Accounting Policies: A. Basis of Presentation The consolidated financial statements include the accounts of the Partnership and its subsidiaries: Sin Vacas Joint Venture (Sin Vacas), Autumn Ridge Joint Venture (Autumn Ridge) and Villa Antigua Joint Venture (Villa Antigua). All intercompany accounts and transactions have been eliminated in consolidation. The Partnership follows the accrual basis of accounting. Refer to Note 5 regarding the termination of the Joint Ventures and the sale of Villas Sin Vacas and Villa Antigua. B. Cash and Cash Equivalents The Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value. It is the Partnership's policy to invest cash in income-producing temporary cash investments. The Partnership mitigates any potential risk from such concentration of credit by placing investments with high quality financial institutions. C. Significant Risks and Uncertainties 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. D. Depreciation Depreciation is provided for by the use of the straight-line method over estimated useful lives as follows: Buildings and improvements 39-40 years Equipment, furnishings and fixtures 5-15 years E. Deferred Expenses Costs of obtaining or extending mortgages on the properties are being amortized over the mortgage term using the straight-line method, which approximates the effective interest method. Fees paid to certain of the property developers were amortized over the term of the services provided using the straight-line method. Any unamortized costs remaining at the date of a refinancing are expensed in the year of refinancing. F. Income Taxes The Partnership is not liable for Federal or state income taxes because Partnership income or loss is allocated to the Partners for income tax purposes. If the Partnership's tax returns are examined by the Internal Revenue Service or state taxing authority and such an examination results in a change in Partnership taxable income (loss), such change will be reported to the Partners. G. Rental Income Leases require the payment of rent in advance; however, rental income is recorded as earned. H. Long-Lived Assets In 1996, the Partnership adopted Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets to be Disposed of." SFAS 121 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. The adoption of SFAS 121 had no effect on reported results in 1996. As further discussed in Note 8, as of the year ended December 31, 1997, the Partnership recorded the assets at the lower of carrying value or net realizable value and has included these amounts as Assets Held for Sale. For the three months ended March 31, 1998 and the year ended December 31, 1997, permanent impairment conditions did not exist at the Partnership's property. I. New Accounting Standards In 1997, the Partnership adopted Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." This accounting standard specifies new computation, presentation, and disclosure requirements for earnings per share to be applied retroactively. Among other things, SFAS 128 requires presentation of basic and diluted earnings per share on the face of the income statement. The computation of basic and diluted earnings per share was based on income available to the Limited Partners divided by the weighted average number of units outstanding during the period. The Partnership has no dilutive type securities. The adoption of SFAS 128 had no effect on the per unit results previously reported. 3. Cash and Cash Equivalents: Cash and cash equivalents at March 31, 1998 and December 31, 1997 consisted of the following: March 31, December 31, 1998 1997 ---- ---- Cash on hand $ 178,602 $ 132,330 Money market accounts 217,146 289,250 ------- ------- $395,748 $421,580 4. Joint Venture and Property Acquisitions: The Partnership has invested in three properties located in Scottsdale and Tucson, Arizona and Colorado Springs, Colorado. The success of the Partnership will depend upon factors which are difficult to predict including general economic and real estate market conditions, both on a national basis and in the areas where the Partnership's investments are located. The Partnership holds a majority interest in these properties and controls the operations of the joint ventures. Villas Sin Vacas On October 25, 1985, the Partnership acquired a majority interest in the Sin Vacas Joint Venture, which owns and operates the Villas at Sin Vacas, a 72-unit residential property located in Tucson, Arizona. Since the Partnership owns a majority interest in the Sin Vacas Joint Venture, the accounts and operations of the Sin Vacas Joint Venture have been consolidated into the Partnership. The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a Phoenix based residential development, construction and management firm. EWI is also the developer of the Villas Sin Vacas property. The Partnership made initial cash payments in the form of capital contributions totaling $2,458,507 and funded $398,949 of property acquisition costs which were treated as a capital contribution to the joint venture. Since completion of construction, the Partnership has made additional contributions totaling $275,167. At December 31, 1996, the total capital contributions and acquisition costs incurred were $2,713,937 and $418,686, respectively. JANUARY 1, 1996 THROUGH MAY 13, 1996 Net cash from operations (as defined in the joint venture agreement) was to be distributed as available to each joint venture partner quarterly as follows: First, to the Partnership, an amount equal to 8.75% per annum, noncumulative (computed daily on a simple noncompounded basis from the date of completion funding) of the Partnership's capital investment, as defined in the joint venture agreement; Second, the balance 70% to the Partnership and 30% to the co-venturer. All losses from operations and depreciation for the Sin Vacas Joint Venture were allocated 99% to the Partnership and 1% to the co-venturer. and Property Acquisitions, continued: All profits from operations, to the extent of cash distributions were allocated to the Partnership and co-venturer in the same proportion as the cash distribution. Any remaining profits are allocated 70% to the Partnership and 30% to the co-venturer. In the case of certain capital transactions and distributions as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be effected by the relative balances in the individual partners' capital accounts. Villa Antigua On June 11, 1987, the Partnership acquired a majority interest in the Villa Antigua Joint Venture, which owns and operates Villa Antigua, an 88-unit residential property located in Scottsdale, Arizona. Since the Partnership owns a majority interest in the Villa Antigua Joint Venture, the accounts and operations of the Villa Antigua Joint Venture have been consolidated into the Partnership. The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a Phoenix based residential development, construction and management firm. EWI is also the developer of the Villa Antigua property. The Partnership made initial cash payments in the form of capital contributions totaling $2,494,677 and funded $381,729 of property acquisition costs which were treated as a capital contribution to the Villa Antigua Joint Venture. Since completion of construction, the Partnership has made additional contributions totaling $85,440. At December 31, 1996, the total capital contributions and acquisition costs incurred were $2,580,117 and $381,729, respectively. JANUARY 1, 1996 THROUGH MAY 13, 1996 Net cash from operations (as defined in the joint venture agreement) was to be distributed as available to each joint venture partner quarterly as follows: First, to the Partnership, an amount equal to 10% per annum, noncumulative (computed daily on a simple noncompounded basis from the date of completion funding) of the Partnership's adjusted capital investment, as defined in the joint venture agreement; Second, the balance 70% to the Partnership and 30% to the co-venturer. All losses from operations and depreciation for the Villa Antigua Joint Venture were allocated 99% to the Partnership and 1% to the co-venturer. All profits from operations, to the extent of cash distributions, were allocated to the Partnership and co-venturer in the same proportion as the cash distributions; however, if for any taxable year there are no cash distributions, profits are allocated 99% to the Partnership and 1% to the co-venturer. In the case of certain capital transactions and distributions as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be affected by the relative balances in the individual partners' capital accounts. Sin Vacas and Villa Antigua MAY 14, 1996 THROUGH NOVEMBER 25, 1997 On May 14, 1996, the Partnership and certain affiliates consummated an agreement with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI") which separated the interests of EWI and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of the properties. In consideration of a payment by the Partnership to EWI of $73,775 and delivery of certain mutual releases, EWI (i) relinquished its contract to manage Sin Vacas and Villa Antigua and its option to exercise its rights of first refusal with regard to the sale of those properties and (ii) assigned all of its interest in the Sin Vacas Joint Venture and the Villa Antigua Joint Venture to the Partnership (while preserving the economic interests of the venturer in these Joint Ventures), which resulted in the dissolution of the Sin Vacas Joint Venture and the Villa Antigua Joint Venture. EWI may still share in the cash flow distributions or proceeds from sale of the properties if certain performance levels are met. On November 25, 1997, Villa Sin Vacas was sold pursuant to the terms of a Sale Agreement and escrow Instructions (the "Agreement") dated May 6, 1997, as amended. Villas Sin Vacas was sold to Villas Sin Vacas Townhome Ventures Limited Partnership, an Arizona Limited Partnership unaffiliated with the Partnership, the assignee of Capital Management Systems, Inc., a Pennsylvania Corporation. The net selling price for Villas Sin Vacas was $4,952,091 subject to certain customary adjustments. The Partnership repaid first mortgage financing in the amount of $2,396,000 at closing utilizing a portion of proceeds from the sale. The Partnership recorded a gain on sale of approximately $975,000. On October 10, 1997, Villa Antigua was sold pursuant to the terms of a Sale Agreement and escrow Instructions (the "Agreement") dated May 6, 1997, as amended. Villa Antigua was sold to Villa Sin Antigua Condominium Ventures Limited Partnership, an Arizona Limited Partnership unaffiliated with the Partnership, the assignee of Capital Management Systems, Inc., a Pennsylvania Corporation. The net selling price for Villa Antigua was $6,141,526 subject to certain customary adjustments. The Partnership repaid first mortgage financing in the amount of $3,010,362 at closing utilizing a portion of proceeds from the sale. The Partnership recorded a gain on sale of approximately $1,307,000. Pinecliff On July 16, 1986, the Partnership acquired Pinecliff (formerly Autumn Ridge), a 96-unit residential property located in Colorado Springs, Colorado and simultaneously contributed the property to the Autumn Ridge Joint Venture comprised of the Partnership and an affiliate of the property developer. Since the Partnership owns a majority interest in the Autumn Ridge Joint Venture, the accounts and operations of the Autumn Ridge Joint Venture have been consolidated into the Partnership. The co-venture partner was Highland Properties, Inc. ("Highland") a Colorado based residential development, construction and management firm. Highland developed the property known as L'Auberge Pinecliff. The Partnership made initial cash payments in the form of capital contributions totaling $3,819,397 and funded $546,576 of property acquisition costs which were treated as a capital contribution to the Autumn Ridge Joint Venture. Since completion of construction, the Partnership has made additional contributions totaling $318,811. 4.Joint Venture and Property Acquisitions, continued: At March 31, 1998, the total capital contributions and acquisition costs incurred were $4,192,309 and $497,475, respectively. JANUARY 1, 1996 THROUGH JULY 2, 1996: Net cash from operations (as defined in the joint venture agreement) was to be distributed as available to each joint venture partner quarterly as follows: First, to the Partnership, an amount equal to 8% per annum, noncumulative (computed daily on a simple noncompounded basis from the date of completion funding) of the Partnership's capital investment, as defined in the joint venture agreement; Second, the balance 82% to the Partnership and 18% to the co-venturer. All losses from operations and depreciation for the Autumn Ridge Joint Venture were allocated 100% to the Partnership. All profits from operations, to the extent of cash distributions, were allocated to the Partnership and co-venturer in the same proportion as the cash distribution. Any remaining profits are allocated 82% to the Partnership and 18% to the co-venturer. In the case of certain capital transactions and distributions as defined in the joint venture agreement, the allocation of related profits, losses and cash distributions, if any, would be different than as described above and would be affected by the relative balances in the individual partners' capital accounts. JULY 3, 1996 THROUGH MARCH 31, 1998 On July 3, 1996, the Partnership and certain affiliates consummated an agreement with Highland Properties, Inc. ("Highland") which separated the interests of Highland and the Partnership, thus affording the Partnership greater flexibility in the operation and disposition of the property. In consideration of a payment by the Partnership to Highland totaling $7,718, and delivery of certain mutual releases, Highland (i) relinquished its option to exercise its rights of first refusal with regard to the sale of the property and (ii) assigned all of its interest in the L'Auberge Pinecliff Joint Venture to the Partnership, (while preserving the economic interests of the venturer in these Joint Ventures), which resulted in the dissolution of the L'Auberge Pinecliff Joint Venture. Highland may still share in the cash flow distributions or proceeds from sale of the properties if certain performance levels are met. The Sin Vacas Joint Venture, the Autumn Ridge Joint Venture and the Villa Antigua Joint Venture are sometimes collectively referred to as the "Joint Ventures". These joint ventures were effectively terminated on December 31, 1996. The Partnership has eliminated various minority interests related to these joint ventures, as such, the Partnership owned 100% of the underlying assets as of December 31, 1996. For the three months ended March 31, 1998 and 1997, Pinecliff had a net income of $88,412 and $16,845, respectively. 5. Mortgage Notes Payable: The property owned by the Partnership is pledged as collateral for the nonrecourse mortgage notes payable outstanding March 31, 1998 and December 31, 1997, which consisted of the following: 1998 1997 ---- ---- Pinecliff 3,044,542 3,058,800 Pinecliff The original maturity date for these notes was July 15, 1997. On July 10, 1997, the lender extended the terms of the mortgage note for a period of one year. Under the modification agreement, the monthly principal and interest payment of $27,976 and the original interest rate of 9.125% remained unchanged. The terms of the agreement provide for a prepayment penalty of 0.5% of the outstanding loan amount in the event the note is paid prior to 60 days before it becomes due. The balance of the note will be due on July 15, 1998. As discussed in Note 8, the Partnership entered into a Sale Agreement for this property with an unaffiliated third party. The estimated sales price is sufficient to cover the mortgage note balance. However, there can be no assurance that the sale of the property will occur. In the event that the sale of Pinecliff does not occur, the Partnership will seek new sources of financing for the property on a long-term basis or seek to renegotiate the mortgage note with its existing lender. If the general economic climate for real estate in this location were to deteriorate resulting in an increase in interest rates for mortgage refinancing or a reduction in the availability of real estate mortgage financing or a decline in the market values of real estate, it may affect the Partnership's ability to complete the refinancing or sell the property. As discussed in Note8, the Partnership entered into a Sale Agreement for this property with an unaffiliated third party. The estimated sales price is sufficient to cover the mortgage note balance. However, there can be no assurance that the sale of the property will occur. Interest included in Accrued expenses in the Consolidated Balance Sheets at March 31, 1998 and December 31, 1997 consisted of the following: 1998 1997 ---- ---- Pinecliff $11,630 $11,630 The principal balance of the mortgage notes payable appearing on the consolidated balance sheets at March 31, 1998 and December 31, 1997 approximates the fair value of the note. 6. Partners' Equity: Under the terms of the Partnership Agreement profits are allocated 95% to the Limited Partners and 5% to the General Partners; losses are allocated 99% to the Limited Partners and 1% to the General Partners. Cash distributions to the partners are governed by the Partnership Agreement and are made, to the extent available, 95% to the Limited Partners and 5% to the General Partners. Gain from the sale of properties is to be allocated as defined in the Partnership Agreement. The net proceeds on the sale of both Villas Sin Vacas and Villa Antigua of $5.3 million were allocated as follows. The Limited Partners received 100% of the cash distribution from sale. The total gain on sale of both Villas Sin Vacas and Villa Antigua of $2.3 million was allocated as follows. The General Partner received a gain on sale allocation of approximately $70,000 and the Limited Partners received a gain on sale allocation of approximately $2.2 million. These distributions/allocations were in accordance with the terms of the Partnership Agreement. 7. Related-Party Transactions: L'Auberge Communities, Inc. is a General Partner of L'Auberge Communities, which owns a 99% interest in GP L'Auberge Communities, L.P. (formerly Berry and Boyle Management). Due to affiliates at March 31, 1998 and December 31, 1997 consisted of reimbursable costs payable to L'Auberge Communities, Inc., an affiliate of the General Partners, in the amounts of $49,541 and $16,076, respectively. For the period ended March 31, 1998 and 1997, general and administrative expenses included $19,289, and $14,547, respectively, of salary reimbursements paid to the General Partners for certain administrative and accounting personnel who perform services for the Partnership. 8. Assets held for Sale During the fourth quarter of 1997, the General Partners of the Partnership committed to a plan to dispose of Pinecliff in Colorado Springs, Colorado. On January 15, 1998, the Partnership entered into a Sale Agreement (the "Agreement") to sell Pinecliff to an unaffiliated third party. The selling price for Pinecliff is approximately $6,700,000. The Agreement is subject to completion of customary due diligence to the satisfaction of the purchaser, and the purchaser obtaining a financing commitment on commercially reasonable terms and conditions. The Partnership expects to consummate this sale in 1998. Under certain conditions, the sale is contingent upon the approval by the Limited Partners. As of May 13, 1998, the Partnership has received sufficient consents from the Limited Partners, approving the sale of the property. As it is the intent of the General Partners to pursue the sale of this property, the Partnership has recorded the assets at the lower of carrying value or net realizable value and has included these amounts as Assets Held for Sale on the Consolidated Balance Sheet. In accordance with SFAS 121, the Partnership has stopped depreciating these assets effective January 1, 1998. If closing of the sale were to occur, any proceeds from sale will be allocated to the Partners in accordance with the terms of the Partnership Agreement and the Partnership will likely be liquidated. 18 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources At March 31, 1998, the Partnership had cash and cash equivalents of $395,748 compared with $421,580 at December 31, 1997. The aggregate net decrease of $25,832 resulted primarily from $33,367 received from the escrow agent relating to the sale of Villa Antigua, offset by the cash needed for operations of $42,678, purchase of fixed assets of $2,261, and $14,260 of principal payments on mortgage notes payable. Property Status For the period ended March 31, 1998, the Partnership owned and operated L'Auberge Pinecliff, formerly Autumn Ridge ("Pinecliff"), a 96-unit multifamily rental property in Colorado Springs, Colorado, subject to first mortgage financing in the original principal amount of $3,072,739. During the fourth quarter of 1997, the Partnership sold two properties: (1) Villas at Sin Vacas, a 72-unit multifamily rental property in Tucson, Arizona, which was sold in November 1997; and (2) Villa Antigua, an 88-unit multifamily rental property in Scottsdale, Arizona, which was sold in October 1997. The ownership of each property was formerly structured as a Joint Venture in which the Partnership owned a majority interest. With regard to the termination of the Joint Ventures and the sales of properties, see Note 5 of Notes to Consolidated Financial Statements. Pinecliff As of March 31, 1998, the property was 92% occupied, compared to 81% approximately one year ago. The market rents for the various unit types were as follows: Market Rents March 31, Unit Type 1998 1997 --------- ---- ---- One bedroom one bath $930 $905 Two bedroom two bath 1,155 1,109 As discussed in Note 8 of the Notes to the Consolidated Financial Statements, on January 15, 1998, the Partnership entered into a purchase and sale agreement (the "Agreement") to sell Pinecliff to an unaffiliated third party. The selling price for Pinecliff is approximately $6,700,000. The Agreement is subject to completion of customary due diligence to the satisfaction of the purchaser, and the purchaser obtaining a financing commitment on commercially reasonable terms and conditions. The Partnership expects to consummate this sale in the second quarter of 1998. The sale is contingent on the consent of the Limited partners to the dissolution. If closing of the sale were to occur, any proceeds from sale will be allocated to the Partners in accordance with the terms of the Partnership Agreement and the Partnership will be liquidated. Results of Operations For the three months ended March 31, 1998 the Partnership's operating results were comprised of its share of the income and expenses from Pinecliff, as well as partnership level interest income earned on short term investments, reduced by administrative expenses. A summary of these operating results appears below. L'Auberge Investment Consolidated Pinecliff Partnership Total Total revenue ........................................ $ 263,261 $ 3,581 $ 266,842 Expenses: General and administrative ......................... 60,535 60,535 Operations ......................................... 101,538 65 101,603 Depreciation and amortization ...................... 3,640 6,640 Interest ........................................... 69,671 69,671 --------- --------- --------- 174,849 60,600 235,449 --------- --------- --------- Net income ........................................... 88,412 (57,019) $ 31,393 ========= ========= ========= For the three months ended March 31, 1997, the Partnership's operating results were comprised of its share of the income and expenses from the Sin Vacas, Pinecliff and Villa Antigua, as well as partnership level interest income earned on short term investments, reduced by administrative expenses. A summary of these operating results appears below. Sin L'Auberge Villa Investment Consolidated Vacas Pinecliff Antigua Partnership Total Total revenue ............................ $ 185,073 $ 235,026 $ 238,173 $ 10,443 $ 668,715 Expenses: General and administrative ............. 42,252 42,252 Operations ............................. 86,962 101,820 91,258 280,040 Depreciation and ....................... 31,669 45,451 30,660 107,780 amortization Interest ............................... 55,331 70,910 68,761 195,002 --------- --------- --------- --------- --------- 173,962 218,181 190,679 42,252 625,074 --------- --------- --------- --------- --------- Net income ............................... $ 11,111 $ 16,845 $ 47,494 ($ 31,809) $ 43,641 ========= ========= ========= ========= =========
Comparison of Operating Results for the Three Months Ended March 31, 1998 and 1997: Partnership operations for the three months ended March 31, 1998 generated net income of $31,393 compared with net income of $43,641 for the corresponding period in 1997. Total revenue decreased by $395,953 or 60%, due to the fact that Villa Sin Vacas and Villa Antigua were sold in the fourth quarter of 1997. The revenue from Pinecliff increased by $33,235 or 14% due to an increase in occupancy. Operating expenses decreased in total by $178,437 or 64% due to the sales of the properties, however the expenses for Pinecliff decreased by $282. General and administrative expenses have increased by $18,283 or 43%, due primarily to the administrative costs relating to the sale of the properties, including legal fees and printing and mailing costs of the consent of the Limited Partners for the Dissolution of the Partnership. PART II-OTHER INFORMATION ITEM 1. Legal Proceedings Response: None ITEM 2. Changes in Securities Response: None ITEM 3. Defaults Upon Senior Securities Response: None ITEM 4. Submission of Matters to a Vote of Security Holders Response: None ITEM 5. Other Information Response: None ITEM 6. Exhibits and Reports on Form 8-K (A.) Exhibit - None (B.) Report on Form 8-K, Item 2, dated October 10, 1997 filed October 23, 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. CLUSTER HOUSING PROPERTIES By: GP L'Auberge Communities, L.P., a California Limited Partnership, General Partner By: L'Auberge Communities, Inc., its General Partner By: __/s/ Stephen B. Boyle______________________________ Stephen B. Boyle, President Date: May 15, 1998 EX-27 2 FDS --
5 3-MOS Dec-31-1998 Mar-31-1998 395,748 0 0 0 0 0 7,948,873 (2,152,207) 6,333,800 200,168 3,044,542 0 0 0 3,089,091 6,333,800 0 261,865 0 0 165,778 0 69,671 0 0 0 0 0 0 31,393 0 0
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