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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
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 Pembroke Companies Inc
70 East 55th Street, 7th Floor
New York, New York 10022
(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
------ ------
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HIGH CASH PARTNERS, L.P.
FORM 10-Q - March 31, 2002
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 2002 and December 31, 2001................1
STATEMENTS OF OPERATIONS - For the three months ended
March 31, 2002 and 2001..........................................2
STATEMENT OF PARTNERS' DEFICIT - For the three months ended
March 31, 2002...................................................3
STATEMENTS OF CASH FLOWS - For the three months ended
March 31, 2002 and 2001..........................................4
NOTES TO FINANCIAL STATEMENTS........................................5
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..............................8
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K................................13
SIGNATURES....................................................................14
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,
2002 December 31,
(unaudited) 2001
------------------ ------------------
ASSETS
Real estate, net $ 14,362,182 $ 14,433,815
Cash and cash equivalents 1,033,516 1,100,234
Tenant receivables, net 148,730 112,339
Other assets 369,325 441,920
Prepaid expense 58,106 58,106
------------------ ------------------
$ 15,971,859 $ 16,146,414
================== ==================
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgage loan payable $ 6,500,000 $ 6,500,000
Deferred interest payable 19,903,010 19,691,497
Accounts payable and accrued expenses 37,260 57,134
Tenants' security deposits payable 66,805 64,618
------------------ ------------------
26,507,075 $ 26,313,249
Commitments and contingencies
Partners' deficit
Limited partners' deficit (96,472 units
issued and outstanding) (10,429,862) (10,065,165)
General partners' deficit (105,354) (101,670)
------------------ ------------------
Total partners' deficit (10,535,216) (10,166,835)
------------------ ------------------
$ 15,971,859 $ 16,146,414
================== ==================
See notes to financial statements.
1
HIGH CASH PARTNERS, L.P.
STATEMENTS OF OPERATIONS
(unaudited)
----------------------------------------
For the three months ended
March 31,
----------------- -----------------
2002 2001
----------------- -----------------
Revenues
Rental income $ 661,168 $ 648,662
Interest income 13,126 14,004
----------------- -----------------
674,294 662,666
----------------- -----------------
Costs and expenses
Mortgage loan interest 713,914 694,431
Operating 111,208 114,231
Depreciation and amortization 109,059 107,721
Partnership management fees 75,369 75,369
Property management fees 19,792 20,893
General and Administrative 13,333 37,705
----------------- -----------------
1,042,675 1,050,350
----------------- -----------------
Net loss $ (368,381) $ (387,684)
================= =================
Net loss attributable to
Limited partners $ (364,697) $ (383,808)
General partners (3,684) (3,876)
----------------- -----------------
$ (368,381) $ (387,684)
================= =================
Net loss per unit of limited partnership
interest (96,472 units outstanding) $ (3.78) $ (3.98)
----------------- -----------------
See notes to financial statements.
2
HIGH CASH PARTNERS, L.P.
STATEMENT OF PARTNERS' DEFICIT
(unaudited)
General Partners' Limited Partners' Total Partners'
Deficit Deficit Deficit
----------------- ------------------- -------------------
Balance, January 1, 2002 $ (101,670) $ (10,065,165) $ (10,166,835)
Net loss for the three months
ended March 31, 2002 (3,684) (364,697) (368,381)
----------------- ------------------- -------------------
Balance, March 31, 2002 $ (105,354) $ (10,429,862) $ (10,535,216)
================= =================== ===================
See notes to financial statements.
3
HIGH CASH PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
(unaudited)
For the three months ended
March 31,
--------------- --------------
2002 2001
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Net loss $ (368,381) $ (387,684)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities
Deferred interest expense 211,514 694,431
Depreciation and amortization 109,059 107,721
Changes in operating assets and liabilities
Tenant receivables (36,391) (75,441)
Other assets 41,418 (39,689)
Prepaid expenses -- (44,455)
Accounts payable and accrued expenses (19,874) 5,245
Tenants' security deposits payable 2,187 --
--------------- --------------
Net cash (used in) provided by operating activities (60,468) 260,128
--------------- --------------
Cash flows from investing activities
Additions to Real Estate (6,250) --
--------------- --------------
Net (decrease) increase in cash and cash equivalents (66,718) 260,128
Cash and cash equivalents, beginning of period 1,100,234 1,103,651
--------------- --------------
Cash and cash equivalents, end of period $ 1,033,516 $ 1,363,779
=============== ==============
Supplemental Disclosure of cash flow information:
Interest paid $ 502,401 $ --
=============== ==============
See notes to financial statements.
4
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. However, if the Partnership
is unable to refinance or otherwise restructure its outstanding
indebtedness to Resources Accrued Mortgage Investors 2 L.P. ("RAM 2") prior
to the Extended Maturity Date (as hereinafter defined), the Partnership
will lose its entire interest in its sole real estate asset (See Note 3).
These circumstances raise substantial doubt as to the Partnership's ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
2. 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, 2001. The results of operations for the
three months ended March 31, 2002 are not necessarily indicative of the
results to be expected for the full year.
3. MORTGAGE LOAN PAYABLE
The mortgage loan payable (the "Mortgage Loan") represents a first mortgage
loan held by RAM 2, a public limited partnership sponsored by affiliates of
the former general partners of the Partnership. The Mortgage Loan bears
interest at the rate of 11.22% per annum, compounded monthly and did not
require payment until its original maturity date of February 28, 2001. The
principal balance, along with deferred interest thereon, was $26,403,010 at
March 31, 2002, and aggregated approximately $25,000,000 at its original
maturity date of February 28, 2001.
Because the Partnership believed that it would be unable either to repay or
refinance the Mortgage Loan at its original maturity date of February 28,
2001, the Managing General Partner negotiated and caused the Partnership to
enter into a mortgage loan modification agreement (the "Mortgage Loan
Modification Agreement") with RAM 2 in order to effect a modification of
the Mortgage Loan and prevent the immediate foreclosure of the Mortgage
Loan and the consequent loss of the Property.
The Partnership entered into the Mortgage Loan Modification Agreement with
RAM 2 effective January 31, 2001. Pursuant to the terms of the Mortgage
Loan Modification Agreement, RAM 2 agreed to forbear, for not less than one
year and up to two years, the
5
exercise of its rights and remedies under the Mortgage Loan for the
Partnership's failure to repay all amounts due and payable thereunder at
its original maturity date of February 28, 2001. Under the Mortgage Loan
Modification Agreement, the deed to the Property, along with a bill of
sale, assignment of leases and other conveyance documents (the "Conveyance
Documents") were placed in escrow with counsel to RAM 2. The Conveyance
Documents will not be released to RAM 2 until the earliest to occur of the
following dates (the "Extended Maturity Date"):
I. Any date on which any action taken or omitted to be taken by the
Partnership in bad faith, intended to hinder or impede RAM 2's
exercise of its rights or remedies under the terms of the Mortgage
Loan Modification Agreement, remains uncured for more than 10 days
after notice thereof from RAM 2;
II. Any date on or after March 1, 2002, upon the closing date of the sale
or other conveyance of the Property (a) if RAM 2 identifies a bona
fide third party purchaser to acquire the Property, or (b) for any
other reason deemed reasonably necessary by RAM 2 to avoid a material
economic disadvantage to it; and
III. March 1, 2003.
Unless the Partnership is able to arrange alternate financing or a sale of
the Property, of which there is no guarantee, the Conveyance Documents can
be released to RAM 2 at any time on or before March 1, 2003, at and after
which the Partnership will no longer have any interest in the Property;
however, there can be no assurance that RAM 2 will not foreclose earlier
under the other terms of the Mortgage Loan Modification Agreement, as set
forth above.
The Mortgage Loan Modification Agreement further provides that, from March
1, 2001, until such time as the Conveyance Documents have been released,
the Partnership will be entitled to receive $100,000 per annum pro-rated
monthly and paid monthly to the extent cash flow generated by the Property
permits and RAM 2 will be entitled to receive the balance of the net
operating income generated by the Property to be applied against current
interest and the outstanding principal and deferred interest on the
Mortgage Loan. For the three months ended March 31, 2002, the Partnership
retained $25,000 of operating cash flow and applied $502,401 to current
interest incurred under the Mortgage Loan.
Under the terms of the Mortgage Loan Modification Agreement, the
Partnership will retain its interest in the Property until and unless the
Conveyance Documents are released to RAM 2 in accordance with the terms
thereof. Prior to March 1, 2003, until RAM 2 notifies the Partnership that
it has entered into a contract to sell or convey the Property, the
Partnership will have the right to satisfy the Mortgage Loan for an amount
equal to the sum of (x) the then unpaid principal balance of the Mortgage
Loan, and all accrued interest thereon and other charges due thereunder and
(y) 66% of the value of the Property in excess of the amount described in
clause (x) above, as additional interest on the Mortgage Loan. If the
Mortgage Loan is satisfied, the Conveyance Documents will be returned to
the Partnership. If the Partnership is unable to refinance or otherwise
restructure this outstanding indebtedness prior to the Extended Maturity
Date, the Partnership will lose its entire interest in the Property.
6
Under the terms of the Mortgage Loan, the Partnership was obligated to
provide RAM 2 with a current appraisal of the Property upon RAM 2's
request. If it was 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 Loan, calculated at a rate of 6.22% per
annum compounded monthly through the date of such appraisal, exceeded 85%
of the appraised value of the Property, an amount equal to such excess (the
"Excess Payment") would become immediately due and payable to RAM 2. In
accordance with the terms of the Mortgage Loan Modification Agreement, RAM
2 requested an appraisal of the Property by a real estate appraisal firm
unaffiliated with the Partnership, Pembroke HCP, LLC, its managing general
partner (the "Managing General Partner") or RAM 2. The appraisal, which was
performed as of March 1, 2001, indicated that an Excess Payment was not due
or payable to RAM 2 at that date. Consequently, under the terms of the
Mortgage Loan Modification Agreement, RAM 2 has no further appraisal right
pursuant to the terms of the Mortgage Loan.
4. 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")
(collectively, the "General Partners"), respectively. In the same
transaction, XRC Corp. ("XRC"), 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 additional 6,257 Units in the secondary market.
Prior to the sale of the general partnership interests in the Partnership
to Pembroke HCP and Pembroke AGP, Wexford Management LLC had performed
management and administrative services for AGP, 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 each of the quarters ended March 31, 2002 and
2001, $12,000 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 was paid to
unaffiliated local management companies that had been engaged for the
purpose of performing the local property management functions. No property
management fees were payable to Pembroke Realty for the quarters ended
March 31, 2002 or 2001. No leasing activity compensation was paid to
Pembroke Realty for the quarters ended March 31, 2002 or 2001.
In connection with its entering into the Mortgage Loan Modification
Agreement with RAM 2, which became effective on January 31, 2001, the
Partnership retained Kestrel
7
Management LP ("Kestrel"), an affiliate of RAM 2, to perform property
management functions commencing on January 2, 2001. Kestrel assumed all
management services previously performed by Pembroke Realty and the
unaffiliated management companies, pursuant to the terms of a management
agreement. In January 2002, responsibility for the management of the
Property was assigned by Kestrel to Pelican, LLC ("Pelican"), an affiliate
of the general partner of RAM 2. For the quarter ended March 31, 2002,
Pelican was entitled to receive $19,792 in respect of property management
services rendered to the Partnership.
For managing the affairs of the Partnership, the Managing General Partner
is entitled to a partnership management fee equal to $75,369 per quarter.
For each of the quarters ended March 31, 2002 and 2001, the Managing
General Partner received 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 $3,684 and $3,876 in the quarters
ended March 31, 2002 and 2001, respectively. They also are entitled to
receive 1% of the distributions of the Partnership.
5. REAL ESTATE
Real estate, which is the Partnership's sole asset, is summarized as
follows:
March 31, 2002
(unaudited) December 31, 2001
------------------ ---------------------
Land $ 6,667,189 $ 6,667,189
Building and improvements 12,972,195 12,965,945
------------------ ---------------------
19,639,384 19,633,134
Accumulated depreciation (5,277,202) (5,199,319)
------------------ ---------------------
$ 14,362,182 $ 14,433,815
================== =====================
The land, building and improvements that comprise the Partnership's sole
real estate asset are collateralized by a mortgage loan payable.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. However, if the Partnership
is unable to refinance or otherwise restructure its outstanding
indebtedness to Resources Accrued Mortgage Investors 2 L.P. ("RAM 2") prior
to the Extended Maturity Date, the Partnership will lose its entire
interest in its sole real estate asset. These circumstances raise
substantial doubt as to the Partnership's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
8
The Partnership's sole real estate asset (the "Property") is a community
shopping center located in Reno, Nevada containing approximately 233,000
square feet of net leasable area.
The Partnership uses undistributed cash flow from operations as its primary
measure of liquidity. As of March 31, 2002, working capital reserves
amounted to approximately $1,203,000 which does not include any amount
which may be currently payable under the Partnership's mortgage loan (the
"Mortgage Loan") payable to RAM 2 or deferred interest thereon. Such
reserves may be used to fund capital expenditures, insurance, real estate
taxes and loan payments. All expenditures made during the quarter ended
March 31, 2002 were funded from operations.
At March 31, 2002, the total amount outstanding on the Mortgage Loan was
$26,403,010, which included deferred interest of $19,903,010. The scheduled
maturity date of the Mortgage Loan was originally February 28, 2001, at
which time the total amount outstanding on the mortgage was approximately
$25,000,000.
Pursuant to the Mortgage Loan Modification Agreement, RAM 2 has agreed to
forbear for not less than one year and up to two years in the exercise of
its rights and remedies under the Mortgage Loan triggered by the
Partnership's failure to repay fully all amounts due and payable thereunder
at maturity.
Under the Mortgage Loan Modification Agreement, the deed to the Property,
along with a bill of sale, assignment of leases and other conveyance
documents (the "Conveyance Documents") have been placed in escrow with
counsel to RAM 2. The Conveyance Documents will not be released to RAM 2
until the earliest to occur of (such date referred to herein as the
"Extended Maturity Date"):
(i) any date on which any action taken or omitted to be taken by the
Partnership in bad faith, intended to hinder or impede RAM 2's
exercise of its rights or remedies under the terms of the Mortgage
Loan Modification Agreement, remains uncured for more than 10 days
after notice of same from RAM 2;
(ii) any date on or after March 1, 2002, upon the closing date of the sale
or other conveyance of the Property (a) if RAM 2 identifies a bona
fide third party purchaser to acquire the Property or (b) for any
other reason deemed reasonably necessary by RAM 2 to avoid a material
economic disadvantage to it; and
(iii) March 1, 2003.
Unless the Partnership is able to arrange alternate financing or a sale of
the Property, of which there is no guarantee, the Conveyance Documents can
be released to RAM 2 at any time on or before March 1, 2003, at and after
which the Partnership will no longer have any interest in the Property;
however, there can be no assurance that RAM 2 will not foreclose earlier
under the other terms of the Mortgage Loan Modification Agreement, as set
forth above.
The Mortgage Loan Modification Agreement further provides that 100% of the
net operating income generated by the Property allocable to the period
ending February 28, 2001, the original maturity date of the Mortgage Loan,
will be retained by the Partnership. From and after March 1, 2001 until
such time as the Conveyance Documents have been released, the Partnership
will be entitled to receive $100,000 per
9
annum pro-rated monthly and paid monthly to the extent cash flow permits
and RAM 2 will be entitled to receive the balance of the net operating
income generated by the Property to be applied to current interest and the
outstanding principal and deferred interest on the Mortgage Loan. For the
three months ended March 31, 2002, the Partnership retained $25,000 of
operating cash flow and applied $502,401 to current interest incurred under
the Mortgage Loan. From and after March 1, 2001, the Partnership has used
its cash flow and cash reserves to fund the payment of Partnership fees and
expenses. To the extent not used to pay Partnership fees and expenses,
these funds will be available for distribution to the Limited Partners.
However, there can be no assurance that the Partnership will have excess
cash available, or that future distributions will be made to the Limited
Partners. At March 31, 2002, the Partnership had cash and cash equivalents
of $1,033,516.
In addition, RAM 2 has agreed to release the Partnership and its affiliates
from all claims for principal or interest due under the Mortgage Loan
effective on the date that the Conveyance Documents are released to RAM 2
or such other party as agreed to by RAM 2. Such release will be effective
provided that the Partnership (i) does not become the subject of any
bankruptcy proceeding on or before one year from the date of release of the
Conveyance Documents and (ii) has not perpetrated any fraud upon RAM 2.
Under the terms of the Mortgage Loan, the Partnership was obligated to
provide RAM 2 with a current appraisal of the Property upon RAM 2's
request. If it was 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 Loan calculated at a rate of 6.22% per
annum compounded monthly through the date of such appraisal (that sum, the
"Measurement Amount"), exceeded 85% of the appraised value of the Property,
an amount equal to such excess (the "Excess Payment") would become
immediately due and payable to RAM 2. Any amount so paid by the Partnership
would be applied first against accrued and unpaid interest on the Mortgage
Loan, and the balance, if any, against the principal thereof. In accordance
with the terms of the Mortgage Loan Modification Agreement, RAM 2 was
entitled to request an appraisal of the Property; however, if such
appraisal indicated that no Excess Payment was due, RAM 2 would have no
further appraisal rights. RAM 2 requested that the Property be appraised by
a real estate appraisal firm unaffiliated with the Partnership, the
Managing General Partner or RAM 2. The appraisal, which was performed as of
March 1, 2001, indicated a fair market value of $20 million for the
Property. As of March 1, 2001 the Measurement Amount was $13,684,645.
Because the Measurement Amount did not exceed 85% of the appraised value of
the Property on that date, no Excess Payment was or is payable to RAM 2.
Consequently, under the terms of the Mortgage Loan Modification Agreement,
RAM 2 has no further appraisal right thereunder.
Under the terms of the Mortgage Loan Modification Agreement, the
Partnership will retain its interest in the Property until and unless the
Conveyance Documents are released to RAM 2 in accordance with the terms
thereof. In addition, the Partnership retained the right to repay the
Mortgage Loan in accordance with its terms on any date prior to March 1,
2001. Thereafter, and prior to March 1, 2003, until RAM 2 notifies the
Partnership that it has entered into a contract to sell or convey the
Property, the Partnership will have the right to satisfy the Mortgage Loan
for an amount equal to the
10
sum of (x) the then unpaid principal balance of the Mortgage Loan, and all
accrued interest thereon and other charges due thereunder and (y) 66% of
the value of the Property in excess of the amount described in clause (x)
above, as additional interest on the Mortgage Loan. If the Mortgage Loan is
satisfied, the Conveyance Documents will be returned to the Partnership.
In connection with the Partnership's entering into the Mortgage Loan
Modification Agreement, Lawrence J. Cohen, the sole shareholder and
director of Pembroke Companies Inc., which is the sole member and the
manager of the Managing General Partner, has executed an unconditional
limited guaranty of payment in the amount of the principal balance of the
Mortgage Loan, all accrued and unpaid interest thereon and all other
charges due thereunder, that will be effective only if Mr. Cohen or his
affiliates cause the Partnership to file for bankruptcy or to commence a
civil action seeking to hinder, impede or delay RAM 2's exercise of any
right or remedy available to it.
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 Partnership pursued
a claim in the Levitz bankruptcy proceedings and was awarded a general
unsecured claim and an administrative expense claim in 2001. In 2002, the
Partnership received 4,127 shares of Levitz common stock in satisfaction of
its unsecured claim and $15,000 in satisfaction of its administrative
expense claim.
In 1999, Good Guys, Inc. ("Good Guys") vacated its premises and ceased
paying rent under the lease as of December 1, 2000. In April 2001, the
Partnership agreed to consent to Good Guys' sublet of its premises; in
connection with this agreement Good Guys paid all of its past due rent.
The vacancy at the Levitz space has resulted in a loss of income to the
Partnership. This vacancy 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 for the Levitz space.
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
procured, the Partnership expects to have to make capital expenditures to
secure such tenant.
During 1999, the Partnership entered into a short-term lease for the Levitz
space with a then existing tenant at an annual rent substantially less than
under the Levitz lease. The Partnership has the right to terminate this
lease upon written notice in the event that 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 situation, 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 to make such
capital expenditures.
Real Estate Market
11
The market value of the Property reflects real estate market conditions in
the vicinity of 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 has hindered the lease-up of new space.
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, 2002 Compared to Three Months Ended March 31,
2001
The Partnership realized a net loss of $368,381($3.78 per Unit) for the
three months ended March 31, 2002 compared to a net loss of $387,684 ($3.98
per Unit) for the corresponding 2001 period, a decreased loss of $19,303.
The decreased loss was primarily the result of a slight increase in
revenues combined with an overall decrease in costs and expenses.
Revenues increased slightly from 2001 to 2002, principally due to increased
rental income.
Rental income increased slightly from 2001 to 2002 as a result of scheduled
increases in existing leases.
Costs and expenses decreased from 2001 to 2002 primarily as a result of
decreased general and administrative expenses partially offset by an
increase in mortgage loan interest.
Mortgage loan interest increased due to the compounding effect from the
deferral of the interest expense on the Mortgage Loan.
General and administrative expenses decreased as a result of decreased
legal costs; the legal costs incurred in connection with the Mortgage Loan
Modification Agreement during 2001 represented a one-time non-recurring
expense.
12
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
13
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 14, 2002 By: /s/ Lawrence J. Cohen
---------------------
President and Prinicipal
Financial and Accounting Officer
14