FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 0-16877
FOX STRATEGIC HOUSING INCOME PARTNERS
(Exact name of small business issuer as specified in its charter)
California 94-3016373
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) FOX STRATEGIC HOUSING INCOME PARTNERS
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1997
Assets
Cash and cash equivalents $ 4,686
Receivables and deposits 181
Other assets 61
Investment properties:
Land $ 3,119
Buildings and related personal property 18,116
21,235
Less accumulated depreciation (5,945) 15,290
$ 20,218
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 25
Tenant security deposits 64
Accrued taxes 152
Accrued interest 151
Other liabilities 41
Mortgage notes payable 8,321
Partners' Capital (Deficit):
Limited partners' (26,111 units outstanding) $ 11,689
General partner's (225) 11,464
$ 20,218
See Accompanying Notes to Consolidated Financial Statements
b) FOX STRATEGIC HOUSING INCOME PARTNERS
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1997 1996
Revenues:
Rental income $ 735 $ 715
Other income 79 67
Total revenues 814 782
Expenses:
Operating 352 349
Interest 233 228
Depreciation 154 149
General and administrative 59 86
Total expenses 798 812
Net income (loss) $ 16 $ (30)
Net income (loss) allocated to general
partner $ 3 $ (30)
Net income (loss) allocated to limited
partners 13 --
$ 16 $ (30)
Net income (loss) per limited
partnership unit $ .50 $ --
See Accompanying Notes to Consolidated Financial Statements
c) FOX STRATEGIC HOUSING INCOME PARTNERS
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner's Partners' Total
Original capital contributions 26,111 $ -- $ 26,111 $ 26,111
Partners' (deficit) capital at
December 31, 1996 26,111 $ (228) $ 11,676 $ 11,448
Net income for the three months
ended March 31, 1997 -- 3 13 16
Partners' (deficit) capital at
March 31, 1997 26,111 $ (225) $ 11,689 $ 11,464
<FN>
See Accompanying Notes to Consolidated Financial Statements
d) FOX STRATEGIC HOUSING INCOME PARTNERS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net income (loss) $ 16 $ (30)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 154 149
Amortization of loan costs 10 10
Interest added to note payable principal 72 69
Change in accounts:
Receivables and deposits 25 (139)
Other assets (3) 2
Accounts payable (4) 25
Tenant security deposit liabilities (4) (4)
Accrued taxes (8) 69
Accrued interest payable 151 149
Other liabilities (4) 46
Net cash provided by operating activities 405 346
Cash flows from investing activities:
Property improvements and replacements (34) (19)
Net cash used in investing activities (34) (19)
Cash flows from financing activities: -- --
Net increase in cash and cash equivalents 371 327
Cash and cash equivalents at beginning of period 4,315 1,409
Cash and cash equivalents at end of period $ 4,686 $ 1,736
Supplemental information of non cash investing and
financing activities:
Beginning accrued interest added to note
payable principal $ 358 $ 356
<FN>
See Accompanying Notes to Consolidated Financial Statements
FOX STRATEGIC HOUSING INCOME PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Fox Strategic Housing Income
Partners (the "Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of Fox Capital Management Corporation ("FCMC" or the "Managing General
Partner"), a California corporation, 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 Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
Fox Partners VIII, a California general partnership, is the general partner.
The general partners of Fox Partners VIII are FCMC and Fox Realty Investors
("FRI"), a California general partnership.
Pursuant to a series of transactions which closed during the first half of 1996,
affiliates of Insignia Financial Group, Inc. ("Insignia") acquired all of the
issued and outstanding shares of stock of FCMC, NPI Equity Investments II, Inc.
("NPI Equity"), the managing general partner of FRI, and National Property
Investors, Inc. ("NPI"). In connection with these transactions, affiliates of
Insignia appointed new officers and directors of NPI Equity and FCMC.
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were incurred during the three month periods ended March 31, 1997 and 1996
(in thousands):
For the Three Months Ended
March 31
1997 1996
Property management fees (included in operating
expenses) $ 38 $ 37
Reimbursement for services of affiliates (included
in general and administrative and operating
expenses) 26 46
For the period from January 19, 1996, to March 31, 1997, the Partnership insured
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 received 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 two apartment complexes. 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
Barrington Place Apartments
Westlake, Ohio 96% 96%
Wood View Apartments
Atlanta, Georgia 92% 95%
The Partnership's net income for the three months ended March 31, 1997, was
approximately $16,000 versus a net loss of approximately $30,000 for the
corresponding period of 1996. The increase in net income is primarily
attributable to an increase in rental income and a decrease in general and
administrative expenses. The rental income increase primarily relates to
increased rental rates at both properties, which more than offset the reduction
in an average occupancy at Wood View Apartments. The decrease in general and
administrative expenses is due to a decrease in expense reimbursement paid to
affiliates of the Managing General Partner. The decrease is directly related to
the costs incurred in connection with the transition and relocation of the
administration offices during the first quarter of 1996. Operating, interest,
and depreciation expense remained consistent from the first quarter of 1996 to
the first quarter of 1997. There were no major repairs and maintenance included
in operating expenses during the three month periods ended March 31, 1997 and
1996.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At March 31, 1997, the Partnership had unrestricted cash of approximately
$4,686,000 as compared to approximately $1,736,000 at March 31, 1996. Net cash
provided by operating activities increased primarily due to the increase in
rental income and the decrease of general and administrative expenses as
discussed above. The decrease in cash provided by investing activities is the
result of an increase in property improvements and replacements.
The Partnership's properties are cross-collateralized by a zero coupon first
mortgage which secures the entire amount of the note payable. Interest accrues
on the amount borrowed at a contract rate of 10.9 percent per annum, with the
interest accrued added to principal each January and July. As of March 31,
1997, approximately $5,193,000 in accrued interest has been added to the
principal of this note. The Partnership is or was required to repay a specified
percentage of the then outstanding original principal amount of the loan as
follows: 20 percent in August 1995, 20 percent in August 1996, and 30 percent
in August 1997. In addition, provided that the Partnership has generated income
in an amount as defined in the note agreement, it will be required to repay a
specified percentage of the then outstanding accrued interest added to principal
as follows: 20 percent in August 1995, 20 percent in August 1996, and 30
percent in August 1997. The remaining principal balance plus all accrued and
unpaid interest is due in August 1998. In August 1995, the Partnership paid
approximately $1,947,000 (which included $970,000 of accrued interest added to
principal). In August 1996, the Partnership paid $782,000, which was 20 percent
of the then outstanding original principal balance (no additional payment of
accrued interest was required). In August 1997, the Partnership will have to
pay approximately $938,000 of principal.
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 properties 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. The
mortgage indebtedness and accrued interest mature August 1, 1998, at which time
the properties will either be refinanced or sold. Future cash distributions
will depend on the levels of net cash generated from operations, property sales,
refinancings, and the availability of cash reserves. In addition, distributions
may be limited by the debt repayments discussed above. No cash distributions
were paid during 1996 or during the three months ended March 31, 1997. Cash
distributions are expected to remain suspended as a result of the pending debt
maturity which is discussed above.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) 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 duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FOX STRATEGIC HOUSING INCOME PARTNERS
By: FOX PARTNERS VIII
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
Its Managing General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Vice President and Treasurer
Date: May 6, 1997