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, 2002
[ ] 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, 2002
Assets
Cash and cash equivalents $ 351
Receivables and deposits 150
Other assets 111
Investment property:
Land $ 621
Buildings and related personal property 9,947
10,568
Less accumulated depreciation (5,975) 4,593
$ 5,205
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 9
Tenant security deposit liabilities 135
Accrued property taxes 312
Other liabilities 90
Mortgage note payable 5,324
Partners' Deficit
General partner $ (147)
Limited partners (15,698 units issued and
outstanding) (518) (665)
$ 5,205
See Accompanying Notes to Financial Statements
b)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended
March 31,
2002 2001
Revenues:
Rental income $ 480 $ 459
Other income 30 36
Total revenues 510 495
Expenses:
Operating 121 140
General and administrative 49 65
Depreciation 132 136
Property taxes 63 66
Interest expense 109 112
Total expenses 474 519
Net income (loss) $ 36 $ (24)
Net income allocated to general partner (2%) $ 1 $ --
Net income (loss) allocated to limited partners (98%) 35 (24)
$ 36 $ (24)
Net income (loss) per limited partnership unit $ 2.23 $ (1.53)
Distributions per limited partnership unit $ 2.48 $ 36.25
See Accompanying Notes to Financial Statements
c)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(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 at
December 31, 2001 15,698 $ (147) $ (514) $ (661)
Distributions paid to partners -- (1) (39) (40)
Net income for the three months
ended March 31, 2002 -- 1 35 36
Partners' deficit at
March 31, 2002 15,698 $ (147) $ (518) $ (665)
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,
2002 2001
Cash flows from operating activities:
Net income (loss) $ 36 $ (24)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 132 136
Amortization of loan costs 1 2
Change in accounts:
Receivables and deposits (6) 8
Due from affiliate -- 2
Other assets (18) (18)
Accounts payable 3 2
Tenant security deposit liabilities 7 (10)
Accrued property taxes 63 (177)
Other liabilities (61) (102)
Net cash provided by (used in) operating activities 157 (181)
Cash flows from investing activities:
Property improvements and replacements (36) (4)
Cash flows from financing activities:
Distributions to partners (40) (570)
Payments on mortgage note payable (31) (28)
Net cash used in financing activities (71) (598)
Net increase (decrease) in cash and cash equivalents 50 (783)
Cash and cash equivalents at beginning of period 301 1,152
Cash and cash equivalents at end of period $ 351 $ 369
Supplemental disclosure of cash flow information:
Cash paid for interest $ 108 $ 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, 2002, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2002. 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, 2001.
Reclassifications
Certain reclassifications have been made to the 2001 balances to conform to the
2002 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
Partnership activities. The Partnership Agreement provides for (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership.
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 for both of the three months ended March 31, 2002 and 2001, which is
included in operating expenses.
An affiliate of the Managing General Partner received reimbursement of asset
management fees amounting to approximately $17,000 and $32,000 for the three
months ended March 31, 2002 and 2001, respectively, which is included in general
and administrative expenses.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $20,000 and
$19,000 for the three months ended March 31, 2002 and 2001, respectively, which
is included in general and administrative expenses.
Beginning in 2001, the Partnership began insuring its property up to certain
limits through coverage provided by AIMCO which is generally self-insured for a
portion of losses and liabilities related to workers compensation, property
casualty and vehicle liability. The Partnership insures its property above the
AIMCO limits through insurance policies obtained by AIMCO from insurers
unaffiliated with the Managing General Partner. During the three months ended
March 31, 2002 and 2001, the Partnership was charged by AIMCO and its affiliates
approximately $14,000 and $15,000, respectively, for insurance coverage and fees
associated with policy claims administration.
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, 2002 and 2001 was 87% and 86%, respectively.
Results of Operations
The Partnership realized net income of approximately $36,000 for the three
months ended March 31, 2002 compared to a net loss of approximately $24,000 for
the three months ended March 31, 2001. The increase in net income is primarily
attributable to an increase in total revenues and a decrease in total expenses.
Total revenues increased due to an increase in rental income partially offset by
a decrease in other income. Rental income increased due to an increase in
student housing fees. Other income decreased due to a decrease in interest
income as a result of lower cash balances throughout the period.
Total expenses decreased primarily due to a decrease in operating and general
and administrative expenses. Operating expense decreased due to a decrease in
salaries and related employee benefits and advertising costs.
General and administrative expenses decreased due to a decrease in
reimbursements to the Managing General Partner allowed under the Partnership
Agreement associated with its management of the Partnership. 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 in general and administrative expenses.
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, 2002, the Partnership had cash and cash equivalents of
approximately $351,000 compared to approximately $369,000 at March 31, 2001.
Cash and cash equivalents increased approximately $50,000 from December 31,
2001, due to approximately $157,000 of cash provided by operating activities
which was offset by approximately $36,000 and $71,000 of cash used in investing
and financing activities, respectively. Cash used in investing activities
consisted of property improvements and replacements. Cash used in financing
activities consists of payments of principal made on the mortgage encumbering
Lewis Park Apartments and distributions to the partners. 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.
During the three months ended March 31, 2002, the Partnership completed
approximately $36,000 of capital improvements at Lewis Park, consisting
primarily of floor covering replacements, furniture, appliances and
miscellaneous improvements. These improvements were funded from operating cash
flow. Capital improvements of approximately $99,000 have been budgeted for 2002
which include appliance and floor covering replacements and parking lot
improvements. 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 $5,324,000 is amortized over 20 years with a
maturity date of September 1, 2020.
The Partnership distributed the following amounts during the three months ended
March 31, 2002 and 2001 (in thousands, except per unit data):
Three Months Per Limited Three Months Per Limited
Ended Partnership Ended Partnership
March 31, 2002 Unit March 31, 2001 Unit
Operations $ 40 $ 2.48 $ 23 $ 1.40
Refinancing (1) -- -- 547 34.85
$ 40 $ 2.48 $ 570 $36.25
(1) From the refinancing of Lewis Park Apartments.
The Partnership's cash available for distribution is reviewed on a monthly
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 2002 or subsequent periods.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates owned 5,389 limited partnership units (the
"Units") in the Partnership representing 34.33% of the outstanding units as of
March 31, 2002. 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 2002:
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: