-----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, RMjq0y8hUv4NFiA80EIKwDK6xKQlZlw9wWWOjhUC5mMoGbI7xZFeiCNNq2ErBKcx G5eLPQ809DaZLcBwKFbkiA== 0000950134-96-006102.txt : 19961115 0000950134-96-006102.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950134-96-006102 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALLWOOD REALTY PARTNERS L P CENTRAL INDEX KEY: 0000865439 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF NONRESIDENTIAL BUILDINGS [6512] IRS NUMBER: 752313955 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10643 FILM NUMBER: 96662428 BUSINESS ADDRESS: STREET 1: 3710 RAWLINS STE 1500 CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 2145285588 MAIL ADDRESS: STREET 2: 3710 RAWLINS SUITE 1500 CITY: DALLAS STATE: TX ZIP: 75219 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1996 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------- FORM 10-Q 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, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 1-10643 --------- HALLWOOD REALTY PARTNERS, L.P. (Exact name of registrant as specified in its charter) --------- DELAWARE 75-2313955 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3710 RAWLINS SUITE 1500 DALLAS, TEXAS 75219-4298 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (214) 528-5588 INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO ----- ----- THE REGISTRANT IS A LIMITED PARTNERSHIP AND ISSUES UNITS REPRESENTING OWNERSHIP OF LIMITED PARTNER INTERESTS. NUMBER OF UNITS OUTSTANDING AT NOVEMBER 8, 1996: 1,672,556 UNITS. ================================================================================ 2 HALLWOOD REALTY PARTNERS, L.P. TABLE OF CONTENTS
ITEM PART I - FINANCIAL INFORMATION PAGE - ---- ------------------------------ ---- 1 Financial Statements: Consolidated Balance Sheets as of September 30, 1996 and December 31, 1995 3 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1996 and 1995 4 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1996 and 1995 5 Notes to Consolidated Financial Statements 6 2 Results of Operations and Management's Discussion and Analysis of Financial Condition 8 PART II - OTHER INFORMATION --------------------------- 1-6 Other Information 11 Signatures 12
Page 2 3 HALLWOOD REALTY PARTNERS, L.P. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT UNIT AMOUNTS)
SEPTEMBER 30, December 31, 1996 1995 ------------- ------------ (UNAUDITED) ASSETS - ------ Real estate: Land $ 56,820 $ 56,461 Buildings and improvements 257,794 257,706 Tenant improvements 18,214 16,311 ----------- ---------- 332,828 330,478 Accumulated depreciation and amortization (146,908) (138,212) ----------- ---------- Real estate, net 185,920 192,266 Cash and cash equivalents 6,920 14,302 Accounts receivable 2,099 1,080 Prepaid lease commissions, net 6,646 4,518 Lease concessions 2,190 2,498 Loan reserves and escrows 6,194 4,966 Loan costs, net 3,683 3,905 Prepaid expenses and other assets, net 1,431 1,824 ----------- ---------- Total assets $ 215,083 $ 225,359 =========== ========== LIABILITIES AND PARTNERS' CAPITAL - --------------------------------- Liabilities: Mortgages payable $ 161,355 $ 166,675 Unamortized mortgage payable forgiveness 10,911 8,912 Accounts payable and accrued expenses 6,387 5,170 Prepaid rent and security deposits 3,266 2,685 ----------- ---------- Total liabilities 181,919 183,442 ----------- ---------- Partners' capital: Limited partners - 1,672,556 and 1,747,765 units outstanding, respectively 32,832 41,498 General partner 332 419 ----------- ---------- Total partners' capital 33,164 41,917 ----------- ---------- Total liabilities and partners' capital $ 215,083 $ 225,359 =========== ==========
See notes to consolidated financial statements. Page 3 4 HALLWOOD REALTY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT PER UNIT AMOUNTS) (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------- ---------- ----------------------- 1996 1995 1996 1995 -------- ---------- --------- -------- REVENUES: Property operations $ 12,095 $ 12,727 $ 36,323 $ 37,614 Interest 182 110 644 328 -------- ---------- --------- -------- Total revenues 12,277 12,837 36,967 37,942 -------- ---------- --------- -------- EXPENSES: Property operations 6,148 6,090 18,572 17,807 Interest 3,195 3,978 10,240 12,017 Depreciation and amortization 4,269 4,401 12,818 13,129 General and administrative 768 641 2,284 2,101 -------- ---------- --------- -------- Total expenses 14,380 15,110 43,914 45,054 -------- ---------- --------- -------- LOSS BEFORE EXTRAORDINARY ITEM (2,103) (2,273) (6,947) (7,112) Extraordinary item - Loss on early extinguishment of debt - (765) - (765) -------- ---------- --------- -------- NET LOSS $ (2,103) $ (3,038) $ (6,947) $ (7,877) ======== ========== ========= ======== ALLOCATION OF NET LOSS: Limited partners $ (2,082) $ (3,007) $ (6,878) $ (7,798) General partner (21) (31) (69) (79) -------- ---------- --------- -------- Total $ (2,103) $ (3,038) $ (6,947) $ (7,877) ======== ========== ========= ======== LOSS PER UNIT: Loss before extraordinary item $ (1.24) $ (1.30) $ (4.03) $ (4.05) Loss on early extinguishment of debt - (0.43) - (0.43) -------- ---------- --------- -------- Net loss $ (1.24) $ (1.73) $ (4.03) $ (4.48) ======== ========== ========= ======== WEIGHTED AVERAGE UNITS OUTSTANDING 1,673 1,748 1,706 1,742 ======== ========== ========= ========
See notes to consolidated financial statements. Page 4 5 HALLWOOD REALTY PARTNERS, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, ----------------------------- 1996 1995 ---- ---- OPERATING ACTIVITIES: Net loss $ (6,947) $ (7,877) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 12,818 13,129 Amortization of debt forgiveness (1,239) - Lease concessions 308 528 Changes in assets and liabilities: Receivables (1,019) 119 Prepaid lease commissions, net (2,128) (688) Prepaid expenses and other assets, net 558 1,219 Accounts payable and other liabilities 1,798 (6,290) ---------- ---------- Net cash provided by operating activities 3,033 140 ---------- ---------- INVESTING ACTIVITIES: Property and tenant improvements (4,773) (3,450) Property acquisition (1,699) - Mortgage receivable principal payments 64 58 ---------- ---------- Net cash used for investing activities (6,408) (3,392) ---------- ---------- FINANCING ACTIVITIES: Mortgage principal payments (2,082) (1,883) Mortgage principal proceeds - 88,400 Mortgage principal refinanced - (70,171) Loan reserves - (11,099) Loan fees (119) (3,618) Purchase of Units (1,806) - Sale of Units to General Partner - 360 Purchase of fractional Units - (176) ---------- ---------- Net cash provided by (used for) financing activities (4,007) 1,813 ---------- ---------- DECREASE IN CASH AND CASH EQUIVALENTS (7,382) (1,439) BEGINNING CASH AND CASH EQUIVALENTS 14,302 7,786 ---------- ---------- ENDING CASH AND CASH EQUIVALENTS $ 6,920 $ 6,347 ========== ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid in cash during the period $ 11,551 $ 13,180 ========== ==========
See notes to consolidated financial statements. Page 5 6 HALLWOOD REALTY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED) 1 ORGANIZATION AND ACCOUNTING POLICIES Hallwood Realty Partners, L.P. ("HRP" or the "Partnership"), a publicly traded Delaware limited partnership, is engaged in diversified real estate activities, including the acquisition, ownership and operation of commercial office, industrial real estate and other real estate related assets. Units of limited partners' interest in the Partnership ("Units") are traded on the American Stock Exchange under the symbol "HRY". Hallwood Realty Corporation ("HRC" or "General Partner"), a Delaware corporation and wholly-owned subsidiary of The Hallwood Group Incorporated ("Hallwood") is responsible for asset management of the Partnership and its Properties. Hallwood Commercial Real Estate, Inc. ("HCRE"), formerly named Hallwood Management Company, another wholly-owned subsidiary of Hallwood, provides property management services to the Partnership's real estate properties. The consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and disclosures required by generally accepted accounting principles, although, in the opinion of management, all adjustments considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures thereto included in Form 10-K for the year ended December 31, 1995. Certain reclassifications have been made to the prior period amounts to conform to the classifications used in the current period. The reclassifications had no effect on the previously reported net loss. 2 TRANSACTIONS WITH RELATED PARTIES HRC and HCRE are compensated for services provided to HRP and its Properties. The following table sets forth such compensation and reimbursements of costs paid by HRP for the periods presented (in thousands):
ENTITY THREE MONTHS NINE MONTHS PAID OR ENDED ENDED REIMBURSED SEPTEMBER 30, SEPTEMBER 30, ----------- ------------------ ------------------ 1996 1995 1996 1995 ---- ---- ---- ---- Asset management fees HRC $ 111 $ 114 $ 336 $ 332 Property management fees HCRE 339 369 1,062 1,098 Lease commissions HCRE 1,467 484 2,251 1,210 Construction fees HCRE 125 63 279 207 Acquisition fee HRC - - 17 - Reimbursements of costs (a) HRC 583 492 1,704 1,447
(a) These costs are mostly recorded as general and administrative expenses and represent reimbursement, at cost, for salaries, employee and director insurance and certain overhead. HRP pays the balance of its account with HRC monthly. Page 6 7 HALLWOOD REALTY PARTNERS, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED) 3 PARTNERS' CAPITAL HRP purchased, in private transactions, 74,760 Units for $1,776,000 in May 1996 and 449 Units for $12,000 in July 1996. In addition, the General Partner's capital account was adjusted by $18,000 in order to maintain its 1% general partner interest, in accordance with HRP's Partnership Agreement. Accordingly, HRP's outstanding Units have decreased from 1,747,765 Units to 1,672,556 Units. The following table illustrates the changes to Partners' Capital for the nine months ended September 30, 1996 (in thousands except Unit amounts):
Limited Partner General Limited Units Partner Partners Total Outstanding ------- -------- --------- ----------- Partners' capital, January 1, 1996 $ 419 $ 41,498 $ 41,917 1,747,765 Purchase and retirement of Units (18) (1,788) (1,806) (75,209) Net loss for the first nine months of 1996 (69) (6,878) (6,947) - -------- --------- --------- --------- Partners' capital, September 30, 1996 $ 332 $ 32,832 $ 33,164 1,672,556 ======== ========= ========= =========
4 FIRST MARYLAND BUILDING - LEASE RENEWAL AND MORTGAGE PAYABLE Per the loan modification agreement described below, HRP is required to spend $2,700,000 for the costs of improvements and the leasing commission for the lease renewal of First Maryland Building's major tenant. The tenant's previous lease was not scheduled to expire until mid-1997, however the tenant had been in negotiations with HRP in an effort to reduce their rental rate of $25 per square foot per annum, which was substantially above the prevailing market rate in downtown Baltimore, Maryland. Concurrently with the loan modification, HRP executed a revised ten- year lease with the tenant which calls for rents ranging from $15 to $17 per square foot per annum and increases their space from 62% to 71% of the property's net rentable space of approximately 343,000 square feet. On October 3, 1996, but effective May 1, 1996, the lender for First Maryland Building extended the loan to April 30, 2003 with an unchanged interest rate of LIBOR plus 3.25% (currently at 8.813%) and forgave $3,237,000 of the loan in addition to the $9,250,000 of forgiveness granted in September 1995. Under this agreement, 49.9% of the property's net cash flow must be used to amortize the principal of the loan. The outstanding loan balance, net of the loan forgiveness, as of September 30, 1996 is $25,552,000. For financial reporting purposes, the loan forgiveness is treated as a troubled debt restructuring and accordingly, HRP did not recognize a gain. Instead, the loan forgiveness remains on the balance sheet of the Partnership and is being amortized over the life of the loan. Interest expense is computed in such a way that a constant effective interest rate (currently equal to approximately 1.3%) is applied to the carrying amount of the loan. The contingent nature of the forgiveness that was part of the September 1995 loan modification was removed with the October 1996 loan modification. Accordingly, for federal income tax purposes, the total loan forgiveness of $12,487,000 will be reported as a gain to the partners of HRP on their 1996 Schedule K-1s. Based on available records, the General Partner believes that most individuals who were partners at the time of HRP's formation in November 1990 and certain other partners possibly have enough prior years' suspended losses to absorb a part, if not all, of this gain. Partners should consult their own tax advisor or preparer to assess the tax consequences of this transaction. Page 7 8 HALLWOOD REALTY PARTNERS, L.P. ITEM 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATIONS THIRD QUARTER 1996 COMPARED TO THIRD QUARTER 1995 REVENUE FROM PROPERTY OPERATIONS decreased $632,000, or 5.0%, for the third quarter of 1996, as compared to the 1995 third quarter. The following table illustrates the components of the change, in thousands: Rental income, net $ (755) Expense recoveries (60) Other property income 183 -------- Net decrease $ (632) ========
Overall rental occupancies and rates remained fairly consistent with the prior period. The decrease in rental income is primarily due to a reduction in rental rates at First Maryland Building, a decrease in occupancy at Parklane Towers and Corporate Square, partially offset by a rise in occupancy at Executive Park and the addition of the Joy Road property in February 1996. The First Maryland Building rental rate reduction is discussed in Note 4 to the financial statements. Corporate Square's decrease in occupancy was temporary due to the expiration of a significant lease in late 1995; earlier in 1996, the space was re-leased and effective September 25, 1996, the new tenant took possession, which increased the property's occupancy from about 72% to 91%. INTEREST INCOME increased $72,000 as a result of an increase in HRP's average cash position between periods and therefore increased funds available for investment. PROPERTY OPERATING EXPENSES increased $58,000, or 1.0%, for the third quarter of 1996, as compared to the same period in 1995, primarily due to higher leasing commission amortization and security control costs, partially offset by lower utility costs and one-time professional fees incurred in the 1995 period. The following table illustrates the components of the change, in thousands: Administrative costs $ 26 Management fees (33) Marketing and leasing 65 Utilities (68) Janitorial and other services 68 Repairs and maintenance (37) Real estate taxes 33 Insurance 4 -------- Net increase $ 58 ========
INTEREST EXPENSE decreased $783,000 due to $569,000 of amortization of First Maryland's debt forgiveness in the 1996 period, a reduction in loan cost amortization of $28,000, lower litigation cost interest of $62,000, and $124,000 of other net decreases in interest costs. In October 1995, HRP began amortizing $9,250,000 of debt forgiveness associated with the First Maryland Building against the carrying value of the debt over the life of the loan. On October 3, 1996, but effective May 1, 1996, an additional $3,237,000 of debt forgiveness was granted (see Note 4 to the financial statements). DEPRECIATION AND AMORTIZATION EXPENSE decreased $132,000 primarily due to reduced building improvement depreciation. GENERAL AND ADMINISTRATIVE EXPENSES increased $127,000 in the comparable third quarters as the result of increased business/franchise taxes, certain professional fees and overhead costs. LOSS ON EARLY EXTINGUISHMENT OF DEBT in the 1995 third quarter of $765,000 represents pre-payment penalties incurred with the early pay off of loans associated with new financing and the write off of certain loan costs. Page 8 9 HALLWOOD REALTY PARTNERS, L.P. RESULTS OF OPERATIONS - CONTINUED FIRST NINE MONTHS OF 1996 COMPARED TO FIRST NINE MONTHS OF 1995 REVENUE FROM PROPERTY OPERATIONS decreased $1,291,000, or 3.4%, during the first nine months of 1996, as compared to the first nine months of 1995. The following table illustrates the components of the change, in thousands: Rental income, net $ (579) Expense recoveries (875) Other property income 163 --------- Net decrease $ (1,291) =========
Overall rental occupancies and rates remained fairly consistent with the prior period. The decrease in rental income is primarily due to a reduction in rental rates at First Maryland Building, a decrease in occupancy at Parklane Towers and Corporate Square, partially offset by a rise in occupancy at Executive Park and the addition of the Joy Road property in February 1996. The First Maryland Building rental rate reduction is discussed in Note 4 to the financial statements. Corporate Square's decrease in occupancy was temporary due to the expiration of a significant lease in late 1995; earlier in 1996, the space was re-leased and effective September 25, 1996, the new tenant took possession, which increased the property's occupancy from about 72% to 91%. During the first quarter of 1995, expense recoveries were abnormally high due to adjustments made to the amount of real estate tax recoveries from tenants in the state of Michigan for the two years prior to 1995. Accordingly, expense recoveries for the 1996 period decreased from the prior year period. INTEREST INCOME increased $316,000 as a result of an increase in HRP's average cash position between periods and therefore increased funds available for investment. PROPERTY OPERATING EXPENSES increased $765,000, or 4.3%, for the first nine months of 1996, as compared to the same period in 1995, primarily due to higher utility costs, leasing commission amortization, security control costs and repairs to heating and air duct systems, partially offset by one-time costs for certain professional fees incurred in the 1995 period. The following table illustrates the components of the change, in thousands: Administrative costs $ (51) Management fees (32) Marketing and leasing 215 Utilities 221 Janitorial and other services 150 Repairs and maintenance 165 Real estate taxes 84 Insurance 13 ------- Net increase $ 765 =======
INTEREST EXPENSE decreased $1,777,000 due to $1,239,000 of amortization of First Maryland's debt forgiveness in the 1996 period, a reduction in loan cost amortization of $113,000, lower litigation cost interest of $206,000, and $219,000 of other net decreases in interest costs. In October 1995, HRP began amortizing $9,250,000 of debt forgiveness associated with the First Maryland Building against the carrying value of the debt over the life of the loan. On October 3, 1996, but effective May 1, 1996, an additional $3,237,000 of debt forgiveness was granted (see Note 4 to the financial statements). DEPRECIATION AND AMORTIZATION EXPENSE decreased $311,000 primarily due to reduced building improvement depreciation. GENERAL AND ADMINISTRATIVE EXPENSES increased $183,000 in the first nine months of 1996, as compared to the corresponding period of 1995, primarily due to increased personnel costs, business/franchise taxes, certain professional fees and overhead costs. LOSS ON EARLY EXTINGUISHMENT OF DEBT in the 1995 third quarter of $765,000 represents pre-payment penalties incurred with the early pay off of loans associated with new financing and the write off of certain loan costs. Page 9 10 HALLWOOD REALTY PARTNERS, L.P. LIQUIDITY AND CAPITAL RESOURCES HRP is engaged in diversified real estate activities, including the acquisition, ownership and operation of commercial office, industrial real estate and other real estate related assets. While it is the General Partner's primary intention to operate HRP's existing real estate investments and to acquire and operate additional real estate investments, HRC also continually evaluates each of HRP's real estate investments in light of current economic trends and operations to determine if any should be considered for disposal. At this time, there are no plans to dispose of any of HRP's real estate properties. As of September 30, 1996, HRP owned twelve properties (the "Properties), of which seven are office building properties and five are industrial park properties containing approximately 2,610,000 and 2,557,000 net rentable square feet, respectively. The Properties are located in six states. The Partnership seeks to maximize the value of the Properties by making capital and tenant improvements, by executing marketing programs to attract and retain tenants and by reducing operating expenses where possible. As of September 30, 1996, HRP had cash and cash equivalents of $6,920,000 as compared to $14,302,000 as of December 31, 1995. Therefore, HRP's cash position decreased $7,382,000 during the first nine months of 1996. The sources of cash during the period were $3,033,000 of cash provided by operating activities and $64,000 of payments from a mortgage receivable. Uses of cash during the period were $4,773,000 of property and tenant improvements, $1,699,000 to purchase the Joy Road property in February 1996, $2,082,000 of mortgage principal payments, $1,806,000 to purchase 75,209 limited partner Units (see Note 3 to the Financial Statements), and $119,000 of loan fees. Substantially all of the buildings in eleven of HRP's twelve Properties were encumbered by non-recourse mortgages as of September 30, 1996. Based upon loan maturities currently in effect, in the aggregate, HRP is required to pay about $247,000 of principal payments for the remainder of 1996. Per the loan modification agreement described below, HRP is required to spend $2,700,000 for the costs of improvements and the leasing commission for the lease renewal of First Maryland Building's major tenant. The tenant's previous lease was not scheduled to expire until mid-1997, however the tenant had been in negotiations with HRP in an effort to reduce their rental rate of $25 per square foot per annum, which was substantially above the prevailing market rate in downtown Baltimore, Maryland. Concurrently with the loan modification, HRP executed a revised ten-year lease with the tenant which calls for rents ranging from $15 to $17 per square foot per annum and increases their space from 62% to 71% of the property's net rentable space of approximately 343,000 square feet. On October 3, 1996, but effective May 1, 1996, the lender for First Maryland Building extended the loan to April 30, 2003 with an unchanged interest rate of LIBOR plus 3.25% (currently at 8.813%) and forgave $3,237,000 of the loan in addition to the $9,250,000 of forgiveness granted in September 1995. Under this agreement, 49.9% of the property's net cash flow must be used to amortize the principal of the loan. The outstanding loan balance, net of the loan forgiveness, as of September 30, 1996 is $25,552,000. The contingent nature of the forgiveness that was part of the September 1995 loan modification was removed with the October 1996 loan modification. Accordingly, for federal income tax purposes, the total loan forgiveness of $12,487,000 will be reported as a gain to the partners of HRP on their 1996 Schedule K-1s. Based on available records, the General Partners believes that most individuals who were partners at the time of HRP's formation in November 1990 and certain other partners possibly have enough prior years' suspended losses to absorb a part, if not all, of this gain. Partners should consult their own tax advisor or preparer to assess the tax consequences of this transaction. Executive Park's mortgage notes matured on June 16, 1996. On October 8, 1996, the lender and HRP entered into a renewal and loan modification agreement, which extended the maturity date fifteen years to November 15, 2011 and set the initial interest rate at 8.87%. The notes are self-amortizing and include call options every three years for evaluation of financial performance. The interest rate may be adjusted, within certain parameters, at the call option dates. For the foreseeable future, the Partnership anticipates that mortgage and note principal payments (excluding balloon mortgage payments), tenant improvements and capital expenditures will be funded by net cash from operations. The primary sources of capital to fund future Partnership acquisitions and balloon mortgage payments will be proceeds from the sale, financing, or refinancing of its Properties. Each quarter HRC, as General Partner, reviews the Partnership's capacity to make cash distributions. No such cash distributions are anticipated for the immediate future. Page 10 11 HALLWOOD REALTY PARTNERS, L.P. PART II - OTHER INFORMATION
Item ---- 1 Legal Proceedings None. ----------------- 2 Changes in Securities None. --------------------- 3 Defaults upon Senior Securities None. ------------------------------- 4 Submission of Matters to a Vote of Security Holders None. --------------------------------------------------- 5 Other Information None. ----------------- 6 Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 27 - Financial Data Schedule Page 13 (b) Reports on Form 8-K None.
Page 11 12 HALLWOOD REALTY PARTNERS, L.P. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this Quarterly Report of Form 10-Q for the quarter ended September 30, 1996 has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. HALLWOOD REALTY PARTNERS, L.P. ------------------------------------ (Registrant) By: HALLWOOD REALTY CORPORATION General Partner Date: November 12, 1996 By: /s/ WILLIAM L. GUZZETTI ----------------- -------------------------------- William L. Guzzetti President (Chief Operating Officer) Date: November 12, 1996 By: /s/ JEFFREY D. GENT ----------------- -------------------------------- Jeffrey D. Gent Vice President - Finance (Principal Financial and Accounting Officer) Page 12 13 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 27 - Financial Data Schedule
EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1996 SEP-30-1996 6,920 0 2,099 0 0 0 332,828 146,908 215,083 0 0 0 0 32,832 332 215,083 0 12,277 0 11,185 0 0 3,195 (2,103) 0 (2,103) 0 0 0 (2,103) (1.24) (1.24)
-----END PRIVACY-ENHANCED MESSAGE-----