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 quarterly period ended March 31, 2000
Commission file number 0-17651
HIGH CASH PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3347257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
High Cash Partners, L.P.
c/o Colliers International
5310 Kietzke Lane, Suite 105
Reno, Nevada 89511
(Address of principal executive offices)
(212) 350-9900
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by checkmark 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
HIGH CASH PARTNERS, L.P.
FORM 10-Q - MARCH 31, 2000
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 2000 and December 31, 1999................1
STATEMENTS OF OPERATIONS - For the three months ended
March 31, 2000 and 1999.....................................2
STATEMENT OF PARTNERS' DEFICIT - For the three months
ended March 31, 2000........................................3
STATEMENTS OF CASH FLOWS - For the three months
ended March 31, 2000 and 1999...............................4
NOTES TO FINANCIAL STATEMENTS........................................5
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.........................7
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K...............................10
SIGNATURES.................................................................11
PART I - FINANCIAL INFORMATION
This report contains statements that constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Those statements appear in a number of places herein and include statements
regarding the intent, belief or current expectations of the Partnership,
primarily with respect to the future operating performance of the Partnership or
related developments. Any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and actual results and
developments may differ from those described in the forward-looking statements
as a result of various factors, many of which are beyond the control of the
Partnership.
ITEM 1 - FINANCIAL STATEMENTS
HIGH CASH PARTNERS, L.P.
BALANCE SHEETS
March 31, December 31,
2000 1999
ASSETS
Real estate, net ...................... $ 14,961,277 $ 15,040,394
Cash and cash equivalents ............. 640,980 957,503
Tenant receivables, net ............... 45,823 66,632
Other assets .......................... 96,881 99,967
Prepaid real estate taxes ............. 56,966 --
Prepaid insurance premiums ............ 18,222 28,136
$ 15,820,149 $ 16,192,632
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgage loan payable ................. $ 6,500,000 $ 6,500,000
Deferred interest payable ............. 16,056,182 15,435,131
Accounts payable and accrued expenses . 53,300 69,681
Due to affiliates ..................... 1,711 1,542
Tenants' security deposits payable .... 68,129 68,867
$ 22,679,322 $ 22,075,221
Commitments and contingencies
Partners' deficit
Limited partners' deficit (96,472 units
issued and outstanding) ............... (6,790,576) (5,823,761)
General partners' deficit ............. (68,597) (58,828)
Total partners' deficit ............ (6,859,173) (5,882,589)
$ 15,820,149 $ 16,192,632
See notes to financial statements.
HIGH CASH PARTNERS, L.P.
STATEMENTS OF OPERATIONS
For the three months ended
March 31,
2000 1999
Revenues
Rental income .................... $ 659,905 $ 554,784
Interest income .................. 7,107 43,140
Other income ..................... -- 10,741
667,012 608,665
Costs and expenses
Mortgage loan interest ........... 621,051 555,426
Operating ........................ 118,804 135,359
Depreciation and amortization .... 90,824 90,169
Partnership management fees ...... 75,369 75,369
Property management fees ......... 20,817 17,570
Administrative ................... 17,055 23,017
943,920 896,910
Net loss $(276,908) $(288,245)
Net loss attributable to
Limited partners ................. $(274,139) $(285,363)
General partners ................. (2,769) (2,882)
$(276,908) $(288,245)
Net loss per unit of limited partnership
interest (96,472 units outstanding) . $ (2.84) $ (2.96)
See notes to financial statements.
HIGH CASH PARTNERS, L.P.
STATEMENT OF PARTNERS' DEFICIT
General Limited Total
Partners' Partners' Partners'
Deficit Deficit Deficit
Balance, January 1, 2000 .......... $ (58,828) $(5,823,761) $(5,882,589)
Net loss for the three months ended
March 31, 2000 ................... (2,769) (274,139) (276,908)
Distributions ..................... (7,000) (692,676) (699,676)
Balance, March 31, 2000 ........... $ (68,597) $(6,790,576) $(6,859,173)
See notes to financial statements.
HIGH CASH PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
For the three months ended
March 31,
2000 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Net loss $ (276,908) $ (288,245)
Adjustments to reconcile net loss to net cash
provided by operating activities
Deferred interest expense 621,051 555,426
Depreciation and amortization 90,824 90,169
Changes in operating assets and liabilities
Tenant receivables 20,809 (1,670)
Other assets (8,621) (8,741)
Prepaid real estate taxes (56,966) (63,626)
Prepaid insurance premiums 9,914 6,307
Accounts payable and accrued expenses (16,381) (8,562)
Deferred revenue -- 35,000
Due to affiliates 169 2,661
Tenants' security deposits payable (738) --
Net cash provided by operating activities 383,153 318,719
Cash flows from financing activities
Distributions to partners (699,676) --
Net (decrease) increase in cash and cash equivalents (316,523) 318,719
Cash and cash equivalents, beginning of period 957,503 4,270,688
Cash and cash equivalents, end of period $ 640,980 $ 4,589,407
See notes to financial statements.
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management, all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of such
financial information have been included. The accompanying financial
statements, footnotes and discussions should be read in conjunction with
the financial statements, related footnotes and discussions contained in
the High Cash Partners, L.P. (the "Partnership") annual report on Form 10-K
for the year ended December 31, 1999. The results of operations for the
three months ended March 31, 2000 are not necessarily indicative of the
results to be expected for the full year.
2. CHANGE IN GENERAL PARTNER OWNERSHIP, CONFLICTS OF INTEREST AND TRANSACTIONS
WITH RELATED PARTIES
On June 13, 1997, Resources High Cash, Inc. ("RHC") and Presidio AGP Corp.
("AGP") sold their general partnership interests in the Partnership to
Pembroke HCP LLC ("Pembroke HCP") and Pembroke AGP Corp. ("Pembroke AGP"),
respectively. In the same transaction, XRC Corp., the parent company of
RHC, sold its 8,361 Units to Pembroke Capital II, LLC, an affiliate of
Pembroke HCP and Pembroke AGP. Subsequently, Pembroke Capital II LLC
acquired beneficial ownership of an aggregate of an additional 5,752 Units
in the secondary market.
Prior to the sale of the general partnership interest in the Partnership to
Pembroke HCP and Pembroke AGP, Wexford Management LLC had performed
management and administrative services for Presidio, XRC and XRC's direct
and indirect subsidiaries, as well as for the Partnership. Following the
sale, an affiliate of Pembroke HCP was engaged to perform administrative
services for the Partnership. During the quarters ended March 31, 2000 and
March 31, 1999, $12,000 and $9,000, respectively, in reimbursable payroll
expenses were paid to the affiliate of Pembroke HCP for services performed
during the quarter.
The Partnership had been a party to a supervisory management agreement with
Resources Supervisory Management Corp. ("Resources Supervisory"), an
affiliate of RHC and AGP, pursuant to which Resources Supervisory performed
certain property management functions. Resources Supervisory performed such
services through June 13, 1997. Effective June 13, 1997, the Partnership
terminated this agreement and entered into a similar agreement with
Pembroke Realty Management LLC ("Pembroke Realty"), an affiliate of
Pembroke HCP and Pembroke AGP. A portion of the property management fees
payable to Resources Supervisory and Pembroke Realty were paid to an
unaffiliated management company, which had been engaged for the purpose of
performing the property management functions that were the subject of the
supervisory management agreement. For the quarters ended March 31, 2000 and
1999, Pembroke
2. CHANGE IN GENERAL PARTNER OWNERSHIP, CONFLICTS OF INTEREST AND TRANSACTIONS
WITH RELATED PARTIES (continued)
Realty was entitled to receive $20,817 and $17,570, respectively, of which
$15,613 and $14,642, respectively, was payable to unaffiliated management
companies. No leasing activity compensation was paid to Pembroke Realty for
the quarters ended March 31, 2000 or 1999. Current fees of $1,711 payable
to Pembroke Realty at March 31, 2000 were paid in the subsequent quarter.
For managing the affairs of the Partnership, the Managing General Partner
is entitled to an annual partnership management fee equal to $301,475. For
each of the quarters ended March 31, 2000 and 1999, the Managing General
Partner was entitled to a partnership management fee of $75,369.
The general partners are allocated 1% of the net income or losses of the
Partnership, which amounted to losses of $2,769 and $2,882 in the quarters
ended March 31, 2000 and 1999, respectively. They also are entitled to
receive 1% of distributions.
3. REAL ESTATE
Real estate, which is the Partnership's sole asset, is summarized as
follows:
March 31, December 31,
2000 1999
Land $ 6,667,189 $ 6,667,189
Building and improvements 12,940,226 12,940,225
19,607,415 19,607,415
Accumulated depreciation (4,646,138) (4,567,021)
$ 14,961,277 $ 15,040,394
The land, building and improvements that comprise the Partnership's sole
asset are collateralized by a mortgage loan payable.
4. DUE TO AFFILIATES
The amounts due to affiliates are as follows:
March 31, December 31,
2000 1999
Supervisory Management Fee $ 1,711 $ 1,542
5. DISTRIBUTIONS
In January 2000, the Partnership declared and paid a cash distribution of
approximately $700,000 in the aggregate, or $7.18 per Unit, to Unitholders
of record on January 1, 2000.
ITEM 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
The Partnership's sole property is a community shopping center located in
Reno, Nevada containing approximately 233,000 square feet of net leasable
area.
The Partnership uses working capital reserves set aside from the net
proceeds of its public offering in 1989 and undistributed cash flow from
operations as its primary measure of liquidity. As of March 31, 2000,
working capital reserves amounted to approximately $707,000, which may be
used to fund capital expenditures, insurance, real estate taxes and loan
payments. All expenditures made during the quarter ended March 31, 2000
were funded from cash flow from operations.
At March 31, 2000, the total amount outstanding on the Partnership's
mortgage loan payable to Resources Accrued Mortgage Investors 2 L.P. ("RAM
2") was $22,556,182, which included deferred interest payable of
$16,056,182. The mortgage did not permit a prepayment before March 1, 1999,
and, therefore, the Partnership was not able to refinance the mortgage
before that date. The mortgage matures on February 28, 2001. At that time,
the total amount outstanding on the mortgage is expected to be
approximately $25,000,000. If the value of the property at that time does
not exceed $25,000,000, the Partnership may lose its entire investment in
the property. In that connection, in the first quarter of 1997, the value
of the property was written down to $15,875,000. At present, the
Partnership believes that, unless conditions change materially, the value
of the Property at February 28, 2001 will be significantly less than
$25,000,000.
The mortgage further requires the Partnership to provide RAM 2 with a
current appraisal of the Partnership's property upon RAM 2's request. If it
is determined, based upon the requested appraisal, that the sum of (i) the
principal balance of the mortgage loan plus all other then outstanding
indebtedness secured by the property and (ii) all accrued and unpaid
interest on the mortgage at 6.22% per annum, compounded monthly (that sum,
the "Measurement Amount"), exceeds 85% of the appraised value, an amount
equal to such excess would become immediately due and payable to RAM 2.
To date, the lender has not requested an appraisal. There can be no
assurance that, if the lender requests an appraisal, 85% of the appraised
value will equal the Measurement Amount. At March 31, 2000, the Measurement
Amount was approximately $12,973,000, which was approximately $521,000 less
than 85% of the $15,875,000 value to which the Property was written down in
the first quarter of 1997. As interest on the mortgage accrues, the
Measurement Amount will increase, and, therefore, unless the value of the
Property is shown to be greater than the value to which it was written down
in the first quarter of 1997, the Measurement Amount will exceed 85% of the
appraised value of the Property during the year 2000.
Management is evaluating its alternatives with respect to the RAM 2 loan.
Such alternatives are limited due to the fact that the principal and
deferred interest on the RAM 2 loan significantly exceed the fair market
value of the Property. There can be no assurance that the Partnership will
be successful in pursuing any of its alternatives. If the Partnership is
not successful in pursuing any of its alternatives, the Partnership will
likely lose its entire interest in the Property. The Partnership's
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Until November 1997, Levitz Furniture Corporation ("Levitz") had occupied
approximately 23% of the space of the Partnership's property (i.e.,
approximately 53,000 out of approximately 233,000 square feet of net
leasable area). In November 1997, Levitz, which had filed for protection
under Chapter 11 of the Bankruptcy Code, vacated its space. Levitz ceased
paying rent to the Partnership as of April 2, 1998.
The vacancy at the Levitz space has resulted in a loss of income to the
Partnership. The vacancy at the Levitz space, as well as a vacancy in an
additional, significant space previously occupied by Good Guys, also may
have adversely affected the surrounding tenants and the Partnership's
ability to attract new tenants, particularly in light of the limited
visibility those tenants have to the main thoroughfare. See "Real Estate
Market" below. The Partnership is actively seeking a long-term,
creditworthy substitute tenant. However, there can be no assurance the
Partnership will succeed in finding a long-term, creditworthy substitute
tenant promptly or on terms comparable to those under the Levitz lease. In
addition, if a substitute tenant is obtained, the Partnership would be
required to make substantial expenditures in order to secure the substitute
tenant and in connection with a new lease.
During 1999, the Partnership entered into a short-term lease for the Levitz
space with a then existing tenant at an annual rent materially less than
under the Levitz lease. The Partnership has the right to terminate this
lease upon written notice, in the event the Partnership secures a
long-term, creditworthy tenant for the space.
The level of leasing activity cannot be predicted, particularly in light of
the Levitz and Good Guys situations, and, therefore, the amount of further
capital expenditures arising from leasing activity is uncertain. There can
be no assurance the Partnership will have sufficient liquidity both to make
such capital expenditures, and to make the payments that may be required
under the terms of the RAM 2 loan. If there is a default on the RAM 2 loan,
the Partnership would be materially and adversely affected.
In January 2000, the Partnership declared and paid a cash distribution of
approximately $7,000,000 in the aggregate, or $7.18 per Unit, to
Unitholders of record on January 1, 2000.
Real Estate Market
A substantial decline in the market value of the Partnership's property
reflects real estate market conditions in the vicinity of the property.
Recently built shopping centers in the vicinity have increased competition
for tenants. This competitive factor, together with the fact that much of
the unleased space in the Partnership's property (including the Levitz
space) has only limited visibility to the main thoroughfare and the fact
that the space occupied by Levitz is expected to be vacant for at least
some period, have hindered the lease-up of new space. As a result, the
Partnership's investment in its property is at risk.
Inflation
Inflation has not had a material impact on the Partnership's operations or
financial condition in recent years and is not expected to have a material
impact in the foreseeable future.
Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31,
1999
The Partnership realized a net loss of $276,908 ($2.84 per Unit) for the
three months ended March 31, 2000 compared to a net loss of $288,245 ($2.96
per Unit) for the corresponding 1999 period, a change of $11,337. The
change was primarily a result of an increase in rental income, partially
offset by an increase in mortgage loan interest expense.
Revenues increased from 1999 to 2000 due to increases in base rentals,
primarily due to the signing of new leases.
Costs and expenses increased from 1999 to 2000 primarily due to an increase
in mortgage loan interest expense, partially offset by decreases in
operating and administrative expenses.
Mortgage loan interest expense increased due to the compounding effect from
the deferral of the interest expense on the zero coupon mortgage.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HIGH CASH PARTNERS, L.P.
By: Pembroke HCP, LLC
Managing General Partner
By: Pembroke Companies, Inc.,
Managing Member
Dated: May 11, 2000 By: /s/ Lawrence J. Cohen
---------------------
Lawrence J. Cohen
President and Principal
Financial and Accounting Officer