FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93.)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from.........to.........
Commission file number 0-9508
PREFERRED PROPERTIES FUND 80
(Exact name of small business issuer as specified in its charter)
California 94-2599964
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
(864) 239-1000
Issuer's telephone number
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports ), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) PREFERRED PROPERTIES FUND 80
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1996
Assets
Cash and cash equivalents $ 267
Other assets 162
Deferred costs, net 45
Investment property:
Land $ 1,059
Buildings and related personal property 4,286
5,345
Less accumulated depreciation (1,829) 3,516
$ 3,990
Liabilities and Partners' Deficit
Liabilities
Accrued expenses and other liabilities $ 115
Notes payable 5,369
Promissory notes:
Principal 231
Deferred interest payable 168
Partners' Deficit:
General partner's $ (893)
Limited partners' (19,997 units issued
and outstanding) (1,000) (1,893)
$ 3,990
See Accompanying Notes to Consolidated Financial Statements
b) PREFERRED PROPERTIES FUND 80
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 204 $ 208 $ 618 $ 647
Other income 6 7 31 60
Total revenues 210 215 649 707
Expenses:
Operating 44 30 105 110
Interest 136 137 410 410
Depreciation 28 28 83 84
General and administrative 118 72 286 212
Total expenses 326 267 884 816
Net loss $ (116) $ (52) $ (235) $ (109)
Net loss allocated
to general partner (5%) $ (6) $ (3) $ (12) $ (5)
Net loss allocated
to limited partners (95%) (110) (49) (223) (104)
$ (116) $ (52) $ (235) $ (109)
Net loss per limited
partnership unit $ (5.51) $ (2.45) $ (11.16) $ (5.20)
Distribution per limited
partnership unit $ -- $ -- $ -- $ 65.06
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) PREFERRED PROPERTIES FUND 80
CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner's Partners' Total
<S> <C> <C> <C> <C>
Original capital contributions 19,997 $ 100 $ 19,997 $ 20,097
Partners' deficit
at December 31, 1995 19,997 $ (881) $ (777) $ (1,658)
Net loss for the nine months
ended September 30, 1996 -- (12) (223) (235)
Partners' deficit
at September 30, 1996 19,997 $ (893) $ (1,000) $ (1,893)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) PREFERRED PROPERTIES FUND 80
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (235) $ (109)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 95 91
Deferred costs paid -- (42)
Change in accounts:
Other assets (133) 122
Accrued expenses and other liabilities 10 (85)
Net cash used in operating activities (263) (23)
Cash flows from investing activities:
Net cash provided by investing activities -- --
Cash flows from financing activities:
Notes payable principal payments (46) (46)
Joint venture partner distributions -- (9)
Retirement of promissory notes (32) (418)
Purchase of minority interest in joint venture -- (10)
Cash distributions to limited partners -- (1,301)
Net cash used in financing activities (78) (1,784)
Net decrease in cash and cash equivalents (341) (1,807)
Cash and cash equivalents at beginning of period 608 2,498
Cash and cash equivalents at end of period $ 267 $ 691
Supplemental disclosure of cash flow information:
Cash paid for interest $ 409 $ 586
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) PREFERRED PROPERTIES FUND 80
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Preferred Properties Fund
80 (the "Partnership") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of NPI Equity Investments II, Inc. ("NPI Equity" or the "Managing
General Partner"), all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and nine month periods ended September 30, 1996, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's annual report on
Form 10-K for the year ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform
to the 1996 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The general partner of the Partnership is Montgomery Realty Company - 80
("MRC-80"), a limited partnership. The general partner of MRC-80 is Fox Realty
Investors ("FRI").
Pursuant to a series of transactions which closed during the first half of
1996, affiliates of Insignia Financial Group, Inc. ("Insignia") acquired control
of NPI Equity, the managing general partner of FRI. NPI Equity is a wholly-
owned subsidiary of National Property Investors, Inc. ("NPI"). In connection
with these transactions, affiliates of Insignia appointed new officers and
directors of NPI Equity.
The following transactions with affiliates of Insignia, NPI and affiliates of
NPI were charged to expense in 1996 and 1995:
For the Nine Months Ended
September 30,
1996 1995
Reimbursement for services of affiliates (included
in general and administrative expenses) $ 101,000 $ 116,000
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES - (CONTINUED)
For the period from January 19, 1996, to September 30, 1996, the Partnership
insured its property under a master policy through an agency and insurer
unaffiliated with the Managing General Partner. An affiliate of the Managing
General Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the Managing General Partner who
received payments on these obligations from the agent. The amount of the
Partnership's insurance premiums accruing to the benefit of the affiliate of the
Managing General Partner by virtue of the agent's obligations is not
significant.
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership has one investment property, Creekside Business Park, located
in Milpitas, California. The property has been fully occupied throughout 1996
and 1995.
The Partnership's net loss for the nine months ended September 30, 1996, was
approximately $235,000 versus a net loss of approximately $109,000 for the same
period of 1995. For the three months ended September 30, 1996, the Partnership
incurred a net loss of approximately $116,000 compared to a net loss of
approximately $52,000 for the three months ended September 30, 1995. The
increase in the net loss for the nine month period is primarily attributable to
decreases in rental and other income and an increase in general and
administrative expenses. Rental income decreased as a result of a tenant
renewing its lease at Creekside Business Park in February 1996 at a lower rental
rate. This reduction was necessary in order to bring this tenant's rent in line
with the current market rental rates. The decrease in other income is due to a
reduction in cash reserves in 1996 resulting primarily from a cash distribution
in 1995. General and administrative expenses increased due to an increase in
legal expenses in 1996, as a result of fees incurred in the Kaufman et al. v.
Northern Trust Bank of California, N.A., et al. litigation (see the
Partnership's annual report on Form 10-K for the year ended December 31, 1995
for a further discussion). The increase in the net loss for the three month
period is primarily attributable to increases in operating expenses and general
and administrative expenses. Operating expenses increased due to an increase in
insurance expense. General and administrative expenses increased due to the
aforementioned increase in legal expenses.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment property to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At September 30, 1996, the Partnership had unrestricted cash of $267,000 as
compared to $691,000 at September 30, 1995. Net cash used in operating
activities increased primarily as a result of the decrease in total revenues and
the payment of legal fees as discussed above. Also contributing to the increase
in cash used in operating activities was an increase in other assets due to
increased receivables for common area maintenance charges, and prepaids and
increased tax escrow funding. Net cash used in financing activities decreased
due to the Partnership not making a distribution in 1996 and fewer redemptions
of promissory notes in 1996 compared to 1995.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The first mortgage
indebtedness of $4,069,000 matures on April 1, 1997, at which time a balloon
payment is due. Unless the Partnership is able to extend or replace a tenant's
lease representing 58 percent of the leasable space of Creekside Business Park,
which expires on September 30, 1997, the Managing General Partner does not
expect to be able to refinance the Partnership's first mortgage. If this loan
is not refinanced or modified, or the property sold, the Partnership could lose
this property through foreclosure. Also included in the Partnership's notes
payable is a $1,300,000 ground lease obligation. The ground lease is accounted
for as a loan and calls for payments equal to 12 percent interest on the
principal until April 1, 1998, when the lease terminates. The ground lease
provides an option to purchase the land at a purchase price of $1,300,000.
Future cash distributions will depend on the level of net cash generated from a
property sale. A cash distribution totalling approximately $1,301,000 was made
in 1995. No cash distributions were made during the nine months ended September
30, 1996. In addition, the Partnership's cash has been adversely affected by
the lawsuit brought by former promissory note holders of the Partnership
against, among others, the Partnership's general partner, MRC-80 (see discussion
of Kaufman et al. v. Northern Trust Bank of California, N.A. et al. contained in
the Partnership's annual reports on Form 10-K for year ended December 31, 1995
("Item 3. Legal Proceedings")). Pursuant to the terms of the Partnership
Agreement, the Partnership is required to indemnify the general partner and its
affiliates.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
b) Reports on Form 8-K: None filed during the quarter ended September
30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned thereunto, duly
authorized.
PREFERRED PROPERTIES FUND 80
By: MONTGOMERY REALTY COMPANY - 80,
Its General Partner
By: FOX REALTY INVESTORS,
Managing General Partner of the
General Partner
By: NPI EQUITY INVESTMENTS II, INC.,
Its Managing General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Principal Financial Officer and
Principal Accounting Officer
Date: November 8, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Preferred
Properties Fund 80 1996 Third Quarter 10-QSB and is qualified in its entirety by
reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000312903
<NAME> PREFERRED PROPERTIES FUND 80
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 267
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 5,345
<DEPRECIATION> (1,829)
<TOTAL-ASSETS> 3,990
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,369
0
0
<COMMON> 0
<OTHER-SE> (1,893)
<TOTAL-LIABILITY-AND-EQUITY> 3,990
<SALES> 0
<TOTAL-REVENUES> 649
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 884
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 410
<INCOME-PRETAX> (235)
<INCOME-TAX> 0
<INCOME-CONTINUING> (235)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (235)
<EPS-PRIMARY> (11.16)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
