SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________________ to ________________
Commission File No. 0-13556
Cluster Housing Properties
(A California Limited Partnership)
(Exact name of registrant as specified in its charter)
California 04-2817478
(State or other jurisdiction of (I.R.S.
Employer incorporation or organization)
Identification No.)
5110 Langdale Way, Colorado Springs CO 80906
(Address of principal executive offices) (Zip Code)
(719) 527-0544
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting securities held by non-affiliates: Not
applicable, since securities are not actively traded on any exchange.
Documents incorporated by reference: None
The Exhibit Index is located on page ______
PART I
ITEM 1. BUSINESS
This form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. 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.
Cluster Housing Properties (the "Partnership"), formerly Berry and Boyle Cluster
Housing Properties, is a California limited partnership formed on August 8,
1983. The General Partners are Stephen B. Boyle and GP L'Auberge Communities,
L.P., a California limited partnership, formerly Berry and Boyle Management.
The primary business of the Partnership is to operate and ultimately dispose of
a diversified portfolio of income-producing residential real properties through
its joint venture interest in such properties. Descriptions of such properties
are included below in "Item 2. Properties" as well as in note 5 of the Notes to
the Consolidated Financial Statements included in this report and incorporated
herein by reference thereto.
On October 25, 1985, the Partnership acquired a majority joint venture interest
in the Sin Vacas Joint Venture, which owns and operates a 72-unit multifamily
rental property located in Tucson, Arizona. The Partnership contributed
$2,520,954 to the Sin Vacas Joint Venture which was used to repay a portion of
the construction loan on the property. The balance of the construction loan was
repaid through the proceeds of a $2,575,000 permanent loan from a third party
lender. In accordance with the terms of the Partnership Agreement, the
Partnership paid an acquisition fee of $250,000 to GP L'Auberge Communities,
L.P. for its services in structuring and negotiating the acquisition. The
Partnership also incurred acquisition expenses relating to the acquisition which
totaled $168,686.
On June 11, 1987, the Partnership acquired a majority joint venture interest in
the Villa Antigua Joint Venture which owns and operates an 88-unit multifamily
rental property located in Scottsdale, Arizona. The Partnership contributed
$2,494,677 to the Villa Antigua Joint Venture which was used to repay a portion
of the construction loan on the property. The balance of the construction loan
was repaid through the proceeds of a $3,200,000 permanent loan from a third
party lender. In accordance with the terms of the Partnership Agreement, the
Partnership paid an acquisition fee of $350,000 to GP L'Auberge Communities,
L.P. for its services in structuring and negotiating the acquisition. The
Partnership also incurred acquisition expenses relating to the acquisition which
totaled $31,729.
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI"), a
Phoenix based residential development, construction and management firm and the
developer of the Villas at Sin Vacas and Villa Antigua properties, which
separated the interests of EWI and the Partnership, thus affording the
Partnership greater flexibility in the operation and disposition of the
properties. In consideration of a payment by the Partnership to EWI of $73,775
and delivery of certain mutual releases, EWI (i) relinquished its contract to
manage Sin Vacas and Villa Antigua and its option to exercise its rights of
first refusal with regard to the sale of those properties and (ii) assigned all
of its interest in the Sin Vacas Joint Venture and the Villa Antigua Joint
Venture to the Partnership (while preserving the economic interests of the
venturer in these Joint Ventures), which resulted in the dissolution of the Sin
Vacas Joint Venture and the Villa Antigua Joint Venture. EWI may still share in
the cash flow distributions or proceeds from sale of the properties if certain
performance levels are met.
On July 16, 1986, the Partnership assigned its right to acquire a property known
as L'Auberge Pinecliff ("Pinecliff"), formerly Autumn Ridge, a 96-unit
multifamily rental property located in Colorado Springs, Colorado to a Colorado
joint venture (the Autumn Ridge Joint Venture) which acquired the property for a
purchase price of $7,320,760. The Partnership simultaneously contributed to the
Autumn Ridge Joint Venture an amount equal to the total purchase price less the
proceeds of a $3,300,000 permanent loan. In accordance with the terms of the
Partnership Agreement, the Partnership paid an acquisition fee of $400,000 to GP
L'Auberge Communities, L.P. for its services in structuring and negotiating this
acquisition. The Partnership also incurred acquisition expenses relating to the
acquisition which totaled $97,475.
On July 3, 1996, the Partnership and certain affiliates consummated an agreement
with Highland Properties, Inc. ("Highland"), a Colorado based residential
development, construction and management firm and developer of the property
known as L'Auberge Pinecliff, which separated the interests of Highland and the
Partnership, thus affording the Partnership greater flexibility in the operation
and disposition of the property. In consideration of a payment by the
Partnership to Highland totaling $7,718, and delivery of certain mutual
releases, Highland (i) relinquished its option to exercise its rights of first
refusal with regard to the sale of the property and (ii) assigned all of its
interest in the L'Auberge Pinecliff Joint Venture to the Partnership, (while
preserving the economic interests of the venturer in these Joint Ventures),
which resulted in the dissolution of the L'Auberge Pinecliff Joint Venture.
Highland may still share in the cash flow distributions or proceeds from sale of
the properties if certain performance levels are met.
The Partnership expects to sell the properties at some future time, taking into
consideration such factors as the price to be realized, the possible risks of
continued ownership and the anticipated advantages to be gained for the
partners. Proceeds from the sale, financing or refinancing of the properties
will not be reinvested by the Partnership or its joint ventures, but will be
distributed to the partners, so that the Partnership will, in effect, be
self-liquidating. Under the terms of the various termination agreements, the
Partnership has control over the decision to sell any property.
The success of the Partnership will depend upon factors which are difficult to
predict and many of which are beyond the control of the Partnership. Such
factors include, among others, general economic and real estate market
conditions, both on a national basis and in those areas where the Partnership's
investments are located, competitive factors, the availability and cost of
borrowed funds, real estate tax rates, federal and state income tax laws,
operating expenses (including maintenance and insurance), energy costs,
government regulations, and potential liability under and changes in
environmental and other laws, as well as the successful management of the
properties.
On-site management of all of the Partnership's properties, Villas at Sin Vacas,
Villa Antigua, and Pinecliff, is currently conducted by an affiliate of the
General Partners. The terms of such property management services between the
Partnership and property managers are embodied in a written management agreement
with respect to each property. The property manager in each case receives
management fees which are competitive with those obtainable in arm's-length
negotiations with independent parties providing comparable services in the
localities in which the properties are located. These fees do not exceed 4% of
the gross revenues from each property plus reimbursement for allocable expenses.
It is the responsibility of the General Partners to select or approve property
managers and to supervise their performance. Property managers are responsible
for on-site operations and maintenance, generation and collection of rental
income and payment of operating expenses.
The difference between rental income and expenses related to operations,
including items such as local taxes and assessments, utilities, insurance
premiums, maintenance, repairs and improvements (and reserves therefor),
bookkeeping and payroll expenses, legal and accounting fees, property management
fees and other expenses incurred, constitute the properties' operating cash
flow. The Partnership's administrative expenses are paid out of the
Partnership's share of such cash flow from the various properties and from
interest income which the Partnership earns on its short-term investments.
The Partnership's investments in real estate are also subject to certain
additional risks including, but not limited to, (i) competition from existing
and future projects held by other owners in the areas of the Partnership's
properties, (ii) possible reduction in rental income due to an inability to
maintain high occupancy levels, (iii) adverse changes in mortgage interest
rates, (iv) possible adverse changes in general economic conditions and adverse
local conditions, such as competitive overbuilding, or a decrease in employment
or adverse changes in real estate zoning laws, (v) the possible future adoption
of rent control legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent increases, and (vi) other
circumstances over which the Partnership may have little or no control.
The Partnership's investments are subject to competition in the rental, lease
and sale of similar types of properties in the localities in which the
Partnership's real property investments are located. Furthermore, the General
Partners of the Partnership are affiliated with other partnerships owning
similar properties in the vicinity in which the Partnership's properties are
located. In addition, other limited partnerships may be formed by affiliates of
the General Partners which will compete with the Partnership.
The Partnership considers itself to be engaged in only one industry segment,
real estate investment.
ITEM 2. PROPERTIES
The Partnership owns and operates three properties: (1) Villas at Sin Vacas, a
72-unit multifamily rental property in Tucson, Arizona, subject to first
mortgage financing in the original principal amount of $2,575,000; (2) L'Auberge
Pinecliff, a 96-unit multifamily rental property in Colorado Springs, Colorado,
subject to first mortgage financing in the original principal amount of
$3,300,000; and, (3) Villa Antigua, an 88-unit multifamily rental property in
Scottsdale, Arizona, subject to first mortgage financing in the original
principal amount of $3,200,000. The ownership was formerly structured as Joint
Ventures of which the Partnership owned a majority interest. With regard to the
termination of the Joint Ventures, see Note 5 of Notes to Consolidated Financial
Statements.
Villas at Sin Vacas
As of February 28, 1997, the property was 91% occupied, compared to 86%
approximately one year ago. At December 31, 1996 and 1995, the market rents for
the various unit types were as follows:
Market Rents
December 31,
Unit
1996 1995
--------- ---- ----
One bedroom one bath $835 $835
Two bedroom two bath 1,050 1,050
Three bedroom two bath 1,200 1,200
Pinecliff
As of February 28, 1997, the property was 86% occupied, compared to 95%
approximately one year ago. At December 31, 1996 and 1995, the market rents for
the various unit types were as follows:
Market Rents
December 31,
Unit Type 1996 1995
- --------- ---- ----
One bedroom one bath $921 $898
Two bedroom two bath 1,125 1,102
Villa Antigua
As of February 28, 1997, the property was 94% occupied, compared to 99%
approximately one year ago. At December 31, 1996 and 1995, the market rents for
the various unit types were as follows:
Market Rents
December 31,
Unit Type 1996 1995
--------- ---- ----
One bedroom one bath $843 $760
Two bedroom two bath 1,080 1,028
Three bedroom two bath 1,130 1,090
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership or of
which any of the properties is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is not
anticipated that any such public market will develop.
The number of holders of Units as of December 31, 1996 was 1,967.
Distributions are made to the Partners on a quarterly basis based upon Net Cash
from Operations, as calculated under Section 10 of the Partnership Agreement.
Total cash distributions to the Limited Partners for 1996 and 1995 were paid as
follows:
Date of
Quarter Ended Payment Amount
- ------------- ------ ------
March 31, 1995 May 15, 1995 $ 121,579
June 30, 1995 August 15, 1995 $ 121,579
September 30, 1995 November 15, 1995 $ 121,579
December 31, 1995 February 15, 1996 $ 97,263
March 31, 1996 May 15, 1996 $ 97,263
June 30, 1996 August 15, 1996 $ 97,263
September 30, 1996 December 11, 1996 $ 97,263
December 31, 1996 February 28, 1997 $ 97,263
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Partnership and consolidated
subsidiaries has been derived from consolidated financial statement audited by
Coopers & Lybrand, L.L.P., whose reports for the periods ended December 31,
1996, 1995 and 1994 are included elsewhere in the Form 10K and should be read in
conjunction with the full consolidated financial statements of the Partnership
including the Notes thereto.
Year Ended
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
Rental income $2,615,350 $2,725,119 $2,572,947 $2,391,911 $2,204,133
Net income (loss) ($167,778) $309,115 $260,976 $141,982 ($142,622)
Net income (loss) allocated to Partners:
Limited Partners - Per Unit
Aggregate 32,421 Units ($5.12) $9.06 $7.65 $4.16 ($4.36)
General Partners ($1,678) $15,456 $13,049 $7,099 ($1,426)
Cash distributions to Partners:
Limited Partners:
Weighted average per Unit $12.00 $15.50 $17.75 $9.50 $3.00
General Partners $20,476 $26,449 $30,288 $16,211 $5,119
Total assets $15,644,667 $16,274,801 $16,587,271 $17,032,336 $17,327,814
Long term obligations $8,559,930 $8,695,278 $8,818,891 $8,931,713 $9,034,755
Long term obligations become due in 1997. The Partnership intends to refinance
these notes prior to the due date, although there can be no assurance that the
Partnership will be able to do so. See Note 6 of Notes to Consolidated
Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Management's expectations regarding future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity; Capital Resources
In connection with its capitalization, the Partnership admitted investors who
purchased a total of 32,421 Units aggregating $16,210,500. These offering
proceeds, net of organizational and offering costs of $2,431,575, provided
$13,778,925 of net proceeds to be used for the purchase of income-producing
residential properties, including related fees and expenses, and working capital
reserves. The Partnership expended $10,410,263 to (i) acquire its joint venture
interests in the Sin Vacas Joint Venture, the Villa Antigua Joint Venture, and
the Autumn Ridge Joint Venture, (ii) to pay acquisition expenses, including
acquisition fees to one of the General Partners, and (iii) to pay certain costs
associated with the refinancing of the Pinecliff permanent loan. The Partnership
distributed $1,731,681 to the Limited Partners as a return of capital resulting
from construction cost savings with respect to the Sin Vacas, Pinecliff and
Villa Antigua projects and other excess offering proceeds. The remaining net
proceeds of $1,636,981 were used to establish initial working capital reserves.
These reserves have been used periodically to enable the Partnership to meet its
various financial obligations including contributions to the various Joint
Ventures that may be required. Cumulatively through December 31, 1996, $368,990
was contributed to the Joint Ventures for this purpose.
In addition to the proceeds generated from the public offering, the Partnership
utilized external sources of financing at the joint venture level to purchase
properties. The Partnership Agreement limits the aggregate mortgage indebtedness
which may be incurred in connection with the acquisition of Partnership
properties to 80% of the purchase price of such properties.
The Partnership's future ability to generate cash adequate to meet its needs is
dependent primarily on the successful operations of its real estate investments.
Such ability is also dependent upon the future availability of bank borrowings,
and upon the future refinancing or sale of the Partnership's real estate
investments and the collection of any mortgage receivable which may result from
such sales. These sources of liquidity will be used by the Partnership for
payment of expenses related to real estate operations, debt service and
professional and management fees and expenses. Net Cash From Operations and Net
Proceeds, if any, as defined in the Partnership Agreement, will then be
available for distribution to the Partners in accordance with Section 10 of the
Partnership Agreement. The General Partners believe that the current working
capital reserves together with projected cash flows for 1997 are adequate to
meet the Partnership's operating cash needs in the coming year. With regard to
certain balloon payments on existing first mortgage debt on the Partnership's
properties, the General partners do not anticipate sufficient cash flow from
operations to retire these mortgage notes. As these mortgage notes payable are
due in fiscal 1997, the Partnership will seek to renegotiate these mortgage
notes with its existing lenders or seek new sources of financing for these
properties on a long term basis, although there can be no assurance that the
Partnership will be able to do so. The General Partners believe that existing
cash flows from the properties will be sufficient to support a level of
borrowing that is at least equal to amounts outstanding as of December 31, 1996.
If the general economic climate for real estate in these respective locations
were to deteriorate resulting in an increase in interest rates for mortgage
financing or a reduction in the availability of real estate mortgage financing
or a decline in the market values of real estate it may affect the Partnership's
ability to complete these refinancings.
The working capital reserves of the Partnership consist of cash and cash
equivalents and short-term investments. Together these amounts provide the
Partnership with the necessary liquidity to carry on its day-to-day operations
and to make necessary contributions to the various Joint Ventures. In 1996, the
aggregate net decrease in working capital reserves was $481,980. This decrease
resulted primarily from cash provided by operations of $349,757 offset by
$281,346 of fixed asset additions, distributions to partners of $389,052 and
$135,348 of principal payments on mortgage notes payable.
In 1995, the aggregate net decrease in working capital reserves was $41,502.
This decrease resulted primarily from cash provided by operations of $758,756
offset by $148,127 of fixed asset additions, distributions to
partners of $528,974 and $123,613 of principal payments on mortgage notes
payable.
Results of Operations
For the year ended December 31, 1996, the Partnership's operating results were
comprised of its share of the income and expenses from the Sin Vacas, L'Auberge
Pinecliff (formerly Autumn Ridge) and Villa Antigua properties, as well as
partnership level interest income earned on short term investments, reduced by
administrative expenses. A summary of these operating results appears below:
Sin L'Auberge Villa Investment Consolidated
Vacas Pinecliff Antigua Total Total
Total revenue $694,550 $1,022,283 $901,463 $53,445 $2,671,741
Expenses:
General and administrative 1,686 - 259 381,328 383,273
Operations 410,622 437,646 363,192 26,368 1,237,828
Depreciation and 126,677 181,804 122,636 - 431,117
amortization
Interest 223,411 286,313 277,577 - 787,301
------------- -------------- --------------
------------- -------------
762,396 905,763 763,664 407,696 2,839,519
------------- -------------- --------------
============= =============
Net income (loss) ($67,846) $116,520 $137,799 ($354,251) ($167,778)
============= ============== ============== ============= =============
For the year ended December 31, 1995, the Partnership's operating results were
comprised of its share of the income and expenses from the Sin Vacas, Autumn
Ridge and Villa Antigua Joint Ventures, as well as partnership level interest
income earned on short term investments, reduced by administrative expenses. A
summary of these operating results appears below:
Sin L'Auberge Villa Investment Consolidated
Vacas Pinecliff Antigua Total Total
Total revenue $755,680 $1,041,402 $930,236 $81,023 $2,808,341
Expenses:
General and administrative 7,200 7,244 7,200 183,245 204,889
Operations 353,533 420,726 310,611 - 1,084,870
Depreciation and 118,909 173,174 118,217 - 410,300
amortization
Interest 226,761 290,606 281,800 - 799,167
------------- -------------- --------------
------------- -------------
706,403 891,750 717,828 183,245 2,499,226
------------- -------------- --------------
============= =============
Net income (loss) $49,277 $149,652 $212,408 ($102,222) $309,115
============= ============== ============== ============= =============
For the year ended December 31, 1994, the Partnership's operating results were
comprised of its share of the income and expenses from the Sin Vacas, Autumn
Ridge and Villa Antigua Joint Ventures, as well as partnership level interest
income earned on short term investments, reduced by administrative expenses. A
summary of these operating results appears below:
Sin Autumn Villa Investment Consolidated
Vacas Ridge Antigua Total Total
Total revenue $757,490 $979,216 $838,362 $56,007 $2,631,075
Expenses:
General and administrative 7,494 7,793 7,862 143,532 166,681
Operations 339,483 353,665 298,421 - 991,569
Depreciation and 115,612 169,787 116,476 - 401,875
amortization
Interest 229,820 294,553 285,601 - 809,974
-------------- ------------- -------------- ---------------------------
692,409 825,798 708,360 143,532 2,370,099
-------------- ------------- -------------- ---------------------------
Net income $65,081 $153,418 $130,002 ($87,525) $260,976
(Loss)
============== ============= ============== ===========================
Comparison of 1996 and 1995 Operating Results:
In accordance with its dispositions strategy, (see "Projected 1997 Operating
Results" below). the Partnership incurred one time costs associated with the
Evans Withycombe termination ($73,775), the Highland termination (($7,718) and
their related legal costs. (Refer to Note 5 of the Consolidated Financial
Statements.) In additions, the Partnership incurred one-time costs associated
with its property interior and exterior refurbishment program, the change in
on-site management following the Evans Withycombe termination, the outsourcing
of much of the Partnership's administration work to an administrative agent and
the relocation of the remaining administration, financial and investor services
functions to a more cost efficient location in Colorado Springs, Colorado.
Consequently, competitive pressures and disposition-related activities led to
rental operating expenses (including advertising, promotion, apartment locator
and concession costs) to increase by $152,958 or 14% over the prior year and
total general and administrative expenses of the Partnership increased $178,384
(87%) over the prior year. Fixed asset purchases increased $281,346 from
$141,735 in the prior year and consisted of such items as carpet, appliances,
equipment for fitness and business centers facilities, and remodeling features.
As a result of the factors described above, distributions to partners decreased
$119,446, or 23%, from $528,974 in 1995 to $409,528 in 1996.
Comparison of 1995 and 1994 Operating Results:
Total revenue increased $177,266, or 7% over the prior year, due to increased
rental income of $152,172 or 6%, primarily as a result of rental rate increases
at the Partnership's properties. Interest income increased $25,094 or 43% in
1995, as a result of higher interest rates earned on money market accounts and
short-term investments. Rental operating expenses increased $93,301 or 9% over
the prior year primarily as a result of increases in maintenance and advertising
costs. General and administrative expenses increased $38,208 or 23%, due
primarily to increased salary expense allocations and legal costs and printing
and mailing costs associated with the voluntary withdrawal of a general partner
of the Partnership. Fixed asset purchases increased $141,735 from $6,392 in the
prior year to $148,127 and included such items as carpet, floor tile and other
replacements and exterior painting of Sin Vacas. As a result of the factors
described above, distributions to partners decreased $76,788, or 13%, from
$605,762 in 1994 to $528,974 in 1995
Projected 1997 Operating Results:
While there can be no assurance that the Partnership will dispose of any or all
of its properties in 1997, on March 25, 1997, the Partnership entered into
letters of intent to sell Villas Sin Vacas in Tucson, Arizona, and Villa
Antigua, Phase I, in Scottsdale, Arizona, to an unaffiliated purchaser. The
purchase price for Villas Sin Vacas would be $5,040,000 and the purchase price
for Villa Antigua, Phase I, would be $9,230,000. Each letter of intent is
subject to completion of customary due diligence to the satisfaction of the
purchaser, the purchaser obtaining a financing commitment for the purchase of
the property on commercially reasonable terms and conditions, the negotiation
and execution of a definitive purchase agreement, and certain other conditions.
Accordingly, there can be no assurance that the sale of such properties will be
consummated in accordance with the terms of the letters of intent or at all. As
a result of the foregoing, operating results of the Partnership may vary
significantly during 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as to the
individual general partners of the Partnership and directors and executive
officers of L'Auberge Communities, Inc. (formerly Berry and Boyle Inc.), the
general partner of GP L'Auberge Communities, L.P., is set forth below.
Individual General Partners
Stephen B. Boyle, age 56, is President, Executive Officer and Director of
L'Auberge Communities, Inc. and a general partner and co-founder of LP L'Auberge
Communities, a California Limited Partnership (formerly Berry and Boyle), a
limited partnership formed in 1983 to provide funds to various affiliated
general partners of real estate limited partnerships, one of which is GP
L'Auberge Communities, L.P.
In September 1995, with the consent of Limited Partners holding a majority of
the outstanding Units, as well as the consent of the mortgage lenders for the
Partnership's three properties, Richard G. Berry resigned as a general partner
of the Partnership.
GP L'Auberge Communities, L.P.
Information as to the directors and executive officers of L'Auberge Communities,
Inc., a general partner of GP L'Auberge Communities, L.P., which is a general
partner of the Partnership, and its affiliates, is set forth below. There are no
familial relationships between or among any officer and any other officer or
director.
Name Position
Stephen B. Boyle See above
Earl C. Robertson Executive Vice President and Chief
Financial Officer
Donna Popke Vice President and Secretary
Earl C. Robertson, age 48, has been a senior development officer, partner and
consultant in several prominent real estate development companies for over
twenty years, including Potomac Investment Associates, developers of planned
golf course communities nationwide. Mr. Robertson was also a key member of the
management team that developed the nationally acclaimed Inn at the Market in
Seattle. He joined L'Auberge Communities, Inc. in June 1995.
Donna Popke, age 37, joined L'Auberge Communities, Inc. in July, 1995 and holds
the title of Vice President and Secretary. Prior to joining L'Auberge
Communities, Inc., Ms. Popke was employed by Olive & Associates in Denver,
Colorado in the field of public accounting for six years and later from 1989 to
1995 with David R. Sellon & Company, a Colorado Springs land development
company.
ITEM 11. EXECUTIVE COMPENSATION
None of the General Partners or any of their officers or directors received any
compensation from the Partnership. See Item 13 below with respect to a
description of certain transactions of the General Partners and their affiliates
with the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As March 21, 1997, no person of record owned or was known by the General
Partners to own beneficially more than 5% of the Partnership's outstanding
Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1996, the Partnership paid or accrued
remuneration to the General Partners or their affiliates as set forth below. In
addition to the information provided herein, certain transactions are described
in notes 7 and 8 in the Notes to Financial Statements appearing in Appendix A,
which are included in this report and are incorporated herein by reference
thereto.
Net Cash From Operations distributed in 1996
to the General Partners $20,476
Allocation of Income and (Loss)
to the General Partners
($1,678)
Property management fees paid to an affiliate of
the General Partners $64,954
Reimbursements to General Partners $82,881
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1,2 See Page F-2
3 See Exhibit Index contained herein
(b) Reports on Form 8-K
The Partnership has not filed and was not required to file any reports
on Form 8-K during the last quarter of 1996.
(c) See Exhibit Index contained herein
(d) See Page F-2.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
CLUSTER HOUSING PROPERTIES
By: GP L'Auberge Communities, L.P., a California
Limited Partnership, General Partner
By: L'Auberge Communities, Inc., its General Partner
By: __/s/ Earl C. Robertson_________________________________
Earl C. Robertson, Executive Vice President
and Chief Financial Officer
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
__/s/ Stephen B. Boyle Director, President and March 26, 1997
--------------------
STEPHEN B. BOYLE Principal Executive
Officer of L'Auberge
Communities, Inc.
__/s/ Earl C. Roberston Executive Vice President and March 26, 1997
---------------------
EARL C. ROBERTSON Principal Financial Officer of
L'Auberge Communities, Inc.
APPENDIX A
CLUSTER HOUSING PROPERTIES
(A California Limited Partnership)
AND SUBSIDIARIES
---------
CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1996
CLUSTER HOUSING PROPERTIES
(A California Limited Partnership)
AND SUBSIDIARIES
---------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1996 and 1995 F-4
Consolidated Statements of Operations for the years
ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Partners' Equity (Deficit)
for the years ended December 31, 1996, 1995 and 1994 F-6
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994 F-7 -- F-8
Notes to Consolidated Financial Statements F-9 -- F-16
All Schedules are omitted as they are not applicable, not required, or the
information is provided in the financial statements or the notes thereto.
Report of Independent Accountants
To the Partners of
Cluster Housing Properties
(a California Limited Partnership):
We have audited the accompanying consolidated balance sheets of Cluster
Housing Properties (a California Limited Partnership) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, partners' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the General Partners of the Partnership. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners of the Partnership, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Cluster
Housing Properties (a California Limited Partnership) and subsidiaries as of
December 31, 1996 and 1995 and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1996 in conformity with generally accepted accounting principles.
Denver , Colorado
February 28, 1997
CLUSTER HOUSING PROPERTIES
(A California Limited Partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
F-18
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
---------------
ASSETS
1996 1995
---- ----
Property, at cost:
Land $3,677,028 $3,677,028
Buildings and improvements 14,067,757 14,067,756
Equipment, furnishings and 1,576,836 1,295,545
fixtures
--------------- --------------
19,321,621 19,040,329
Less accumulated depreciation (4,810,314) (4,418,093)
--------------- --------------
14,511,307 14,622,236
Cash and cash equivalents 1,065,855 480,389
Short-term investments 1,067,446
-
Real estate tax escrows 41,632 44,055
Deposits 3,818 1,693
Accounts receivable 2,605 631
Deferred expenses, net ofaccumulated
amortization of $175,041 and 19,450 58,351
$136,140 --------------- --------------
Total assets $15,644,667 $16,274,801
=============== ==============
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $8,559,930 $8,695,278
Accounts payable 115,410 42,245
Accrued expenses 195,794 164,298
Due to affiliates 8,975 23,173
(Note 8)
Rents received in advance 4,538 10,495
Tenant security 55,320 57,306
deposits
--------------- --------------
8,939,967 8,992,795
liabilities
Minority interest (8,895)
-
Partners' equity 6,704,700 7,290,901
--------------- --------------
Total liabilities and partners' equity $15,644,667 $16,274,801
============= ==============
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
-------------
1996 1995 1994
---- ---- ----
Revenue:
Rental income $2,615,350 $2,725,119 $2,572,947
Interest Income 56,391 83,222 58,128
----------------------------------------------
Total Revenue 2,671,741 2,808,341 2,631,075
Expenses:
Operations 1,237,828 1,084,870 991,569
Interest expense 787,301 799,167 809,974
Depreciation and amortization 431,117 410,300 401,875
General and administrative 383,273 204,889 166,681
----------------------------------------------
Total Expenses 2,839,519 2,499,226 2,370,099
----------------------------------------------
Net income (loss) ($167,778) $309,115 $260,976
==============================================
Net income (loss) allocated to:
General Partners ($1,678) $15,456 $13,049
Per unit Net income (loss) allocated to
Investor Limited Partner
interest:
32,421 units ($5.12) $9.06 $7.65
issued
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
for the years ended December 31, 1996, 1995 and 1994
-------------
Investor Total
General Limited Partners'
Partners Partners Equity
Balance at December 31, 1993 ($141,908) $7,997,454 $7,855,546
Cash distributions (30,288) (575,474) (605,762)
Net income 13,049 247,927 260,976
-------------- --------------- --------------
Balance at December 31, 1994 (159,147) 7,669,907 7,510,760
Cash distributions (26,449) (502,525) (528,974)
Net income 15,456 293,659 309,115
-------------- --------------- --------------
Balance at December 31, 1995 (170,140) 7,461,041 7,290,901
Minority interest absorbed - (8,895) (8,895)
Cash distributions (20,476) (389,052) (409,528)
Net income (1,678) (166,100) (167,778)
-------------- --------------- --------------
Balance at December 31, 1996 ($192,294) $6,896,994 $6,704,700
============== =============== ==============
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995, 1994
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Interest received $80,257 $82,408 $55,610
Cash received from rental income 2,607,383 2,716,163 2,569,838
General and administrative (370,245) (201,143) (159,895)
expenses
Operations expense (1,179,822) (1,039,036) (968,373)
Interest paid (787,816) (799,636) (810,404)
--------------
-------------- ---------------
Net cash provided by operating activities 349,757 758,756 686,776
Cash flows from investing activities:
Purchase of fixed assets (281,346) (148,127) (6,392)
Cash received from short-term investments 1,043,580 327,298 32,545
-------------- --------------- --------------
Net cash provided by investing activities 762,234 179,171 26,153
Cash flows from financing activities:
Distributions to partners (389,052) (528,974) (605,762)
Deposits (2,125) (358) (95)
Principal payments on mortgage notes payable (135,348) (123,613) (112,822)
-------------- --------------- --------------
Net cash used by financing (526,525) (652,945) (718,679)
activities
-------------- --------------- --------------
Net increase (decrease) in cash and cash 585,466 284,982 (5,750)
equivalents
Cash and cash equivalents at beginning of the period 480,389 195,407 201,157
-------------- --------------- --------------
Cash and cash equivalents at end of the period $1,065,855 $480,389 $195,407
============== =============== ==============
Non cash financing activities:
Accrual of distributions to $20,476
partners
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995, 1994
-------------
Reconciliation of net income (loss) to net cash provided by operating
activities:
1996 1995 1994
---- ---- ----
Net income (loss) ($167,778) $309,115 $260,976
Adjustments to reconcile net income (loss) to net cash
provided by operating
activities:
Depreciation and amortization 431,117 410,300 401,875
Change in assets and liabilities net of effects
of investing and financing
activities:
Decrease in real estate tax 2,423 7,750 14,568
escrows
(Increase) decrease in accounts and interest receivable 21,951 (1,445) (1,153)
(Increase) decrease in deposits and prepaid expenses - 2,033 (2,033)
Increase in accounts payable and accrued expenses 84,185 35,871 8,679
Increase (decrease) in due to affiliates (14,198) 4,088 6,973
Increase (decrease) in rent received in (5,957) (3,526) 4,446
advance
Decrease in tenant security (1,986) (5,430) (7,555)
deposits
-------------- --------------- --------------
Net cash provided by operating activities $349,757 $758,756 $686,776
============== =============== ==============
1. Organization of Partnership:
Cluster Housing Properties (a California Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Cluster Housing Properties, was formed
on August 8, 1983. The Partnership issued all of the General Partnership
Interests to three General Partners in exchange for capital contributions
aggregating $2,000. Stephen B. Boyle and GP L'Auberge Communities, L.P., (a
California Limited Partnership), formerly Berry and Boyle Management, are the
General Partners. In September, 1995, with the consent of Limited Partners
holding a majority of the outstanding Units, as well as the consent of the
mortgage lenders for the Partnership's three properties, Richard G. Berry
resigned as a general partner of the Partnership.
A total of 2,000 individual Limited Partners owning 32,421 units have
contributed $16,210,500 of capital to the Partnership. At December 31, 1996, the
total number of Limited Partners was 1,967. Except under certain limited
circumstances, as defined in the Partnership Agreement, the General Partners are
not required to make any additional capital contributions. The General Partners
or their affiliates will receive various fees for services and reimbursement for
various organizational and selling costs incurred on behalf of the Partnership.
The Partnership will continue until December 31, 2010, unless terminated earlier
by the sale of all, or substantially all, of the assets of the Partnership, or
otherwise in accordance with the provisions of Section 16 of the Partnership
Agreement.
2. Significant Accounting Policies:
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its subsidiaries: Sin Vacas Joint Venture (Sin Vacas),
Autumn Ridge Joint Venture (Autumn Ridge) and Villa Antigua Joint
Venture (Villa Antigua). All intercompany accounts and transactions
have been eliminated in consolidation. The Partnership follows the
accrual basis of accounting. Refer to Note 5 regarding the termination
of the Joint Ventures.
B. Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. It
is the Partnership's policy to invest cash in income-producing
temporary cash investments. The Partnership mitigates any potential
risk from such concentration of credit by placing investments with high
quality financial institutions.
C. Short-term Investments
At December 31, 1995, short term investments consisted solely of
various forms of U. S. Government backed securities, with an aggregate
par value of $1,075,000, which matured in February, 1996. As of
December 31, 1996, there were no short term investments. Investments
are recorded at amortized cost, which approximates market value.
D. Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
E. Depreciation
Depreciation is provided for by the use of the straight-line method
over estimated useful lives as follows:
Buildings and improvements 39-40 years
Equipment, furnishings and fixtures 5-15 years
F. Deferred Expenses
Costs of obtaining mortgages on the properties are being amortized over
the mortgage term using the straight-line method, which approximates
the effective interest method. Fees paid to certain of the property
developers were amortized over the term of the services provided using
the straight-line method. Any unamortized costs remaining at the date
of a refinancing are expensed in the year of refinancing.
G. Income Taxes
The Partnership is not liable for Federal or state income taxes because
Partnership income or loss is allocated to the Partners for income tax
purposes. If the Partnership's tax returns are examined by the Internal
Revenue Service or state taxing authority and such an examination
results in a change in Partnership taxable income (loss), such change
will be reported to the Partners.
H. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
I. Long-Lived Assets
The Partnership's long-lived assets include property and equipment. On
a quarterly basis, the partnership evaluates the recoverability of the
rental properties using undiscounted cash flows from operations.
J. Reclassification
Certain items in the financial statements for the years ended December
31, 1995 and 1994 have been reclassified to conform to the 1996
presentation.
3. Property, at Cost
Property, at cost, consisted of the following at December 31, 1996:
Initial Cost Costs Capitalized Gross Amount At Which Carried
to Subsequent to at Close of Period
Partnership Acquisition
----------------------------------------- ------------------------------------ ------------------------------
Buildings Equipment Buildings Equipment Buildings Equipment
Property and Furniture and Furniture and Furniture
Description Land Improvements & Fixtures Land Improvements & Fixtures Land Improvements & Fixtures Total
- ------------------------------------------------------------ ------------------------------------ ----------------------------------
Villas at Sin Vacas,
a 72-unit
residential
rental complex
located
in Tucson, Arizona $799,913 $3,948,060 $344,615 $22,146 $75,678 $190,059 $822,059 $4,023,738 $534,674 $5,380,471
Pinecliff, a 96-unit
residential rental
located in
Colorado Springs,
Colorado 1,242,061 5,981,166 380,288 - 81,889 169,811 1,242,061 6,063,055 550,099 7,855,215
Villa Antigua, an
88-unit
residential rental
complex located in
Scottsdale, Arizona 1,610,646 3,942,388 376,709 2,262 38,576 115,354 1,612,908 3,980,964 492,063 6,085,935
-------------------------------------- ------------------------------ ------------------------------------
$3,652,620 $13,871,614 $1,101,612 $24,408 $196,143 $475,224 $3,677,028 $14,067,757 $1,576,836 $19,321,621
===================================== ========================================================================
Depreciation expense for the years ended December 31, 1996, 1995 and 1994 and accumulated
depreciation
at December 31, 1996 and 1995 consisted of the following:
Accumulated Depreciation
Depreciation December 31,
Expense
1996 1995 1994 1996 1995
----------- ------- ---- ---------- ---- ----
Buildings and improvements $351,694 $351,694 $351,695 $3,639,807 $3,288,113
Equipment, furnishings and 40,527 19,709 11,283 1,170,507 1,129,980
fixtures
------------------------------------------- ---------------------------
$392,221 $371,403 $362,978 $4,810,314 $4,418,093
=========================================== ===========================
Each of the properties is encumbered by a nonrecourse mortgage note payable (see
Note 6).
4. Cash and Cash Equivalents:
Cash and cash equivalents at December 31, 1996 and 1995 consisted of the
following:
1996 1995
---- ----
Cash on hand $ 854,769 $ 30,848
Certificate of depo 211,086 100,000
Money market accoun ________ 349,541
$1,065,855 $480,389
5. Joint Venture and Property Acquisitions:
The Partnership has invested in three properties located in Scottsdale and
Tucson, Arizona and Colorado Springs, Colorado. The success of the Partnership
will depend upon factors which are difficult to predict including general
economic and real estate market conditions, both on a national basis and in the
areas where the Partnership's investments are located.
Sin Vacas
On October 25, 1985, the Partnership acquired a majority interest in the Sin
Vacas Joint Venture, which owns and operates the Villas at Sin Vacas, a 72-unit
residential property located in Tucson, Arizona. Since the Partnership owns a
majority interest in the Sin Vacas Joint Venture, the accounts and operations of
the Sin Vacas Joint Venture have been consolidated into the Partnership.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI is
also the developer of the Villa Sin Vacas property.
The Partnership made initial cash payments in the form of capital contributions
totaling $2,458,507 and funded $398,949 of property acquisition costs which were
treated as a capital contribution to the joint venture. Since completion of
construction, the Partnership has made additional contributions totaling
$275,167. At December 31, 1996, the total capital contributions and acquisition
costs incurred were $2,713,937 and $418,686, respectively.
For the years ended December 31, 1996, 1995 and 1994 the Sin Vacas Joint Venture
had net loss of $67,846 and net income of $49,277, and $65,081, respectively
JANUARY 1, 1996 THROUGH MAY 13, 1996
Net cash from operations (as defined in the joint venture agreement) was to be
distributed as available to each joint venture partner quarterly as follows:
First, to the Partnership, an amount equal to 8.75% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's capital investment, as
defined in the joint venture agreement;
Second, the balance 70% to the Partnership and 30% to the co-venturer.
All losses from operations and depreciation for the Sin Vacas Joint Venture were
allocated 99% to the Partnership and 1% to the co-venturer.
All profits from operations, to the extent of cash distributions, shall first be
allocated to the Partnership and co-venturer in the same proportion as the cash
distribution. Any remaining profits are allocated 70% to the Partnership and 30%
to the co-venturer.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
Villa Antigua
On June 11, 1987, the Partnership acquired a majority interest in the Villa
Antigua Joint Venture, which owns and operates Villa Antigua, an 88-unit
residential property located in Scottsdale, Arizona. Since the Partnership owns
a majority interest in the Villa Antigua Joint Venture, the accounts and
operations of the Villa Antigua Joint Venture have been consolidated into the
Partnership.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI is
also the developer of the Villa Antigua property.
The Partnership made initial cash payments in the form of capital contributions
totaling $2,494,677 and funded $381,729 of property acquisition costs which were
treated as a capital contribution to the Villa Antigua Joint Venture. Since
completion of construction, the Partnership has made additional contributions
totaling $85,440. At December 31, 1996, the total capital contributions and
acquisition costs were $2,580,117 and $381,729, respectively.
The Villa Antigua Joint Venture had net income of $137,799, $212,408, and
$130,002 for the years ended December 31,1996, 1995 and 1994.
JANUARY 1, 1996 THROUGH MAY 13, 1996
Net cash from operations (as defined in the joint venture agreement) was to be
distributed as available to each joint venture partner quarterly as follows:
First, to the Partnership, an amount equal to 10% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's adjusted capital
investment, as defined in the joint venture agreement;
Second, the balance 70% to the Partnership and 30% to the co-venturer.
All losses from operations and depreciation for the Villa Antigua Joint Venture
were allocated 99% to the Partnership and 1% to the co-venturer.
All profits from operations, to the extent of cash distributions, shall first be
allocated to the Partnership and co-venturer in the same proportion as the cash
distributions; however, if for any taxable year there are no cash distributions,
profits are allocated 99% to the Partnership and 1% to the co-venturer.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
Sin Vacas and Villa Antigua
MAY 14, 1996 THROUGH DECEMBER 31, 1996
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI")
which separated the interests of EWI and the Partnership, thus affording the
Partnership greater flexibility in the operation and disposition of the
properties. In consideration of a payment by the Partnership to EWI of $73,775
and delivery of certain mutual releases, EWI (i) relinquished its contract to
manage Sin Vacas and Villa Antigua and its option to exercise its rights of
first refusal with regard to the sale of those properties and (ii) assigned all
of its interest in the Sin Vacas Joint Venture and the Villa Antigua Joint
Venture to the Partnership (while preserving the economic interests of the
venturer in these Joint Ventures), which resulted in the dissolution of the Sin
Vacas Joint Venture and the Villa Antigua Joint Venture. EWI may still share in
the cash flow distributions or proceeds from sale of the properties if certain
performance levels are met.
Pinecliff
On July 16, 1986, the Partnership acquired Pinecliff (formerly Autumn Ridge), a
96-unit residential property located in Colorado Springs, Colorado and
simultaneously contributed the property to the Autumn Ridge Joint Venture
comprised of the Partnership and an affiliate of the property developer. Since
the Partnership owns a majority interest in the Autumn Ridge Joint Venture, the
accounts and operations of the Autumn Ridge Joint Venture have been consolidated
into the Partnership.
The co-venture partner was Highland Properties, Inc. ("Highland") a Colorado
based residential development, construction and management firm. Highland
developed the property known as L'Auberge Pinecliff
The Partnership made initial cash payments in the form of capital contributions
totaling $3,819,397 and funded $546,576 of property acquisition costs which were
treated as a capital contribution to the Autumn Ridge Joint Venture. Since
completion of construction, the Partnership has made additional contributions
totaling $318,811. At December 31, 1996 the total capital contributions and
acquisition costs incurred were $4,187,309 and $497,475, respectively.
For the years ended December 31, 1996, 1995 and 1994 the Autumn Ridge Joint
Venture had net income of $116,520, $149,652, and $153,418, respectively.
JANUARY 1, 1996 THROUGH JULY 2, 1996:
Net cash from operations (as defined in the joint venture agreement) was to be
distributed as available to each joint venture partner quarterly as follows:
First, to the Partnership, an amount equal to 8% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's capital investment, as
defined in the joint venture agreement;
Second, the balance 82% to the Partnership and 18% to the co-venturer.
All losses from operations and depreciation for the Autumn Ridge Joint Venture
were allocated 100% to the Partnership.
All profits from operations, to the extent of cash distributions, shall first be
allocated to the Partnership and co-venturer in the same proportion as the cash
distribution. Any remaining profits are allocated 82% to the Partnership and 18%
to the co-venturer. In the case of certain capital transactions and
distributions as defined in the joint venture agreement, the allocation of
related profits, losses and cash distributions, if any, would be different than
as described above and would be effected by the relative balances in the
individual partners' capital accounts.
JULY 3, 1996 THROUGH DECEMBER 31, 1996
On July 3, 1996, the Partnership and certain affiliates consummated an agreement
with Highland Properties, Inc. ("Highland") which separated the interests of
Highland and the Partnership, thus affording the Partnership greater flexibility
in the operation and disposition of the property. In consideration of a payment
by the Partnership, to Highland totaling $7,718, and delivery of certain mutual
releases, Highland (i) relinquished its option to exercise its rights of first
refusal with regard to the sale of the property and (ii) assigned all of its
interest in the L'Auberge Pinecliff Joint Venture to the Partnership, (while
preserving the economic interests of the venturer in these Joint Ventures),
which resulted in the dissolution of the L'Auberge Pinecliff Joint Venture.
Highland may still share in the cash flow distributions or proceeds from sale of
the properties if certain performance levels are met.
The Sin Vacas Joint Venture, the Autumn Ridge Joint Venture and the Villa
Antigua Joint Venture are sometimes collectively referred to as the "Joint
Ventures". These joint ventures were effectively terminated on December 31,
1996. The Partnership has eliminated various minority interests related to these
joint ventures, as such, the Partnership owns 100% of the underlying assets at
December 31, 1996.
6. Mortgage Notes Payable:
All of the property owned by the Partnership is pledged as collateral for the
nonrecourse mortgage notes payable outstanding at December 31, 1996 and 1995
which consisted of the following:
1996 1995
---- ----
Villas at Sin Vacas $2,428,851 $2,467,255
Pinecliff 3,112,702 3,161,919
Villa Antigua 3,018,377 3,066,104
--------- ---------
$8,559,930 $8,695,278
========= =========
Sin Vacas
Under the terms of the note, monthly principal and interest payments of $21,830,
based on a fixed interest rate of 9.125%, are required over the term of the
loan. The balance of the note will be due on July 15, 1997.
Pinecliff
Under the terms of the note, monthly principal and interest payments of $27,976
are required over the term of the loan, based on a fixed interest rate of
9.125%. The balance of the note will be due on July 15, 1997.
Villa Antigua
Under the terms of the note, monthly principal and interest payments of $27,128,
based on a fixed interest rate of 9.125%, are required over the term of the
loan. The balance of the note will be due on July 15, 1997.
As these mortgage notes payable are due in fiscal 1997, the Partnership will
seek to renegotiate these mortgage notes with its existing lenders or seek new
sources of financing for these properties on a long term basis. The General
Partners believe that existing cash flows from the properties will be sufficient
to support a level of borrowing that is at least equal to amounts outstanding as
of December 31, 1996. If the general economic climate for real estate in these
respective locations were to deteriorate resulting in an increase in interest
rates for mortgage financing or a reduction in the availability of real estate
mortgage financing or a decline in the market values of real estate it may
affect the Partnership's ability to complete these refinancings.
Interest included in Accrued expenses in the Consolidated Balance Sheets at
December 31, 1996 and 1995 consisted of the following:
1996 1995
---- ----
Villas at Sin Vacas $9,235 $ 9,381
Pinecliff 11,835 12,022
Villa Antigua 11,476 11,658
------ ---------
$ 32,546 $ 33,061
======== ========
The principal balance of the mortgage notes payable appearing on the
consolidated balance sheets at December 31, 1996 and 1995 approximates the fair
value of such notes.
7. Partners' Equity:
Under the terms of the Partnership Agreement profits are allocated 95% to the
Limited Partners and 5% to the General Partners; losses are allocated 99% to the
Limited Partners and 1% to the General Partners.
Cash distributions to the partners are governed by the Partnership Agreement and
are made, to the extent available, 95% to the Limited Partners and 5% to the
General Partners.
The allocation of the related profits, losses, and distributions, if any, would
be different than described above in the case of certain events as defined in
the Partnership Agreement, such as the sale of an investment property or an
interest in a joint venture partnership.
8. Related-Party Transactions:
Due to affiliates at December 31, 1996 and 1995 consisted of reimbursable costs
payable to L'Auberge Communities, Inc., an affiliate of the General Partners, in
the amounts of $8,975, and $14,278, respectively. In 1995 distributions payable
to the Villa Antigua co-venturer totaled $8,895. There was no distribution
payable to the co-venturer in 1996.
For the years ended December 31, 1996, 1995 and 1994, general and administrative
expenses included $82,881, $84,643, and $68,625, respectively, of salary
reimbursements paid to the General Partners for certain administrative and
accounting personnel who perform services for the Partnership.
The officers and principal shareholders of Evans Withycombe, Inc., the developer
of the Villas at Sin Vacas and Villa Antigua properties and an affiliate of the
co-venturers of those joint ventures, together hold a two and one half percent
cumulative profit or partnership voting interest in LP L'Auberge Communities, a
California Limited Partnership, formerly Berry and Boyle, which is the principal
limited partner of GP L'Auberge Communities, L.P.
During the years ended December 31, 1996, 1995 and 1994, Evans Withycombe
received property management fees of $32,475, $84,187, and $79,692,
respectively. These fees were 5% of rental revenue in each time period. In
addition, for the years ended December 31, 1996, 1995 and 1994, $64,954,
$51,715, and $49,083, respectively, of property management fees were paid or
accrued to Residential Services - L'Auberge, an affiliate of the General
Partners. These fees were 4% of rental revenue in 1996, and 5% of rental revenue
in 1995 and 1994.
Villa Antigua reimbursed $35,885, $34,707 and $34,878, respectively for its
proportionate share of the 1996, 1995 and 1994 real estate taxes to Villa
Antigua Phase II, which is an affiliate of the General Partners.