-----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, F9HaBGFQET/CqIQLbqmN3v7KUKiEQhgJqqvd5PxOK1vQyPdi0ooms5ZKMaoQ3Sda ixEjpcJjT/CmeMluomIlzw== 0001065949-03-000040.txt : 20030514 0001065949-03-000040.hdr.sgml : 20030514 20030514164128 ACCESSION NUMBER: 0001065949-03-000040 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LARCHDALE OWNERSHIP CO LTD CENTRAL INDEX KEY: 0000753258 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 953932760 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24906 FILM NUMBER: 03699657 BUSINESS ADDRESS: STREET 1: 6355 TOPANGA CANYON BLVD STREET 2: STE 428 CITY: WOODLAND HILLS STATE: CA ZIP: 91367 BUSINESS PHONE: 8183460509 MAIL ADDRESS: STREET 1: 6355 TOPANGA CANYON BLVD SUITE 428 CITY: WOODLAND HILLS STATE: CA ZIP: 91367 10QSB 1 larchdale10qsb33103.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended March 31, 2003 Commission File Number: 0-24906 Larchdale Ownership Company, Ltd. ----------------------------------------- (Exact name of registrant as specified in its charter) California 95-3932760 - -------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer corporation or organization) Identification No.) 6355 Topanga Canyon Blvd., Suite 435, Woodland Hills, CA 91367 ------------------------------------------------------------ (Address of Principal executive offices) (818) 346-0509 ---------------------------- (Registrant's telephone number, including area code) ----------------------------------------- (Former Name, former address, and former fiscal year, if changed since last report) 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_____ LARCHDALE OWNERSHIP COMPANY, LTD. (A California Limited Partnership) Page Number ----------- Part I - Financial Information Balance Sheets March 31, 2003 (Unaudited) and December 31, 2002 3 Statement of Operations and Computation of Net Income (Loss) per Partnership Interest (Unaudited) for the Three Months ended March 31, 2003 and 2002 4 Statement of Cash Flows (Unaudited) for the Three Months Ended March 31, 2003 and 2002 5 Notes to Unaudited Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II - Other Information 9 -2-
LARCHDALE OWNERSHIP COMPANY, LTD. (A California Limited Partnership) Balance Sheets March 31, 2003 (Unaudited) and December 31, 2002 March 31, December 31, 2002 2001 ------------ ----------- ASSETS PROPERTY AT COST Land $ 1,679,198 $ 1,679,198 Buildings and improvements 12,081,160 12,081,160 Furniture and fixtures 410,845 410,845 ----------- ----------- 14,171,203 14,171,203 Less accumulated depreciation 12,246,577 12,234,987 ----------- ----------- 1,924,626 1,936,216 CASH 94,900 83,037 LOAN FEES - net of accumulated amortization of $220,554 at March 31, 2003 and $211,490 at December 31, 2002 141,999 151,063 PREPAID EXPENSES AND OTHER ASSETS 378,993 349,787 ----------- ----------- $ 2,540,518 $ 2,520,103 =========== =========== LIABILITIES AND PARTNERS' CAPITAL NOTE PAYABLE $13,164,736 $13,208,318 ACCOUNTS PAYABLE AND ACCRUED EXPENSES 209,342 224,028 ADVANCE DUE TO AFFILIATE 1,011,000 1,100,000 TENANT SECURITY DEPOSITS 175,069 173,292 PARTNERS' CAPITAL (DEFICIT) (12,019,629) (12,185,535) ----------- ----------- $ 2,540,518 $ 2,520,103 =========== ===========
-3- LARCHDALE OWNERSHIP COMPANY, LTD. (A California Limited Partnership) Statement of Operations (Unaudited) Three Months Ended March 31, March 31, 2003 2002 ------------- ------------- REVENUES Rental Income $ 1,051,757 $1,031,382 Other Income 38,669 30,948 ------------- ------------- 1,090,426 1,062,330 ------------- ------------- EXPENSES Interest 304,125 314,564 Depreciation and amortization 20,654 176,742 Repairs and maintenance 199,167 154,415 Utilities 91,301 117,780 Salaries and related expenses 115,920 127,261 Management and administrative fee 65,400 63,954 Property taxes 57,663 55,990 Professional services 19,474 16,372 Insurance 36,367 19,638 Administrative costs 6,651 4,099 Advertising and promotion 7,798 5,610 ------------- -------------- 924,520 1,056,425 ------------- -------------- NET INCOME (LOSS) $ 165,906 $ 5,905 ============= ============== Net income (loss) per weighted number of limited partnership interests outstanding (35,371 at March 31, 2003 and 2002) $ 4.69 $ 0.17 ============= ============== -4-
LARCHDALE OWNERSHIP COMPANY, LTD. (A California Limited Partnership) Statement of Cash Flows (Unaudited) Three Months Ended March 31, 2003 2002 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) from operations $ 165,906 $ 5,905 Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization 20,654 176,742 (Increase) decrease in: Prepaid expenses and other assets (29,206) (9,634) Increase (decrease) in: Accounts payable and accrued expenses (14,686) 19,773 Accrued interest to affiliate 11,000 40,050 ------------- ------------ Net cash provided (used) by operating activities 153,668 232,836 CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in note payable (43,582) (40,162) Advance due to affiliate (100,000) Increase (decrease) in tenant security deposits 1,777 4,137 ------------- ------------ Net cash provided (used) by financing activities (141,805) (36,025) ------------- ------------ Net increase (decrease) in cash 11,863 196,811 Cash beginning of year 83,037 131,034 ------------- ------------ Cash at end of period $ 94,900 $ 327,845 ============= ============
-5- LARCHDALE OWNERSHIP COMPANY, LTD. (A California Limited Partnership) NOTES TO UNAUDITED FINANCIAL STATEMENTS NOTE 1 - FINANCIAL STATEMENTS The balance sheet as of March 31, 2003, the statement of operations for the three months ended March 31, 2003 and 2002, and the statement of cash flows for the three month periods then ended have been prepared by the partnership without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2003, and for all periods presented, have been made. NOTE 2 - INCOME TAXES The net loss reported for financial reporting purposes is different from that reported for tax purposes, for the three months ended March 31, 2003, as shown below: Net income for financial statements reporting purposes $ 165,906 Tax depreciation difference 3,457 ------------ Net income for income tax reporting purposes $ 169,363 ============ -6- Management's Discussion and Analysis of Financial Condition and Results of Operation Liquidity and Capital Resources - ------------------------------- The Partnership's primary source of liquidity has been funds from operations, proceeds from the initial capitalization, and the exercise of warrants in 1986 and 1987. With the completion of the 1987 warrant offering, the Partnership is fully capitalized. Future capital requirements are expected to be primarily provided by operations. On November 10, 1986, the Partnership obtained a new loan of $12,750,000 from an institutional third-party lender. The note bears interest at a variable rate of 225 basis points over the 11th District Federal Home Loan Bank cost of funds, with a floor of 10%. In May 1992, the Partnership completed a modification of the payment terms of the loan for a one-year period commencing with the payment due January 1, 1992. Under the terms of the modification, monthly interest only payments were made at the reduced rate of 5%, with the difference between interest at the full rate and the reduced payment rate added to the principal amount of the loan. In addition, payments for property taxes were impounded by the lender on a monthly basis. After the end of the modification period, the Partnership made partial monthly payments until April 6, 1993 when payment in full of past due amounts was made and the loan reverted to its unmodified terms. In May 1994, the Partnership completed a second modification of the loan payment terms for a one-year period commencing on November 1, 1993. Under the terms of the second modification, monthly interest only payments were paid at the reduced rate of 9%, with the difference between interest at the full rate of 10% and the reduced payment rate added to the principal amount of the loan. In addition, payments for property taxes were impounded by the lender on a monthly basis. In March 1995, the modification was extended for a one-year period commencing on November 1, 1994. Starting with the payment due on November 1, 1995, the modification expired and monthly payments at the full rate of 10% per annum plus principal amortization were required under the original terms of the note. However, the lender continued to bill the Partnership under the terms of the modification and the Partnership paid the amounts as billed. The Partnership contacted the lender in September 1996 to initiate negotiations to resolve the billing disparity, which had accumulated to $281,000 and the problems of the property taxes due starting in September 1996 and the deferred maintenance of the property. In December 1996, the lender agreed to accept $11,800,000 as payment in full on its loan under the conditions, among others, that payment be received before April 15, 1997, that the property taxes be paid, and that the loan be purchased by a third party independent of the Partnership. The purchase price was reduced by the principal portion of the monthly payments made from January 1, 1997 through the purchase date. The property taxes were paid by the Partnership in December 1996. -7- On February 28, 1997, the Partnership completed the refinancing of the property and paid off the existing loan, which had a balance at closing of $13,245,725 with a cash payment of $11,767,496 for a gain of $1,481,229. The Partnership paid a fee of $50,000 to a third party to purchase the existing loan from the lender and subsequently sell the loan to the Partnership and a fee of $25,213 to a consultant for assistance in making the initial contact with the appropriate lender representative. In addition, the Partnership paid a fee of $140,602 to the general partner, LMH Realty, Inc., equal to 10% of the net gain of $1,406,016 for success in the negotiating of the loan discount and arranging the third party purchase of the loan. The Partnership recognized the remaining gain of $1,265,414 in 1997. The loan was purchased and the refinancing completed with funds from a new loan to the Partnership of $14,000,000 at 8.20% per annum maturing on March 1, 2007 with monthly principal and interest payments of $104,686. The Partnership paid fees to the lender and loan broker of $280,000, loan costs, title insurance, transfer taxes and recording fees of $50,996, and estimated legal fees of $25,000. The new loan provided for reserves for the initial two monthly payments, property taxes and insurance. In addition, the new lender held a reserve of $493,000 for deferred property maintenance items. After the payment of $11,767,496 to the prior lender, the Partnership received net proceeds from the refinancing of $1,316,015. In September 1997, the Partnership completed the pay off of advances due to an affiliate of the general partner of $664,596 plus accrued interest of $430,295. As of the date of this Report, the Partnership does not foresee any trends, demands, commitments, events, or uncertainties which are reasonably likely to result in a material increase or decrease in the Partnership's liquidity. Results of Operations - --------------------- The growth in the rental market slowed during the first quarter of 2003 with rental collections increasing only 2.6% over the first quarter of 2002. Vacancies have increased as tenants purchased homes at low mortgage interest rates and new apartment construction added to the supply of housing. In addition, harsh winter weather and a cautious economy restrained demand for apartments. Depreciation costs decreased as a result of the original purchase cost of property acquired in 1984 becoming fully depreciated during 2002. Repairs and maintenance costs increased in the first quarter of 2003 over the same quarter of 2002 as the result of higher turnover costs related to increasing vacancies. In addition, costs were incurred for snow removal in 2003 that were not incurred in 2002. Insurance costs increased because of substantially higher premiums for property and liability insurance. The partnership made regular monthly interest payments as well as a $100,000 principal payment on the advance due to an affiliate of the general partner, reducing the principal balance to $1,000,000 plus accrued interest of $11,000 at March 31, 2003. -8- Part II Other Information Item 1 - Legal Proceedings Not Applicable Item 2 - Change in Securities Not Applicable Item 3 - Default Upon Senior Securities Not Applicable Item 4 - Submission of Matters to a Vote of Security Holders Not Applicable Item 5 - Other Information Not Applicable Item 6 - Exhibits and Reports on Form 8-K Exhibit 99.14 - Certification -9- 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. LARCHDALE OWNERSHIP COMPANY, LTD. By:/s/L. Mark Hammerschmitt ----------------------------- L. Mark Hammerschmitt, President LMH REALTY, INC. GENERAL PARTNER Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following person on behalf of the Partnership in the capacity and on the date indicated. Signature Title Date - -------------------------- -------------------- ---------------- /s/L. Mark Hammerschmitt - -------------------------------- L. Mark Hammerschmitt, President Managing April 25, 2003 LMH Realty, Inc. General Partner -10- CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT I, L. Mark Hammerschmitt, certify that: 1. I have reviewed this quarterly report on Form 10QSB of Larchdale Ownership Company, Ltd.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and -11- 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 25, 2003 By:/s/L. Mark Hammerschmitt ----------------------------- L. Mark Hammerschmitt, President LMH REALTY, INC. GENERAL PARTNER -12- EX-99.14 OTH CONSENT 3 ex9914.txt EXHIBIT 99.14 SECTION 906 CERTIFICATION Exhibit 99.14 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the periodic report on Form 10-QSB for the period ended March 31, 2003 (the "Report") of Larchdale Ownership Company, Ltd. (the "Company") I, L. Mark Hammerschmitt, President, LMH Realty, Inc., Managing General Partner of the Company, certify, pursuant to 18USC ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: April 25, 2003 By:/s/L. Mark Hammerschmitt ----------------------------- L. Mark Hammerschmitt, President LMH REALTY, INC. GENERAL PARTNER This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----