FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93.)
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-14578
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2825863
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 1,590
Restricted--tenant security deposits 159
Accounts receivable 93
Escrow for taxes 216
Other assets 63
Investment properties:
Land $ 1,121
Buildings and related personal property 13,489
14,610
Less accumulated depreciation (4,428) 10,182
$12,303
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 45
Tenant security deposits 155
Accrued taxes 349
Other liabilities 48
Partners' Capital (Deficit)
General partners $ (46)
Limited partners (15,698 units
issued and outstanding) 11,752 11,706
$12,303
See Accompanying Notes to Financial Statements
b) HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1997 1996
Revenues:
Rental income $ 761 $ 816
Interest income 18 15
Other income 23 17
Total revenues 802 848
Expenses:
Operating 233 228
General and administrative 69 76
Maintenance 64 94
Depreciation 157 134
Property taxes 102 99
Total expenses 625 631
Net income $ 177 $ 217
Net income allocated to general partners (2%) $ 3 $ 4
Net income allocated to limited partners (98%) 174 213
$ 177 $ 217
Net income per limited partnership unit $11.07 $13.55
See Accompanying Notes to Financial Statements
c) HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data and original contributions)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 15,698 $ 200 $15,698,000 $15,698,200
Partners' (deficit) capital
at December 31, 1996 15,698 $ (49) $ 11,578 $ 11,529
Net income for the three
months ended March 31, 1997 3 174 177
Partners' (deficit) capital
at March 31, 1997 15,698 $ (46) $ 11,752$ 11,706
See Accompanying Notes to Financial Statements
d) HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net income $ 177 $ 217
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 157 134
Amortization of leasing commissions 1 1
Change in accounts:
Restricted cash 6 2
Accounts receivable (6) 30
Escrows for taxes 42 (99)
Other assets (2) --
Accounts payable (29) (88)
Tenant security deposit liabilities (7) (5)
Accrued taxes 102 99
Other liabilities (10) (8)
Net cash provided by operating activities 431 283
Cash flows from investing activities:
Property improvements and replacements (233) (21)
Net cash used in investing activities (233) (21)
Net increase in cash and cash equivalents 198 262
Cash and cash equivalents at beginning of period 1,392 1,113
Cash and cash equivalents at end of period $1,590 $1,375
See Accompanying Notes to Financial Statements
e) HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of HCW Pension Real Estate Fund
Limited Partnership ("Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Article 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of IH, Inc. ("Managing General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 1997, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1997. For further information,
refer to the financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-KSB for the year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership paid property management fees for
property management services as noted below for the three months ended March 31,
1997 and 1996, respectively. Such fees are included in operating expenses in
the statements of operations and are reflected in the following table. The
Partnership Agreement ("Agreement") provides that the Managing General Partner
and its affiliates be paid asset management fees based on "tangible asset value"
as defined in the Agreement. The Agreement also provides for reimbursement to
the Managing General Partner and its affiliates for costs incurred in connection
with the administration of Partnership activities. The Managing General Partner
and its affiliates received reimbursements and fees as reflected in the
following table:
Three Months Ended
March 31,
1997 1996
(in thousands)
Property management fees $ 42 $ 48
Asset management fees 34 34
Reimbursement for services of affiliates (1) 36 26
(1) Included in "reimbursement for services of affiliates" for the three months
ended March 31, 1997, is approximately $10,000 in reimbursements for
construction oversight costs.
The Partnership insures its properties under a master policy through an agency
and insurer unaffiliated with the Managing General Partner. An affiliate of the
Managing General Partner acquired, in the acquisition of a business, certain
financial obligations from an insurance agency which was later acquired by the
agent who placed the current year's master policy. The current agent assumed
the financial obligations to the affiliate of the Managing General Partner, who
receives payments on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
Managing General Partner by virtue of the agent's obligations is not
significant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of one apartment complex and one
office building. The following table sets forth the average occupancy of the
properties for the three months ended March 31, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Lewis Park Apartments
Carbondale, Illinois 91% 93%
Highland Professional Tower
Kansas City, Missouri 77% 89%
The Managing General Partner attributes the decrease in occupancy at Highland
Professional Tower to tenants not renewing their leases due to deferred
maintenance at the property. The Managing General Partner is currently working
on a $700,000 project to renovate the common areas of Highland Professional
Tower. The common area renovation project should be complete by July 1997. The
Managing General Partner feels that this project will attract and retain tenants
once completed.
Results of Operations
The Partnership's net income for the three months ended March 31, 1997, was
approximately $177,000 versus approximately $217,000 for the corresponding
period in 1996. The decrease in net income is primarily attributable to the
decrease in rental income. Rental income decreased due to the decrease in
occupancy at Highland Professional Tower as noted above. This decrease in
rental income was partially offset by a decrease in maintenance expense. The
decrease in maintenance expense is primarily due to interior repair work
performed at Lewis Park during the three months ended March 31, 1996.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expenses. As part of this plan,
the General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
Liquidity and Capital Resources
At March 31, 1997, the Partnership had unrestricted cash of approximately
$1,590,000 compared to approximately $1,375,000 at March 31, 1996. Net cash
provided by operating activities increased primarily due to a decrease in
escrows for taxes and a decrease in cash used for payment of accounts payable.
Net cash used in investing activities increased due to the increase in property
improvements and replacements.
The Managing General Partner is currently addressing the deferred maintenance
issues at Highland Professional Tower. The plan to address the deferred
maintenance issues includes approximately $700,000 of common area renovations
and repairs which should be complete by July 1997. These renovations include
the replacement of glass in the entry way, the replacement of flooring and
wallcoverings, restroom and elevator renovations, and the installation of fire
alarm and security systems. These renovations will be paid from cash from
operations. The Partnership has no other material capital programs scheduled to
be performed in 1997, although certain routine capital expenditures and
maintenance expenses have been budgeted. These capital expenditures and
maintenance expenses will be incurred only if cash is available from operations.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. No cash
distributions were made during the three months ended March 31, 1997 or 1996,
respectively. Future cash distributions will depend on the levels of net cash
generated from operations, capital expenditure requirements, property sales,
financings, and the availability of cash reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HCW PENSION REAL ESTATE FUND
LIMITED PARTNERSHIP
By: HCW General Partner Ltd.,
the General Partner
By: IH, Inc.,
the General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: May 5, 1997