0000711642-01-500184.txt : 20011107 0000711642-01-500184.hdr.sgml : 20011107 ACCESSION NUMBER: 0000711642-01-500184 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOX STRATEGIC HOUSING INCOME PARTNERS CENTRAL INDEX KEY: 0000800080 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 943016373 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-16877 FILM NUMBER: 1773621 BUSINESS ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: P O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8642391000 MAIL ADDRESS: STREET 1: 55 BEATTIE PLACE STREET 2: C/O BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 FORMER COMPANY: FORMER CONFORMED NAME: CENTURY PROPERTIES GROWTH FUND XXVI DATE OF NAME CHANGE: 19870208 FORMER COMPANY: FORMER CONFORMED NAME: FOX STRATEGIC HOUSING PARTNERS /CA/ DATE OF NAME CHANGE: 19870402 10QSB 1 foxship.txt FOXSHIP 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 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 [ ] 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 0-16877 FOX STRATEGIC HOUSING INCOME PARTNERS (Exact name of small business issuer as specified in its charter) California 94-3016373 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO 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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) FOX STRATEGIC HOUSING INCOME PARTNERS CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2001
Assets Cash and cash equivalents $ 291 Receivables and deposits 140 Other assets 224 Investment properties: Land $ 3,119 Buildings and related personal property 19,268 22,387 Less accumulated depreciation (8,977) 13,410 $14,065 Liabilities and Partners' (Deficit) Capital Liabilities Accounts payable $ 73 Due to general partner 243 Tenant security deposit liabilities 43 Accrued property taxes 230 Other liabilities 162 Mortgage notes payable 10,123 Partners' (Deficit) Capital General partner $ (302) Limited partners (26,111 units issued and outstanding) 3,493 3,191 $ 14,065 See Accompanying Notes to Consolidated Financial Statements
b) FOX STRATEGIC HOUSING INCOME PARTNERS CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 Revenues: Rental income $ 712 $ 764 $ 2,207 $ 2,263 Other income 38 40 134 108 Total revenues 750 804 2,341 2,371 Expenses: Operating 263 253 749 748 General and administrative 72 78 266 269 Depreciation 185 180 557 530 Interest 175 179 528 537 Property taxes 86 74 223 220 Total expenses 781 764 2,323 2,304 Net (loss) income $ (31) $ 40 $ 18 $ 67 Net (loss) income allocated to general partner $ (6) $ 8 $ 4 $ 13 Net (loss) income allocated to limited partners (25) 32 14 54 $ (31) $ 40 $ 18 $ 67 Net (loss) income per limited partnership unit $ (.96) $1.23 $ .54 $ 2.07 Distributions per limited partnership unit $ -- $ -- $28.46 $ 28.57 See Accompanying Notes to Consolidated Financial Statements
c) FOX STRATEGIC HOUSING INCOME PARTNERS CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 26,111 $ -- $26,111 $26,111 Partners' (deficit) capital at December 31, 2000 26,111 $ (291) $ 4,222 $ 3,931 Distribution to partners -- (15) (743) (758) Net income for the nine months ended September 30, 2001 -- 4 14 18 Partners' (deficit) capital at September 30, 2001 26,111 $ (302) $ 3,493 $ 3,191 See Accompanying Notes to Consolidated Financial Statements
d) FOX STRATEGIC HOUSING INCOME PARTNERS CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2001 2000 Cash flows from operating activities: Net income $ 18 $ 67 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 557 530 Amortization of loan costs 21 23 Change in accounts: Receivables and deposits (83) (93) Other assets (10) (11) Accounts payable 31 (3) Tenant security deposit liabilities (6) 6 Accrued property taxes 57 55 Due to general partner 39 (13) Other liabilities 41 15 Net cash provided by operating activities 665 576 Cash flows from investing activities: Property improvements and replacements (279) (279) Net withdrawals from restricted escrows 50 45 Net cash used in investing activities (229) (234) Cash flows from financing activities: Payments on mortgage notes payable (99) (93) Distribution to partners (758) (761) Net cash used in financing activities (857) (854) Net decrease in cash and cash equivalents (421) (512) Cash and cash equivalents at beginning of period 712 987 Cash and cash equivalents at end of period $ 291 $ 475 Supplemental disclosure of cash flow information: Cash paid for interest $ 507 $ 514 See Accompanying Notes to Consolidated Financial Statements
e) FOX STRATEGIC HOUSING INCOME PARTNERS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Fox Strategic Housing Income Partners (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Fox Partners VIII is the General Partner of the Partnership. The General Partners of Fox Partners VIII are Fox Capital Management Corporation ("FCMC" or the "Managing General Partner"), a California corporation, and Fox Realty Investors ("FRI"), a California general partnership, the Managing General Partner and the managing general partner of FRI are affiliates of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. In the opinion of FCMC, 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, 2001, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000. Principles of Consolidation: The consolidated financial statements include the statements of the Partnership and Westlake East Associates, L.P., a limited partnership in which the Partnership owns a 99% interest. The general partner may be removed by the Registrant; therefore, the consolidated partnership is controlled and consolidated by the Registrant. All significant inter-partnership transactions and balances have been eliminated. Segment Reporting: Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosure about Segments of an Enterprise and Related Information established standards for the way that public business enterprises report information about operating segments in annual financial statements and required that those enterprises report selected information about operating segments in interim financial reports. It also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. The Managing General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as currently presented. Note B - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for 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 Managing General Partner and/or its affiliates were incurred during the nine months ended September 30, 2001 and 2000: 2001 2000 (in thousands) Property management fees (included in operating expenses) $125 $119 Reimbursement for services of affiliates (included in investment properties, operating expense, and general and administrative expenses) 65 71 Partnership management fee (included in general and administrative expense) 63 63 Asset management fees (included in general and administrative expenses) 64 62 During the nine months ended September 30, 2001 and 2000, affiliates of the Managing General Partner were entitled to receive 5% of gross receipts from both of the Partnership's investment properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $125,000 and $119,000 for the nine months ended September 30, 2001 and 2000, respectively. An affiliate of the Managing General Partner received reimbursements of accountable administrative expenses amounting to approximately $65,000 and $71,000 for the nine month periods ended September 30, 2001 and 2000, respectively. This affiliate also received asset management fees of approximately $64,000 and $62,000 for the nine months ended September 30, 2001 and 2000, respectively. In addition, the general partner earned $63,000 in Partnership Management fees on distributions from operations during the nine months ended September 30, 2001, of which approximately $39,000 is subordinated to the Limited Partner's annual receipt of 8% of Adjusted Investment Capital as defined in the Partnership Agreement. Such cumulative subordinated fees owed to the general partner at September 30, 2001 amounted to approximately $243,000. At September 30, 2000, approximately $204,000 was owed to the general partner as cumulative subordinate management fees. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 9,957 limited partnership units in the Partnership representing 38.13% of the outstanding units at September 30, 2001. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of its affiliation with the Managing General Partner. Note C - Distributions The Partnership declared and paid distributions from cash from operations of approximately $758,000 (approximately $743,000 to the limited partners or approximately $28.46 per limited partnership unit) during the nine months ended September 30, 2001. The Partnership distributed cash from operations of approximately $761,000 (approximately $746,000 to the limited partners, $28.57 per limited partnership unit) during the nine months ended September 30, 2000. Note D - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the Managing General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which, together with a demurrer filed by other defendants, is currently scheduled to be heard on November 15, 2001. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. The matters are currently scheduled to be heard on November 15, 2001. The Managing General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Partnership from time to time. The discussion of the Partnership's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Partnership's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for the nine months ended September 30, 2001 and 2000: Average Occupancy Property 2001 2000 Barrington Place Apartments 91% 93% Westlake, Ohio Wood View Apartments 91% 96% Atlanta, Georgia The Managing General Partner attributes the decrease in occupancy at Wood View Apartments to the construction of new apartment complexes and the competitive market of the apartment industry in the Atlanta area. Results of Operations The Partnership's net income for the nine months ended September 30, 2001 totaled approximately $18,000 as compared to net income of approximately $67,000 for the nine months ended September 30, 2000. The Partnership realized a net loss for the three months ended September 30, 2001 of approximately $31,000 compared to net income of approximately $40,000 for the three months ended September 30, 2000. The decrease in net income for the three and nine months ended September 30, 2001 is attributable to a decrease in total revenues and an increase in total expenses. The decrease in total revenues is attributable to a decrease in rental income for both periods which for the nine months ended September 30, 2001 was partially offset by an increase in other income. The decrease in rental income is primarily attributable to a decrease in occupancy and an increase in concession costs partially offset by an increase in average rental rates at both of the Partnership's investment properties. The increase in other income during the nine months ended September 30, 2001 is primarily due to an increase in tenant reimbursements at Wood View Apartments, which was partially offset by a decrease in corporate unit income at Barrington Place Apartments. The increase in total expenses for the nine months ended September 30, 2001 is primarily the result of an increase in depreciation expense. Depreciation expense increased primarily due to capital improvements completed and placed in service during the last twelve months at the Partnership's investment properties. The increase in total expenses for the three months ended September 30, 2001 is primarily attributable to an increase in operating expense at Wood View Apartments and property tax expense at Barrington Place Apartments. The increase in operating expense at Wood View Apartments is primarily attributable to an increase in property expense and insurance expense, which were partially offset by a decrease in maintenance expense. Property expense increased primarily due to an increase in employee salaries and related benefits. The increase in insurance expense is primarily due to an increase in insurance premiums. The decrease in maintenance expense is primarily due to a reduction in the use of contract labor. The increase in property tax expense at Barrington Place Apartments is primarily attributable to the timing and receipt of tax bills received from the taxing authorities. General and administrative expenses remained relatively stable for the comparable periods. Included in general and administrative expense for the three and nine months ended September 30, 2001 and 2000 are management reimbursements to the Managing General Partner allowed under the Partnership Agreement. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and costs associated with the annual audit required by the Partnership Agreement are also included. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of both of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 2001, the Partnership had cash and cash equivalents of approximately $291,000 as compared to approximately $475,000 at September 30, 2000. The net decrease in cash and cash equivalents from the Partnership's year ended December 31, 2000 is approximately $421,000 which is the result of approximately $857,000 of cash used in financing activities and approximately $229,000 of cash used in investing activities partially offset by approximately $665,000 of cash provided by operating activities. Cash used in financing activities consisted of distributions to the partners and payments of principal made on the mortgages encumbering the Partnership's properties. Cash used in investing activities consisted of property improvements and replacements which were partially offset by net withdrawals from escrow accounts maintained by the mortgage lender. The Partnership invests its working capital reserves in interest bearing accounts. 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 properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. Capital improvements planned for each of the Partnership's properties are detailed below. Barrington Place During the nine months ended September 30, 2001, the Partnership expended approximately $94,000 for budgeted and nonbudgeted capital improvements at Barrington Place primarily consisting of a water submetering project, floor covering and appliance replacements, and other building improvements. These improvements were funded from Partnership reserves and operating cash flow. Capital improvements budgeted for 2001 are expected to cost approximately $101,000, which include, but are not limited to, plumbing enhancements, a water submetering project, and other building improvements. Wood View During the nine months ended September 30, 2001, the Partnership expended approximately $185,000 for budgeted and nonbudgeted capital improvements at Wood View primarily consisting of floor covering replacements, interior decoration, appliance replacements, clubhouse renovations, and other building improvements. These improvements were funded from operating cash flow. Capital improvements budgeted for 2001 are expected to cost approximately $112,000 which include, but are not limited to, plumbing enhancements, floor covering and appliance replacements, and other building improvements. The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. At September 30, 2001, mortgage indebtedness was approximately $10,123,000. The loan on the Wood View Apartments in the amount of approximately $5,399,000 bears interest at a rate of 6.64% per annum. The mortgage encumbering Barrington Place Apartments in the amount of $4,724,000 bears interest at a rate of 6.65%. Both mortgage loans mature on August 1, 2008, with balloon payments due, at which time the properties will need to be refinanced or sold. If the properties cannot be refinanced and/or sold for a sufficient amount, the Partnership will risk losing such properties through foreclosure. The Partnership declared and paid distributions from cash from operations of approximately $758,000 (approximately $743,000 to the limited partners or $28.46 per limited partnership unit) during the nine months ended September 30, 2001. The Partnership distributed cash from operations of approximately $761,000 (approximately $746,000 to the limited partners, $28.57 per limited partnership unit) during the nine months ended September 30, 2000. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings and/or property sales. The Partnership's distribution policy is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures to permit additional distributions to its partners during the remainder of 2001 or subsequent periods. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 9,957 limited partnership units in the Partnership representing 38.13% of the outstanding units at September 30, 2001. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of its affiliation with the Managing General Partner. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the Managing General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the Managing General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which, together with a demurrer filed by other defendants, is currently scheduled to be heard on November 15, 2001. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the Managing General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. The matters are currently scheduled to be heard on November 15, 2001. The Managing General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: None. b) Reports on Form 8-K: None filed during the quarter ended September 30, 2001. 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. FOX STRATEGIC HOUSING INCOME PARTNERS (a California Limited Partnership) By: FOX PARTNERS VIII Its General Partner By: Fox Capital Management Corporation Its Managing General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: