-----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, NBg0XhvmCOhA7+1SIr7cu1n2PPt9F1YFgFLH4+NvjtKsH55bFdlIS3eztQhzR60W 7SNr3JukXDTHGG5ry/5nzQ== 0000830051-95-000005.txt : 19951127 0000830051-95-000005.hdr.sgml : 19951127 ACCESSION NUMBER: 0000830051-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951115 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INCOME GROWTH PARTNERS LTD X CENTRAL INDEX KEY: 0000830051 STANDARD INDUSTRIAL CLASSIFICATION: 6500 IRS NUMBER: 330294177 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18528 FILM NUMBER: 95593357 BUSINESS ADDRESS: STREET 1: 11300 SORRENTO VALLEY RD STE 108 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6194572750 MAIL ADDRESS: STREET 1: 11300 SORRENTO VALLEY ROAD STREET 2: SUITE 108 CITY: SAN DIEGO STATE: CA ZIP: 92121 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (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, 1995 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 0-18528 INCOME GROWTH PARTNERS, LTD. X (Exact name of registrant as specified in its charter) CALIFORNIA 33-0294177 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11300 Sorrento Valley Road, Suite 108, San Diego, California 92121 (Address of principal executive offices) (Zip Code) (619) 457-2750 (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 filing requirements for the past 90 days. Yes [X] No [ ] The number of the registrant's Original Limited Partnership Units outstanding as of November 8, 1995 was 18,826.50. The number of the registrant's Class A Units outstanding as of November 8, 1995 was 8,090. -Page 1 of 14 Pages- Exhibit Index located on sequentially numbered page 13 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS INCOME GROWTH PARTNERS, LTD. X (A California Limited Partnership) BALANCE SHEETS
September 30, December 31, 1995 1994 ___________ ___________ (Unaudited) ASSETS Land and buildings: Land $ 7,778,365 $ 9,378,607 Buildings and improvements 20,560,386 32,385,377 ___________ ___________ 28,338,751 41,763,984 Less accumulated depreciation and impairments (6,596,206) (13,240,165) ___________ ___________ 21,742,545 28,523,819 Other assets: Cash 829,738 180,696 Prepaid expenses and other assets 325,719 240,542 ___________ ___________ 1,155,457 421,238 ___________ ___________ $22,898,002 $28,945,057 =========== =========== LIABILITIES AND PARTNERS' DEFICIT Mortgage loans payable $22,031,569 - Other liabilities: Accounts payable and accrued liabilities 653,373 537,684 Accrued interest payable 78,260 - Security deposits 167,912 207,875 ___________ ___________ 22,931,114 745,559 Liabilities subject to compromise: Mortgage Loans Payable - 29,426,708 Accounts payable and accrued liabilities - 934,979 Accrued interest payable - 1,803,196 Due to affiliates - 17,028 ___________ ___________ - 32,181,911 Commitments and Contingencies (Note 4) Partners' deficit (23,112) (3,972,413) Note receivable from general partner (10,000) (10,000) ___________ ___________ $22,898,002 $28,945,057 =========== =========== The accompanying notes are an integral part of the financial statements.
2 INCOME GROWTH PARTNERS, LTD. X (A California Limited Partnership) STATEMENTS OF OPERATIONS (UNAUDITED) For the three months ended: For the nine months ended: Sept 30, 1995 Sept 30, 1994 Sept 30, 1995 Sept 30, 1994 _____________ _____________ _____________ _____________ Revenues: Rents $ 790,318 $1,016,901 $2,856,179 $3,082,431 Other 63,209 55,490 189,877 159,037 _____________ _____________ _____________ _____________ Total revenues 853,527 1,072,391 3,046,056 3,241,468 _____________ _____________ _____________ _____________ Expenses: Interest 181,690 556,500 1,166,120 1,532,805 Operating expenses (excluding depreciation and amortization) 469,605 507,419 1,574,919 1,662,506 Depreciation and amortization 240,616 296,230 833,077 888,691 _____________ _____________ _____________ _____________ Total expenses 891,911 1,360,149 3,574,116 4,084,002 _____________ _____________ _____________ _____________ Loss before extraordinary items (38,384) (287,758) (528,060) (842,534) _____________ _____________ _____________ _____________ Extraordinary gain: Disqualified interest - - 1,472,841 - Debt forgiveness 999,146 - 999,146 - _____________ _____________ _____________ _____________ Net income (loss) $ 960,762 $ (287,758) $1,943,927 $ (842,534) ============= ============= ============= ============= Net loss per limited partnership unit before extraordinary gain $ (1.65) $ (15.28) $ (22.72) $ (44.75) _____________ _____________ _____________ _____________ Income per limited partnership unit from extraordinary gain $ 42.98 $ - $ 106.34 $ - _____________ _____________ _____________ _____________ Net income (loss) per limited partnership unit $ 41.33 $ (15.28) $ 83.63 $ (44.75) ============= ============= ============= ============= Weighted average limited partnership units outstanding 23,245 18,826 23,245 18,826 ============= ============= ============= ============= The accompanying notes are an integral part of the financial statements.
3 INCOME GROWTH PARTNERS, LTD. X (A California Limited Partnership) STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30 (UNAUDITED)
1995 1994 ___________ ___________ Cash flows from operating activities: Net tenant revenues $3,046,056 $3,239,481 Security deposits (refunded) retained (39,963) (1,562) Cash paid to suppliers and employees (2,479,202) (1,716,888) Interest received - 1,987 Interest paid (1,418,215) (1,480,576) ___________ ___________ Net cash (used in) provided by operating activities (891,324) 42,442 ___________ ___________ Cash flows from financing activities: Sale of Partnership Class A Units 2,019,241 - Principal payments under mortgage debt (461,847) (8,250) Amounts due to affiliates, net (17,028) 41,641 ___________ ___________ Net cash provided by financing activities 1,540,366 33,391 ___________ ___________ Net increase in cash 649,042 75,883 Cash and cash equivalents at beginning of period 180,696 118,281 ___________ ___________ Cash and cash equivalents at end of period $ 829,738 $ 194,114 =========== =========== Reconciliation of net income (loss) to net cash (used in) provided by operating activities: Net income (loss) $ 1,943,927 $ (842,534) Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: Depreciation and amortization 833,077 888,691 Extraordinary gains (2,471,987) - Other, primarily changes in other assets and liabilities (1,196,341) (3,715) ___________ ___________ Net cash (used in) provided by operating activities $ (891,324) $ 42,442 =========== =========== The accompanying notes are an integral part of the financial statements.
4 INCOME GROWTH PARTNERS, LTD. X (A California Limited Partnership) NOTES TO FINANCIAL STATEMENTS September 30, 1995 (UNAUDITED) 1. Basis of Financial Statement Presentation The accompanying unaudited condensed financial statements of Income Growth Partners, Ltd. X (the "Partnership") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Partnership believes that the disclosures made are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto included in the Partnership's latest audited financial statements for the year ended December 31, 1994 filed on Form 10K. These financial statements have not been audited by independent public accountants, but include all adjustments (consisting of normal recurring adjustments) which are, in the opinion of the general partner, necessary for a fair presentation of the financial condition, results of operations and cash flows for periods presented. However, these results are not necessarily indicative of results for a full year. Certain prior period amounts have been reclassified to conform with the current period presentation. The accompanying financial statements have been prepared on a going concern basis which assumes continuity of operations and realization of assets and liquidation of liabilities in the ordinary course of business. As a result of the Partnership's continuing high levels of mortgage indebtedness, there are significant uncertainties relating to the ability of the Partnership to continue as a going concern. The financial statements do not include any adjustments that might be necessary as a result of the outcome of the uncertainties discussed herein. 2. Activities of the Partnership In January, 1994, the Partnership filed a voluntary petition for relief under Chapter 11 of the United States Code. Under Chapter 11, the Partnership continued to conduct its business under the supervision of the court until May 2, 1995, when the court confirmed the Partnership's plan of Reorganization (the "Plan") and the Partnership emerged from bankruptcy. Under Chapter 11, certain claims against the Partnership in existence prior to the filing were stayed while the Partnership continued operations as a debtor-in-possession. These claims, which totaled $32,181,911 are 5 reflected in the December 31, 1994 balance sheet as "Liabilities subject to compromise," as required under Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"). Disposition of these obligations is outlined in the Plan and reflected in the interim financial statements. Pursuant to SOP 90-7, the Partnership did not qualify for Fresh-Start Reporting because the holders of existing voting shares immediately before confirmation retained more than 50% of the voting shares of the emerging entity. According to section 41 of SOP 90-7, Entities emerging from Chapter 11 that do not meet the criteria for Fresh-Start Reporting should report liabilities compromised by a confirmed plan at present values of amounts to be paid, determined at appropriate current interest rates, and forgiveness of debt, if any, should be reported as an extraordinary item. Accordingly, during the second quarter the Partnership recorded an extraordinary item listed as Gain on Disqualified Interest in the amount of $1,472,841 due to the reversal of previously accrued interest that was disqualified by the Plan. As of the effective date of the Plan, the Partnership had received between $1,400,000 and $1,900,000 in cash for Class A Partnership Units. Accordingly, under the provisions of the Plan, the Partnership was allowed to retain ownership of the Mission Park and Shadowridge Meadows properties, but not the Margarita Summit property. The offering was closed effective June 30, 1995. The Partnership cured and reinstated the loans on the Mission Park and Shadowridge Meadows properties with payments to the lenders of $344,534 and $556,144 respectively. The payment to the lender on the Mission Park property was made as a full cure and reinstatement of the existing note in accordance with the Plan and was applied against all qualified accrued interest based on the non-default contract rate of interest in the note. The lender was not entitled to any default interest, penalties, or late fees or charges as a result of the bankruptcy proceedings. The remaining principal balance after this loan was cured and reinstated was $12,316,258. The $556,144 payment to the lender on the Shadowridge Meadows property was a full cure and reinstatement of the loan and buydown of the amortization term of the loan from 20 years to 30 years in accordance with the provisions of the Plan and the existing Loan Modification Agreement in effect on this property. Of the $556,144 paid to the lender, $476,144 was applied towards reducing the principal balance of the loan, and the difference was applied towards the lender's fees in accordance with the Plan. The remaining loan balance after the buydown payment was approximately $9,816,119. Since the Partnership was unable to retain ownership of Margarita Summit under the terms of the Plan, it did not cure and reinstate this loan or pay the claim for past due real estate taxes on this property. On May 18, 1995 6 the Partnership stipulated to the appointment of a receiver to take over the day-to-day operations of the property, while the lender completed foreclosure proceedings. Title to Margarita Summit was held by the Partnership until the lender completed foreclosure proceedings on August 1, 1995. The accompanying financial statements include internal results of operations for Margarita Summit through May 1995 and external operations as reported by the receiver for the months of June and July. The lender received all cash collateral generated by Margarita Summit during receivership. Additionally, the accompanying financial statements reflect the elimination of the mortgage debt, land, and building and improvements related to Margarita Summit. As part of the foreclosure transaction, the Partnership recorded an extraordinary gain related to forgiveness of debt of approximately $999,000. In June 1995 the Partnership paid the County of San Diego $19,397 to be used in conjunction with $70,715 they were holding in suspense to completely satisfy the defaulted property tax claim on Mission Park for the 1992 assessment. The outstanding 1993 assessment of $154,133 will continue to accrue interest at a rate of 7% per year until paid off in accordance with the Plan. The Partnership also paid all approved undisputed priority claims and unsecured claims in accordance with the Plan. 3. Contingencies Activities of the General Partner The general partner of the Partnership also serves as the general partner in several other real estate partnerships. To the extent that the operation of these partnerships requires significant financial resources of the general partner or adversely affects the liquidity of the general partner, the general partner's ability to operate and/or manage the affairs of the Partnership could be impaired. Property Leverage Levels The Partnership Agreement permitted acquisition debt in amounts of up to 80 percent of the purchase price of properties, but required that such debt be reduced to no more than 40 percent of the aggregate purchase price of the properties as offering proceeds from the sale of Original Units were received. As a result of less than anticipated Original Unit sales, the Partnership has been unable to reduce its mortgage debt to 40 percent. The aggregate indebtedness on the Partnership's two remaining properties was approximately 71 percent of their purchase prices as of September 30, 1995. Therefore, mortgage principal would have to be reduced by approximately $9.6 million to comply with the terms of the Partnership Agreement. 7 Loan Defaults Effective May 2, 1995 the Partnership cured and reinstated the loans on the Mission Park and Shadowridge Meadows properties. As contemplated by the Plan, the lender on Margarita Summit foreclosed on the property on August 1, 1995. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Financial Statements and Notes thereto filed herewith. a. Liquidity and Capital Resources Historically, the Partnership was dependent upon proceeds from the sale of Original Units to meet its obligations, including debt service requirements. In 1992 the Partnership discontinued sales of Original Units, and between 1992 and 1995 the Partnership's primary source of liquidity has been from cash generated from operations. On May 2, 1995, the Partnership's Plan of Reorganization became effective and by June 30, 1995, the Partnership had received approximately $2,020,000 in additional capital to fund the Plan. After paying the creditors as outlined in the Plan, the partnership retained approximately $700,000 from the proceeds of the new offering in a cash reserve account to provide liquidity for short term negative cash flows. The Partnership is highly sensitive to interest rates because the properties remain highly leveraged, and the interest charges on the Partnership's debt adjust monthly with the 11th District Cost of Funds Index. Between May 1994 and November 1995, increases in the 11th District Cost of Funds Index totaling 1.482% have been announced. If the 11th District Cost of Funds index continues to increase more rapidly than projected, and the Partnership is unable to raise rents at the properties to cover the increased debt service payments, the Partnership may have to fund shortfalls from reserves, attempt to restructure the existing loans, or risk losing one or both of the remaining properties. Due to this high sensitivity to variable interest rates, the partnership is currently pursuing refinancing opportunities that may further stabilize the debt service on the Mission Park property. In October 1995 the partnership made a $200,000 deposit on a loan pay-off agreement with the lender on the Mission Park property in anticipation of such an opportunity. The existing loans on Shadowridge Meadows and Mission Park are currently scheduled to expire in 1998 and 1999 respectively. The Partnership may be able to renegotiate extended loan terms with the existing lenders at that time, or the real estate and financing markets may have improved 8 sufficiently for the Partnership to consider refinancing or selling the properties. In the event that one or more of the properties is unable to support its debt service and the Partnership is unable to cover operational shortfalls from proceeds of the new offering, the Partnership may have to take one or more alternative courses of action. The general partner would then determine, based on its analysis of relevant economic conditions and the status of the properties, a course of action intended to be consistent with the best interests of the Partnership. Possible courses of action might include, the sacrifice of one or more of the properties to reduce negative cash flow, the sale or refinancing of one or more of the properties, the entry into one or more joint venture partnerships with other entities, or the filing of another bankruptcy petition. b. Results of Operations The Partnership had been operating the Shadowridge Meadows Apartments and Mission Park Apartments for approximately 82 months and 73 months respectively at September 30, 1995. The Shadowridge Meadows Apartments and Mission Park Apartments reflected occupancy rates of 96% and 92% respectively as of September 30, 1995, compared to 91% and 91% respectively as of September 30, 1994. Operating expenses, excluding depreciation, amortization, and extraordinary items, for the three and nine month periods ended September 30, 1995 have decreased approximately $38,000 and $88,000 respectively compared to the same periods in 1994, primarily due to the foreclosure of the Margarita Summit property and the elimination of related operating expenses. Interest expense also decreased for the three and nine month periods ended September 30, 1995 by approximately $375,000 and $367,000 respectively compared to the same period in 1994, primarily due to the foreclosure of the Margarita Summit property in 1995. The Partnership has experienced frequent losses from operations primarily due to the high degree of debt service discussed previously. Management estimates that the Partnership may experience continued operating losses in the future unless debt service can be restructured or reduced. PART II - OTHER INFORMATION Item 1. Legal Proceedings The information from note 2 of the financial statements above regarding the bankruptcy proceedings is incorporated herein by this reference. On January 26, 1994, a legal proceeding was brought against the Partnership based on allegations that the Partnership was in default on the loan secured by the Mission Park Apartments. This proceeding was stayed by the bankruptcy, and effectively ended when the Partnership cured and reinstated 9 the loan on the Mission Park Apartments on May 2, 1995 pursuant to the Partnership's Plan of Reorganization. As anticipated in the Partnership's Plan, on May 10, 1995, the lender on the Margarita Summit property filed a Complaint for Unified Judicial Foreclosure; For Specific Performance of Assignment of Rents Provision; For Appointment of a Receiver; and For Injunctive Relief in the Superior Court of the State of California, County of Riverside, in order to start the foreclosure process on Margarita Summit, and appoint a receiver to take over operations of the property. On May 18, 1995 the court approved a Stipulation and Order for the Appointment of a Receiver. The lender completed a non-judicial foreclosure by trustee's sale on August 1, 1995, effectively ending this litigation. There are no other pending legal proceedings which may have a material adverse effect on the Partnership. However, the Partnership is involved in small claims court proceedings against certain present or former tenants of its apartment complexes with regard to landlord-tenant matters, all of which are considered to be in the ordinary course of its business. Item 2. Changes in Securities The information contained in the Partnership's Second Amended Disclosure Statement to Debtor's Second Amended Plan of Reorganization, As Revised and Offering Memorandum for Class A Units from Exhibit 2.2 of the Partnership's Quarterly Report on Form 10-Q for the third quarter ended September 30, 1994 is incorporated herein by this reference. The Partnership made its first withdrawal from the Class A Units escrow account on April 28, 1995 pursuant to its Plan of Reorganization. This activated the 7,407 pending Class A Units at that time. The offering of Class A Units closed on June 30, 1995 by which time the partnership had received approximately $2,020,000 for the purchase of approximately 8,090 Class A Units. Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders The information contained in the Partnership's Second Amended Disclosure Statement to Debtor's Second Amended Plan of Reorganization, As Revised and Offering Memorandum for Class A Units from Exhibit 2.2 of the Partnership's Quarterly Report on Form 10-Q for the third quarter ended September 30, 1994 is incorporated herein by this reference. Along with the Disclosure Statement and Offering Memorandum, the existing limited partners received an Equity Interest Holder Ballot for Accepting or Rejecting Debtor's Second Amended Plan of Reorganization ("Ballot"). A copy of this Ballot was 10 contained in Exhibit 2.2 on sequentially numbered page 217 therein. Pursuant to the Bankruptcy Code, it was requested that the existing equity interest holders complete the Ballot and return it to the Partnership's attorneys by February 1, 1995. By February 1, 1995 the Partnership's attorneys had received completed Ballots from approximately 17% of the 18,826.5 holders of Original Partnership Units. Of the votes received, approximately 89.2% of the unitholders voted to accept the Plan, and 10.8% voted to reject the Plan. There were no other matters submitted to a vote of the holders of Limited Partnership Interests, through solicitation of proxies or otherwise, during the first three quarters of 1995. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K None 11 INCOME GROWTH PARTNERS, LTD. X SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 14, 1995 INCOME GROWTH PARTNERS, LTD. X, a California Limited Partnership By: Income Growth Management, Inc. General Partner By: Timothy C. Maurer _______________________________ Timothy C. Maurer Principal Financial Officer AND Duly Authorized Officer of the Registrant 12 EXHIBIT INDEX Sequentially Exhibit No. Description Numbered Page ___________ ______________________________________________ _____________ 11.2 Weighted Average Partnership Units Calculation 14 13 EXHIBIT 11.2 Weighted Average Partnership Units Calculation Limited Partnership units outstanding at 12/31/94 18,826 Months Additional Class A Units: Outstanding Weighted ___________ ________ Issued and outstanding 1/1/95-4/30/95 0 9 0 Issued and outstanding 5/1/95-5/31/95 7,407 5 37,035 Issued and outstanding 6/1/95-6/30/95 683 4 2,732 ________ 39,767 Divided by nine months in period 4,419 Weighted average partnership units outstanding at 9/30/95 23,245 ====== 14 -----END PRIVACY-ENHANCED MESSAGE-----