SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995
Commission File Number 0-13473
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Massachusetts 04-2830750
(State or other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
200 Berkeley Street, Boston, MA 02117
(Address of Principal Executive Office) (Zip Code)
(800) 722-5457
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days:
YES X NO
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements:
Balance Sheets at September 30, 1995 and
December 31, 1994 3
Statements of Operations for the Three and
Nine Months Ended September 30, 1995 and 1994 4
Statements of Partners' Equity for the
Nine Months Ended September 30, 1995 and
for the Year Ended December 31, 1994 5
Statements of Cash Flows for the Nine
Months Ended September 30, 1995 and 1994 6
Notes to Financial Statements 7-15
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 16-22
PART II: OTHER INFORMATION 23
2
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
1995 1994
---- ----
Assets:
Cash and cash equivalents $1,181,015 $578,996
Restricted cash 341,703 417,985
Note receivable, net of allowance of
$284,155 - -
Prepaid expenses and other assets 9,068 79,275
Investment in property:
Land 1,688,726 2,588,726
Buildings and improvements 11,773,887 18,205,348
----------- -----------
13,462,613 20,794,074
Less: accumulated depreciation (4,810,132) (6,821,682)
----------- -----------
8,652,481 13,972,392
----------- -----------
Total assets $10,184,267 $15,048,648
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $411,046 $318,178
Accounts payable to affiliates 21,988 268,538
Note payable to affiliate - 1,000,000
Long-term debt 8,693,775 13,416,019
----------- -----------
Total liabilities 9,126,809 15,002,735
Partners' equity/(deficit):
General Partners' (669,340) (707,996)
Limited Partners' 1,726,798 753,909
----------- -----------
Total partners' equity 1,057,458 45,913
----------- -----------
Total liabilities and partners' equity $10,184,267 $15,048,648
=========== ===========
See Notes to Financial Statements
3
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
Income:
Rental income $435,833 $808,720 $1,855,365 $2,392,464
Interest income 38,387 9,786 73,748 20,505
Gain/(loss) on sale of property (62) - 3,983,713 -
-------- -------- ---------- ----------
Total income 474,158 818,506 5,912,826 2,412,969
Expenses:
Interest 160,983 285,490 688,244 858,949
Property operating expenses 250,714 365,440 882,260 1,041,837
Depreciation 93,862 155,578 380,064 469,866
General and administrative 30,943 27,998 96,693 89,314
Provision for/(recovery of)
uncollectible note receivable - - - (13,903)
-------- -------- ---------- ----------
Total expenses 536,502 834,506 2,047,261 2,446,063
-------- -------- ---------- ----------
Net income/(loss) ($62,344) ($16,000) $3,865,565 ($33,094)
======== ======== ========== ==========
Allocation of net income/(loss):
General Partners' ($623) ($160) $38,656 ($331)
Limited Partners' (61,721) (15,840) 3,826,909 (32,763)
-------- -------- ---------- ----------
($62,344) ($16,000) $3,865,565 ($33,094)
======== ======== ========== ==========
Net income/(loss) per Limited
Partnership Unit outstanding ($2.81) ($0.72) $174.31 ($1.49)
======== ======== ========== ==========
See Notes to Financial Statements
4
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
(Unaudited)
Nine Months Ended September 30, 1995
and Year Ended December 31, 1994
General Limited
Partners Partners Total
-------- -------- -----
Partners' equity/(deficit) at
January 1, 1994 (21,954 Limited
Partnership Units outstanding) ($707,556) $797,431 $89,875
Less: Net loss (440) (43,522) (43,962)
-------- ---------- ----------
Partners' equity/(deficit) at
December 31, 1994 (21,954 Limited
Partnership Units outstanding) (707,996) 753,909 45,913
Add: Net income 38,656 3,826,909 3,865,565
Less: Cash Distributions - (2,854,020) (2,854,020)
-------- ---------- ----------
Partners' equity/(deficit) at
September 30, 1995 (21,954 Limited
Partnership Units outstanding) ($669,340) $1,726,798 $1,057,458
======== ========== ==========
See Notes to Financial Statements
5
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
---- ----
Operating activities:
Net income/(loss) $3,865,565 ($33,094)
Adjustments to reconcile net income/(loss)
to net cash provided by operating activities:
Depreciation 380,064 469,866
Gain on sale of property (3,983,713) -
---------- ----------
261,916 436,772
Changes in operating assets and liabilities:
Decrease in prepaid expenses,
other assets, and receivables 70,207 76,554
Increase in accounts payable
and accrued expenses 92,868 183,075
Decrease/(increase) in restricted cash 76,282 (124,504)
Decrease in accounts payable to
affiliates (246,550) (210,583)
---------- ----------
Net cash provided by operating
activities 254,723 361,314
Investing activities:
Proceeds from sale of property 8,923,560 -
---------- ----------
Net cash provided by investing
activities 8,923,560 -
Financing activities:
Principal payments on note payable to affiliate (1,000,000) -
Principal payments on long-term debt (4,722,244) (137,792)
Cash distributed to Partners (2,854,020) -
---------- ----------
Net cash used in financing activities (8,576,264) (137,792)
---------- ----------
Net increase in cash and cash
equivalents 602,019 223,522
Cash and cash equivalents at beginning
of year 578,996 444,021
---------- ----------
Cash and cash equivalents at end of
period $1,181,015 $667,543
========== ==========
See Notes to Financial Statements
6
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Organization of Partnership
---------------------------
John Hancock Properties Limited Partnership (the "Partnership") was
formed under the Massachusetts Uniform Limited Partnership Act on
May 17, 1984. As of September 30, 1995, the Partnership consisted
of a sole Managing General Partner, John Hancock Realty Equities,
Inc. (the "Managing General Partner"), an Associate General
Partner, JH Associates Limited Partnership (the "Associate General
Partner"), and 2,053 Limited Partners. The Managing General
Partner and Associate General Partner are collectively referred to
as the "General Partners" and the General Partners and the Limited
Partners are collectively referred to as the "Partners". The
Managing General Partner is the general partner of the Associate
General Partner and is a wholly-owned, indirect subsidiary of John
Hancock Mutual Life Insurance Company. The Partnership is engaged
in the acquisition, operation and disposition of investment real
estate. The initial capital of the Partnership was $6,000,
representing capital contributions of $800 from the Managing
General Partner, $200 from the Associate General Partner and $5,000
from the initial Limited Partner (a former director of the Managing
General Partner). The Amended Agreement of Limited Partnership of
the Partnership (the "Partnership Agreement") authorized the
issuance of up to 35,000 Units of Limited Partnership Interests at
$1,000 per unit. During the offering period, which terminated on
August 31, 1985, 21,954 Units of Limited Partnership Interests (the
"Units") were sold. There have been no changes in the number of
Units outstanding subsequent to the termination of the offering
period.
The latest date on which the Partnership is due to terminate is
December 31, 2020, unless it is terminated sooner in accordance
with the terms of the Partnership Agreement. It is expected that
in the ordinary course of the Partnership's business, the
properties of the Partnership will be disposed of, and the
Partnership terminated, before December 31, 2020. As initially
stated in its Prospectus, it was expected that the Partnership
would be dissolved upon the sale of its last remaining property,
which at that time was expected to be within five to eight years
following the date such property was acquired by the Partnership.
As of September 30, 1995 and the date hereof, the Partnership has
one property remaining in its portfolio. This property is
currently listed for sale. Upon the sale of this last remaining
property, the operations of the Partnership will terminate and the
Partnership will be dissolved, in accordance with the terms of the
Partnership Agreement.
7
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. Significant Accounting Policies
-------------------------------
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-
Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine month period
ending September 30, 1995 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1995.
For further information, refer to the financial statements and
footnotes thereto included in the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1994.
Cash equivalents are highly liquid investments with maturities of
three months or less when purchased. These investments are
recorded at cost plus accrued interest, which approximates market
value. Restricted cash represents funds restricted for tenant
security deposits and funds held in escrow.
Investments in property are recorded at cost less any property
write-downs for permanent impairment of values. Cost includes the
initial purchase price of the property plus the cost of significant
improvements, acquisition and legal fees, and other miscellaneous
acquisition costs.
Depreciation has been provided on a straight-line basis over the
estimated useful lives of the various assets: thirty years for the
buildings and five years for related improvements. Maintenance and
repairs are charged to operations as incurred.
The net income/(loss) per Unit for the three and nine months ended
September 30, 1995 and 1994 is computed by dividing the Limited
Partners' share of net income/(loss) by the number of Units
outstanding at the end of such periods.
No provision for income taxes has been made in the Financial
Statements since such taxes are the responsibility of the
individual partners rather than that of the Partnership.
Certain 1994 amounts have been reclassified to be consistent with
the 1995 presentation.
8
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. The Partnership Agreement
-------------------------
Profits from the normal operations of the Partnership for each
fiscal year, or portion thereof, are allocated between the Limited
Partners and the General Partners in the same proportion as
Distributable Cash from Operations (as defined in the Partnership
Agreement) provided that (i) in no event shall the General Partners
be allocated less than 1% of any such profits from normal
operations, and (ii) if there is any fiscal year which produces no
Distributable Cash from Operations but which produces profits for
tax purposes from normal operations, such profits are allocated 90%
to the Limited Partners and 10% to the General Partners.
Losses from the normal operations of the Partnership for each
fiscal year or portion thereof are allocated 99% to the Limited
Partners and 1% to the General Partners, except that any such
profits or losses which were based upon the Partnership's
operations prior to the initial closing under the Partnership's
offering of Units were allocated 99% to the General Partners and 1%
to the initial Limited Partner. Distributable Cash from Operations
is distributed 90% to the Limited Partners and 10% to the General
Partners; provided, however, that in each fiscal year the General
Partners will defer their receipt of any Distributable Cash from
Operations to the extent necessary to provide the Limited Partners
a non-cumulative return in such year equal to 4% of their Invested
Capital (as defined in the Partnership Agreement.) All
distributions of Distributable Cash from Operations deferred by the
General Partners accrue and are payable to them, to the extent
possible, out of subsequent years' Distributable Cash from
Operations remaining after the receipt by the Limited Partners of
the aforesaid 4% return, or out of cash from sales and refinancings
as specified below.
Cash from Sales or Refinancings (as defined in the Partnership
Agreement) is distributed to the Limited Partners until the Limited
Partners have received, first, a return of their total Invested
Capital, and, second, such additional amount as may be necessary,
after giving effect to all previous distributions of Distributable
Cash from Operations and of Cash from Sales or Refinancings to the
extent required to satisfy any deficiency in the Cumulative Return
on Investment (as defined in the Partnership Agreement) to produce
in the aggregate a Cumulative Return on Investment of 7% per annum
for all fiscal quarters commencing on or after January 1, 1986, and
ending prior to the date of such distribution. The General
Partners are then entitled to receive an amount of Cash from Sales
or Refinancings equal to any portion of the General Partners' share
of Distributable Cash from Operations which was previously deferred
in order to permit the payment to the Limited Partners of a
non-cumulative return in each year equal to 4% of their Invested
Capital. Any Cash from Sales or Refinancings remaining after the
Limited Partners have received a return of their total Invested
Capital plus the Cumulative Return on Investment of 7% per annum
for all fiscal quarters commencing on or after January 1, 1986, and
ended prior to the date of such distribution, and after the General
Partners have received an amount of such cash equal to any such
deferred payment of Distributable Cash from Operations, will be
distributed 85% to the Limited Partners and 15% to the General
Partners.
9
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
3. The Partnership Agreement (continued)
-------------------------------------
Cash from the Sale of the last of the Partnership's properties is
distributed in the same manner as Cash from Sales or Refinancings,
except that before any other distribution is made to the Partners,
each Partner shall first receive from such cash, an amount equal to
the then positive balance, if any, in such Partner's capital
account after crediting or charging to such account the profits or
losses for tax purposes from such sale. To the extent, if any,
that a Partner is entitled to receive a distribution of cash based
upon a positive balance in its capital account prior to such
distribution, such distribution will be credited against the amount
of such cash the Partner would have been entitled to receive based
upon the manner of distribution of Cash from Sales or Refinancings,
as specified in the previous paragraph.
Profits from Sales or Refinancings are generally allocated in the
same manner as cash from the related transaction; however, in no
event shall the General Partners be allocated less than 1% of any
such profits from the transaction. Losses from Sales or
Refinancings are allocated 99% to the Limited Partners and 1% to
the General Partners. In connection with the sale of the last of
the Partnership's properties, and therefore the dissolution of the
Partnership, profits will be allocated to any Partners having a
deficit balance in their capital account in an amount equal to the
deficit balance. Any remaining profits will be allocated in the
same order as cash from the sale would be distributed.
4. Transactions with the General Partners and Affiliates
-----------------------------------------------------
Expenses incurred or paid by the General Partners or their
affiliates and to which the General Partners and their affiliates
are entitled to reimbursement from the Partnership, and interest
expense on borrowings from the Managing General Partner were as
follows:
Nine Months Ended
September 30,
1995 1994
---- ----
Operating expenses $70,336 $52,905
Interest on note payable to affiliate 35,417 60,000
-------- --------
$105,753 $112,905
======== ========
The expenses above are included in expenses on the Statements of
Operations.
Accounts payable to affiliates represents amounts due to the
General Partners and their affiliates for various services provided
to the Partnership.
10
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. Transactions with the General Partners and Affiliates (continued)
-----------------------------------------------------------------
Note payable to affiliate represented a short-term borrowing by the
Partnership in the principal amount of $1,000,000 from the Managing
General Partner, initially made to the Partnership on December 1,
1988. Due to the cash flow constraints of the Partnership, the
Managing General Partner each year made a new short-term loan to
the Partnership for the outstanding principal amount of $1,000,000.
The most recent Note carried interest at a rate of 8.5% per annum.
During the second quarter of 1995, the Partnership utilized net
proceeds from the sale of the Northgreen Apartments to pay the
Managing General Partner the entire outstanding principal balance
of the Note in the amount of $1,000,000.
From 1991 through the second quarter of 1993, payments to the
Managing General Partner towards the reimbursement of general and
administrative expenses incurred by the Managing General Partner on
behalf of the Partnership and the payment of interest on the short-
term loans referred to above were deferred in order for the
Partnership to meet its working capital needs. The Managing
General Partner also made short-term advances to the Partnership in
order to cover operating expenses that could not be paid from the
operating cash flow of the Partnership. Since the third quarter of
1993, the Partnership has no longer deferred the reimbursement of
such expenses. In addition, during the year ended December 31,
1994, the Partnership paid $453,853 to the Managing General Partner
as reimbursement for the short-term advances and towards the then
outstanding balance of the deferred general and administrative
expenses and interest described above. During June 1995, the
Partnership utilized net proceeds from the sale of the Northgreen
Apartments, and approximately $83,000 of cash generated from the
Partnership's operations, to reimburse the Managing General Partner
for the entire outstanding balance of such deferred amounts in the
aggregate amount of $126,834.
On November 1, 1995, the mortgage note on the Fisherman's Village
Apartments came due. At that time, the Partnership did not have
sufficient cash to pay the outstanding principal balance of
$8,693,775. The Managing General Partner had pursued obtaining an
extension on the mortgage loan from the lender; however, the lender
would only agree to a six month extension at a cost of two percent
of the outstanding principal balance. After reviewing the terms of
the lender's proposed extension and other third party financing
options, the Managing General Partner determined that it was in the
best interest of the Partnership to have the Managing General
Partner provide short-term financing to the Partnership.
Therefore, on November 1, 1995 the Managing General Partner
purchased the mortgage loan from the existing lender for the amount
of the outstanding principal balance, or $8,693,775. In connection
therewith, the Partnership made a $500,000 payment towards the
outstanding balance of the mortgage loan and the mortgage loan was
modified to i) reflect the lump-sum cash payment made by the
Partnership to the Managing General Partner; ii) extend the
maturity date of the mortgage to November 1, 1996; iii) allow for
prepayment at any time; and iv) adjust the interest rate on the
loan to the base lending rate charged by the First National Bank of
Boston, or 8.75%, payable monthly. (The Partnership Agreement
provides that the Managing General Partner may loan funds to the
Partnership at an interest rate that shall not exceed by more than
2% the base rate of the First National Bank of Boston.)
11
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. Transactions with the General Partners and Affiliates (continued)
-----------------------------------------------------------------
The Managing General Partner currently anticipates that the
Partnership will obtain the funds necessary to satisfy the mortgage
indebtedness, which is due on November 1, 1996, through the sale of
its last remaining property.
The Managing General Partner serves in a similar capacity for three
other affiliated real estate limited partnerships.
5. Investment in Property
----------------------
Investment in property at cost consists of residential real estate
as follows:
September 30, December 31,
1995 1994
---- ----
Fisherman's Village Apartments $13,462,613 $13,462,613
Northgreen Apartments - 7,331,461
----------- -----------
$13,462,613 $20,794,074
=========== ===========
On June 1, 1995, the Partnership sold the Northgreen Apartments to
a non-affiliated buyer for a gross sales price of $9,200,000 and
received net sales proceeds of $8,923,560, after deductions for
commissions and selling expenses incurred in connection with the
sale of the property. This transaction resulted in a non-recurring
gain of $3,983,713, representing the difference between the net
sales price and the property's net book value of $4,939,847. The
Partnership received net cash proceeds of $4,319,849 from the sale,
representing the excess of the net sales proceeds over the
outstanding mortgage indebtedness on the property of $4,603,711,
which indebtedness was assumed by the buyer.
The Fisherman's Village Apartments property is currently listed for
sale.
12
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
6. Long-Term Debt
--------------
September 30, December 31,
1995 1994
---- ----
Long-term debt consists of the following:
Non-recourse first mortgage note
collateralized by Fisherman's Village
Apartments. The mortgage note is due
November 1, 1995. Prior to November
1, 1992 the note carried an interest
rate of 11.5% amortized over a 30-year
term. Commencing November 1, 1992
the note carried an interest rate of 7.39%
amortized over a 28-year term. A balloon
payment equal to the entire outstanding
principal balance and all accrued but unpaid
interest is due upon maturity of the mortgage,
November 1, 1995. $8,693,775 $8,781,178
Non-recourse first mortgage note
collateralized by the Northgreen
Apartments. On June 1, 1995,
the property was sold and the
mortgage indebtedness was
assumed by the buyer of the
property. - 4,634,841
---------- -----------
$8,693,775 $13,416,019
========== ===========
On November 1, 1995, the mortgage loan on the Fisherman's Village
Apartments matured and the Managing General Partner purchased the
mortgage loan from the existing lender. For further information
regarding the Managing General Partner's purchase of such mortgage
loan, see Note 4 to the Financial Statements.
13
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
7. Note Receivable
---------------
Effective August 9, 1987, the unconditional guaranty obligation
granted by the seller of the Waterford Apartments (the "Obligor")
to the Partnership for operating deficits (including debt service)
was extended until August 1, 1994. (The Waterford Apartments was
conveyed to the property's mortgagee by a deed-in-lieu of
foreclosure on August 9, 1991.) The outstanding balance due in the
amount of $258,950 was restructured as a 10.5% Promissory Note due
on or before August 1, 1994. In accordance with the terms of the
Promissory Note, monthly installments of interest only were payable
at a rate of 5.5% through July 31, 1990. Commencing on August 1,
1990 monthly payments in the amount of $2,781 to amortize the then
outstanding principal and deferred interest balance of $303,985 in
accordance with a 30-year amortization at a rate of 10.5% were
required. As of December 31, 1993 the Managing General Partner
believed, based on information obtained with respect to the
Obligor's financial condition, that it was probable that the
Partnership would be unable to collect all amounts due from the
Obligor in accordance with the terms of the note. Accordingly, as
of December 31, 1993, the Partnership established a provision,
reflected in the accompanying Balance Sheets, against the then
entire outstanding balance of the note in the amount of $298,058.
The provision has since been reduced to $284,155 as a result of
payments received on the note during 1994.
In June 1994, the Obligor notified the Partnership that he would be
unable to continue to pay the minimum monthly payments on the note
and would be unable to pay the outstanding balance of the note upon
its maturity on August 1, 1994. As of September 30, 1995, and as
of the date hereof, the Obligor is in default on the Promissory
Note for failure to make the minimum required payments due since
June 1, 1994 and for failure to pay the outstanding balance of the
note, which was due on August 1, 1994. Once the Obligor ceased
making the requisite payments on the note, the Managing General
Partner issued a default notice and demand for payment to the
Obligor and filed a complaint with the court demanding full payment
of all amounts owing under the note.
On December 7, 1994 the court granted the Partnership a summary
judgment in response to the complaint filed against the Obligor in
the amount of $305,489, which represents the balance of the note at
maturity plus accrued interest thereon from the maturity date of
the note through the date of the judgment. As of the date hereof,
the Partnership has not received payment from the Obligor, and the
Managing General Partner continues to pursue collection of the
judgment amount.
14
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
8. Federal Income Taxes
--------------------
A reconciliation of the net income/(loss) reported in the
Statements of Operations to the net income/(loss) reported for
federal income tax purposes is as follows:
Nine Months Ended
September 30,
1995 1994
---- ----
Net income/(loss) per Statements of
Operations $3,865,565 ($33,094)
Add/(deduct): Excess tax gain over book gain
on disposition of assets 1,897,508 -
Excess of tax depreciation over
book depreciation (206,476) (225,039)
Provision for/(recovery of)
uncollectible note receivable - (13,903)
Other income (1,500) -
---------- --------
Net income/(loss) for federal income
tax purposes $5,555,097 ($272,036)
========== ========
15
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
- -------
During the offering period (from September 21, 1984 to August 31, 1985) the
Partnership sold 21,954 Units of Limited Partnership Interests (the
"Units") representing gross proceeds of $21,954,000. The proceeds of the
offering were used to acquire investment properties, fund reserves, and pay
acquisition fees, management fees, and organizational and offering
expenses. The Partnership's investment properties are described in greater
detail in Notes 5 and 6 to the Financial Statements included in Item 1 of
this Report.
The latest date on which the Partnership is due to terminate is December
31, 2020, unless it is terminated sooner in accordance with the terms of
the Partnership Agreement. It is expected that in the ordinary course of
the Partnership's business, the properties of the Partnership will be
disposed of, and the Partnership terminated, before December 31, 2020. As
initially stated in its Prospectus, it was expected that the Partnership
would be dissolved upon the sale of its last remaining property, which at
that time was expected to be within five to eight years following the date
such property was acquired by the Partnership. As of September 30, 1995
and the date hereof, the Partnership has one property remaining in its
portfolio. This property is currently listed for sale. Upon the sale of
this last remaining property, the operations of the Partnership will
terminate and the Partnership will be dissolved, in accordance with the
terms of the Partnership Agreement.
Liquidity and Capital Resources
- -------------------------------
On March 13, 1995, the Managing General Partner entered into a Purchase and
Sale Agreement on behalf of the Partnership (the "Agreement") for the sale
of the Northgreen Apartments property to a non-affiliated buyer (the
"Buyer") for a gross sales price of $9,200,000. On June 1, 1995, the
Partnership sold the Northgreen Apartments to the Buyer and received net
sales proceeds of $8,923,560, after deductions for commissions and selling
expenses incurred in connection with the sale of the property. This
transaction generated a non-recurring gain of $3,983,713, representing the
difference between the net sales price and the property's net book value of
$4,939,847. The Partnership received net cash proceeds of $4,319,849 from
the sale of the property, representing the excess of the net sales proceeds
over the outstanding mortgage indebtedness on the property of $4,603,711,
which indebtedness was assumed by the Buyer. The Partnership retained
$1,465,829 of the net sales proceeds to satisfy liabilities of the
Partnership and to fund working capital reserves for any contingent
liabilities. The remaining net sales proceeds in the amount of $2,854,020,
or $130 per Unit, were distributed to the Limited Partners during the third
quarter of 1995.
16
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
- -------------------------------
Real estate market conditions in the Orlando, Florida area, where the
Fisherman's Village Apartments are located, have recovered from the
overbuilding of multi-family residential units which occurred during the
late 1980's and early 1990's. However, real estate market conditions
remain competitive due to the construction of new multi-family housing
units. Fisherman's Village Apartments was successful in increasing
occupancy levels during 1993 through the use of leasing incentives and
capital improvements made during that year at the property. During 1994,
Fisherman's Village Apartments reduced the level of leasing incentives
offered as market conditions improved and occupancy stabilized. The
Managing General Partner listed the Fisherman's Village Apartments for sale
during April 1995 based upon such market conditions and the operations of
the property. A decline in the property's operations occurred during the
first quarter of 1995, as had been anticipated; however, the decline
unexpectedly continued during the second and third quarters of 1995. The
Managing General Partner does not expect a significant improvement in
market conditions over the near term. Given the property's age and future
capital expenditure requirements, and the projected cost and availability
of long-term, third party financing when the property's mortgage loan
matures on November 1, 1996, the Managing General Partner believes that a
sale of the property remains in the best interest of the Partnership.
During the second quarter of 1995, the Managing General Partner had the
independent appraiser who had appraised the Fisherman's Village Apartments
on June 30, 1994 update its appraisal report. Based upon the appraiser's
investigation and analysis, the property's market value was estimated to be
approximately $9,750,000, compared to the Partnership's cumulative
investment in the property of approximately $13,463,000. The net book
value of the Fisherman's Village property in the amount of $8,652,481 at
September 30, 1995 was evaluated in comparison to the estimated future
undiscounted cash flows and the independent appraisal and, based upon such
evaluation, the Managing General Partner determined that no impairment in
value existed and that a write-down in value was not required as of
September 30, 1995.
As of September 30, 1995, the Partnership had $1,181,015 in cash and cash
equivalents and $341,703 in restricted cash, which represents tenants'
security deposits and funds held in escrow.
17
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
- -------------------------------
Since the Partnership's inception, Adjusted Cash from Operations (as
defined in the Partnership Agreement) has been insufficient to provide the
Limited Partners with cash distributions. Based on current information,
the Managing General Partner does not anticipate that Adjusted Cash from
Operations will be sufficient to provide the Limited Partners with any cash
distributions during 1995. The Partnership's liquidity has been adversely
affected by declining income and the level of expenditures needed to
restore and maintain its properties. These factors have had a significant
impact on the Partnership's ability to generate cash. Due to these cash
flow constraints, from 1989 through June 1995, the Partnership had been
unable to repay the $1,000,000 principal balance on the short-term loan
made by the Managing General Partner to the Partnership without the
Managing General Partner each year making a new short-term loan to the
Partnership in the outstanding principal amount of $1,000,000. In
addition, from 1991 through the second quarter of 1993, payments to the
Managing General Partner towards the reimbursement of general and
administrative expenses incurred on behalf of the Partnership by the
Managing General Partner and the payment of interest on the short-term
loans referred to above were deferred in order for the Partnership to meet
its working capital needs. The Managing General Partner also made short-
term advances to the Partnership in order to cover operating expenses that
could not be paid from the operating cash flow of the Partnership.
Commencing with the year ended December 31, 1993, the Partnership has no
longer deferred the reimbursement of such expenses. In addition, during
the year ended December 31, 1994, the Partnership paid $453,853 to the
Managing General Partner as reimbursement for the short-term advances and
towards the then outstanding balance of the deferred amounts. During June
1995, the Partnership utilized a portion of the net proceeds from the sale
of the Northgreen Apartments property, and approximately $83,000 of cash
generated from the Partnership's operations, to reimburse the Managing
General Partner for the entire outstanding balance of the deferred amounts
in the aggregate amount of $126,834 and $1,000,000 for the outstanding
principal balance of the short-term loan.
During the nine months ended September 30, 1995, the Partnership made
$4,722,244 of principal payments on its long-term mortgage debt. Of this
amount, $118,533 was generated from the Partnership's operations and
$4,603,711 was assumed by the buyer of the Northgreen Apartments. A
balloon payment equal to the entire outstanding principal balance and all
accrued but unpaid interest on the Fisherman's Village Apartments' mortgage
loan in the aggregate amount of $8,749,098 came due on November 1, 1995.
At that time, the Partnership did not have sufficient cash to make such
balloon payment to the lender. The Managing General Partner had pursued
obtaining an extension on the mortgage loan from the lender; however, the
lender would only agree to a six month extension at a cost of two percent
of the outstanding principal balance.
18
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
- -------------------------------
After reviewing the terms of the lender's proposed extension and other
third party financing options, the Managing General Partner determined that
it was in the best interest of the Partnership to have the Managing General
Partner provide short-term financing to the Partnership. Therefore, on
November 1, 1995 the Managing General Partner purchased the mortgage loan
from the existing lender for the amount of the outstanding principal
balance, or $8,693,775. In connection therewith, the Partnership made a
$500,000 payment towards the outstanding balance of the mortgage loan and
the mortgage loan was modified to i) reflect the lump-sum cash payment made
by the Partnership to the Managing General Partner; ii) extend the maturity
date of the mortgage to November 1, 1996; iii) allow for prepayment at any
time; and iv) adjust the interest rate on the loan to the base lending rate
charged by the First National Bank of Boston, or 8.75%, payable monthly.
(The Partnership Agreement provides that the Managing General Partner may
loan funds to the Partnership at an interest rate that shall not exceed by
more than 2% the base rate of the First National Bank of Boston.)
The Managing General Partner currently anticipates that the Partnership
will obtain the funds necessary to satisfy the mortgage indebtedness, which
is due on November 1, 1996, through the sale of its last remaining
property.
As of December 31, 1993, the Partnership established a reserve against the
entire outstanding balance of the note receivable (the "Note") relating to
the unconditional guaranty obligation for operating deficits granted by the
seller of the Waterford Apartments (the "Obligor"). The Managing General
Partner believed, based on information obtained with respect to the
Obligor's financial condition, that it was probable that the Partnership
would be unable to collect all amounts due from the Obligor in accordance
with the terms of the Note. Accordingly, the Partnership established a
provision against the then entire outstanding balance of the Note in the
amount of $298,058. The provision has since been reduced by $13,903 as a
result of payments made by the Obligor. In June 1994, the Obligor notified
the Partnership that he would be unable to pay either the outstanding
balance of the Note upon its maturity on August 1, 1994 or the minimum
monthly payments on the Note. As of September 30, 1995, and as of the date
hereof, the Obligor is in default on the Note for failure to make the
minimum required payments due since June 1, 1994 and for failure to pay the
outstanding balance of the Note, which was due on August 1, 1994. Once the
Obligor ceased making the requisite payments on the Note, the Managing
General Partner issued a default notice and demand for payment to the
Obligor and filed a complaint with the court demanding full payment of the
Note. On December 7, 1994 the Partnership was granted a summary judgment
in response to the complaint filed against the Obligor in the amount of the
Note plus accrued interest thereon totaling $305,489. As of the date
hereof, the Partnership has not received payment from the Obligor and the
Managing General Partner continues to pursue collection of the judgment
amount. There can be no assurance that the Partnership will be able to
recover all, if any, of the amounts due from the Obligor.
Cash in the amount of $2,854,020, or $130 per Unit, generated from the sale
of the Northgreen Apartments property, was distributed to the Limited
Partners during the third quarter of 1995.
No capital expenditures have been made during the nine months ended
September 30, 1995, and the Partnership does not anticipate incurring any
significant capital expenditures during the remainder of 1995.
19
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations
- ---------------------
The net income for the nine months ended September 30, 1995 was $3,865,565
as compared to a net loss of $33,094 for the same period in 1994. Included
in net income for the nine months ended September 30, 1995 is a non-
recurring gain of $3,983,713 from the sale of the Northgreen Apartments
Average occupancy for the Fisherman's Village Apartments for the nine
months ended September 30, 1995 was 90%.
Rental income for the nine months ended September 30, 1995 decreased by
$537,099, or 22%, as compared to the same period in 1994. This decrease is
primarily due to the sale of the Northgreen Apartments property on June 1,
1995. Rental income at the Fisherman's Village Apartments decreased by 6%
for the nine months ended September 30, 1995 as compared to the same period
in 1994. This decrease primarily resulted from a decline in average
occupancy at the property from 95% during the first nine months of 1994 to
90% during the same period in 1995. In addition, during the nine months
ended September 30, 1995, rental concessions were offered at the property
in an effort to increase occupancy.
Interest income for the nine months ended September 30, 1995 increased by
$53,243, or 260%, as compared to the same period in 1994. This increase
was primarily due to an increase in the Partnership's cash and cash
equivalents between periods and an increase in the interest rate earned on
such amounts. Cash and cash equivalents increased significantly due to the
sale of the Northgreen Apartments on June 1, 1995.
Interest expense for the nine months ended September 30, 1995 decreased by
$170,705, or 20%, as compared to the same period in 1994. This decrease is
primarily attributable to the sale of the Northgreen Apartments property.
In addition, during June 1995 the Partnership paid the entire outstanding
balance of the short-term loan made by the Managing General Partner
resulting in a further decrease in interest expense. Interest expense with
respect to the Fisherman's Village Apartments property was consistent
between periods.
Property operating expenses for the nine months ended September 30, 1995
decreased by $159,577, or 15%, as compared to the same period in 1994. This
decrease is primarily due to the sale of the Northgreen Apartments.
Property operating expenses at Fisherman's Village increased between
periods primarily due to an increase in maintenance and repair expenses
which were incurred as a result of unusually high turnover of rental units
during the nine months ended September 30, 1995. In addition, the
Fisherman's Village Apartments incurred maintenance and repair expenses
related to plumbing repairs required to be made at the property during
1995.
Depreciation expense for the nine months ended September 30, 1995 decreased
by $89,802, or 19%, as compared to the same period in 1994. This decrease
is primarily due to the sale of the Northgreen Apartments.
20
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations (continued)
- ---------------------
General and administrative expenses for the nine months ended September 30,
1995 increased by $7,379, or 8%, as compared to the same period in 1994.
This increase between periods was primarily due to an increase in the
Managing General Partner's costs relating to the sale of the Northgreen
Apartments, which resulted in an increased expense allocation to the
Partnership in accordance with the terms of the Partnership Agreement.
As of December 31, 1993 the Managing General Partner established an
allowance against the $298,058 outstanding balance of the note receivable
relating to the unconditional guaranty obligation granted by the seller of
the Waterford Apartments. During 1994, the Partnership received payments
on the note totaling $13,903. However, the Obligor is in default on the
note for failure to make the minimum required payments due since June 1,
1994 and for failure to pay the outstanding balance of the note, which was
due on August 1, 1994. (This note receivable is also discussed in Note 7
to the Financial Statements included in Item 1 of this Report).
The Managing General Partner believes that inflation has had no significant
impact on the Partnership during the nine months ended September 30, 1995
and the Managing General Partner anticipates that inflation will not have a
significant impact during the remainder of 1995.
21
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Cash Flow
- ---------
The following table provides the calculations of Adjusted Cash from
Operations and Distributable Cash from Operations, which are calculated in
accordance with Section 17 of the Partnership Agreement:
Nine Months Ended
September 30,
1995 1994
---- ----
Net cash provided by
operating activities (a) $254,723 $361,314
Net change in operating assets
and liabilities (a) 7,193 75,458
-------- --------
Cash provided by operations (a) 261,916 436,772
Principal payments on long-term debt
(exclusive of payments for
retirement of debt) (118,533) (137,792)
-------- --------
Cash provided by operations,
as adjusted 143,383 298,980
Increase in working capital reserves (143,383) (298,980)
-------- --------
Adjusted Cash from Operations (b) - -
Decrease in working capital reserves - -
-------- --------
Distributable Cash from Operations (b) $- $-
======== ========
(a) Net cash provided by operating activities, net change in operating
assets and liabilities, and cash provided by operations are as
calculated in the Statements of Cash Flows included in Item 1 of this
Report.
(b) As defined in the Partnership Agreement. Distributable Cash from
Operations should not be considered as an alternative to net income
(i.e. not an indicator of performance) or to reflect cash flows or
availability of discretionary funds.
22
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business of the
Partnership, to which the Partnership is a party or to which any
of its properties is subject.
Item 2. Changes in Securities
There were no changes in securities during the third quarter of
1995.
Item 3. Defaults Upon Senior Securities
There were no defaults upon senior securities during the third
quarter of 1995.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders of the
Partnership during the third quarter of 1995.
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K
(a) There are no exhibits to this report.
(b) There were no Reports on Form 8-K filed during the
third quarter of 1995.
23
JOHN HANCOCK PROPERTIES LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Signatures
----------
Pursuant to the requirements 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, on the 13th day of November, 1995.
John Hancock Properties Limited Partnership
By: John Hancock Realty Equities, Inc.,
Managing General Partner
By: WILLIAM M. FITZGERALD
--------------------------------
William M. Fitzgerald, President
By: RICHARD E. FRANK
--------------------------------
Richard E. Frank, Treasurer
(Chief Accounting Officer)