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 June 30, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-14578
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)
June 30, 2001
Assets
Cash and cash equivalents $ 392
Receivables and deposits 108
Other assets 109
Investment property:
Land $ 621
Buildings and related personal property 9,856
10,477
Less accumulated depreciation (5,577) 4,900
$ 5,509
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 28
Tenant security deposit liabilities 101
Accrued property taxes 388
Other liabilities 74
Mortgage note payable 5,415
Partners' Deficit
General partner $ (144)
Limited partners (15,698 units issued and
outstanding) (353) (497)
$ 5,509
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 Six Months Ended
June 30, June 30,
2001 2000 2001 2000
Revenues:
Rental income $ 371 $ 386 $ 826 $ 848
Other income 70 59 110 95
Total revenues 441 445 936 943
Expenses:
Operating 151 170 291 278
General and administrative 50 85 115 151
Depreciation 135 141 271 279
Interest 110 -- 222 --
Property taxes 54 67 120 134
Total expenses 500 463 1,019 842
Net (loss) income $ (59) $ (18) $ (83) $ 101
Net (loss) income allocated
to general partner (2%) $ (2) $ -- $ (2) $ 2
Net (loss) income allocated
to limited partners (98%) (57) (18) (81) 99
$ (59) $ (18) $ (83) $ 101
Net (loss) income per limited
partnership unit $ (3.63) $ (1.15) $ (5.16) $ 6.31
Distributions per limited
partnership unit $ 8.15 $ 34.33 $ 44.40 $141.80
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 -- (3) (697) (700)
Net loss for the six months
ended June 30, 2001 -- (2) (81) (83)
Partners' deficit
at June 30, 2001 15,698 $ (144) $ (353) $ (497)
See Accompanying Notes to Financial Statements
d)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2001 2000
Cash flows from operating activities:
Net (loss) income $ (83) $ 101
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation 271 279
Amortization of loan costs 2 --
Change in accounts:
Receivables and deposits 31 211
Other assets (10) (26)
Due from affiliate 57 --
Accounts payable 23 (89)
Tenant security deposit liabilities (23) (16)
Accrued property taxes (123) 135
Other liabilities (126) (51)
Net cash provided by operating activities 19 544
Cash flows used in investing activities:
Property improvements and replacements (22) (25)
Cash flows used in financing activities:
Distributions to partners (700) (2,250)
Payments on mortgage note payable (57) --
Net cash used in financing activities (757) (2,250)
Net decrease in cash and cash equivalents (760) (1,731)
Cash and cash equivalents at beginning of period 1,152 2,196
Cash and cash equivalents at end of period $ 392 $ 465
Supplemental disclosure of cash flow information:
Cash paid for interest $ 220 $ --
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"). 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 and six month
periods ended June 30, 2001, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 2001. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2000. The General Partner is an affiliate of Apartment Investment
and Management Company ("AIMCO"), a publicly traded real estate investment
trust.
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 established standards for related disclosures about products and services,
geographic areas, and major customers. As defined in SFAS No. 131, the
Partnership has only one reportable segment. The Managing General Partner
believes that segment-based disclosures will not result in a more meaningful
presentation than the 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
six months ended June 30, 2001 and 2000:
2001 2000
(in thousands)
Property management fees (included in operating expenses) $ 51 $ 50
Asset management fees (included in general and
administrative expenses) 50 71
Reimbursement for services of affiliates (included in
general and administrative expenses) 36 21
Affiliates of the Managing General Partner were entitled to receive 5% of gross
receipts from the Registrant's property for providing property management
services. The Registrant paid to such affiliates approximately $51,000 and
$50,000 for the six months ended June 30, 2001 and 2000, respectively.
An affiliate of the Managing General Partner received reimbursement of asset
management fees amounting to approximately $50,000 and $71,000 for the six
months ended June 30, 2001 and 2000, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $36,000 and
$21,000 for the six months ended June 30, 2001 and 2000, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 5,052 limited partnership units (the
"Units") in the Partnership representing 32.18% of the outstanding units as of
June 30, 2001. A number of these units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters, which would include without limitation, voting on certain
amendments to the Partnership Agreement and voting to remove the Managing
General Partner. When voting on matters, AIMCO would in all likelihood vote the
Units it acquired in a manner favorable to the interest of the Managing General
Partner because of its affiliation with the Managing General Partner.
Note C - Distributions
During the six months ended June 30, 2001, the Partnership declared and paid
distributions of approximately $700,000 (approximately $697,000 to the limited
partners or $44.40 per limited partnership unit) consisting of approximately
$153,000 of cash from operations (approximately $150,000 to the limited partners
or $9.56 per limited partnership unit) and approximately $547,000 to the limited
partners from the remaining proceeds from the financing of Lewis Park Apartments
in August 2000 ($34.84 per limited partnership unit).
During the six months ended June 30, 2000, the Partnership declared and paid
distributions of approximately $2,250,000 (approximately $2,226,000 to the
limited partners or $141.80 per limited partnership unit) consisting of
approximately $1,177,000 of cash from operations (approximately $1,153,000 to
the limited partners or $73.45 per limited partnership unit) and approximately
$1,073,000 to the limited partners from the sale of Highland Professional Tower
($68.35 per limited partnership unit).
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 six
months ended June 30, 2001 and 2000 was 78% and 86%, respectively. The Managing
General Partner attributes the decrease in occupancy to the restructuring of the
property's leases and the cyclical and unpredictable nature of student housing
during the summer months.
Results of Operations
The Partnership recognized a net loss of approximately $83,000 for the six
months ended June 30, 2001 compared to net income of approximately $101,000 for
the six months ended June 30, 2000. The decrease in net income was attributable
to a slight decrease in total revenues and an increase in total expenses.
Total revenues decreased due to a decrease in rental income primarily due to a
decrease in occupancy at the Partnership's investment property offset by an
increase in other income due to increases in cable and student housing income.
Total expenses increased due to increases in operating and interest expenses
offset by a decrease in property tax and general and administrative expenses.
Operating expenses increased due to an increase in employee related costs at the
Partnership's investment property and the collection of receivables in 2000 that
were previously deemed uncollectible at Highlands Professional Park which was
sold in December 1999 offset by decreases in contract labor. Interest expense
increased due to the financing of Lewis Park Apartments in August 2000. Property
tax expense decreased due to the timing of the receipt of the property tax bills
from the taxing authorities. General and administrative expenses decreased due
to a decrease in asset management fees paid to the Managing General Partner
pursuant to the Partnership Agreement.
The Partnership recognized a net loss of approximately $59,000 and $18,000 for
the three months ended June 30, 2001 and 2000, respectively. The increase in net
loss was attributable to a slight decrease in total revenues and an increase in
total expenses.
Total revenues decreased due to a decrease in rental income primarily due to a
decrease in occupancy at the Partnership's investment property. Total expenses
increased due to an increase in interest expense offset by a decrease in
operating, property tax and general and administrative expenses. Interest
expense increased due to the financing of Lewis Park Apartments in August 2000.
Operating expense decreased due to a decrease in maintenance expense resulting
from a decrease in contract labor at the Partnership's investment property.
Property tax expense decreased due to the timing of the receipt of the property
tax bills from the taxing authorities. General and administrative expenses
decreased due to a decrease in asset management fees paid to the Managing
General Partner pursuant to the Partnership Agreement.
Included in general and administrative expense at both June 30, 2001 and 2000
are management reimbursements to the Managing General Partner allowed under the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and 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 June 30, 2001, the Partnership had cash and cash equivalents of approximately
$392,000 as compared to approximately $465,000 at June 30, 2000. Cash and cash
equivalents decreased approximately $760,000 from December 31, 2000, due to
approximately $757,000 and $22,000 of cash used in financing and investing
activities, respectively, slightly offset by approximately $19,000 of cash
provided by 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.
During the six months ended June 30, 2001, the Partnership completed
approximately $22,000 of capital improvements at Lewis Park Apartments,
consisting primarily of flooring and appliance replacements. These improvements
were funded from operating cash flow. The Partnership has budgeted approximately
$65,000 for capital improvements for 2001, consisting primarily of air
conditioning unit, cabinet, appliance, and flooring replacements. Additional
improvements may be considered and will depend on the physical condition of the
property as well as 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 $5,415,000 is being amortized over 20 years with a
maturity date of September 1, 2020.
During the six months ended June 30, 2001, the Partnership declared and paid
distributions of approximately $700,000 (approximately $697,000 to the limited
partners or $44.40 per limited partnership unit) consisting of approximately
$153,000 of cash from operations (approximately $150,000 to the limited partners
or $9.56 per limited partnership unit) and approximately $547,000 to the limited
partners from the remaining proceeds from the financing of Lewis Park Apartments
in August 2000 ($34.84 per limited partnership unit).
During the six months ended June 30, 2000, the Partnership declared and paid
distributions of approximately $2,250,000 (approximately $2,226,000 to the
limited partners or $141.80 per limited partnership unit) consisting of
approximately $1,177,000 of cash from operations (approximately $1,153,000 to
the limited partners or $73.45 per limited partnership unit) and approximately
$1,073,000 to the limited partners from the sale of Highland Professional Tower
($68.35 per limited partnership unit). 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 the debt maturity, 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 5,052 limited partnership units (the
"Units") in the Partnership representing 32.18% of the outstanding units as of
June 30, 2001. A number of these units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will make one or more additional offers to acquire additional limited
partnership interests in the Partnership for cash or in exchange for units in
the operating partnership of AIMCO. Under the Partnership Agreement, unitholders
holding a majority of the Units are entitled to take action with respect to a
variety of matters, which would include without limitation, voting on certain
amendments to the Partnership Agreement and voting to remove the Managing
General Partner. When voting on matters, AIMCO would in all likelihood vote the
Units it acquired in a manner favorable to the interest of the Managing General
Partner because of its affiliation with the Managing General Partner.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
None.
b) Reports on Form 8-K filed during the quarter ended June 30, 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.,
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: