-----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, MjLrpeZPY2VzADIPF/YWylZHZxIhCjhDV9q4b4xMUrJKgdwXO05CkHsxOnn/ugNB eWym9m1e80eqhzGPF3QfRA== 0000761657-97-000003.txt : 19971117 0000761657-97-000003.hdr.sgml : 19971117 ACCESSION NUMBER: 0000761657-97-000003 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE 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: SEC FILE NUMBER: 000-16877 FILM NUMBER: 97718128 BUSINESS ADDRESS: STREET 1: 1 INSIGNIA FINANCIAL P O BOX 1089 STREET 2: C/O INSIGNIA FINANCIAL GROUP INC CITY: GREENVILLE STATE: SC ZIP: 29602 BUSINESS PHONE: 8032391513 MAIL ADDRESS: STREET 1: 1 INSIGNIA FINANCIAL P O BOX 1089 STREET 2: C/O INSIGNIA FINANCIAL GROUP INC CITY: GREENVILLE STATE: SC ZIP: 29602 FORMER COMPANY: FORMER CONFORMED NAME: FOX STRATEGIC HOUSING PARTNERS /CA/ DATE OF NAME CHANGE: 19870402 FORMER COMPANY: FORMER CONFORMED NAME: CENTURY PROPERTIES GROWTH FUND XXVI DATE OF NAME CHANGE: 19870208 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 (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, 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 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.) One Insignia Financial Plaza 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) FOX STRATEGIC HOUSING INCOME PARTNERS CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 1997 Assets Cash and cash equivalents $ 4,547 Receivables and deposits 89 Other assets 76 Investment properties: Land $ 3,119 Buildings and related personal property 18,196 21,315 Less accumulated depreciation (6,258) 15,057 $ 19,769 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 9 Tenant security deposits 60 Accrued taxes 111 Accrued interest 142 Other liabilities 54 Mortgage notes payable 7,836 Partners' Capital (Deficit): General partner's $ (206) Limited partners' (26,111 units outstanding) 11,763 11,557 $ 19,769 See Accompanying Notes to Consolidated Financial Statements b) FOX STRATEGIC HOUSING INCOME PARTNERS CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data)
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Rental income $ 736 $ 742 $ 2,208 $ 2,163 Other income 85 91 260 242 Total revenues 821 833 2,468 2,405 Expenses: Operating 342 443 1,046 1,239 Interest 228 228 698 685 Depreciation 156 152 467 453 General and administrative 45 84 148 253 Total expenses 771 907 2,359 2,630 Net income (loss) $ 50 $ (74) $ 109 $ (225) Net income (loss) allocated to general partner $ 10 $ -- $ 22 $ (47) Net income (loss) allocated to limited partners 40 (74) 87 (178) $ 50 $ (74) $ 109 $ (225) Net income (loss) per limited partnership unit $ 1.53 $ (2.83) $ 3.33 $ (6.82) See Accompanying Notes to Consolidated Financial Statements
c) FOX STRATEGIC HOUSING INCOME PARTNERS CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner's Partners' Total Original capital contributions 26,111 $ -- $ 26,111 $ 26,111 Partners' (deficit) capital at December 31, 1996 26,111 $ (228) $ 11,676 $ 11,448 Net income for the nine months ended September 30, 1997 -- 22 87 109 Partners' (deficit) capital at September 30, 1997 26,111 $ (206) $ 11,763 $ 11,557 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, 1997 1996 Cash flows from operating activities: Net income (loss) $ 109 $ (225) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 467 453 Amortization of loan costs 30 25 Interest added to note payable principal 525 517 Change in accounts: Receivables and deposits 117 (257) Other assets (39) 17 Accounts payable (20) (4) Tenant security deposit liabilities (8) 3 Accrued taxes (49) 125 Accrued interest payable 142 143 Other liabilities 9 60 Net cash provided by operating activities 1,283 857 Cash flows from investing activities: Property improvements and replacements (113) (144) Proceeds from cash investments -- 2,630 Net cash (used in) provided by investing activities (113) 2,486 Cash flows from financing activities: Repayment of note payable principal (938) (782) Net cash used in financing activities (938) (782) Net increase in cash and cash equivalents 232 2,561 Cash and cash equivalents at beginning of period 4,315 1,409 Cash and cash equivalents at end of period $ 4,547 $ 3,970 Supplemental disclosure of non cash investing and financing activities: Beginning accrued interest added to note payable principal $ 358 $ 356 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") 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 consolidated financial statements. In the opinion of Fox Capital Management Corporation ("FCMC" or the "Managing General Partner"), a California Corporation, 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, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. 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 year ended December 31, 1996. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. 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 payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. Fox Partners VIII, a California general partnership, is the general partner. The general partners of Fox Partners VIII are FCMC and Fox Realty Investors ("FRI"), a California general partnership. Pursuant to a series of transactions which closed during the first half of 1996, affiliates of Insignia Financial Group, Inc. ("Insignia") acquired all of the issued and outstanding shares of stock of FCMC, NPI Equity Investments II, Inc. ("NPI Equity"), the Managing General Partner of FRI, and National Property Investors, Inc. ("NPI"), the sole stockholder of NPI Equity. In connection with these transactions, affiliates of Insignia appointed new officers and directors of NPI Equity and FCMC. The following transactions with affiliates of Insignia, NPI, and affiliates of NPI were incurred during the nine month periods ended September 30, 1997 and 1996 (in thousands): 1997 1996 Property management fees (included in operating expenses) $ 115 $ 112 Reimbursement for services of affiliates (included in general and administrative and operating expenses) 49 138 For the period from January 19, 1996, to August 31, 1997, the Partnership insured its properties under a master policy through an agency and insurer unaffiliated with the Managing General Partner. An affiliate of the Managing 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 Managing General Partner who received payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the Managing General Partner by virtue of the agent's obligations is not significant. On August 28, 1997, an Insignia affiliate (the "Purchaser") commenced tender offers for limited partnership interests in six real estate limited partnerships (including the Partnership) in which various Insignia affiliates act as general partner. The Purchaser offered to purchase up to 11,750 of the outstanding units of limited partnership interest in the Partnership at $260.00 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 28, 1997 (the "Offer to Purchase") and the related Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed with the Securities and Exchange Commission on August 28, 1997. Because of the existing and potential future conflicts of interest (described in the Partnership's Statements on Schedule 14D-9 filed with the Securities and Exchange Commission), neither the Partnership nor the General Partner expressed any opinion as to the Offer to Purchase and made no recommendation as to whether unit holders should tender their units in response to the Offer to Purchase. As a result of the tender offer, an Insignia affiliate purchased 3,919 of the outstanding limited partner units of the Partnership. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for each of the nine months ended September 30, 1997 and 1996: Average Occupancy Property 1997 1996 Barrington Place Apartments Westlake, Ohio 95% 96% Wood View Apartments Atlanta, Georgia 93% 95% The Partnership realized net income for the nine months ended September 30, 1997 of approximately $109,000 compared to a net loss of approximately $225,000 for the nine months ended September 30, 1996. The Partnership's net income for the three months ended September 30, 1997 was approximately $50,000 compared to a net loss of approximately $74,000 for the three months ended September 30, 1996. The increase in net income for the three and nine months ended September 30, 1997 is primarily attributable to decreased operating expenses. Included in operating expense for the nine months ended September 30, 1997, is approximately $39,000 of major repairs and maintenance comprised primarily of landscaping. Included in operating expenses for the nine months ended September 30, 1996, is approximately $196,000 of major repairs and maintenance comprised primarily of an exterior painting project of approximately $122,000 at Woodview. In addition to the decrease in operating expense was a decrease in general and administrative expenses due to a reduction in expense reimbursements paid to affiliates of the Managing General Partners. This decrease is directly related to the costs incurred in connection with the transition and relocation of the administration offices during 1996. Increased other income also contributed to the increased net income for the nine month period, primarily due to increased interest income. Interest income increased due to higher average cash balances in the nine months ended September 30, 1997, compared to the corresponding period in 1996. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment properties 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 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. At September 30, 1997, the Partnership held cash and cash equivalents of approximately $4,547,000, compared to approximately $3,970,000 at September 30, 1996. Net cash provided by operations increased primarily due to the decreases in operating and general and administrative expenses as discussed above. The decrease in net cash provided by investing activities is the result of proceeds from a maturing cash investment in 1996. Net cash used in financing activities increased due to the increase in mortgage payments required in 1997 compared to 1996. The Partnership's properties are cross-collateralized by a zero coupon first mortgage which secures the entire amount of the note payable. Interest accrues on the amount borrowed at a contract rate of 10.9 percent per annum, with the interest accrued added to principal each January and July. As of September 30, 1997, approximately $5,646,000 in accrued interest has been added to the principal of this note. The Partnership was required to repay a specified percentage of the then outstanding original principal amount of the loan as follows: 20 percent in August 1995, 20 percent in August 1996, and 30 percent in August 1997. In addition, provided that the Partnership generated income in an amount as defined in the note agreement, it was required to repay a specified percentage of the then outstanding accrued interest added to principal as follows: 20 percent in August 1995, 20 percent in August 1996, and 30 percent in August 1997. The remaining principal balance plus all accrued and unpaid interest is due in August 1998. In August 1995, the Partnership paid approximately $1,947,000 (which included $970,000 of accrued interest added to principal). In August 1996, the Partnership paid $782,000, which is 20 percent of the then outstanding original principal balance (no additional payment of accrued interest was required). In August 1997, the Partnership paid approximately $938,000 of principal, resulting in principal plus accrued interest due in August 1998 of approximately $7,978,000. 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 various properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness and accrued interest mature August 1, 1998, at which time the properties will either be refinanced or sold. Future cash distributions will depend on the levels of net cash generated from operations, capital expenditure requirements, property sales, refinancings, and the availability of cash reserves. In addition, distributions may be limited by the debt repayments discussed above. No cash distributions were paid during the nine months ended September 30, 1997 or 1996. Cash distributions are expected to remain suspended as a result of the pending debt maturity which is discussed above. On August 28, 1997, an Insignia affiliate (the "Purchaser") commenced tender offers for limited partnership interests in six real estate limited partnerships (including the Partnership) in which various Insignia affiliates act as general partner. The Purchaser offered to purchase up to 11,750 of the outstanding units of limited partnership interest in the Partnership at $260.00 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 28, 1997 (the "Offer to Purchase") and the related Assignment of Partnership Interest attached as Exhibits (a)(1) and (a)(2), respectively, to the Tender Offer Statement on Schedule 14D-1 originally filed with the Securities and Exchange Commission on August 28, 1997. Because of the existing and potential future conflicts of interest (described in the Partnership's Statements on Schedule 14D-9 filed with the Securities and Exchange Commission), neither the Partnership nor the General Partner expressed any opinion as to the Offer to Purchase and made no recommendation as to whether unit holders should tender their units in response to the Offer to Purchase. As a result of the tender offer, an Insignia affiliate purchased 3,919 of the outstanding limited partner units of the Partnership. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In August 1997, an Insignia affiliate (the "Purchaser") commenced tender offers for limited partner interests in six real estate limited partnerships including the Partnership (collectively, the "Tender Partnerships"), in which various affiliates of Insignia Financial Group, Inc. ("Insignia") act as general partner. On September 5, 1997, a partnership claiming to be a holder of limited partnership units in one of the Tender Partnerships, filed a complaint with respect to a putative class action in the Court of Chancery in the State of Delaware in and for New Castle County (the "City Partnerships complaint") challenging the actions of the defendants (including Insignia, certain Insignia affiliates) in connection with the tender offers. Neither the Partnership nor the Managing General Partner were named as defendants in the action. The City Partnerships complaint alleges that, among other things, the defendants have intentionally mismanaged the Tender Partnerships and coerced the limited partners into selling their units pursuant to the tender offers for substantially lower prices than the units are worth. The plaintiffs also allege that the defendants breached an alleged duty to provide an independent analysis of the fair market value of the limited partnership units, failed to appoint a disinterested committee to review the tender offer and did not adequately consider other alternatives available to the limited partners. On September 8, 1997, persons claiming to be holders of limited partnership units in the Tender Partnerships filed a complaint with respect to a putative class action and derivative suit in the Superior Court for the State of California for the County of San Mateo (the "Kline complaint") challenging the actions of the defendants (including Insignia, certain Insignia affiliates and the Tender Partnerships) in connection with the tender offers. The Kline complaint alleges that, among other things, the defendants have intentionally mismanaged the Tender Partnerships and that, as a result of the tender offers, the Purchaser will acquire effective voting control over the Tender Partnerships at substantially lower prices, than the units are worth. On September 24, 1997, the court denied the plaintiffs' application for a temporary restraining order and their request for preliminary injunctive relief preventing the completion of the tender offers. On September 10, 1997, persons claiming to be holders of limited partnership units in the Tender Partnerships filed a complaint with respect to a putative class action and derivative suit in the Superior Court for the State of California for the County of Alameda (the "Heller complaint") challenging the actions of the defendants (including Insignia, certain Insignia affiliates and the Tender Partnerships) in connection with the tender offers. The Heller complaint alleges that, among other things, the defendants have intentionally mismanaged the Tender Partnerships and that, as a result of the tender offers, the Purchaser will acquire effective voting control of the Tender Partnerships at substantially lower prices than the units are worth. The Plaintiffs also allege that the defendants breached an alleged duty to retain an independent advisor to consider alternatives to the tender offers. The Managing General Partner believes that the allegations contained in the City Partnerships, Kline and Heller complaints are without merit and intends to vigorously contest each of those complaints to which it and the Partnership have been named as defendants. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) 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, 1997. SIGNATURES In accordance with 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. FOX STRATEGIC HOUSING INCOME PARTNERS By: FOX PARTNERS VIII Its General Partner By: FOX CAPITAL MANAGEMENT CORPORATION Its Managing General Partner By: /s/William H. Jarrard, Jr. William H. Jarrard, Jr. President and Director By: /s/Ronald Uretta Ronald Uretta Vice President and Treasurer Date: November 14, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Fox Strategic Housing Income Partners 1997 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000800080 FOX STRATEGIC HOUSING INCOME PARTNERS 1,000 9-MOS DEC-31-1997 SEP-30-1997 4,547 0 0 0 0 0 21,315 6,258 19,769 0 7,836 0 0 0 11,557 19,769 0 2,468 0 0 2,359 0 698 0 0 0 0 0 0 109 3.33 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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