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 March 31, 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 0-14578
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2825863
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 2001
Assets
Cash and cash equivalents $ 369
Receivables and deposits 131
Due from affiliate 55
Other assets 117
Investment property:
Land $ 621
Buildings and related personal property 9,838
10,459
Less accumulated depreciation (5,442) 5,017
$ 5,689
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 7
Tenant security deposit liabilities 114
Accrued property taxes 334
Other liabilities 98
Mortgage note payable 5,444
Partners' Deficit
General partner $ (140)
Limited partners (15,698 units issued and
outstanding) (168) (308)
$ 5,689
See Accompanying Notes to Financial Statements
b)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2001 2000
Revenues:
Rental income $ 455 $ 462
Other income 40 36
Total revenues 495 498
Expenses:
Operating 140 108
General and administrative 65 66
Depreciation 136 138
Property taxes 66 67
Interest expense 112 --
Total expenses 519 379
Net (loss) income $ (24) $ 119
Net (loss) income allocated to general partner (2%) $ -- $ 2
Net (loss) income allocated to limited partners (98%) (24) 117
$ (24) $ 119
Net (loss) income per limited partnership unit $ (1.53) $ 7.45
Distributions per limited partnership unit $ 36.25 $107.47
See Accompanying Notes to Financial Statements
c)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 15,698 $ -- $15,698 $15,698
Partners' (deficit) capital at
December 31, 2000 15,698 $ (139) $ 425 $ 286
Distributions paid to partners -- (1) (569) (570)
Net loss for the three months
ended March 31, 2001 -- -- (24) (24)
Partners' deficit at
March 31, 2001 15,698 $ (140) $ (168) $ (308)
See Accompanying Notes to Financial Statements
d)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
2001 2000
Cash flows from operating activities:
Net (loss) income $ (24) $ 119
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation 136 138
Amortization of loan costs 2 --
Change in accounts:
Receivables and deposits 8 293
Due from affiliate 2 --
Other assets (18) (27)
Accounts payable 2 (72)
Tenant security deposit liabilities (10) 7
Accrued property taxes (177) 67
Other liabilities (102) (36)
Net cash (used in) provided by operating activities (181) 489
Cash flows used in investing activities:
Property improvements and replacements (4) (9)
Cash flows used in financing activities:
Distributions to partners (570) (1,700)
Payments on mortgage note payable (28) --
Net cash used in financing activities (598) (1,700)
Net decrease in cash and cash equivalents (783) (1,220)
Cash and cash equivalents at beginning of period 1,152 2,196
Cash and cash equivalents at end of period $ 369 $ 976
Supplemental disclosure of cash flow information:
Cash paid for interest $ 110 $ --
See Accompanying Notes to Financial Statements
e)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of HCW Pension Real Estate Fund
Limited Partnership (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. The General Partner of the Partnership is HCW General
Partner Ltd., whose sole general partner is IH, Inc. (the "Managing General
Partner"), an affiliate of Apartment Investment and Management Company
("AIMCO"), a publicly traded real estate investment trust. In the opinion of the
Managing General Partner, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 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 financial
statements and footnotes thereto included in the Partnership's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 2000.
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 requires that those enterprises report
selected information about operating segments in interim financial reports. It
also establishes 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 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 (i) certain
payments to affiliates for services and (ii) 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
three months ended March 31, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $ 26 $ 25
Asset management fees (included in general and
administrative expenses) 32 36
Reimbursement for services of affiliates (included in
general and administrative expenses) 19 12
Affiliates of the Managing General Partner are entitled to receive 5% of gross
receipts from the Registrant's residential property for providing property
management services. The Registrant paid to such affiliates approximately
$26,000 and $25,000 for each of the three months ended March 31, 2001 and 2000,
respectively.
An affiliate of the Managing General Partner received reimbursement of asset
management fees amounting to approximately $32,000 and $36,000 for the three
months ended March 31, 2001 and 2000, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $19,000 and
$12,000 for the three months ended March 31, 2001 and 2000, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 5,028 limited partnership units (the
"Units") in the Partnership representing 32.03% of the outstanding units as of
March 31, 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
During the three months ended March 31, 2001, the Partnership declared and paid
a distribution of approximately $570,000 (approximately $569,000 to the limited
partners or $36.25 per limited partnership unit) consisting of approximately
$23,000 of cash from operations (approximately $22,000 to the limited partners
or $1.40 per limited partnership unit) and approximately $547,000 to the limited
partners from the remaining proceeds from the financing of Lewis Park Apartments
($34.85 per limited partnership unit). During the three months ended March 31,
2000, the Partnership declared and paid a distribution of approximately
$1,700,000 ($107.47 per limited partnership unit) consisting of $627,000 of cash
from operations and $1,073,000 from the sale of Highland Professional Tower. The
limited partners received approximately $1,687,000 and the general partner
received approximately $13,000. Subsequent to March 31, 2001, the Partnership
declared and paid distributions of approximately $130,000 (approximately
$127,000 paid to the limited partners or $8.09 per limited partnership unit)
from operations.
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 Registrant from time to time. The
discussion of the Registrant'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 Registrant'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 property consists of one apartment complex located
in Carbondale, Illinois. The average occupancy of the property for the three
months ended March 31, 2001 and 2000 was 86% and 89%, respectively. The Managing
General Partner attributes the decrease in occupancy to decreased enrollment at
the local university.
Results of Operations
The Partnership realized a net loss of approximately $24,000 for the three
months ended March 31, 2001 compared to net income of approximately $119,000 for
the three months ended March 31, 2000. The decrease in net income is primarily
attributable to an increase in total expenses and a slight decrease in total
revenue.
Total revenue decreased due to a decrease in rental revenue at Lewis Park
Apartments. Rental revenue decreased due to a decrease in occupancy slightly
offset by an increase in average rental rates.
Total expenses increased primarily due to an increase in interest and operating
expenses. Interest expense increased due to the issuance of a mortgage note
payable during August 2000 on Lewis Park Apartments as discussed below.
Operating expense increased due to an increase in salaries and related employee
benefits at the investment property.
Included in general and administrative expenses at March 31, 2001 and 2000, are
management reimbursements to the Managing General Partner allowed under the
Partnership Agreement. In addition, cost associated with the quarterly and
annual communications with investors and regulatory agencies and 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 its investment property to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Registrant 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 March 31, 2001, the Partnership had cash and cash equivalents of
approximately $369,000 as compared to approximately $976,000 at March 31, 2000.
Cash and cash equivalents decreased approximately $783,000 from the
Partnership's year ended December 31, 2000, due to approximately $598,000 of
cash used in financing activities, approximately $4,000 of cash used in
investing activities and approximately $181,000 of cash used in operating
activities. Cash used in financing activities consisted of distributions paid to
the partners and, to a lesser extent, principal payments on the mortgage
encumbering Lewis Park Apartments. Cash used in investing activities consisted
of property improvements and replacements. 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 property 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
the Partnership's property are detailed below.
Lewis Park Apartments
During the three months ended March 31, 2001, the Partnership completed
approximately $4,000 of capital improvements at Lewis Park, consisting primarily
of miscellaneous improvements. These improvements were funded from operating
cash flow. The Partnership evaluated the capital improvement needs of the
property for the year. The amount budgeted is approximately $65,000, consisting
primarily of air conditioning unit replacements, appliance replacements, and
carpet and vinyl replacement. Additional improvements may be considered and will
depend on the physical condition of the property as well as replacement reserves
and anticipated cash flow generated by the property.
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 Registrant's current assets are thought to be sufficient for any short-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of approximately $5,444,000 is amortized over 20 years with a
maturity date of September 1, 2020. The Managing General Partner will attempt to
refinance this indebtedness and/or sell the property prior to its maturity date.
If the property cannot be refinanced or sold for a sufficient amount, the
Registrant may risk losing the property through foreclosure.
During the three months ended March 31, 2001, the Partnership declared and paid
a distribution of approximately $570,000 (approximately $569,000 to the limited
partners or $36.25 per limited partnership unit) consisting of approximately
$23,000 of cash from operations (approximately $22,000 to the limited partners
or $1.40 per limited partnership unit) and approximately $547,000 to the limited
partners from the remaining proceeds from financing of Lewis Park Apartments
($34.85 per limited partnership unit). During the three months ended March 31,
2000, the Partnership declared and paid a distribution of approximately
$1,700,000 ($107.47 per limited partnership unit) consisting of $627,000 of cash
from operations and $1,073,000 from the sale of Highland Professional Tower. The
limited partners received approximately $1,687,000 and the general partner
received approximately $13,000. Subsequent to March 31, 2001, the Partnership
declared and paid distributions of approximately $130,000 (approximately
$127,000 paid to the limited partners or $8.09 per limited partnership unit)
from operations. The Partnership's distribution policy is reviewed on a
quarterly basis. Future cash distributions will depend on the levels of net cash
generated from operations, the availability of cash reserves, and the timing of
debt refinancing and/or a property sale. There can be no assurance that the
Partnership will generate sufficient funds from operations, after planned
capital improvement expenditures, to permit any 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 5,028 limited partnership units (the
"Units") in the Partnership representing 32.03% of the outstanding units as of
March 31, 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 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None.
b) Reports on Form 8-K filed during the first quarter of 2001:
None.
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.
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
By: HCW General Partner, Ltd.,
General Partner
By: IH, Inc.,
the 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: