================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 JUNE 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-10643
------------------------------
HALLWOOD REALTY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
------------------------------
DELAWARE 75-2313955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3710 RAWLINS
SUITE 1500
DALLAS, TEXAS 75219-4298
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 528-5588
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 twelve (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 ninety (90) days: Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act): Yes [X] No [ ]
THE REGISTRANT IS A LIMITED PARTNERSHIP AND ISSUES UNITS REPRESENTING
OWNERSHIP OF LIMITED PARTNER INTERESTS.
NUMBER OF UNITS OUTSTANDING AT AUGUST 1, 2003: 1,593,948
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PAGE 1
HALLWOOD REALTY PARTNERS, L.P.
FORM 10-Q
TABLE OF CONTENTS
<Table>
<Caption>
PART I - FINANCIAL INFORMATION
Page
----
Item 1 Financial Statements:
Condensed Consolidated Balance Sheets as of June 30, 2003 (unaudited)
and December 31, 2002 3
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 2003 and 2002 (unaudited) 4
Condensed Consolidated Statements of Comprehensive
Income for the Three and Six Months Ended June 30,
2003 and 2002 (unaudited) 5
Condensed Consolidated Statement of Partners' Capital for the
Six Months Ended June 30, 2003 (unaudited) 6
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2003 and 2002 (unaudited) 7
Notes to Condensed Consolidated Financial Statements (unaudited) 8
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations, Liquidity and Capital Resources 13
Item 3 Quantitative and Qualitative Disclosures About Market Risk 18
Item 4 Controls and Procedures 18
PART II - OTHER INFORMATION
Items 1 to 6 Other Information 19
Signature 20
</Table>
PAGE 2
HALLWOOD REALTY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT UNIT AMOUNTS)
<Table>
<Caption>
JUNE 30, December 31,
2003 2002
----------- ------------
(UNAUDITED)
ASSETS
Real estate:
Land $ 59,015 $ 59,015
Buildings and improvements 310,054 310,154
Tenant improvements 26,677 23,504
Construction in progress 1,692 836
--------- ---------
397,438 393,509
Accumulated depreciation and amortization (187,928) (183,671)
--------- ---------
Real estate, net 209,510 209,838
Cash and cash equivalents 29,956 32,363
Accounts receivable 1,470 2,315
Escrow deposits held by lenders 10,394 8,918
Effective rent receivable 5,323 4,729
Lease commissions, net 11,005 11,390
Loan costs, net 2,410 2,677
Prepaid expenses and other assets 1,437 2,190
--------- ---------
Total assets $ 271,505 $ 274,420
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgages payable $ 195,581 $ 197,552
Accounts payable and accrued expenses 7,171 5,743
Prepaid rent, security deposits and other 3,192 3,533
Payable to affiliates 410 512
Deferred litigation proceeds 6,405 6,405
--------- ---------
Total liabilities 212,759 213,745
--------- ---------
Commitments and contingencies
Partners' capital:
Limited partners - 1,593,948 and 1,589,948
units outstanding, respectively 57,379 59,152
General partner 580 597
Accumulated other comprehensive income 787 926
--------- ---------
Total partners' capital 58,746 60,675
--------- ---------
Total liabilities and partners' capital $ 271,505 $ 274,420
========= =========
</Table>
See notes to condensed consolidated financial statements.
PAGE 3
HALLWOOD REALTY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
2003 2002 2003 2002
-------- -------- -------- --------
REVENUES:
Property operations $ 16,858 $ 16,755 $ 33,715 $ 33,591
Parking, construction and tenant services 878 2,398 1,827 3,629
-------- -------- -------- --------
Total revenues 17,736 19,153 35,542 37,220
-------- -------- -------- --------
EXPENSES:
Property operations 6,769 6,610 13,838 13,294
Parking, construction and tenant services 434 1,771 895 2,463
Interest 3,787 3,967 7,531 7,417
Depreciation and amortization 3,791 3,802 7,524 7,529
General and administrative 1,165 1,062 2,297 2,018
Litigation costs 5,119 148 5,496 365
-------- -------- -------- --------
Total expenses 21,065 17,360 37,581 33,086
-------- -------- -------- --------
INCOME (LOSS) BEFORE INTEREST INCOME (3,329) 1,793 (2,039) 4,134
Interest income 91 149 201 282
-------- -------- -------- --------
NET INCOME (LOSS) $ (3,238) $ 1,942 $ (1,838) $ 4,416
======== ======== ======== ========
ALLOCATION OF NET INCOME (LOSS):
Limited partners $ (3,206) $ 1,923 $ (1,820) $ 4,372
General partner (32) 19 (18) 44
-------- -------- -------- --------
Total $ (3,238) $ 1,942 $ (1,838) $ 4,416
======== ======== ======== ========
NET INCOME (LOSS) PER UNIT
AND POTENTIAL UNIT:
Basic $ (2.01) $ 1.21 $ (1.14) $ 2.75
======== ======== ======== ========
Assuming dilution $ (2.01) $ 1.17 $ (1.14) $ 2.65
======== ======== ======== ========
WEIGHTED AVERAGE UNITS USED IN
COMPUTING NET INCOME (LOSS) PER UNIT
AND POTENTIAL UNIT:
Basic 1,594 1,590 1,596 1,590
======== ======== ======== ========
Assuming dilution 1,594 1,647 1,596 1,647
======== ======== ======== ========
</Table>
See notes to condensed consolidated financial statements.
PAGE 4
HALLWOOD REALTY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------------- -----------------------
2003 2002 2003 2002
------- ------- ------- -------
NET INCOME (LOSS) $(3,238) $ 1,942 $(1,838) $ 4,416
Amortization of deferred gain
from sale of interest rate swap (69) (69) (139) (139)
------- ------- ------- -------
COMPREHENSIVE INCOME $(3,307) $ 1,873 $(1,977) $ 4,277
======= ======= ======= =======
</Table>
See notes to condensed consolidated financial statements.
PAGE 5
HALLWOOD REALTY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(IN THOUSANDS EXCEPT UNIT AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
Accumulated Limited
Other Partnership
General Limited Comprehensive Units
Partner Partners Income Total Outstanding
--------- --------- ------------- --------- -----------
PARTNERS' CAPITAL,
JANUARY 1, 2003 $ 597 $ 59,152 $ 926 $ 60,675 1,589,948
Issuance of units upon exercise of options 1 47 -- 48 4,000
Amortization of deferred gain from
sale of interest rate swap -- -- (139) (139) --
Net loss (18) (1,820) -- (1,838) --
--------- --------- --------- --------- ---------
PARTNERS' CAPITAL,
JUNE 30, 2003 $ 580 $ 57,379 $ 787 $ 58,746 1,593,948
========= ========= ========= ========= =========
</Table>
See notes to condensed consolidated financial statements.
PAGE 6
HALLWOOD REALTY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
SIX MONTHS ENDED
JUNE 30,
-------------------------
2003 2002
-------- --------
OPERATING ACTIVITIES:
Net income (loss) $ (1,838) $ 4,416
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 7,524 7,529
Effective rent adjustments (570) (167)
Changes in assets and liabilities:
Accounts receivable 845 46
Lease commission payments (1,342) (883)
Prepaid expenses, escrow deposits and other assets (452) 216
Accounts payable and other liabilities 1,235 (1,312)
-------- --------
Net cash provided by operating activities 5,402 9,845
-------- --------
INVESTING ACTIVITIES:
Property and tenant improvements (5,858) (3,351)
Property development cost -- (1,960)
-------- --------
Net cash used in investing activities (5,858) (5,311)
-------- --------
FINANCING ACTIVITIES:
Mortgage principal payments (1,971) (1,804)
Loan fees (28) --
Issuance of units upon exercise of options 48 --
-------- --------
Net cash used in financing activities (1,951) (1,804)
-------- --------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (2,407) 2,730
BEGINNING CASH AND CASH EQUIVALENTS 32,363 24,913
-------- --------
ENDING CASH AND CASH EQUIVALENTS $ 29,956 $ 27,643
======== ========
</Table>
See notes to condensed consolidated financial statements.
PAGE 7
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended June 30, 2003 and 2002
(unaudited)
1 ORGANIZATION AND ACCOUNTING POLICIES
Hallwood Realty Partners, L.P. ("HRP"), a publicly traded Delaware
limited partnership, operates in the commercial real estate industry.
HRP's activities include the acquisition, ownership and operation of
its commercial real estate assets. Units representing limited
partnership interests are traded on the American Stock Exchange under
the symbol "HRY". As of June 30, 2003 there were 1,593,948 units
outstanding.
Hallwood Realty, LLC ("Realty" or the "General Partner"), a Delaware
limited liability company and indirectly wholly-owned subsidiary of The
Hallwood Group Incorporated ("Hallwood"), is HRP's general partner and
is responsible for asset management of HRP and its real estate
properties, including decision-making responsibility for financing,
refinancing, acquiring and disposing of properties. In addition, Realty
provides general operating and administrative services to HRP. Hallwood
Commercial Real Estate, LLC ("HCRE"), another indirectly wholly-owned
subsidiary of Hallwood, provides property management, leasing and
construction supervision services for HRP's real estate properties.
The accompanying unaudited condensed consolidated financial statements
of Hallwood Realty Partners, L.P. have been prepared in accordance with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnote
disclosures required by accounting principles generally accepted in the
United States of America for complete financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included. These financial statements should be
read in conjunction with the audited consolidated financial statements
and related disclosures thereto included in Form 10-K for the year
ended December 31, 2002.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of certain assets, liabilities, revenues, and expenses as of
and for the reporting periods. Actual results may differ from these
estimates. Operating results for the three months and/or six months
ended June 30, 2003 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2003.
Reclassifications, including a gross-up for parking, construction and
tenant service expenses that were previously netted against revenues,
have been made in the prior period to conform to the classifications
used in the current period. The reclassifications had no effect on
previously reported net income.
2 STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information -
Cash interest payments were $7,278,000 and $7,122,000 (net of
capitalized interest of $256,000) in the six months ended June
30, 2003 and 2002, respectively.
PAGE 8
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended June 30, 2003 and 2002
(unaudited)
3 COMPUTATION OF NET INCOME (LOSS) PER UNIT
Basic earnings per unit is computed by dividing results attributable to
the limited partners' interests by the weighted average number of units
outstanding. Earnings per unit assuming dilution is computed by
dividing results attributable to the limited partners' interests by the
weighted average number of units and potential units outstanding.
Options to acquire units were issued during 1995 and are considered to
be potential units. The number of potential units is computed using the
treasury stock method which assumes that the increase in the number of
units is reduced by the number of units which could have been
repurchased by HRP with the proceeds from the exercise of these
options. The options are considered antidilutive in 2003 and therefore
are not taken into consideration in the computation of earnings per
unit assuming dilution. The following table illustrates the amounts
used to calculate the weighted average number of units outstanding (in
thousands):
<Table>
<Caption>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------- --------------------
2003 2002 2003 2002
----- ----- ----- -----
Weighted average units outstanding - basic 1,594 1,590 1,596 1,590
Potential weighted average units issued from options 65 69 67 69
Potential repurchase of units from unit option proceeds (8) (12) (9) (12)
----- ----- ----- -----
Potential weighted average units outstanding - assuming dilution 1,651 1,647 1,654 1,647
===== ===== ===== =====
</Table>
4 TRANSACTIONS WITH RELATED PARTIES
Realty and HCRE are compensated for services provided to HRP and its
real estate properties and are reimbursed, at cost, for certain costs
and expenses. In particular, since HRP does not directly employ any
individuals, the compensation and other costs related to approximately
90 employees rendering services on behalf of HRP and its properties are
reimbursed by HRP to Realty and HCRE. HRP pays or settles its account
balances with Realty and HCRE on a monthly basis. The following table
sets forth such compensation and reimbursements paid by HRP (in
thousands):
<Table>
<Caption>
THREE MONTHS SIX MONTHS
ENTITY PAID ENDED JUNE 30, ENDED JUNE 30,
OR ------------------- -------------------
REIMBURSED 2003 2002 2003 2002
----------- ------ ------ ------ ------
Asset management fee Realty $ 152 $ 155 $ 303 $ 309
Reimbursement of costs (a) Realty 806 721 1,634 1,493
Property management fee HCRE 490 503 998 1,011
Lease commissions HCRE 305 464 690 691
Construction fees HCRE 113 128 297 385
Reimbursement of costs (b) HCRE 917 920 1,862 1,901
</Table>
(a) These costs are recorded as general and
administrative expenses and represent reimbursement
to Realty for administrative level employee and
director compensation, officer and director liability
insurance, and allocated overhead costs.
(b) These costs are recorded as property operating
expenses and represent reimbursement to HCRE for
property-level employee compensation and related
expenses.
PAGE 9
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended June 30, 2003 and 2002
(unaudited)
5 PARTNERS' CAPITAL
In 1995, HRP issued options totaling 86,000 units to certain executives
of Realty and HCRE with an exercise price of $11.875 per unit. The
options were vested over a three year period ending in 1997 and they
expire on February 27, 2005. In February 2003, options for 4,000 units
were exercised by the estate of a deceased HCRE executive. As of June
30, 2003, a total of 21,200 options had been exercised, none have been
canceled and 64,800 options remained exercisable. No options have been
granted since 1995. As the only options of HRP fully vested in 1997,
there is no difference between the historical operations and pro forma
operations for the periods presented herein had the expense provisions
of Statement of Financial Accounting Standards No. 123 "Accounting for
Stock-Based Compensation" been adopted.
On May 1, 2003, High River Limited Partnership, an affiliate of Carl C.
Icahn, announced its unsolicited tender offer for any and all of the
outstanding limited partnership units of HRP at $100 per unit. In May
2003, management, the board of directors of Realty, and certain
professional advisors evaluated the offer and advised unitholders to
reject the offer as inadequate. The unsolicited tender offer has
subsequently been extended to August 8, 2003.
On July 29, 2003, and in a subsequent letter addressed to the board of
directors of Realty, Mr. Icahn announced a purported proposal to
purchase HRP in a merger transaction for an aggregate purchase price of
$222 million, subject to existing debt. On August 1, 2003, at the
direction of its board of directors, Realty sent a letter to Mr. Icahn
stating that HRP has engaged Morgan Stanley & Co. Incorporated to
initiate discussions with parties interested in participating in a
transaction with HRP and stating that if Mr. Icahn is interested in
participating in that process, he should contact Morgan Stanley.
The board of directors of the General Partner has authorized its
advisors to continue its evaluation of potential alternatives to the
tender offer, including, without limitation, to initiate discussions
with prospective parties interested in participating in a transaction
with HRP at prices and on terms which the board believes would be in
the best interest of all partners. Such transaction may include,
without limitation, an extraordinary transaction, such as a merger,
reorganization or liquidation, involving HRP or any of its subsidiaries
or a purchase, sale or transfer of a material amount of assets by HRP
or any of its subsidiaries. There can be no assurance, however, that
HRP will be able to generate interest in any such transaction.
Additionally, subject to availability at prices deemed favorable and in
accordance with applicable laws and regulations, HRP may acquire units
from time to time in open market transactions, privately negotiated
transactions or otherwise. There can be no assurance that HRP will
engage in any such acquisitions or the prices at which such
acquisitions may occur.
Except as described above, HRP is not presently undertaking or engaging
in any negotiations in response to the tender offer that relate to a
tender offer for or other acquisition of the units by HRP, any of its
subsidiaries or any other person or a change in the present
distribution policy, indebtedness or capitalization of HRP.
PAGE 10
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended June 30, 2003 and 2002
(unaudited)
6 LITIGATION
On June 20, 1997, an action was filed against HRP, the General Partner,
its directors, and Hallwood by Gotham Partners, L.P. in the Court of
Chancery of the State of Delaware, styled Gotham Partners, L.P. v.
Hallwood Realty Partners, L.P., et al. (C.A. No. 15754). As filed, the
action alleged claims of breach of fiduciary duties, breach of HRP's
partnership agreement, and fraud in connection with certain
transactions involving HRP's units in the mid 1990's. Hallwood was
alleged to have aided and abetted the alleged breaches. On June 21,
2000, after completing fact discovery, all parties moved for summary
judgment on several issues. In September and October 2000, the Delaware
court issued three separate written opinions resolving the summary
judgment motions. In the opinions, the court ruled that trial would be
required as to all issues, except that (i) Gotham was found to have
standing to pursue its derivative claims; (ii) defendants were entitled
to judgment dismissing the fraud claim; (iii) the General Partner was
entitled to judgment dismissing the breach of fiduciary duty claims
brought against it; and (iv) the General Partner's outside directors
were entitled to judgment dismissing all claims brought against them.
A five-day trial was held in January 2001. On July 18, 2001, the
Delaware Court of Chancery rendered its opinion. In its decision, the
court determined that an option plan and a sale of units to Hallwood in
connection with a reverse split of units implemented by HRP in 1995
were in compliance with HRP's partnership agreement. The court also
found that the sale of units to Hallwood in connection with a 1995
odd-lot offer by HRP did not comply with certain procedures required by
the HRP partnership agreement. The court ruled that the defendants
other than HRP pay a judgment to HRP in the amount of $3,417,423, plus
pre-judgment interest from August 1995. The judgment amount represents
what the court determined was an underpayment by Hallwood. In August
2001, plaintiff and certain defendants appealed the Court of Chancery's
judgment to the Delaware Supreme Court. In October 2001, HRP received
the $3,417,423 judgment together with $2,987,576 of interest. HRP
recorded the judgment and interest as "Deferred Litigation Proceeds" on
its balance sheet, until the case's final outcome is determined. Oral
arguments were heard on February 12, 2002, and a rehearing en banc was
held on March 26, 2002. On August 29, 2002, the Supreme Court affirmed
the judgment of the trial court that the remaining defendants other
than HRP are jointly and severally liable to HRP. The Supreme Court
reversed the trial court's determination of damages, and remanded the
case to the trial court to fashion appropriate relief.
On July 8, 2003, the Delaware Court of Chancery issued its decision
after remand. In the decision, the Court of Chancery determined that
defendants were required to pay to HRP the difference between the price
paid for 293,539 units of HRP purchased by Hallwood in 1995 of $14.20
per unit and the value of those units, including a control premium for
those units, as determined by the court in its decision, of $36.02 per
unit, plus pre-judgment interest. The court also denied plaintiff's
requests for rescission, rescissory damages or other forms of relief.
In its earlier decision before remand, the trial court had determined
that the value of the units was $25.84 per unit and, as mentioned
above, Hallwood paid the judgment amount plus interest in October 2001.
Under the trial court's decision on remand, Hallwood is required to pay
an additional amount of approximately $2,988,000, plus pre-judgment
interest of approximately $3,762,000. On July 25, 2003, the trial court
entered its final order and judgment on remand which provided, among
other things, that HRP pay plaintiff $3,000,000 in attorneys' fees,
cost and expenses. On July 28, 2003, the plaintiff appealed the final
order and judgment on remand to the Delaware Supreme Court. The
$6,750,000 balance due is to bear simple interest at the statutory rate
of 7% until paid.
On April 23, 2003, an action was filed against the General Partner, its
directors and HRP as nominal defendant by High River Limited
Partnership, which is indirectly wholly owned by Carl C. Icahn, in the
Court of Chancery of the State of Delaware, styled High River Limited
Partnership v. Hallwood Realty, LLC, et al. (C.A. No. 20276). The
action challenges the unit purchase rights agreement dated November 30,
1990, between HRP and Equiserve Trust Company, N.A., as rights agent,
as amended (the "Rights Plan"). High River claims in the suit that
defendants have wrongfully utilized the Rights Plan to prevent High
River and other third parties from purchasing 15 percent or more of the
units of the Partnership, while at the same time exempting the General
Partner and its affiliates and subsidiaries from the provisions of the
Rights Plan. High River asserts that if defendants make additional
purchases of units, they could render removal of the General Partner
pursuant to the two-thirds removal provision of the partnership
PAGE 11
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three and Six Months Ended June 30, 2003 and 2002
(unaudited)
6 LITIGATION (CONTINUED)
agreement impossible, thereby impeding or preventing the High River
tender offer. High River also claims that defendants wrongfully refused
to redeem the rights and thereby frustrated High River's tender offer.
The complaint, as amended, seeks as relief an order redeeming the
rights, preventing defendants from treating the General Partner as
exempt from or otherwise not subject to the definition of Acquiring
Person under the Rights Agreement, or, alternatively, preventing
defendants from treating High River as an Acquiring Person under the
Rights Agreement or applying the Rights Agreement to the High River
tender offer. The parties are proceeding with discovery. Trial is
scheduled for September 2, 2003.
On April 28, 2003, a putative class action lawsuit was filed against
the General Partner, its directors and HRP as nominal defendant by
three purported unitholders of HRP in the Court of Chancery of the
State of Delaware, styled I.G. Holdings, Inc., et al. v. Hallwood
Realty LLC, et al. (C.A. No. 20283). The action asserts that in
allegedly refusing to consider the High River tender offer, the
defendants are not acting in good faith and are deriving an improper
personal benefit in impeding a potential removal of the General Partner
or a sale of control of HRP, in breach of their fiduciary duties under
the partnership agreement. The action further asserts that HRP's
Schedule 14D-9 issued in response to the High River tender offer fails
to disclose material information relating to the General Partner's
recommendation regarding the offer. The complaint seeks as relief an
order requiring the General Partner to consider the High River tender
offer, an order preventing the General Partner or its affiliates from
acquiring units or otherwise improperly entrenching the General Partner
or impeding a transaction that would maximize value for the public
unitholders, an order directing the defendants to use the Rights Plan
fairly and disclose all material information in connection with the
tender offer and the General Partner's recommendations and conclusions
with respect thereto, and damages. This matter has been coordinated
with the High River case and is therefore also scheduled for trial on
September 2, 2003.
HRP is from time to time involved in various other legal proceedings
and claims which arise in the ordinary course of business. These
matters are generally covered by insurance. Management believes that
the resolution of these matters will not have a material adverse effect
on HRP's financial position, cash flow or operations.
7 SUBSEQUENT EVENT
In July 2003, HRP obtained a $16,000,000 loan secured by the
newly-completed five-story office building within the Executive Park
property in Atlanta, Georgia. The ten year loan calls for interest-only
payments for the first two years, followed by principal and interest
payments during the remaining term, amortized over 28 years. The
interest rate is 5.76% and the maturity date is August 10, 2013. The
loan proceeds will be for general working capital purposes and they
replenish a majority of the costs for building construction and tenant
improvements incurred since 2001. A seven-year lease for the entire
building, with an option for five additional years, was executed in
September 2002 and it commenced after the completion of tenant
improvements in May 2003.
PAGE 12
HALLWOOD REALTY PARTNERS, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES
RESULTS OF OPERATIONS
SECOND QUARTER OF 2003 COMPARED TO THE SECOND QUARTER OF 2002
REVENUE FROM PROPERTY OPERATIONS for the second quarter of 2003 increased
$103,000, or 0.6%, compared to the 2002 second quarter. The following table
illustrates the components of the change, in thousands:
<Table>
Rental income, net $ 82
Other property income 21
-----
Net increase $ 103
=====
</Table>
Net rental income increased primarily due to a slight increase in overall rental
rates, partially offset by a decline in average occupancy between periods from
87.0% to 86.7%. As of June 30, 2003, HRP had leases executed and in place for
90.2% of the portfolio's net rentable square feet.
REVENUE FROM PARKING, CONSTRUCTION AND TENANT SERVICES for the second quarter of
2003 decreased $1,520,000, or 63.4%, primarily as a result of fewer construction
service projects completed in the 2003 period compared to the 2002 period. By
their nature, the demand for and size of construction service projects can vary
significantly from time to time.
PROPERTY OPERATING EXPENSES for the second quarter of 2003 increased $159,000,
or 2.4%, compared to the same period in 2002 and included general increases in
costs, including property liability and damage insurance and real estate taxes.
PARKING, CONSTRUCTION AND TENANT SERVICES EXPENSE for the second quarter of 2003
decreased $1,337,000, or 75.5%, primarily as a result of fewer construction
service projects completed in the 2003 period compared to the 2002 period. By
their nature, the demand for and size of construction service projects can vary
significantly from time to time.
INTEREST EXPENSE for the second quarter of 2003 declined $180,000, or 4.5%,
compared to the same period in 2002, primarily as a result of a decrease in
mortgage interest due to reduced interest for HRP's only variable rate mortgage,
as well as a decrease in the average mortgage debt balance between periods.
DEPRECIATION AND AMORTIZATION EXPENSE was fairly consistent between periods and
decreased $11,000, or 0.3%.
GENERAL AND ADMINISTRATIVE EXPENSES for the second quarter of 2003 increased
$103,000, or 9.7%, compared to the same period in 2002, due to increases in
certain professional fees, director and officer liability insurance, and
overhead costs.
LITIGATION COSTS were $5,119,000 and $148,000 for the second quarter of 2003 and
2002, respectively, and are related to the lawsuits described in Note 6 and the
tender offer described in Note 5 to the condensed consolidated financial
statements. The 2003 amount includes a $3,000,000 financial advisory fee to
Morgan Stanley in conjunction with the High River tender offer.
INTEREST INCOME decreased by $58,000, or 38.9%, as a result of decreased
earnings on overnight cash investments, due to significantly lower interest
rates available between the periods.
PAGE 13
HALLWOOD REALTY PARTNERS, L.P.
RESULTS OF OPERATIONS (CONTINUED)
FIRST SIX MONTHS OF 2003 COMPARED TO THE FIRST SIX MONTHS OF 2002
REVENUE FROM PROPERTY OPERATIONS for the first six months of 2003 increased
$124,000, or 0.4%, compared to the 2002 first six months. The following table
illustrates the components of the change, in thousands:
<Table>
Rental income, net $ (36)
Other property income 160
-----
Net increase $ 124
======
</Table>
Net rental income decreased primarily due to a decline in average occupancy
between periods from 88.3% to 86.3%, partially offset by a slight increase in
overall rental rates of 0.9%. As of June 30, 2003, HRP had leases executed and
in place for 90.2% of the portfolio's net rentable square feet. The change in
the other property income component includes an increase in tenant expense
recoveries, partially offset by a lease termination fee received in the 2002
period.
REVENUE FROM PARKING, CONSTRUCTION AND TENANT SERVICES for the first six months
of 2003 decreased $1,802,000, or 49.7%, primarily as a result of fewer
construction service projects completed in the 2003 period compared to the 2002
period. By their nature, the demand for and size of construction service
projects can vary significantly from time to time.
PROPERTY OPERATING EXPENSES for the first six months of 2003 increased $544,000,
or 4.1%, compared to the same period in 2002. Utilities increased $264,000,
primarily due to higher heating costs due to a colder winter in the 2003 period,
compared to the 2002 period. Combined, all other operating costs increased
$280,000, or about 2.1% between the periods, and include general increases in
real estate taxes and property liability and damage insurance.
PARKING, CONSTRUCTION AND TENANT SERVICES EXPENSE for the first six months of
2003 decreased $1,568,000, or 63.7%, primarily as a result of fewer construction
service projects completed in the 2003 period compared to the 2002 period. By
their nature, the demand for and size of construction service projects can vary
significantly from time to time.
INTEREST EXPENSE for the first six months of 2003 increased $114,000, or 1.5%,
compared to the same period in 2002, primarily due to capitalization of $256,000
of construction interest in the 2002 period. The change in interest expense also
includes a decrease in mortgage interest of $225,000 (due to reduced interest
for HRP's only variable rate mortgage, as well as a decrease in the average
mortgage debt balance between periods) and an increase in other interest costs
of $83,000.
DEPRECIATION AND AMORTIZATION EXPENSE decreased $5,000, or 0.1%, primarily due
to lower lease commission amortization, partially offset by building
depreciation and tenant improvement amortization for the newly completed
building at Executive Park.
GENERAL AND ADMINISTRATIVE EXPENSES for the first six months of 2003 increased
$279,000, or 13.8%, compared to the same period in 2002, due to increases in
certain professional fees, director and officer liability insurance, and
overhead costs.
LITIGATION COSTS were $5,496,000 and $365,000 for the first six months of 2003
and 2002, respectively, and are related to the lawsuits described in Note 6 and
the tender offer described in Note 5 to the condensed consolidated financial
statements. The 2003 amount includes a $3,000,000 financial advisory fee to
Morgan Stanley in conjunction with the High River tender offer.
INTEREST INCOME decreased by $81,000, or 28.7%, as a result of decreased
earnings on overnight cash investments, due to significantly lower interest
rates available between the periods.
PAGE 14
HALLWOOD REALTY PARTNERS, L.P.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL INFORMATION -
HRP operates in the commercial real estate industry. HRP's activities include
the acquisition, ownership and operation of its commercial real estate assets.
While it is the General Partner's intention to operate HRP's existing real
estate investments and to acquire and operate additional real estate
investments, Realty also continually evaluates each of HRP's real estate
investments in light of current economic trends, operations, and other factors
to determine if any should be considered for disposition.
As of June 30, 2003, HRP owned 14 real estate assets, located in six states
containing 5,200,000 net rentable square feet. HRP seeks to maximize the value
of its real estate by making capital and tenant improvements, by executing
marketing programs to attract and retain tenants, and by controlling or
reducing, where possible, operating expenses.
This Form 10-Q should be read in conjunction with the audited consolidated
financial statements and related disclosures thereto included in Form 10-K for
the year ended December 31, 2002. There have been no changes to critical
accounting policies identified and set forth in HRP's Form 10-K for the year
ended December 31, 2002.
CASH SOURCES, CASH USES AND COMMITMENTS -
HRP's cash position decreased $2,407,000 during the first six months of 2003 to
$29,956,000 as of June 30, 2003. The sources of cash during the period were
$5,402,000 of cash provided by operating activities and $48,000 from the
exercise and issuance of unit options. The uses of cash were $5,858,000 for
property and tenant improvements, $1,971,000 for scheduled mortgage principal
payments, and $28,000 for loan fees.
For the foreseeable future, HRP anticipates that mortgage principal payments,
tenant and capital improvements, lease commissions and litigation costs will be
funded by net cash from operations. We believe that there will be sufficient
cash from operations to meet these needs because HRP had leases in place as of
December 31, 2002 to provide $54,963,000 of minimum rental payments during 2003.
For the prior year of 2002, HRP had leases in place to provide $55,261,000 of
minimum rental payments (based on leases in place as of December 31, 2001),
however the actual rental payments recorded for 2002 were $61,481,000. Actual
rental payment results for 2002 were greater than the minimum rental payment
amount primarily due to our ability to attract and retain tenants. For the six
months ended June 30, 2003 and 2002, HRP's actual rental payments were
$30,275,000 and $30,690,000, respectively. Our ability to fund operations in the
future will depend upon continued success in maintaining current occupancy
levels by retaining current tenants and attracting new tenants, as well as
sustaining or increasing rental rates.
The primary sources of capital to fund any future acquisitions or developments
will be proceeds from the sale, financing or refinancing of one or more of our
properties. HRP has estimated and budgeted tenant and capital improvements of
$15,631,000 and lease commissions of $2,851,000 for 2003. For the first six
months of 2003, HRP incurred $5,858,000 of tenant and capital improvements and
$1,342,000 of lease commissions of these estimates. Each quarter Realty reviews
HRP's capacity to make cash distributions. HRP has not made any cash
distributions since February, 1992.
LITIGATION & JUDGMENT -
On July 18, 2001, the Delaware Court of Chancery rendered its opinion for the
action styled Gotham Partners, L.P. v. Hallwood Realty Partners, L.P., et al.
(C.A. No. 15754). (For more information about this litigation, see Note 6 to the
condensed consolidated financial statements.) The court ruled that the
defendants other than HRP pay a judgment to HRP in the amount of $3,417,423,
plus pre-judgment interest from August 1995. The judgment amount represents what
the court determined was an underpayment by Hallwood. In August 2001, plaintiff
and certain defendants appealed the Court of Chancery's judgment to the Delaware
Supreme Court. In October 2001, HRP received the $3,417,423 judgment together
with $2,987,576 of interest. HRP recorded the judgment and interest as "Deferred
Litigation Proceeds" on its balance sheet, until the case's final outcome is
determined. Oral arguments were heard on February 12, 2002, and a rehearing en
banc was held on March 26, 2002. On August 29, 2002, the Supreme Court affirmed
the judgment of the trial court that the remaining defendants other than HRP are
jointly and severally liable to HRP. The Supreme Court reversed the trial
court's determination of damages, and remanded the case to the trial court to
fashion appropriate relief.
PAGE 15
HALLWOOD REALTY PARTNERS, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
LITIGATION & JUDGMENT (CONTINUED) -
On July 8, 2003, the Delaware Court of Chancery issued its decision after
remand. In the decision, the Court of Chancery determined that defendants were
required to pay to HRP the difference between the price paid for 293,539 units
of HRP purchased by Hallwood in 1995 of $14.20 per unit and the value of those
units, including a control premium for those units, as determined by the court
in its decision, of $36.02 per unit, plus pre-judgment interest. The court also
denied plaintiff's requests for rescission, rescissory damages or other forms of
relief. In its earlier decision before remand, the trial court had determined
that the value of the units was $25.84 per unit and, as mentioned above,
Hallwood paid the judgment amount plus interest in October 2001. Under the trial
court's decision on remand, Hallwood is required to pay an additional amount of
approximately $2,988,000, plus pre-judgment interest of approximately
$3,762,000. On July 25, 2003, the trial court entered its final order and
judgment on remand which provided, among other things, that HRP pay plaintiff
$3,000,000 in attorneys' fees, cost and expenses. On July 28, 2003, the
plaintiff appealed the final order and judgment on remand to the Delaware
Supreme Court. The $6,750,000 balance due is to bear simple interest at the
statutory rate of 7% until paid.
On April 23, 2003, an action was filed against the General Partner, its
directors and HRP as nominal defendant by High River Limited Partnership, which
is indirectly wholly owned by Carl C. Icahn, in the Court of Chancery of the
State of Delaware, styled High River Limited Partnership v. Hallwood Realty,
LLC, et al. (C.A. No. 20276). The action challenges the unit purchase rights
agreement dated November 30, 1990, between HRP and Equiserve Trust Company,
N.A., as rights agent, as amended (the "Rights Plan"). High River claims in the
suit that defendants have wrongfully utilized the Rights Plan to prevent High
River and other third parties from purchasing 15 percent or more of the units of
the Partnership, while at the same time exempting the General Partner and its
affiliates and subsidiaries from the provisions of the Rights Plan. High River
asserts that if defendants make additional purchases of units, they could render
removal of the General Partner pursuant to the two-thirds removal provision of
the partnership agreement impossible, thereby impeding or preventing the High
River tender offer. High River also claims that defendants wrongfully refused to
redeem the rights and thereby frustrated High River's tender offer. The
complaint, as amended, seeks as relief an order redeeming the rights, preventing
defendants from treating the General Partner as exempt from or otherwise not
subject to the definition of Acquiring Person under the Rights Agreement, or,
alternatively, preventing defendants from treating High River as an Acquiring
Person under the Rights Agreement or applying the Rights Agreement to the High
River tender offer. The parties are proceeding with discovery. Trial is
scheduled for September 2, 2003.
On April 28, 2003, a putative class action lawsuit was filed against the General
Partner, its directors and HRP as nominal defendant by three purported
unitholders of HRP in the Court of Chancery of the State of Delaware, styled
I.G. Holdings, Inc., et al. v. Hallwood Realty LLC, et al. (C.A. No. 20283). The
action asserts that in allegedly refusing to consider the High River tender
offer, the defendants are not acting in good faith and are deriving an improper
personal benefit in impeding a potential removal of the General Partner or a
sale of control of HRP, in breach of their fiduciary duties under the
partnership agreement. The action further asserts that HRP's Schedule 14D-9
issued in response to the High River tender offer fails to disclose material
information relating to the General Partner's recommendation regarding the
offer. The complaint seeks as relief an order requiring the General Partner to
consider the High River tender offer, an order preventing the General Partner or
its affiliates from acquiring units or otherwise improperly entrenching the
General Partner or impeding a transaction that would maximize value for the
public unitholders, an order directing the defendants to use the Rights Plan
fairly and disclose all material information in connection with the tender offer
and the General Partner's recommendations and conclusions with respect thereto,
and damages. This matter has been coordinated with the High River case and is
therefore also scheduled for trial on September 2, 2003.
PAGE 16
HALLWOOD REALTY PARTNERS, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
PROPERTY DEVELOPMENT AND LOAN PROCEEDS -
In February 2001, HRP began constructing a five-story office building within the
Executive Park property in Atlanta, Georgia containing 128,000 net rentable
square feet on a site formerly occupied by an 18,000 square foot building. The
building and its parking garage, excluding tenant finish-out, was completed in
April 2002. A seven-year lease for the entire building, with an option for five
additional years, was executed with the General Services Administration in
September 2002 and it commenced after the completion of tenant improvements in
May 2003. Ultimately, HRP incurred and capitalized $16,032,000 of building
construction costs, which included its parking garage, but excluded the existing
land costs. The lease commissions incurred were $774,000, while the tenant
improvements were $3,159,000.
All these costs were paid from cash funds on hand; however, in July 2003, HRP
obtained a $16,000,000 loan secured by the office building. The ten year loan
calls for interest-only payments for the first two years, followed by principal
and interest payments during the remaining term, amortized over 28 years. The
interest rate is 5.76% and the maturity date is August 10, 2013. The loan
proceeds will be used for general working capital purposes and they replenish a
majority of the costs for building construction and tenant improvements incurred
since 2001.
MORTGAGE LOANS -
Substantially all of the buildings in HRP's real estate properties were
encumbered and pledged as collateral by non-recourse mortgage loans aggregating
$195,581,000 as of June 30, 2003. These mortgage loans have interest rates
varying from 2.62% to 8.70% (with an effective average interest rate of 7.50%)
and mature between 2005 and 2020. Other than Allfirst Building's mortgage
($25,000,000), all mortgages have fixed interest rates. Most of the mortgage
loans require monthly principal payments with balloon payments due at maturity.
Based upon loan amortizations in effect, HRP is required to pay approximately
$2,027,000 of principal payments during the remainder of 2003.
Since August 2000, HRP has had available a $2,000,000 revolving line of credit,
which matures on July 29, 2004. The line of credit has a variable interest rate
of either prime plus 0.50% or LIBOR plus 3.0% and requires monthly interest
payments, but no principal amortization. HRP has not borrowed against this
facility.
TRANSACTIONS WITH RELATED PARTIES -
For information about transactions with related parties, see Note 4 to the
condensed consolidated financial statements.
INFLATION -
Inflation did not have a significant impact on HRP during 2002 or for the six
months ended June 30, 2003. Additionally, inflation is not anticipated to have a
material impact on HRP for the rest of 2003.
FORWARD-LOOKING STATEMENTS -
In the interest of providing investors with certain information regarding HRP's
future plans and operations, certain statements set forth in this Form 10-Q
relate to management's future plans, objectives and expectations. Such
statements are forward-looking statements. Although any forward-looking
statements contained in this Form 10-Q or otherwise expressed by or on behalf of
HRP are, to the knowledge and in the judgment of the officers and directors of
the General Partner, expected to prove true and come to pass, management is not
able to predict the future with absolute certainty. Although HRP believes that
the assumptions underlying the forward-looking statements are reasonable, any of
the assumptions could be inaccurate and, therefore, there can be no assurance
that the forward-looking statements will prove to be accurate.
Forward-looking statements involve known and unknown risks and uncertainties,
which may cause HRP's actual performance and financial results in future periods
to differ materially from any projection, estimate or forecasted result. These
risks and uncertainties include the risks identified in Item 1 - Business -
"Risks, Competition and Other Factors" contained in HRP's Form 10-K for the year
ended December 31, 2002.
PAGE 17
HALLWOOD REALTY PARTNERS, L.P.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On July 27, 2000, HRP sold its interest rate swap agreement for $1,597,000. HRP
had entered into the interest rate swap agreement in 1998 to reduce its exposure
to changes in interest rates for the loan secured by Allfirst Building. This
interest rate swap agreement effectively fixed the loan's cash interest rate at
6.78%, as opposed to the mortgage loan interest rate of LIBOR plus 1.30% (or
7.94% at the time of the swap agreement sale). The proceeds from the sale were
designated for general working capital purposes. For financial reporting
purposes, the proceeds are being amortized over the life of the loan as a
reduction to interest expense. During 2001, as the result of the adoption of
SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" HRP
reclassified the remaining unamortized gain from liabilities to accumulated
other comprehensive income. The proceeds will continue to be amortized over the
life of Allfirst Building's mortgage payable as a reduction to interest expense.
As of June 30, 2003 and December 31, 2002, the unamortized balance, included on
the balance sheet as "Accumulated other comprehensive income", was $787,000 and
$926,000, respectively.
Also on July 27, 2000 and in connection with the sale of the swap agreement, HRP
purchased an interest rate cap for Allfirst Building's mortgage loan for
$288,000, which limits HRP's exposure to changing interest rates to a maximum of
10%. This interest rate cap, which has a notional amount of $25,000,000, has
terms consistent with Allfirst Building's mortgage loan. Allfirst Building's
cash interest rate was 2.62% and 2.68% as of June 30, 2003 and December 31,
2002, respectively. The interest rate cap is a derivative and designated as a
cash flow hedge. Hedge effectiveness is measured based on using the intrinsic
value of the interest rate cap. All changes in the fair value of the time value
of the cap are recorded directly to earnings. With the January 1, 2001 adoption
of SFAS No. 133, HRP recorded the cumulative effect of the adoption as a
reduction to income of $192,000, or the amount of the difference between the
carrying value as of January 1, 2001 of $267,000 and the then estimated fair
value of $75,000, all of which represented change in time value. Thereafter, on
a quarterly basis, HRP has recorded changes in the estimated fair value of the
cap in interest expense. As of June 30, 2003 and December 31, 2002, the
estimated fair value of the interest rate cap was $14,000 and $55,000,
respectively.
Other than Allfirst Building's mortgage ($25,000,000), all mortgages have fixed
interest rates. Accordingly, changes in LIBOR or the prime rate do not
significantly impact the amount of interest paid by HRP. Assuming a 100 basis
point, or 1%, change in LIBOR, interest paid by HRP would increase or decrease
by $250,000 on an annual basis.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. It is the conclusion
of the registrant's principal executive officer and principal financial
officer that the registrant's disclosure controls (as defined in
Exchange Act rules 13a-14 and 15d-14), based on their evaluation of
these controls and procedures as of the end of the period covered by
this report, are effective.
(b) Changes in internal controls. There were no significant changes in the
registrant's internal controls or in other factors that could
significantly affect these controls subsequent to the date of their
evaluation.
PAGE 18
HALLWOOD REALTY PARTNERS, L.P.
PART II - OTHER INFORMATION
Item
1 Legal Proceedings
Reference is made to Note 6 to the condensed consolidated financial
statements contained in this Form 10-Q.
2 Changes in Securities and Use of Proceeds
On March 28, 2003, HRP and EquiServe Trust Company, N.A. amended the
Unit Purchase Agreement (the "Rights Agreement"), which describes the
terms and conditions of the limited partner unit purchase rights (the
"Rights") that were distributed in 1990. The Rights currently trade
automatically with HRP's units representing limited partner interests,
are not evidenced by separate certificates and are not exercisable
until the occurrence of events specified in the Rights Agreement. The
Rights Agreement was amended to extend the expiration date of the
Rights Agreement to March 31, 2008, to reflect the automatic adjustment
that occurred to the initial exercise price from $50 to $250 as a
result of the 1-for-5 reverse unit split effected by HRP in 1995 and
otherwise to update the Rights Agreement.
In connection with the announcement of an intent to conduct a tender
offer discussed in Item 5 of this 10-Q, on April 29, 2003, the board of
directors of the General Partner deferred the Distribution Date of the
Rights, as defined in the Rights Agreement, until the close of business
on the tenth day after the date of the filing of a tender offer
statement on Schedule TO with the Securities and Exchange Commission.
Such a filing was made on May 1, 2003, and the board of directors of
the General Partner subsequently deferred the Distribution Date until a
later date the General Partner may determine. The action of the General
Partner does not foreclose its ability to, or indicate any intention
not to, determine another Distribution Date, in its sole discretion,
and does not alter or affect the provisions of the Rights Agreement
with respect to any Distribution Date that may occur upon an Unit
Acquisition Date (as defined in the Rights Agreement) or the provisions
of the Rights Agreement with respect to any tender or exchange offer
other than the tender offer announced on May 1, 2003.
3 Defaults upon Senior Securities None.
4 Submission of Matters to a Vote of Security Holders None.
5 Other Information
Reference is made to Note 5 to the condensed consolidated financial
statements contained in this Form 10-Q.
6 Exhibits and Reports on Form 8-K
(a) Exhibits
31.1 Certification of the Chief Executive Officer Pursuant
to Section 302 of Sarbanes-Oxley Act of 2002
31.2 Certification of the Chief Financial Officer Pursuant
to Section 302 of Sarbanes-Oxley Act of 2002
32.1 Certifications of the the Chief Executive Officer and
Chief Financial Officer Pursuant to Section 906 of
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
On May 13, 2003, HRP filed a report on Form 8-K containing a
press release, dated May 13, 2003, setting forth its first
quarter 2003 results (such press release is not incorporated
by reference herein or deemed "filed" within the meaning of
Section 18 of the Securities Act of 1933, as amended). HRP
filed a report on Form 8-K, dated May 13, 2003, to report that
the board of directors of the General Partner of HRP had
expanded the board size by one and appointed Hamilton P.
Schrauff as an outside director, effective immediately. HRP
filed a report on Form 8-K, dated July 8, 2003, to report the
Delaware Court of Chancery decision in the litigation
encaptioned Gotham Partners, L.P. v Hallwood Realty Partners,
L.P., et al. For more information, see Note 6 to the condensed
consolidated financial statements contained herein.
PAGE 19
HALLWOOD REALTY PARTNERS, L.P.
SIGNATURE
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.
HALLWOOD REALTY PARTNERS, L.P.
(Registrant)
By: HALLWOOD REALTY, LLC
General Partner
Date: August 4, 2003 By: /s/ JEFFREY D. GENT
-------------------- -----------------------------------
Jeffrey D. Gent
Vice President - Finance
(Principal Financial and Accounting
Officer)
PAGE 20