UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________________
Commission file number 0-18226
-------
NYLIFE Government Mortgage Plus Limited Partnership
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 13-3487910
------------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
51 MADISON AVENUE, NEW YORK, NEW YORK 10010
------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 576-6456
---------------
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 __
---
NYLIFE Government Mortgage Plus
Limited Partnership
June 30, 1996
INDEX
PAGE NO.
Part I - Financial Information (Unaudited)
Item 1. Financial Statements
Statement of Net Assets in Liquidation
as of June 30, 1996 3
Balance Sheet as of December 31, 1995 4
Statement of Operations for the Three and
Six Months Ended June 30, 1996 and 1995 5
Statement of Partners' Capital and Net Assets in
Liquidation for the Six Months
Ended June 30, 1996 and for the Year Ended
December 31, 1995 6
Statement of Cash Flows for the Six Months Ended
June 30, 1996 and 1995 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II - Other Information 14
Item 2. Changes in Securities 14
Item 4. Submission of Matters to a Vote of Securities Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
NYLIFE Government Mortgage Plus
Limited Partnership
Statement of Net Assets in Liquidation
as of June 30, 1996
1996
ASSETS (Unaudited)
---------------
Cash and cash equivalents $ 863,993
Interest receivable 125,628
Investments in Participating Insured Mortgages 16,746,969
Investments in Participating Guaranteed Loans 400,100
---------------
Total assets 18,136,690
LIABILITIES
Accrued liabilities 110,321
---------------
Total liabilities 110,321
---------------
NET ASSETS $ 18,026,369
---------------
---------------
The accompanying notes are an integral part of this financial statement.
3
NYLIFE Government Mortgage Plus
Limited Partnership
Balance Sheet
as of December 31, 1995
ASSETS 1995
---------------
Cash and cash equivalents $ 867,686
Interest receivable 208,392
Investments in Participating Insured Mortgages 29,765,800
Investments in Participating Guaranteed Loans 400,100
Deferred acquisition fees and expenses - net 875,965
---------------
Total assets $ 32,117,943
---------------
---------------
LIABILITIES AND PARTNERS' CAPITAL
Due to affiliates $ 21,729
Accrued liabilities 79,423
---------------
Total liabilities 101,152
---------------
Partners' capital:
Capital contributions
net of public offering expenses 36,028,557
Accumulated earnings 17,372,364
Cumulative distributions (21,384,130)
---------------
Total partners' capital 32,016,791
---------------
Total liabilities and partners' capital $ 32,117,943
---------------
---------------
The accompanying notes are an integral part of this financial statement.
4
NYLIFE Government Mortgage Plus
Limited Partnership
Statement of Operations
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------------------------------------------------------
1996 1995 1996 1995
-------------- -------------- -------------- --------------
INCOME
Interest - cash and cash equivalents $ 80,291 $ 22,335 $ 146,000 $ 46,287
Interest - Mortgages (net of amortization
of deferred acquisition costs) 429,140 599,098 932,791 1,683,750
Other income - - 57,098 324,000
-------------- -------------- -------------- --------------
Total income 509,430 621,433 1,135,888 2,054,037
-------------- -------------- -------------- --------------
EXPENSES
General and administrative 58,904 47,046 104,760 91,376
Asset management fees 21,729 21,729 43,458 49,396
-------------- -------------- -------------- --------------
Total expenses 80,633 68,775 148,218 140,772
-------------- -------------- -------------- --------------
Net income $ 428,797 $ 552,658 $ 987,670 $ 1,913,265
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
NET INCOME ALLOCATED
General Partner $ 8,576 $ 11,053 $ 19,753 $ 22,859
Corporate Limited Partner 10 13 25 46
Unitholders 420,211 541,591 967,892 1,890,360
-------------- -------------- -------------- --------------
$ 428,797 $ 552,657 $ 987,670 $ 1,913,265
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Net income per Unit $ .05 $ .07 $ .12 $ .23
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
Number of Units 8,168,457.7 8,168,457.7 8,168,457.7 8,168,457.7
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
The accompanying notes are an integral part of these financial statements.
5
NYLIFE Government Mortgage Plus
Limited Partnership
Statement of Partners' Capital and Net Assets in Liquidation
for the Six Months Ended June 30, 1996 (Unaudited)
and for the Year Ended December 31, 1995
Corporate Total
Limited General Partners'
Unitholders Partner Partner Capital
--------------- --------------- --------------- ---------------
Balance at January 1, 1995 $ 33,921,431 $ 915 $ (39,821) $ 33,882,525
Net income 2,909,307 71 43,654 2,953,032
Distributions (4,771,535) (117) (47,114) (4,818,766)
--------------- --------------- --------------- ---------------
Balance at December 31, 1995 32,059,203 869 (43,281) 32,016,791
Net income 967,892 25 19,753 987,670
Distributions (14,085,024) (345) (22,133) (14,107,502)
--------------- --------------- --------------- ---------------
Balance at June 30, 1996
before Liquidation adjustment $ 18,942,070 $ 549 $ (45,661) $ 896,959
--------------- --------------- ---------------
--------------- --------------- ---------------
Liquidation adjustment (870,590)
---------------
Net Assets in
Liquidation at June 30, 1996 $ 18,026,369
---------------
---------------
The accompanying notes are an integral part of these financial statements.
6
NYLIFE Government Mortgage Plus
Limited Partnership
Statement of Cash Flows
for the Six Months Ended June 30, 1996 and 1995
(Unaudited)
1996 1995
---------------- ----------------
Cash flows from operating activities:
Net income $ 987,670 $ 1,913,265
---------------- ----------------
Adjustments to reconcile net income to net cash
flows from operating activities:
Amortization of acquisition fees and expenses 5,374 570,203
Changes in assets and liabilities:
Decrease in interest receivable 82,764 71,956
(Decrease) in due to affiliates (21,729) (50,000)
Increase (decrease) in accrued liabilities 30,898 (19,074)
---------------- ----------------
Total adjustments 97,309 573,085
---------------- ----------------
Net cash provided by operating activities 1,084,978 2,486,350
---------------- ----------------
Cash flows from investing activities:
Repayment of Participating Insured Mortgages 13,018,831 60,671
Repayment of Participating Guaranteed Loans - 1,095,800
---------------- ----------------
Net cash provided by investing activities 13,018,831 1,156,471
---------------- ----------------
Cash flows from financing activities:
Distributions to partners (14,107,502) (3,667,863)
---------------- ----------------
Net cash used in financing activities (14,107,502) (3,667,863)
---------------- ----------------
Net decrease in cash and cash equivalents (3,693) (25,042)
---------------- ----------------
Cash and cash equivalents at beginning of period 867,686 950,967
---------------- ----------------
Cash and cash equivalents at end of period $ 863,993 $ 925,925
---------------- ----------------
---------------- ----------------
The accompanying notes are an integral part of these financial statements.
7
NYLIFE GOVERNMENT MORTGAGE PLUS
LIMITED PARTNERSHIP
(IN PROCESS OF LIQUIDATION)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
As discussed in further detail in Note 2, on July 1, 1996, the Unitholders of
the Partnership approved the dissolution of the Partnership. As a result, the
Partnership has changed its basis of accounting for the period subsequent to
June 30, 1996, from the historical cost basis to the liquidation basis. Under
the liquidation basis of accounting, the Partnerships' assets at June 30, 1996
are reported at estimated net realizable value, and the Partnerships'
liabilities are presented at estimated settlement amounts. The net effect of
the revaluation of the Partnership's assets and liabilities due to the
adoption of the liquidation basis of accounting was a downward liquidation
adjustment of $870,590, to write-off of unamortized deferred acquisition
costs which was reported on the statement of Partners' Capital and Net
Assets in Liquidation for the period ended June 30, 1996.
Investment in Participating Insured Mortgages and Participating Guaranteed Loans
at June 30, 1996 are recorded at net book value which the general partner
believes approximates net realizable value. For all other assets and
liabilities presented on the liquidation basis of accounting, the general
partner believes that historical cost approximates fair value due to the short-
term nature of such assets and liabilities. The balance sheet at December 31,
1995, and the accompanying statements of operations, partners' capital and
cash flows were prepared using the historical cost basis of accounting.
The summarized financial information contained herein is unaudited; however, in
the opinion of management, all adjustments (which include normal recurring
adjustments) necessary for a fair presentation of financial information have
been included. The accompanying financial statements and related notes should be
read in conjunction with the Partnership's 1995 Annual Report on Form 10-K.
All capitalized terms used in these Notes to Financial Statements, unless
otherwise defined herein, shall have the meanings set forth in the Partnership
Agreement.
NOTE 2 - LIQUIDATION
Two class action lawsuits were filed against the general partner and certain
of its affiliates in the District Court of Harris County, Texas (the "Texas
State Court") on January 11, 1996, styled GRIMSHAWE V. NEW YORK LIFE
INSURANCE CO., ET AL. (No. 96-001188) and SHEA V. NEW YORK LIFE INSURANCE
CO., ET AL. (No. 96-01189) alleging misconduct in connection with the
original sale of Units in the Partnership, including violation of various
laws and regulations and claims of continuing fraudulent conduct. The
plaintiffs asked for compensatory damages for their lost original investment,
plus interest, costs (including attorneys' fees), punitive damages,
disgorgement of any earnings compensation and benefits received by the
defendants as
8
a result of the alleged actions and other unspecified relief to which
plaintiffs might have been entitled. These suits were amended and refiled in a
consolidated action (the "Lawsuit") in the United States District Court for the
Southern District of Florida (the "Court") on March 18, 1996. The plaintiffs
purported to represent claims of all persons (the "Class") who purchased or
otherwise assumed rights and title to investments in certain limited
partnerships, including the Partnership, and other programs created, sponsored,
marketed, sold, operated or managed by the defendants (collectively, the
"Proprietary Partnerships"). On May 3, 1996, the Texas State Court entered an
order dismissing the Texas proceeding without prejudice, and provided that the
dismissal would be with prejudice upon final disposition of the Lawsuit. The
Partnership was not a defendant in the Lawsuit.
The defendants expressly denied any wrongdoing alleged in the Lawsuit and
conceded no liability or wrongdoing in connection with the sale of the Units
or the structure of the program. Nevertheless, to reduce the burden of
protracted litigation, the defendants entered into a Stipulation of
Settlement ("Settlement Agreement") with the plaintiffs because, in their
opinion, such settlement would (i) provide substantial benefits to the
Unitholders in a manner consistent with New York Life's position that it had
previously determined to wind up the Partnership through orderly liquidation
as the continuation of the business no longer serves the intended objectives
of either the Unitholders or the defendants and to offer the Unitholders an
enhancement to the liquidating distribution they would otherwise receive and
(ii) provide an opportunity to wind up the Partnership on a schedule
favorable to the Unitholders and resolve the issues raised by the Lawsuit.
In coordination with the proposed settlement, the General Partner solicited
the approval of the Unitholders for the dissolution of the Partnership. On
July 1, 1996, the expiration date for the solicitation of such consents, the
Unitholders of the Partnership approved the dissolution and termination
of the Partnership. NYLIFE Realty Inc., as liquidator, has commenced the
process of winding up the Partnership.
Final approval of the Settlement Agreement was given by the Court on July 3,
1996. The Settlement Agreement became final on August 5, 1996, the date on
which the period for appeal of the Settlement Agreement expired. Under the
terms of the Settlement Agreement, each settling Unitholder will receive a
complete return of his original investment, less distributions received prior
to the final settlement date; if a settling Unitholder has already received
such referenced net return prior to or as a result of the payment of the
liquidation advance provided for under the Settlement, such settling
Unitholder will also receive the greater of (a) $10 per Unit or (b) $200 in
addition to the liquidation advance. NYLIFE Inc., the sole stockholder of the
General Partner, will deposit funds into a trust account for the benefit of
the General Partner to ensure the payments to settling Unitholders under the
Settlement Agreement. The General Partner will act as paying agent for
NYLIFE Inc. with respect to the payments. In exchange for the settlement
benefits, the settling Unitholders will release any and all claims that the
settling Unitholders may have against the defendants in connection with any
and all causes of action related to the Proprietary Partnerships and all
activities related to the dissolution and liquidation of such partnerships.
9
NOTE 3- INVESTMENTS IN MORTGAGES
The Partnership's net proceeds of $33,580,000 were committed for investment in
Participating Insured Mortgages ("PIMs") and Participating Guaranteed Loans
("PGLs"). Of this total amount committed, $1,946,594 had been included in the
Partnership's working capital reserve and subsequently distributed to the
Unitholders on November 15, 1994.
PARTICIPATING INSURED MORTGAGES
Investment in PIMs on the balance sheets as of June 30, 1996 and December 31,
1995 is comprised of the following:
JUNE 30, 1996:
Cross Creek Signature Place Total
----------- --------------- -----
Investment in PIM $7,226,406 $9,756,900 $16,112,716
Principal repayments (116,800) ( 120,049 ) (236,337)
----------- ------------ ------------
$7,110,118 $9,636,851 $16,746,969
----------- ------------ ------------
----------- ------------ ------------
DECEMBER 31, 1995:
Cross Creek The Highlands Signature Place Total
----------- ------------- --------------- -----
Investment in PIM $7,226,406 $13,037,676 $9,756,900 $30,020,982
Principal repayments (100,837) (54,466) (99,879) (255,182)
Acquisition fees and expenses net of
accumulated amortization 293,276 -0- 582,689 875,965
----------- ------------ ------------ ------------
$7,418,845 $12,983,209 $10,239,710 $30,641,765
----------- ------------ ------------ ------------
----------- ------------ ------------ ------------
(1) As described below in Recent Developments - the Highlands GNMA was
satisfied in full upon the sale of the Highlands GNMA on February 27,
1996.
PARTICIPATING GUARANTEED LOANS
Investment in PGLs on the balance sheets as of June 30, 1996 and December 31,
1995 is comprised of the following:
JUNE 30, 1996:
Cross Creek Signature Place Total
----------- --------------- -----
Investment in PGL $400,000 $100 $400,100
-------- -------- --------
-------- -------- --------
DECEMBER 31, 1995:
Cross Creek Signature Place Total
----------- --------------- -----
Investment in PGL $400,000 $100 $400,100
-------- -------- --------
-------- -------- --------
(1) The Highlands, the Highlands PGL was repaid in full upon the sale of the
Highlands on January 31, 1995.
As the Earn-out periods for each of the Properties expired during 1994, the
Partnership has no further commitments to fund amounts under the PGLs.
RECENT DEVELOPMENTS - HIGHLAND OAKS GNMA CERTIFICATE
On February 27, 1996, the Partnership sold the Highlands GNMA for cash in the
amount of $13,105,373.01. The Highlands GNMA was sold through Utendahl Capital
Partners, an unaffiliated broker dealer, pursuant to which the Highlands
Borrower agreed to pay a portion of any additional taxes determined by the State
of Florida to be due in connection with the recording of the original loan
documents. The State of Florida claimed that $136,800 in
10
additional recording taxes were due. On March 12, 1996, the Partnership settled
the recording tax claim of the State of Florida through a payment made on behalf
of the Partnership in the amount if $64,000 ($53,850 of which was funded by the
General Partner and $10,150 of which was funded by the Original Highlands
Borrower.) The Partnership has recently received the signed Closing Agreement
settling the claim from the State of Florida and the letters of credit will be
returned to the Original Highlands Borrower. The sales price represents
principal in the amount of $12,976,812.45, accrued interest in the amount of
$71,462.59 and a premium of $57,097.97. The Partnership was not charged any
separate fees or commissions in connection with the sale. The General Partner
of the Partnership decided to sell the Highlands GNMA to take advantage of what
it perceived to be a favorable market in which the Highlands GNMA could be sold
at a premium. The Partnership distributed the proceeds to the Unitholders on
May 15, 1996.
The sale of the Highlands GNMA, together with the 1995 sale of the Highlands and
the related modification of the Highlands Mortgage, terminated the Partnership's
beneficial interest in the Highlands Mortgage and the Highlands.
NOTE 4 - TRANSACTIONS WITH THE GENERAL PARTNER
The following is a summary of the fees earned and reimbursable expenses incurred
by the General Partner for the six months ended June 30, 1996 and 1995:
Total earned for the Total earned for the
Unpaid at six months ended six months ended
June 30, 1996 June 30, 1996 June 30, 1995
------------- ------------- -------------
Asset management fees $ - $43,459 $49,396
Reimbursement of general and
administrative expenses to the
General Partner 50,000 50,000 50,000
------- ------- -------
$50,000 $93,459 $99,396
------- ------- -------
------- ------- -------
NOTE 5 - SURPLUS CASH - SIGNATURE PLACE
A review of the borrower's audited financial statements for the year ended
December 31, 1995 indicated that the Partnership was due surplus cash under the
terms of the Additional Interest Agreement and Supplemental Interest Agreement.
Surplus cash (as defined by HUD) is cash on hand at a particular month end that
exceeds the amount of the required reserve. As outlined by HUD, the required
reserve generally includes reserves for obligations due within 30 days such as
accrued mortgage interest payable; delinquent mortgage principal payments and
deposits to the reserve for replacements, if any; accounts payable and accrued
expenses due within 30 days; loans and notes payable due within 30 days;
deficient tax insurance or mortgage insurance premium escrow deposits, if a any;
prepaid rents; and tenant security deposits payable.
During the second quarter of 1996, the Partnership received a distribution of
$72,582 that represents its 50% allocation under the Additional Interest
Agreement and a distribution of $7,258 that represents its 10% allocation under
the Supplemental Interest Agreement. This is the first participation the
Partnership has been entitled to from the Signature Place Mortgage since its
inception in 1991.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's cash and cash equivalents balance at June 30, 1996, consists
of $426,269 of working capital reserves, and cash generated from operations net
of accrued interest. The Partnership's working capital reserves, are invested
in short-term obligations of the United States government and other cash
equivalents.
During the process of winding up and liquidating the Partnership, the
Partnership will no longer pay quarterly distributions to the Unitholders.
However, upon the sale of the Partnership's assets, payment of the Partnership's
liabilities and provision for contingent liabilities, liquidating distributions
will be paid to the Unitholders. Liquidating distributions paid to the settling
Unitholders will be subject to the terms of the Settlement Agreement.
The Partnership currently derives its income primarily from its investments in
PIMs, which are long-term, fixed interest rate Government National Mortgage
Association ("GNMA") securities, guaranteed as to the timely payment of
principal and interest by GNMA and backed by the full faith and credit of the
United States Government. The Partnership's only operating expenses are general
and administrative expenses which include audit and tax return preparation fees,
printing and postage costs for quarterly and annual reports, and reimbursement
to the General Partner for reimbursable expenses incurred in accordance with the
Partnership Agreement. In addition, the Partnership pays an asset management
fee to the General Partner of .5% annually of the average aggregate amount
invested in the Cross Creek and Signature Place Mortgages. As discussed in Note
3 to the financial statements, in connection with the 1995 sale of the
Highlands, the Partnership is no longer entitled to participations in net
cash flow or net appreciation of the Highlands. Accordingly, effective January
31, 1995, the General Partner decided to forego an asset management fee with
respect to the aggregate amount invested in the Modified Mortgage. After the
payment of general and administrative expenses, the Partnership distributes all
of its income to the Unitholders on a quarterly basis.
The PIMs and PGLs relating to the Cross Creek and Signature Place Mortgages
entitle the Partnership to participate in the net cash flow of the properties
above cerain levels and in any net appreciation in value upon refinancing.
During the quarter ended June 30, 1996, the Partnership received participations
of $79,840 from Signature Place. To date the partnership has not received any
such participations from Cross Creek.
Net cash provided by operating activities for the six months ended June 30,1996
was $1,084,978 as compared to $2,486,350 for the comparable 1995 period. This
decrease is primarily a result of the sale of the Highlands property in January
1995 as discussed in the Partnership's annual report on Form 10-K.
RESULTS OF OPERATIONS
12
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30,1995 The
Partnership's net income decreased by $925,595 for the six months ended June
30, 1996 as compared to the corresponding period in 1995. The decrease is
primarily a result of the sale of the Highlands GNMA in February 1996 which
resulted in a substantial decrease in interest income from Mortgages for the
six months ended June 30,1996.
The increase in interest on cash and cash equivalents of $99,713 is due to
the shift of funds from investments in PIMs to short-term investments as a
results of the sale of the Highlands GNMA in the first quarter. In addition,
as a result of sale of the Highlands GNMA, the Partnership recognized a gain
of $57,098.
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30,1995
The decrease in the Partnership's net income for three months ended June
30,1996 compared to the corresponding 1995 period is primarily a result of
the sale of the Highlands GNMA in February 1996, resulted in a substantial
decrease in interest income from Mortgages which was partially offset by the
receipt of participations from the Signature Place Mortgage of $79,840.
The increase in interest on cash and cash equivalents of $57,956 is due to the
shift of funds from investments in PIMs to short-term investments subseqment
to the sale of the Highlands GNMA in the first quarter.
13
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
During the process of winding up and liquidating the Partnership,
the Partnership will no longer pay any quarterly cash distributions to
the Unitholders. However, upon the sale of the Partnership's assets,
payment of the Partnership's liabilities and provision for contingent
liabilities, liquidating distributions will be paid to the Unitholders.
Liquidating distributions paid to the settling Unitholders will be subject
to the terms of the Settlement Agreement.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Through a consent solicitation of Unitholders that expired on
July 1, 1996, Unitholders of the Partnership approved the proposal to
dissolve and terminate the Partnership. The number of consents and
abstentions with respect to the proposal is set forth below:
Affirmative Withheld
Consents Consents Abstentions
Dissolution Proposal 5,624,548.585 411,374.763 153,262.964
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
None
14
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.
NYLIFE Government Mortgage
Plus Limited Partnership
By: NYLIFE Realty Inc.
General Partner
Date: August 14, 1996 By: /s/ Kevin M. Micucci
-------------------------
Kevin M. Micucci
President (Principal Executive, Financial
and Accounting Officer)
15