-----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, C9YJYna4ay/KyGQGKk6Sqk2bnsmEuj9fh4qq5sc2SXTrWowLaZqCf0daL1VFM9QB fsw6QljePD4KGzicAyR9vQ== 0000812564-98-000027.txt : 19981118 0000812564-98-000027.hdr.sgml : 19981118 ACCESSION NUMBER: 0000812564-98-000027 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCCOMBS REALTY PARTNERS LTD CENTRAL INDEX KEY: 0000759198 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 330068732 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14570 FILM NUMBER: 98751129 BUSINESS ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 BUSINESS PHONE: 3037578101 MAIL ADDRESS: STREET 1: 1873 SOUTH BELLAIRE STREET 17TH FLOOR CITY: DENVER STATE: CO ZIP: 80222 10QSB 1 FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. Securities And Exchange Commission Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 [ ] 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 0-14570 MCCOMBS REALTY PARTNERS (Exact name of small business issuer as specified in its charter) California 33-0068732 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 Issuer's telephone number Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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) MCCOMBS REALTY PARTNERS CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands) September 30, 1998 Assets Cash and cash equivalents $ 358 Receivables and deposits 98 Restricted escrows 316 Other assets 133 Investment properties: Land $ 499 Buildings and related personal property 5,432 5,931 Less accumulated depreciation (3,418) 2,513 $ 3,418 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 7 Tenant security deposit liabilities 19 Accrued property taxes 60 Other liabilities 69 Mortgage note payable 5,684 Partners' Capital (Deficit) General partner $ 1 Limited partners (17,199.69 units issued and outstanding) (2,422) (2,421) $ 3,418 See Accompanying Notes to Consolidated Financial Statements b) MCCOMBS REALTY PARTNERS CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except for unit data) Three Months Ended Nine Months Ended September 30, September 30, 1998 1997 1998 1997 Revenues: Rental income $ 328 $ 348 $ 949 $ 1,037 Other income 31 32 104 96 Total revenues 359 380 1,053 1,133 Expenses: Operating 160 142 458 443 General and administrative 17 20 65 49 Depreciation 56 52 168 154 Interest 120 121 361 365 Property taxes 20 20 60 60 Total expenses 373 355 1,112 1,071 Net (loss) income $ (14) $ 25 $ (59) $ 62 Net (loss) income allocated to general partners (1%) $ -- $ -- $ -- $ -- Net (loss) income allocated to limited partners (99%) (14) 25 (59) 62 $ (14) $ 25 $ (59) $ 62 Net (loss) income per limited partnership unit $ (.81) $ 1.45 $ (3.43) $ 3.60 See Accompanying Notes to Consolidated Financial Statements c) MCCOMBS REALTY PARTNERS CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except for unit data)
Limited Partnership General Limited Units Partner Partners Total Partners' capital (deficit) at December 31, 1997 17,199.69 $ 1 $ (2,363) $ (2,362) Net loss for the nine months ended September 30, 1998 -- -- (59) (59) Partners' capital (deficit) at September 30, 1998 17,199.69 $ 1 $ (2,422) $ (2,421) See Accompanying Notes to Consolidated Financial Statements
d) MCCOMBS REALTY PARTNERS CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1998 1997 Cash flows from operating activities: Net (loss) income $ (59) $ 62 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation 168 154 Amortization of loan costs 14 14 Change in accounts: Receivables and deposits (56) 32 Other assets 5 (6) Accounts payable (71) (26) Tenant security deposit liabilities (7) 2 Accrued property taxes 60 (16) Other liabilities (9) (3) Net cash provided by operating activities 45 213 Cash flows from investing activities: Property improvements and replacements (40) (52) Net deposits to restricted escrows (55) (54) Net cash used in investing activities (95) (106) Cash flows from financing activities: Payments on mortgage note payable (43) (40) Net cash used in financing activities (43) (40) Net (decrease) increase in cash and cash equivalents (93) 67 Cash and cash equivalents at beginning of period 451 386 Cash and cash equivalents at end of period $ 358 $ 453 Supplemental disclosure of cash flow information: Cash paid for interest $ 347 $ 350 See Accompanying Notes to Consolidated Financial Statements e) MCCOMBS REALTY PARTNERS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A- GOING CONCERN Under the Plan of Reorganization described in Item 2, McCombs Realty Partners (the "Partnership") was required to pay claims to limited partners and creditors of approximately $11,000,000 on October 20, 1998. This raises substantial doubt about the Partnership's ability to continue as a going concern. In order to attempt to satisfy the remaining claims under the Plan, the Partnership would be required to sell the investment property. As an alternative to the sale of the property, the Partnership could attempt to obtain authorization from the Court and the Limited Partners to extend the settlement date of October 20, 1998 to a future period. The limited partners were approached in August 1998 and asked to either approve a sale of the Partnership's sole investment property or for the General Partner to petition the Bankruptcy Court for an extension of the settlement date. The required fifty percent response was not received. The General Partner is continuing to see that the Partnership operates its business in the ordinary course while it evaluates the best course of action to follow. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE B - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of 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 Article 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 CRPTEX, Inc. ("General Partner"), a wholly owned subsidiary of Insignia Properties Trust ("IPT") (see Note D), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1998 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the annual report on Form 10-KSB for the year ended December 31, 1997 for the Partnership. Principles of Consolidation The Partnership's consolidated financial statements include the accounts of Pelham Place, L.P. which is the limited partnership which holds title to Lakewood at Pelham. The Partnership ultimately owns a 100% beneficial interest in Pelham Place, L.P. and, accordingly, is consolidated. All intercompany transactions have been eliminated. Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE C - TRANSACTIONS WITH AFFILIATED PARTIES The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following transactions with the General Partner and its affiliates were incurred during the nine months ended September 30, 1998 and 1997: 1998 1997 (in thousands) Property management fees (included in operating expenses) $ 55 $ 57 Reimbursement for services from affiliates (included in operating and general and administrative expenses) (1) 41 24 (1) Included in "Reimbursements for services from affiliates" for 1998 and 1997 is approximately $1,000 and $2,000, respectively, in reimbursements for construction oversight costs. For the period of January 1, 1997 to August 31, 1997, the Partnership insured its property under a master policy through an agency affiliated with the General Partner with an insurer unaffiliated with the General Partner. An affiliate of the 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 master policy. The agent assumed the financial obligations to the affiliate of the General Partner, which received payment on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations was not significant. NOTE D - TRANSFER OF CONTROL - SUBSEQUENT EVENT On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control of the General Partner. In addition, AIMCO also acquired approximately 51% of the outstanding common shares of beneficial interest of IPT. Also, effective October 1, 1998, IPT and AIMCO entered into an Agreement and plan of Merger pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders of a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger and has granted an irrevocable limited proxy to unaffiliated representatives of IPT to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no other holder of IPT is required to approve the merger. The General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment property consists of one apartment complex. The average occupancy of Lakewood at Pelham Apartments for the nine month periods ended September 30, 1998 and 1997 was 90% and 95%, respectively. The decrease in occupancy at Lakewood at Pelham for the nine months ended September 30, 1998 in comparison to the same period in 1997 is attributable to the overbuilding of new apartments in the Greenville, South Carolina market. Additionally, construction of a new office park adjacent to the property has somewhat affected the aesthetic value of the complex. However, average occupancy for the nine months ended September 30, 1998 remains close to the market average. Results of Operations The Partnership's net loss for the nine months ended September 30, 1998 was approximately $59,000 as compared to net income of approximately $62,000 for the corresponding period of 1997. The Partnership's net loss for the three month period ended September 30, 1998 was approximately $14,000 versus net income of approximately $25,000 for the corresponding period in 1997. The decrease in net income for the nine months ended September 30, 1998 is primarily due to a decrease in rental income and increases in operating, general and administrative, and depreciation expenses. Rental income decreased as a result of the decrease in occupancy at Lakewood at Pelham Apartments, despite an increase in the average rental rate. The increase in operating expense can be attributed to an increase in ordinary maintenance costs related to interior repairs in 1998. The decrease in net income for the three month period ended September 30, 1998 compared to the same period of 1997 is primarily attributable to the decrease in rental income and increase in operating expense as previously described. General and administrative expense increased primarily due to increases in reimbursements associated with the administration of the partnership. Depreciation expense increased due to approximately $100,000 of capital improvements and replacements at the property over the last twelve months. Included in operating expense for the nine months ended September 30, 1998 is approximately $10,000 of major repairs and maintenance primarily comprised of landscaping costs. Included in operating expense for the nine months ended September 30, 1997 is approximately $8,000 of major repairs and maintenance primarily comprised of exterior building repairs and golf cart costs. As part of the ongoing business plan of the Partnership, the 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 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 General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 1998, the Partnership held cash and cash equivalents of approximately $358,000 versus approximately $453,000 at September 30, 1997. The net decrease in cash and cash equivalents for the nine months ended September 30, 1998 was approximately $93,000 compared to a net increase of approximately $67,000 for the nine months ended September 30, 1997. Net cash provided by operating activities decreased due to the increase in net loss, as discussed above. Also contributing to this decrease was an increase in receivables and deposits and a decrease in accounts payable, partially offset by an increase in accrued property taxes, all of which were related to the timing of receipts and payments. Net cash used in investing and financing activities remained consistent for the nine month periods ended September 30, 1998 and 1997. 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, including satisfaction of remaining claims related to the Partnership's Plan of Reorganization, as described below, and to comply with federal, state and local legal and regulatory requirements. Such assets are currently not sufficient to meet the short-term needs of the Partnership. No cash distributions were paid or declared during the nine months ended September 30, 1998 or 1997, and none are expected for the remainder of 1998. On March 9, 1987, the original general partners of the Partnership, on behalf of the Partnership, filed a voluntary petition under Chapter 11 of the Federal Bankruptcy Code in U.S. Bankruptcy Court, Central District Court of California ("Court"). The Partnership continued as Debtor-In-Possession to operate its business in the ordinary course subject to control of the Court until the Court confirmed the Partnership's Plan of Reorganization ("Plan") effective October 25, 1988. The Plan was approved by all required classes of creditors. The Plan provides for the following claim priorities as of September 30, 1998: 1 First, all creditors, except Class 12 creditors ($23,100), will be satisfied; 2) Limited Partners, both original and substitute, who made additional capital contributions will be paid claims in the amount of the additional contributions of approximately $730,000 on October 20, 1998; 3) Class 12 creditors will be paid claims aggregating $23,100 on October 20, 1998; 4) Limited Partners who made additional capital contributions and who were original Limited Partners will be paid existing capital contributions of approximately $9,818,000 on October 20, 1998; 5) Limited Partners who did not make additional capital contributions will be paid one-third of existing capital contributions (one-third of $1,200,000) on October 20, 1998. All other claims noted in the Plan were settled on June 25, 1995 when the Partnership refinanced the then outstanding mortgages encumbering the property. Additionally, the Plan calls for the General Partner to make a capital contribution of $14,500 and loan or expend an additional $117,500 on behalf of the Partnership on an as needed basis. The Partnership received the $14,500 capital contribution but has not required the additional $117,500. In order to attempt to satisfy the remaining claims under the Plan, the Partnership would be required to sell the investment property, or as an alternative, the Partnership could attempt to obtain authorization from the Court and the Limited Partners to extend the settlement date of October 20, 1998 to a future period. The limited partners were approached in August 1998 and asked to either approve a sale of the Partnership's sole investment property or for the General Partner to petition the Bankruptcy Court for an extension of the settlement date. The required fifty percent response was not received. As a result, the Partnership defaulted on its obligations which were due on October 20, 1998. The General Partner is continuing to see that the Partnership operates its business in the ordinary course while it evaluates the best course of action to follow. Additionally, the Partnership's mortgage indebtedness of approximately $5,684,000 matures in July 2005, and would require a property sale or refinancing at that time. However, there can be no assurance that these courses of action will be successful and that the Partnership will have sufficient funds to meet its obligations in 1998 or beyond. Transfer of Control - Subsequent Event On October 1, 1998, Insignia Financial Group, Inc. completed its merger with and into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result of the Insignia Merger, AIMCO acquired control of the General Partner. In addition, AIMCO also acquired approximately 51% of the outstanding common shares of beneficial interest of Insignia Properties Trust ("IPT"), the sole shareholder of the General Partner. Also, effective October 1, 1998, IPT and AIMCO entered into an Agreement and plan of Merger pursuant to which IPT is to be merged with and into AIMCO or a subsidiary of AIMCO (the "IPT Merger"). The IPT Merger requires the approval of the holders of a majority of the outstanding IPT Shares. AIMCO has agreed to vote all of the IPT Shares owned by it in favor of the IPT Merger and has granted an irrevocable limited proxy to unaffiliated representatives of IPT to vote the IPT Shares acquired by AIMCO and its subsidiaries in favor of the IPT Merger. As a result of AIMCO's ownership and its agreement, the vote of no other holder of IPT is required to approve the merger. The General Partner does not believe that this transaction will have a material effect on the affairs and operations of the Partnership. Year 2000 General Description of the Year 2000 Issue and the Nature and Effects of the Year 2000 on Information Technology (IT) and Non-IT Systems The Year 2000 Issue is the result of computer programs being written using two digits rather than four to define the applicable year. The Partnership is dependent upon the General Partner and its affiliates for management and administrative services ("Managing Agent"). Any computer programs or hardware that have date-sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Managing Agent has determined that it will be required to modify or replace significant portions of its software and certain hardware so that those systems will properly utilize dates beyond December 31, 1999. The Managing Agent presently believes that with modifications or replacements of existing software and certain hardware, the Year 2000 Issue can be mitigated. However, if such modifications and replacements are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Managing Agent and the Partnership. Status of Progress in Becoming Year 2000 Compliant The Managing Agent's plan to resolve the Year 2000 Issue involves the following four phases: assessment, remediation, testing and implementation. To date, the Managing Agent has fully completed its assessment of all information systems that could be significantly affected by the Year 2000, and has begun the remediation, testing and implementation phase on both hardware and software systems. Assessments are continuing in regards to embedded systems in operating equipment. The Managing Agent anticipates having all phases complete by June 1, 1999. In addition to the areas the Partnership is relying on the Managing Agent to verify compliance with, the Partnership has certain operating equipment, primarily at the property sites, which needed to be evaluated for Year 2000 compliance. The focus of the General Partner was to the security systems, elevators, heating-ventilation-air-conditioning systems, telephone systems and switches, and sprinkler systems. The General Partner is currently engaged in the identification of all non-compliant operational systems, and is in the process of estimating the costs associated with any potential modifications or replacements needed to such systems in order for them to be Year 2000 compliant. It is not expected that such costs would have a material adverse affect upon the operations of the Partnership. Risk Associated with the Year 2000 The General Partner believes that the Managing Agent has an effective program in place to resolve the Year 2000 issue in a timely manner and has appropriate contingency plans in place for critical applications that could affect the Partnership's operations. To date, the General Partner is not aware of any external agent with a Year 2000 issue that would materially impact the Partnership's results of operations, liquidity or capital resources. However, the General Partner has no means of ensuring that external agents will be Year 2000 compliant. The General Partner does not believe that the inability of external agents to complete their Year 2000 resolution process in a timely manner will have a material impact on the financial position or results of operations of the Partnership. However, the effect of non-compliance by external agents is not readily determinable. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: 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 September 30, 1998. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MCCOMBS REALTY PARTNERS By: CRPTEX, INC. as General Partner By: /s/Patrick Foye Patrick Foye Executive Vice President By: /s/Timothy R. Garrick Timothy R. Garrick Vice President - Accounting (Duly Authorized Officer) Date: November 16, 1998 EX-27 2
5 This schedule contains summary financial information extracted from McCombs Realty Partners 1998 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000759198 MCCOMBS REALTY PARTNERS 1,000 9-MOS DEC-31-1998 SEP-30-1998 358 0 98 0 0 0 5,931 (3,418) 3,418 0 5,684 0 0 0 (2,421) 3,418 0 1,053 0 0 1,112 0 361 0 0 0 0 0 0 (59) (3.43) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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