UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 0-10222
QUALIFIED PROPERTIES 80, L.P.
(formerly Hutton/GSH Qualified Properties 80)
___________________________________________
Exact name of registrant as specified in its charter
Virginia 13-3046808
State or other jurisdiction of incorporation
or organization I.R.S. Employer
Identification No.
3 World Financial Center, 29th Floor
New York, New York ATTN: Andre Anderson 10285
Address of principal executive offices zip code
Registrant's telephone number, including area code: (212) 526-3237
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
Title of Class
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
Documents Incorporated by Reference:
Portions of Prospectus of Registrant dated October 10, 1980 (included in
Amendment No. 2 to Registration Statement, No. 2-67908, of Registrant filed
October 10, 1980) are incorporated by reference into Part III.
Portions of Parts I, II, III and IV are incorporated by reference to the
Partnership's Annual Report to Unitholders for the year ended December 31, 1995
filed as an exhibit under Item 14.
PART I
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Item 1. Business
(a) General Development of Business
Qualified Properties 80, L.P. (the "Registrant" or the "Partnership") (formerly
Hutton/GSH Qualified Properties 80) is a Virginia limited partnership formed on
January 13, 1981, of which QP80 Real Estate Services Inc. ("RE Services"),
formerly Hutton Real Estate Services, Inc. (See Item 10 "Certain Matters
Involving Affiliates of RE Services) and HS Advisors, Ltd. ("HS Advisors"), are
the general partners (the "General Partners"). The Partnership was originally
formed to acquire, operate and hold for investment the following five
commercial properties (the "Properties" or individually a "Property"): Diamond
Springs Warehouse Facility ("Diamond Springs"), a warehouse located in Virginia
Beach, Virginia; 959 Ridgeway Office Building, a two-story office building
located in Memphis, Tennessee; 889 Ridgelake Office Building, a three-story
office building located in Memphis, Tennessee; Swenson Business Park - Building
A, a one-story research and development facility located in San Jose, Cal
ifornia; and Stevens Creek Office Building, a class-A office property located
in San Jose, California. The Partnership does not plan to invest in any
additional property.
Diamond Springs was sold on March 1, 1995 for a gross sales price, including
non-refundable extension fees, of $3,195,000 resulting in net proceeds to the
Partnership of $2,978,654, excluding the extension fees in the amount of
$70,000. Additional information regarding the sale is incorporated by
reference to Note 9 "Sale of Diamond Springs Warehouse" of the Notes to the
Consolidated Financial Statements contained in the Partnership's Annual Report
to Unitholders for the year ended December 31, 1995 filed as an exhibit under
Item 14.
Additional information regarding the historical development of business is
incorporated by reference to Note 1 "Organization" and Note 4 "Real Estate
Investments" of the Notes to the Consolidated Financial Statements in the
Partnership's Annual Report to Unitholders for the year ended December 31, 1995
filed as an exhibit under Item 14.
(b) Financial Information About Industry Segment
The Partnership's sole business is the ownership and operation of the
Properties. All of the Partnership's revenues, operating profits or losses and
assets relate solely to such industry segment.
(c) Narrative Description of Business
The Partnership's principal investment objectives with respect to the
Properties (in no particular order of priority) are:
1) Capital appreciation;
2) Distributions of Net Cash From Operations attributable to rental income;
and
3) Preservation and protection of capital.
Distributions of Net Cash From Operations will be the Partnership's objective
during its operational phase, while the preservation and appreciation of
capital will be the Partnership's long-term objectives. The attainment of the
Partnership's investment objectives will depend on many factors, including
successful management of the operations of the Properties. Future economic
conditions in the United States as a whole and, in particular, in Memphis,
Tennessee and San Jose, California, where the remaining Properties are located,
will also be important factors, especially with regard to achievement of
capital appreciation.
From time to time the Partnership expects to sell its Properties taking into
consideration such factors as market conditions for these types of properties,
leasing commissions, property cash flow, if any, to be realized, and the
possible risks of continued ownership. No Property will be sold, financed or
refinanced by the Partnership without the agreement of both General Partners.
Proceeds from any future sale, financing or refinancing of the Properties will
not be reinvested but will be distributed to the Partners, so that the
Partnership will, in effect, be self-liquidating. As part payment for
Properties sold, the Partnership may receive purchase money obligations
collateralized by mortgages or deeds of trust. In such cases, the amount of
such obligations will not be included in Net Proceeds From Sale or Refinancing
(distributable to the Partners) until and to the extent the obligations are
realized in cash, sold or otherwise liquidated.
Additional information is incorporated by reference to Note 1 "Organization"
and Note 4 "Real Estate Investments" of the Notes to the Consolidated Financial
Statements contained in the Partnership's Annual Report to Unitholders for the
year ended December 31, 1995 filed as an exhibit under Item 14.
(d) Competition
Incorporated by reference to the section entitled "Property Profiles & Leasing
Update" in the Partnership's Annual Report to Unitholders for the year ended
December 31, 1995 filed as an exhibit under Item 14.
(e) Employees
The Partnership has no employees.
Item 2. Properties
Description of Properties and material leases incorporated by reference to the
section entitled "Property Profiles & Leasing Update" and Note 4 "Real Estate
Investments" of the Notes to the Consolidated Financial Statements in the
Partnership's Annual Report to Unitholders for the year ended December 31,
1995, filed as an exhibit under Item 14.
Item 3. Legal Proceedings
Neither the Partnership nor any of the Properties is subject to any material
pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the year ended December 31, 1995, no matter was
submitted to a vote of security holders through the solicitation of proxies or
otherwise.
PART II
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Item 5. Market for Registrant's Limited Partnership Units and Related
Unitholder Matters
(a) Market Information An established public market for Interests does not
exist and is not likely to develop.
(b) Holders As of December 31, 1995, the number of holders of Units was
1,981.
(c) Distributions Cash distributions paid to the Limited Partners for the
two years ended December 31, 1995 incorporated by reference to the
section entitled "Message to Investors" in the Partnership's Annual
Report to the Unitholders for the year ended December 31, 1995 filed as
an exhibit under Item 14.
Item 6. Selected Financial Data
Incorporated by reference to the Partnership's Annual Report to the Unitholders
for the year ended December 31, 1995, which is filed as an exhibit under Item
14.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Partnership had cash and cash equivalents totaling $1,062,602 at December
31, 1995, compared with $1,468,010 at December 31, 1994. The decrease
primarily reflects cash distributions, tenant and building improvement costs
and debt service payments in excess of cash flow from operations and proceeds
from the sale of Diamond Springs. The cash and cash equivalents balance
includes funds held as a working capital reserve to fund tenant improvements
and leasing commissions, in addition to cash generated from operations. In
addition, the Partnership had a restricted cash balance of $115,521 at December
31, 1995, which is made up of security deposits and funds reserved for property
tax payments.
Diamond Springs was sold on March 1, 1995 for a gross sales price, plus
non-refundable extension fees, totaling $3.195 million. Of the $3.195 million,
$70,000 relates to escrowed deposits applied to extension fees earned as a
result of the multiple extensions granted by the Partnership during sale
negotiations. During the fourth quarter of 1994, $60,000 of the extension fees
was recognized as other income and the remaining $10,000 was recognized as
other income in the first quarter of 1995. The gain on disposition of the
property totaled $1,870,743. Land, buildings and improvements, net of
accumulated depreciation, decreased to $15,237,261 at December 31, 1995, from
$16,940,559 at December 31, 1994 primarily as a result of the Diamond Springs
sale.
Prepaid expenses totaled $456,924 at December 31, 1995 compared with $334,120
at December 31, 1994. The increase is primarily attributable to the
capitalization of leasing commissions at Stevens Creek Office Building and 889
Ridgeway Office Building. Rent and other receivables decreased from $101,889
at December 31, 1994 to $31,458 at December 31, 1995 largely due to the receipt
of past due rents at Stevens Creek Office Building. Deferred rent receivable
totaled $423,953 at December 31, 1995, compared to $331,361 at December 31,
1994. The increase is primarily due to the straight-lining of a rental
contingency associated with a lease at 889 Ridgelake Office Building.
Accounts payable and accrued expenses totaled $182,346 at December 31, 1995
compared with $265,705 at December 31, 1994. The decrease is largely due to
lower real estate taxes accrued for the Memphis properties associated with
their favorable re-assessment in 1995.
For the year ended December 31, 1995, the Partnership declared cash
distributions to the Limited Partners totaling $77.50 per unit. Included in
this total is a special distribution of $54.00 per Unit paid on April 12, 1995
representing proceeds from the sale of Diamond Springs, and the fourth quarter
cash distribution of $6.50 per unit which was paid on February 9, 1996. In
addition, on March 29, 1996 the Partnership paid a special cash distribution in
the amount of $9.20 per Unit. The distribution was funded from the
Partnership's cash reserves. The timing and amount of future distributions
will depend on several factors, including the adequacy of rental income
generated by current leases and Partnership cash flow. Additional information
pertaining to cash distributions is incorporated by reference to the section
entitled "Message to Investors" in the Partnership's Annual Report to
Unitholders for the year ended December 31, 1995 filed as an exhibit under Item
14.
On March 15, 1996, based upon, among other things, the advice of Partnership
counsel, Skadden, Arps, Slate, Meagher & Flom, the General Partners adopted a
resolution that states, among other things, if a Change of Control (as defined
below) occurs, the General Partners may distribute the Partnership's cash
balances not required for its ordinary course day-to-day operations. "Change
of Control" means any purchase or offer to purchase more than 10% of the Units
that is not approved in advance by the General Partners. In determining the
amount of the distribution, the General Partners may take into account all
material factors. In addition, the Partnership will not be obligated to make
any distribution to any partner and no partner will be entitled to receive any
distribution until the General Partners have declared the distribution and
established a record date and distribution date for the distribution. The
Partnership filed a Form 8-K disclosing this resolution on March 21, 1996.
Results of Operations
1995 versus 1994
The Partnership's operations resulted in net income of $2,291,800 for the year
ended December 31, 1995, compared with a net income of $475,347 for the year
ended December 31, 1994. The increase is primarily attributable to the
$1,870,743 gain recognized on the sale of Diamond Springs.
Rental income totaled $3,488,485 for the year ended December 31, 1995, compared
with $3,736,211 a year earlier. The decrease is primarily due to the sale of
Diamond Springs, partially offset by higher rental income generated at 889
Ridgelake Office Building, Stevens Creek Office Building and Swenson Business
Park - Building A. Interest income increased to $75,844 for the year ended
December 31, 1995 compared to $52,955 for the year ended December 31, 1994,
reflecting higher interest rates earned on the Partnership's higher average
cash balances.
Property operating expenses totaled $1,651,942 for the year ended December 31,
1995, compared with $1,755,374 for the year ended December 31, 1994. The
decrease is primarily attributable to the acceleration of leasing commissions
in connection with the sale of Diamond Springs, lower repairs and maintenance
expenses at Stevens Creek Office Building and lower utility costs at Swenson
Business Park - Building A. Depreciation and amortization decreased to
$1,432,461 for the year ended December 31, 1995 from $1,536,864 for the year
ended December 31, 1994, largely reflecting the sale of Diamond Springs.
General and administrative expenses totaled $206,419 for the year ended
December 31, 1995 compared with $137,539 for the year ended December 31, 1994.
The increase is primarily attributable to the payment in 1995 of 1994
distributions to the coventurers of Stevens Creek Office Building in the amount
of $63,379.
As of December 31, 1995, lease levels at each of the Properties were as
follows: Swenson Business Park-Building A - 100%; 959 Ridgeway Office Building
- - 100%; Stevens Creek Office Building - 100% and 889 Ridgelake Office Building
- - 98%.
1994 Versus 1993
The Partnership's operations resulted in a net income of $475,347 for the year
ended December 31, 1994, compared with a net loss of $54,587 for the year ended
December 31, 1993. The change from net loss to net income is primarily
attributable to an increase in rental and other income and lower property
operating and general and administrative expenses.
Rental income and other income totaled $3,736,211 and $569,373, respectively,
for the year ended December 31, 1994, compared with $3,496,686 and $347,534,
respectively, a year earlier. Other income is comprised of tenant reimbursable
income and a $60,000 deposit earned in relation to the terms of the sales
contract of the Diamond Springs. The increases are attributable to higher
average occupancy at four of the Partnership's properties. Interest income
increased to $52,955 for the year ended December 31, 1994 compared to $50,098
for the year ended December 31, 1993, reflecting higher interest rates earned
on the Partnership's cash balances.
Property operating expenses totaled $1,755,374 for the year ended December 31,
1994, compared with $1,822,501 for 1993. The decrease is primarily
attributable to the timing of building improvements at the Partnership's
properties and a reduction in building services' costs.
Bad debt expense totaled $13,507 for the year ended December 31, 1994
reflecting the write-off of a tenant's outstanding rent receivable balance at
Diamond Springs. General and administrative expenses totaled $137,539 for the
year ended December 31, 1994 compared with $160,037 for the year ended December
31, 1993. The decrease is primarily attributable to lower printing and postage
costs.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders for
the year ended December 31, 1995, which is filed as an exhibit under Item 14.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
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Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Partnership are QP80 Real Estate Services Inc. ("RE
Services"), formerly Hutton Real Estate Services, Inc., an affiliate of Lehman
Brothers Inc. ("Lehman"), and HS Advisors, Ltd, an affiliate of Goodman Segar
Hogan, Inc. See the section captioned "Certain Matters Involving Affiliates of
RE Services" for a description of the sale of certain of Shearson Lehman
Brothers, Inc. ("Shearson") domestic retail and asset management businesses to
Smith Barney, Harris Upham & Co. Incorporated, which resulted in a change in
the Lehman General Partner's name. Brief descriptions of the business
experience of the directors and officers of the General Partners are provided
below. There is no family relationship among any of the persons currently
serving as directors or officers of the General Partners.
QP80 Real Estate Services Inc.
Certain officers and directors of the general partner are now serving (or in
the past have served) as officers or directors of entities which act as general
partners of a number of real estate limited partnerships which have sought
protection under the provisions of the Federal Bankruptcy Code. The
partnerships which have filed bankruptcy petitions own real estate which has
been adversely affected by the economic conditions in the markets in which that
real estate is located and, consequently, the partnerships sought the
protection of the bankruptcy laws to protect the partnerships' assets from loss
through foreclosure.
Name Office
Kenneth L. Zakin Director and President
William Caulfield Vice President and Chief Financial
Officer
Lawrence M. Ostow Vice President
Kenneth L. Zakin, 48, is a Senior Vice President of Lehman Brothers Inc. and
has held such title since November 1988. He is currently a senior manager in
Lehman Brothers' Diversified Asset Group and was formerly group head of the
Commercial Property Division of Shearson Lehman Brothers' Direct Investment
Management Group responsible for the management and restructuring of limited
partnerships owning commercial properties throughout the United States. From
January 1985 through November 1988, Mr. Zakin was a Vice President of Shearson
Lehman Brothers Inc. Mr. Zakin is a director of Lexington Corporate
Properties, Inc. He is a member of the Bar of the State of New York and
previously practiced as an attorney in New York City from 1973 to 1984
specializing in the financing, acquisition, disposition, and restructuring of
real estate transactions. Mr. Zakin is a member of the Real Estate Lender's
Association and is currently an associate member of the Urban Land Institute
and a member of the New York District Council Advisory Services Committee. He
received a Juris Doctor degree from St. John's University School of Law in
1973 and a B.A. degree from Syracuse University in 1969.
William Caulfield, 36, is a Vice President of Lehman Brothers Inc. and is
responsible for investment management of commercial real estate in the
Diversified Asset Group. Prior to the Shearson/Hutton merger in 1988, Mr.
Caulfield was a Senior Analyst with E.F. Hutton since October 1986 in Hutton's
Partnership Administration Group. Before joining Hutton, Mr. Caulfield was a
Business Systems Analyst at Eaton Corp. from 1985 to 1986. Prior to Eaton, he
was an Assistant Treasurer with National Westminster Bank USA. Mr. Caulfield
holds a B.S. degree in Finance from St. John's University and an M.B.A. from
Long Island University - C.W. Post Campus.
Lawrence M. Ostow, 28, is a Vice President of Lehman Brothers Inc. and is
responsible for the management of commercial real estate in the Diversified
Asset Group. Mr. Ostow joined Lehman Brothers in September 1992. Prior to
that, Mr. Ostow was a Senior Consultant with Arthur Andersen & Co. in the Real
Estate Services Group, beginning in July 1990. Mr. Ostow is a candidate for an
M.B.A. from the Stern School of Business in 1997 and earned a B.A. degree in
Economics from the University of Michigan in 1990.
HS Advisors II, Ltd.
HS Advisors II, Ltd. is a California limited partnership formed on May 20,
1980, the sole general partner of which is Hogan Stanton Investment, Inc. ("HS
Inc."), a wholly-owned subsidiary of Goodman Segar Hogan, Inc. The names and
ages of, as well as the positions held by, the directors and executive officers
of HS Inc. are as set forth below. There are no family relationships between
or among any officer and any other officer or director.
Name Office
Robert M. Stanton Chairman
Mark P. Mikuta President
John L. Cote Vice President and Treasurer
Julie R. Adie Vice President and Secretary
Robert M. Stanton, 57, is the retired Chairman and Chief Executive Officer of
Goodman Segar Hogan, Inc., a diversified commercial real estate company
headquartered in Norfolk, Virginia. Mr. Stanton joined Goodman Segar Hogan in
1966 and retired from the company in 1993. He is currently President of
Stanton Partners, Inc., a real estate investment and advisory firm. Mr.
Stanton serves as a Trustee of the Urban Land Institute (ULI) and is a past
Trustee and State Director of the International Council of Shopping Centers
(ICSC). He was chairman of the 1981 edition of The Dollars and Cents of
Shopping Centers, published by ULI. Mr. Stanton co-authored The Valuation of
Shopping Centers, published by the American Institute of Real Estate
Appraisers. Currently, he serves on the advisory board of Norfolk Southern
Corporation and is Chairman of the Greater Norfolk Corporation. He holds the
Certified Property Manager (CPM) designation conferred by the Institute of Real
Estate Management. Mr. Stanton also serves as Chairman of American Storage
Properties. A graduate of Old Dominion University with a B.A. Degree in
Banking and Finance, he served as Rector of the Board of Visitors.
Mark P. Mikuta, 41, is President of Goodman Segar Hogan, Inc. and is Controller
of Dominion Capital, Inc., a wholly-owned subsidiary of Dominion Resources.
Mr. Mikuta joined Dominion Resources in 1987. Prior to joining Dominion
Resources, he was an internal auditor with Virginia Commonwealth University in
Richmond, Virginia from 1980 - 1987 and an accountant with Coopers & Lybrand
from 1977 - 1980. Mr. Mikuta earned a bachelor of science degree in accounting
from the University of Richmond in 1977. He is a Certified Public Accountant
(CPA) and Certified Financial Planner (CFP) in the state of Virginia and a
member of the American Institute of Certified Public Accountants.
John L. Cote, 51, is a Vice President of Goodman Segar Hogan, Inc. and Senior
Vice President of Goodman Segar Hogan Hoffler, L.P. ("GSHH"). He heads that
company's Asset Management Division, where he is responsible for the portfolio
of the office, retail and industrial properties throughout the southeastern
United States. Prior to joining GSHH, Mr. Cote was Vice President of
Armada-Hoffler Holdings, Inc., a real estate developer and construction company
located in Chesapeake, Virginia. He was employed by Armada-Hoffler from 1980
through 1993. He holds a B.S. Degree in Political Science from the University
of Southern Mississippi.
Julie R. Adie, 41, is a Vice President of Goodman Segar Hogan, Inc. and Senior
Vice President of Goodman Segar Hogan Hoffler, L.P. ("GSHH"). She is
responsible for investment management of a commercial real estate portfolio for
the company's Asset Management Division. Prior to GSHH, Ms. Adie was an asset
manager with Aetna Real Estate Investors from 1986 to 1988. Ms. Adie practiced
as an attorney from 1978 through 1984 and is currently a member of the Virginia
Bar Association. She holds a B.A. Degree from Duke University, a Juris Doctor
from University of Virginia and an M.B.A. from Dartmouth College.
Certain Matters Involving Affiliates of QP80 Real Estate Services Inc.
On July 31, 1993, Shearson sold certain of its domestic retail brokerage and
asset management businesses to Smith Barney, Harris Upham & Co. Incorporated
("Smith Barney"). Subsequent to the sale, Shearson changed its name to Lehman
Brothers Inc. The transaction did not affect the ownership of the
Partnership's General Partner. However, the assets acquired by Smith Barney
included the name "Hutton." Consequently, Hutton Real Estate Services IV,
Inc., a General Partner, changed its name to QP80 Real Estate Services Inc.
Additionally, effective August 3, 1995, the Partnership changed its name to
Qualified Properties 80, L.P., to delete any reference to "Hutton."
On August 1, 1993, GSH transferred all of its leasing, management and sales
operations to Goodman Segar Hogan Hoffler, L.P., a Virginia limited partnership
("GSHH"). On that date, the leasing, management and sales operations of a
portfolio of properties owned by the principals of Armada/Hoffler ("HK") were
also obtained by GSHH. The General Partner of GSHH is Goodman Segar Hogan
Hoffler, Inc., a Virginia corporation ("GSHH Inc."), which has a one percent
interest in GSHH. The stockholders of GSHH Inc. are GSH with a sixty-two
percent stock interest and H.K. Associates, L.P., an affiliate of HK, with a
thirty-eight percent stock interest. The remaining ninety-nine percentage
interests in GSHH are limited partnership interests owned fifty percent by GSH
and forty-nine percent by HK. The transaction did not affect the ownership of
the general partners.
Item 11. Executive Compensation
Neither of the General Partners nor any of their directors and officers
received any compensation from the Partnership. See Item 13 "Certain
Relationships and Related Transactions" below with respect to a description of
certain transactions of the General Partners and their affiliates with the
Partnership.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Beneficial Owners
As of December 31, 1995, one party was known by the Partnership to be the
beneficial owner of more than five percent of the Units of the Partnership.
The owner, Liquidity Fund, owns a total of 3,746 units or 7.31% of the Units in
ten separate accounts. Liquidity Fund's address is 1900 Powell Street, Suite
730, Emeryville, California 94608-1817.
(b) Security Ownership of Management
The General Partners own 200 Units (134 by RE Services and 66 by HS Advisors),
as required by the terms of the offering described in the Prospectus of
Partnership, dated October 10, 1980 (the "Prospectus") contained in Amendment
No. 2 to Registration Statement No. 2-67908 of Partnership, filed October 10,
1980.
(c) Changes in Control
None.
Item 13. Certain Relationships and Related Transactions
(a) Transactions with Management and Others. Incorporated by reference to
Note 7 "Transactions with the General Partners and Affiliates" of the
Notes to the Consolidated Financial Statements of the Partnership's
Annual Report to Unitholders for the year ended December 31, 1995 filed
as an exhibit under Item 14.
(b) Certain Business Relationships. There have been no business
transactions between any of the Directors and the Partnership.
(c) Indebtedness of Management. No management person is indebted in any
amount to the Partnership.
PART IV
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Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements:
Report of Independent Auditors (1)
Consolidated Balance Sheets - At December 31, 1995 and 1994 (1)
Consolidated Statements of Partners' Capital (Deficit) -
For the years ended December 31, 1995, 1994 and 1993 (1)
Consolidated Statements of Operations - For the years ended
December 31, 1995, 1994 and 1993 (1)
Consolidated Statements of Cash Flows - For the years ended
December 31, 1995, 1994 and 1993 (1)
Notes to Consolidated Financial Statements (1)
(1) Incorporated by reference to the Partnership's Annual Report to
Unitholders for the year ended December 31, 1995, which is filed as an
exhibit under Item 14.
(a)(2) Financial Statement Schedules
Schedule III - Real Estate and Accumulated Depreciation F-1
No other schedules are presented because the information is not
applicable or is included in the financial statements
or notes thereto.
(a)(3) See Exhibit Index contained herein.
(b) Reports on Form 8-K filed in the fourth quarter of 1995:
None
(c) See Exhibit Index contained herein.
EXHIBIT INDEX
-----------------
Exhibit No.
(4)(A) Certificate and Agreement of Limited Partnership (included as, and
incorporated by reference to, Exhibit A to the Prospectus of
Registrant dated October 10, 1980 (the "Prospectus"), contained in
Amendment No. 2 to Registration Statement (the "1980 Registration
Statement"), No. 2-67908, of Registrant filed October 10, 1980).
(B) Subscription Agreement and Signature Page (included as, and
incorporated by reference to, Exhibit B to the Prospectus).
(C) First Amendment to Certificate and Agreement of Limited Partnership
of the Registrant, dated February 23, 1981 (included as, and
incorporated by reference to, Exhibit 4(C) to the Registrant's
Annual Report on Form 10-K filed March 31, 1982 (the "1981 Annual
Report")).
(D) Third Amendment to Certificate and Agreement of Limited Partnership
of the Registrant, dated January 28, 1982 (included as, and
incorporated by reference to, Exhibit 4(D) to the 1981 Annual
Report).
(10)(A) Purchase Agreement relating to Diamond Springs Warehouse Facility,
between Hutton Real Estate Services I, Inc. and CPI Associates VII,
and the exhibits thereto (included as, and incorporated by reference
to, Exhibit 12(C) to the 1980 Registration Statement).
(B) Permanent loan commitment, as amended, relating to Stevens Creek
Office Building, between Hutton Real Estate Services I, Inc. and CPI
Associates VII, and the exhibits thereto (included as, and
incorporated by reference to Exhibit 10 to the Registrant's Current
Report (the "1982 Current Report") on Form 8-K filed May 17, 1982,
and incorporated herein by reference).
(C) Purchase Agreement relating to UMIC Office Building, between UMIC
Securities Corporation and 959 Ridgeway Associates, Ltd., and the
exhibits thereto (included as, and incorporated by reference to,
Exhibit 10(C) to the 1982 Annual Report).
(D) Purchase Agreement relating to the Ridgeway Office Building, between
the Registrant and 889 Ridge Lake Boulevard Partnership, First
Amendment to Purchase Agreement, and the exhibits thereto (included
as, and incorporated by reference to, Exhibit 10 to the 1982 Current
Report).
(E) Funding Commitment relating to the Swenson Business Park - Building
A, between the Registrant and Carl N. Swenson Company, Inc., and the
exhibits thereto (included as, and incorporated by reference to,
Exhibit 10(E) to the Annual Report).
(13) Registrant's Annual Report to Unitholders for the year ended
December 31, 1995.
(23) Consent of Independent Auditors
(27) Financial Data Schedule
(28) Portions of Prospectus of Registrant dated October 10, 1980
(included as, and incorporated by reference to, Exhibit (28) to the
Registrant's Annual Report on Form 10-K filed March 30, 1988.) <PAGE>
SIGNATURES
------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: April 1, 1996
QUALIFIED PROPERTIES 80, L.P.
BY: HS Advisors, Ltd.
General Partner
BY: Hogan Stanton, Inc.
General Partner
BY: /s/Robert M. Stanton
Name: Robert M. Stanton
Title: Chairman of the Board
BY: QP80 Real Estate Services,
Inc.
General Partner
BY: /s/Kenneth L. Zakin
Name: Kenneth L. Zakin
Title: Director and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capabilities and on the dates indicated.
QP80 REAL ESTATE SERVICES INC.
A General Partner
Date: April 1, 1996
BY: /s/Kenneth L. Zakin
Kenneth L. Zakin
Director and President
Date: April 1, 1996
BY: /s/William Caulfield
William Caulfield
Vice President and
Chief Financial Officer
Date: April 1, 1996
BY: /s/Lawrence M. Ostow
Lawrence M. Ostow
Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant in the capabilities and on the dates indicated.
HS ADVISORS, LTD.
A General Partner
Date: April 1, 1996
BY: /s/Robert M. Stanton
Robert M. Stanton
Chairman of the Board of
Hogan Stanton, Inc.,
as general partner of
HS Advisors, Ltd.
Date: April 1, 1996
BY: /s/Mark P. Mikuta
Mark P. Mikuta
President of Hogan
Stanton, Inc., as
general partner of
HS Advisors, Ltd.
Date: April 1, 1996
BY: /s/John L. Cote
John L. Cote
Vice President and
Treasurer of Hogan
Stanton, Inc., as
general partner of HS
Advisors, Ltd.
Date: April 1, 1996
BY: /s/Julie R. Adie
Julie R. Adie
Vice President and
Secretary of Hogan
Stanton, Inc., as general
partner of HS Advisors,
Ltd.
Exhibit (13)
---------------
Qualified Properties 80, L.P.
1995 Annual Report to Unitholders
-------------------------------------
Qualified Properties 80, L.P., formerly Hutton/GSH Qualified Properties 80 (the
"Partnership"), is a limited partnership formed in 1981 to acquire, operate and
hold for investment commercial real estate. The Partnership's original
investments were comprised of five commercial Properties. Diamond Springs
Warehouse, located in Virginia Beach, Virginia was sold on March 1, 1995. The
Partnership's remaining Properties are a commercial office building and a
combined office/research and development facility located in San Jose,
California, and two commercial office buildings located in Memphis, Tennessee.
Provided below is a comparison of lease levels at the Properties as of December
31, 1995 and 1994.
Percentage Leased
Property Location 1995 1994
Swenson Business Park - Building A San Jose, CA 100% 100%
Stevens Creek Office Building San Jose, CA 100% 100%
959 Ridgeway Office Building Memphis, TN 100% 100%
889 Ridgelake Office Building Memphis, TN 98% 92%
Administrative Inquiries Performance Inquiries/Form 10-Ks
Address Changes/Transfers First Data Investor Services Group
Service Data Corporation P.O. Box 1527
2424 South 130th Circle Boston, Massachusetts 02104-1527
Omaha, Nebraska 68144-2596 Attn: Financial Communications
800-223-3464 (select option 1) 800-223-3464 (select option 2)
MESSAGE TO INVESTORS
------------------------
The General Partners are pleased to present the 1995 Annual Report for
Qualified Properties 80, L.P. As previously reported, the sale of Diamond
Springs Warehouse closed on March 1, 1995. Operations at the Partnership's
four remaining Properties were strong in 1995 as the San Jose, California and
Memphis, Tennessee markets, where the Properties are located, substantially
improved. However, the Partnership faces challenges at the 959 Ridgeway
Office Building as all four leases, accounting for 100% of the Property's
leasable space, are scheduled to expire in 1996. As this is a small property,
we do not anticipate that these expirations will significantly affect the
Partnership. Included in this report is a discussion of operations and leasing
progress at the Properties and audited financial statements for the year ended
December 31, 1995.
Cash Distributions
- ------------------
For the year ended December 31, 1995, the Partnership paid cash distributions
to the Limited Partners totaling $77.50 per Unit. Included in this total was a
cash distribution in the amount of $54 per Unit, representing net proceeds from
the sale of Diamond Springs Warehouse, paid on April 12, 1995 and the
Partnership's fourth quarter cash distribution of $6.50 per Unit which was paid
on February 9, 1996. During the third quarter of 1995, the Partnership
increased its quarterly cash distribution from $5.25 per Unit to $6.50 per
Unit. In addition, on March 29, 1996 the Partnership paid a special cash
distribution in the amount of $9.20 per Unit. This distribution was made from
the Partnership's cash reserves.
Since inception, including the special distribution, the Partnership has paid
cash distributions totaling $471.80 per original $500 Unit, including $114 per
Unit in return of capital payments which have reduced the Unit size from $500
to $386. The timing and amount of future cash distributions will depend on
several factors, including the adequacy of cash flow and the Partnership's cash
reserve requirements. Information regarding the payment of cash distributions
for the last two years is provided below.
Cash Distributions Per Limited Partnership Unit
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
1994 $7.00 $7.00 $7.00 $7.00 $28.00
1995 $5.25 $59.25* $6.50 $6.50 $77.50
* Includes $54 in return of capital resulting from the sale of Diamond Springs
Warehouse.
Market Overview
- ---------------
Although still lagging behind other sectors of real estate, the commercial
office market showed signs of improvement during 1995, particularly in the
suburban office sector. The national vacancy rate declined to 11.5% as of the
fourth quarter of 1995, down from approximately 16% as of year-end 1994. In
general, the gap between supply and demand is gradually narrowing as the
existing supply of office space is absorbed. However, demand for office space
varies widely from region to region as corporate layoffs persist and companies
continue to be selective in their choice of location. Moreover, despite the
resurgence of investment in other segments of the real estate industry, lenders
continue to be selective in providing capital for commercial office properties.
With respect to the Partnership's properties, the San Jose market strengthened
substantially during late 1995, resulting from the recent business expansion in
the computer technology industry. In the Memphis market, continued economic
improvement during the year led to fewer vacancies and higher rental rates in
the commercial office market.
Summary
- -------
During the remainder of 1996, the General Partners will primarily focus on
re-leasing the available space at 959 Ridgeway Office Building, where one
tenant vacated the premises upon expiration of its lease on January 31, 1996
and three additional leases representing all of the remaining space at the
Property are scheduled to expire by year-end. The General Partners will
attempt to renew these leases in addition to the two expiring leases at Stevens
Creek Office Building representing 11% of the property's leasable space. While
the Memphis and San Jose markets have improved in 1995, there can be no
assurance that the expiring leases can be renewed. Additionally, the General
Partners intend to closely monitor generally improving market conditions to
determine the future strategy for marketing the properties for sale. We will
update you with respect to any such efforts in future investor reports.
Very truly yours,
QP80 Real Estate Services Inc. Hogan Stanton Investment, Inc.
General Partner General Partner of HS Advisors, Ltd.
/s/Kenneth L. Zakin /s/Robert M. Stanton
Kenneth L. Zakin Robert M. Stanton
President Chairman
April 1, 1996
PROPERTY PROFILES & LEASING UPDATE
--------------------------------------
SWENSON BUSINESS PARK-BUILDING A San Jose, California
Swenson Building A is a 26,907 square foot research and development facility
situated within a 65-acre business park which is located just north of central
San Jose in California. The property provides an attractive location for many
high technology companies due to its easy access to the San Jose Airport and
Interstate 880.
Leasing Update - The property remained 100% leased to two high-technology
tenants as of December 31, 1995. One tenant occupies 13,829 square feet or
approximately 52% of the property's leasable space pursuant to a lease
scheduled to expire in January 2003. The other tenant occupies the remaining
13,078 square feet or 48% of the property's leasable area pursuant to a lease
scheduled to expire in February 1998. Neither of the leases generated rental
revenues of 10% or more of the Partnership's 1995 consolidated rental income.
STEVENS CREEK OFFICE BUILDING San Jose, California
Located between Interstate 280, Lawrence Expressway and Stevens Creek Boulevard
in the Cupertino submarket of San Jose, Stevens Creek Office Building is a
84,916 square foot, class-A office building commonly referred to as the
"Triangle Building" due to its unique three-sided design. This location
provides the facility with high visibility and easy access to downtown San
Jose.
Leasing Update - During the year, the General Partners executed a new four-year
lease with a tenant for 3,268 square feet which had previously been vacated by
another tenant which terminated its lease in September 1995. Although one
tenant, occupying 3,100 square feet, vacated its space upon expiration of its
lease on February 28, 1995, the General Partners executed a lease expansion for
the entire space with an existing tenant which now leases 9,399 or 11% of the
property's leasable space pursuant to leases scheduled to expire June 30, 1998.
As a result, the property remained 100% leased at year-end 1995. One lease,
comprising 39,910 square feet or approximately 47% of the property, generated
rental income of $677,328 or approximately 19% of the Partnership's
consolidated rental revenues. Three leases representing a total of 11,452
square feet or 14% of the property's leasable space are scheduled to expire in
1996, however, one tenant occupying 2,430 square feet has renewed its lease
through February, 2000. The General Partners will approach the other two
tenants regarding renewals when appropriate.
San Jose Market Update - Market conditions in the Silicon Valley strengthened
throughout the year. According to Emerging Trends in Real Estate, the
turn-around in the research and development sector can be greatly attributed to
the wave of high-technology and biotechnology industry expansions, in addition
to an increasing number of start-up companies. Vacancy rates for the research
and development sector in the Silicon Valley market declined at year-end 1995
to 4.9% from 10.8% a year earlier. The San Jose market, located within the
Silicon Valley, showed significant improvement as economic conditions in the
area strengthened. As a result, the vacancy rate in San Jose fell to 6.6% as
of the fourth quarter of 1995, from 8.9% for the corresponding period in 1994.
The area started experiencing increases in rental rates during the latter half
of 1995 which are expected to continue to increase during 1996.
The Stevens Creek property is located within the Cupertino office submarket.
The submarket, which contains 336,509 square feet of office space, showed
marked improvement in 1995 as the vacancy rate declined to 2.4% as of year-end
1995, compared to 11.6% a year earlier. The substantially lower vacancy rate
in 1995 reflects a continued influx of technology-related companies, in
particular computer software companies, in 1995. This trend is expected to
continue during 1996 and, consequently, the Cupertino office market is expected
to remain strong.
959 RIDGEWAY OFFICE BUILDING Memphis, Tennessee
The 959 Ridgeway Office Building is a two-story brick and glass office building
containing 29,170 square feet of leasable area, and is situated in a
fourteen-building office park. The property is located in Ridgeway Center in
the East Memphis submarket of Memphis.
Leasing Update - The property was 100% leased to four tenants as of December
31, 1995, unchanged from a year earlier. However, in January 1996 a tenant
occupying 9,344 square feet or 32% of the property's space vacated its space
upon expiration of its lease. Another lease with a tenant occupying 3,143
square feet or approximately 9% of the property's space expired on March 31,
1996. The tenant is currently leasing on a month-to-month basis.
Additionally, the property's two remaining leases are scheduled to expire in
December 1996. The General Partners have been in contact with these tenants
regarding lease renewals, however, it is too early to ascertain whether these
tenants will renew. The General Partners are currently marketing the
property's vacant space. While the Memphis market has been improving, it is
uncertain whether the space will be leased in the near term. No lease at the
property generated in excess of 10% of the Partnership's 1995 consolidated
rental income.
889 RIDGELAKE OFFICE BUILDING Memphis, Tennessee
Located in Ridgeway Center in close proximity to the 959 Ridgeway Office
Building, the 889 Ridgelake Office Building is a three-story office building
which contains 94,823 square feet of leasable area.
Leasing Update - During 1995, the General Partners executed three new leases
totaling 31,464 square feet or approximately 33% of the property's leasable
space. Additionally, two existing tenants expanded their spaces for a total of
1,100 square feet. This activity was partially offset by the vacancy of two
tenants, leasing a total of 17,900 square feet, which prematurely terminated
their respective leases. Two other tenants leasing a total of 4,011 square
feet also vacated the premises upon expiration of their respective leases. As
a result, the property was 98% leased at December 31, 1995 compared with 92% in
1994. No leases are scheduled to expire in 1996.
One tenant, which occupies 50,529 square feet or approximately 53% of the
property's leasable space pursuant to a lease originally scheduled to expire in
December 1998, generated rental income in 1995 totaling $711,374 or
approximately 20% of the Partnership's consolidated rental revenue. During
1995, the tenant extended its lease to December 31, 2000.
Memphis Market Update - The East Memphis submarket contains approximately 8.8
million square feet of space and is the largest submarket in metropolitan
Memphis accounting for 45.2% of the total office inventory. In the past year,
the East Memphis office submarket improved, despite the addition of a new
office building in 1995, as demand for office space increased. As of year-end
1995, East Memphis had a vacancy rate for office space of 6.3%, compared with
7.9% at year-end 1994. In addition, rental rates increased by approximately 3
percent in 1995 and are expected to increase further in 1996.
FINANCIAL HIGHLIGHTS
------------------------
For the years ended December 31,
(dollars in thousands, except per Unit data)
1995 1994 1993 1992 1991
Total income $ 4,145 $ 4,359 $ 3,894 $ 3,419 $ 2,893
Net income (loss) 2,292 475 (55) (122) (176)
Net income (loss) per Unit 44.08 8.99 (1.04) (2.33) (3.37)
Net cash from operations 1,417 1,916 1,485 990 968
Total assets 17,328 19,267 20,303 21,336 22,549
Mortgage note payable 4,098 4,170 4,235 4,293 4,345
Cash distributions per
Limited Partnership Unit 77.50* 28.00 22.00 16.00 16.00
* Includes $54 in return of capital resulting from the sale of Diamond Springs
Warehouse.
The above selected financial data should be read in conjunction with the
financial statements and related notes included in this report.
- - The decrease in total income and net cash from operations is largely
attributable to the Partnership's lower rental income resulting from the
sale of Diamond Springs Warehouse, partially offset by higher rental income
generated at 889 Ridgelake Office Buildings, Stevens Creek Office Building
and Swenson Business Park - Building A.
- - The increase in net income is primarily attributable to the $1,870,743 gain
recognized on the sale of Diamond Springs Warehouse.
Consolidated Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
Land $ 3,642,847 $ 3,903,847
Buildings and improvements 21,780,615 23,351,200
25,423,462 27,255,047
Less-accumulated depreciation (10,186,201) (10,314,488)
15,237,261 16,940,559
Cash and cash equivalents 1,062,602 1,468,010
Restricted cash 115,521 90,890
1,178,123 1,558,900
Prepaid expenses, net of accumulated
amortization of $409,161 in 1995 and
$298,948 in 1994 456,924 334,120
Rent and other receivables 31,458 101,889
Deferred rent receivable 423,953 331,361
Total Assets $ 17,327,719 $ 19,266,829
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 182,346 $ 265,705
Due to affiliates 10,938 8,078
Security deposits payable 68,288 96,480
Distribution payable 339,817 365,957
Mortgage note payable 4,098,403 4,169,996
Total Liabilities 4,699,792 4,906,216
Minority interest 25,519 26,853
Partners' Capital (Deficit):
General Partners (123,029) (103,830)
Limited Partners 12,725,437 14,437,590
Total Partners' Capital 12,602,408 14,333,760
Total Liabilities and Partners' Capital $ 17,327,719 $ 19,266,829
Consolidated Statements of Partners' Capital (Deficit)
For the years ended December 31, 1995, 1994 and 1993
General Limited Total
Partners Partners Partners
Balance at December 31, 1992 $ (65,334) $ 16,591,705 $ 16,526,371
Net loss (1,092) (53,495) (54,587)
Distributions (23,002) (1,126,676) (1,149,678)
Balance at December 31, 1993 (89,428) 15,411,534 15,322,106
Net income 14,874 460,473 475,347
Distributions (29,276) (1,434,417) (1,463,693)
Balance at December 31, 1994 (103,830) 14,437,590 14,333,760
Net income 33,317 2,258,483 2,291,800
Distributions (52,516) (3,970,636) (4,023,152)
Balance at December 31, 1995 $ (123,029) $ 12,725,437 $ 12,602,408
Consolidated Statements of Operations
For the years ended December 31, 1995, 1994 and 1993
Income 1995 1994 1993
Rent $ 3,488,485 $ 3,736,211 $ 3,496,686
Other 580,687 569,373 347,534
Interest 75,844 52,955 50,098
Total Income 4,145,016 4,358,539 3,894,318
Expenses
Property operating 1,651,942 1,755,374 1,822,501
Depreciation and amortization 1,432,461 1,536,864 1,539,143
Interest 434,471 441,580 447,983
Bad debt - 13,507 -
General and administrative 206,419 137,539 160,037
Total Expenses 3,725,293 3,884,864 3,969,664
Income (loss) before minority
interest and gain on sale of
real estate 419,723 473,675 (75,346)
Minority interest 1,334 1,672 20,759
Income (loss) before gain on
sale of real estate 421,057 475,347 (54,587)
Gain on sale of real estate 1,870,743 - -
Net Income (Loss) $ 2,291,800 $ 475,347 $ (54,587)
Net Income (Loss) Allocated:
To the General Partners $ 33,317 $ 14,874 $ (1,092)
To the Limited Partners 2,258,483 460,473 (53,495)
$ 2,291,800 $ 475,347 $ (54,587)
Per limited partnership unit
(51,234 outstanding) $44.08 $8.99 $(1.04)
Consolidated Statements of Cash Flows
For the years ended December 31, 1995, 1994 and 1993
Cash Flows from Operating Activities: 1995 1994 1993
Net income (loss) $ 2,291,800 $ 475,347 $ (54,587)
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation and amortization 1,432,461 1,536,864 1,539,143
Gain on sale of real estate (1,870,743) - -
Minority interest in loss of
consolidated venture (1,334) (1,672) (20,759)
Increase (decrease) in cash
arising from changes in operating
assets and liabilities:
Cash restricted (24,631) (37,728) (15,719)
Prepaid expenses (279,685) (72,498) (230,252)
Rent and other receivables 70,431 68 (21,988)
Deferred rent receivable (92,592) (3,451) 196,958
Accounts payable and accrued
expenses (83,359) 23,847 79,570
Due to affiliates 2,860 (2,710) 3,219
Security deposits payable (28,192) (2,474) 9,755
Net cash provided by operating activities 1,417,016 1,915,593 1,485,340
Cash Flows from Investing Activities:
Proceeds from sale of real estate 2,978,654 - -
Additions to real estate (680,193) (607,547) (547,138)
Net cash provided by (used for) investing
activities 2,298,461 (607,547) (547,138)
Cash Flows from Financing Activities:
Cash distributions (4,049,292) (1,463,693) (992,839)
Principal payments on mortgage note
payable (71,593) (64,508) (58,105)
Net cash used for financing activities (4,120,885) (1,528,201) (1,050,944)
Net decrease in cash and cash equivalents (405,408) (220,155) (112,742)
Cash and cash equivalents at beginning of
year 1,468,010 1,688,165 1,800,907
Cash and cash equivalents at end of year $ 1,062,602 $ 1,468,010 $ 1,688,165
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the year for interest $ 434,471 $ 441,580 $ 447,983
Supplemental Disclosure of Noncash
Investing Activities:
Write off of fully depreciated tenant
improvements $ 310,659 $ 647,260 $ -
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
1. Organization
Qualified Properties 80, L.P. (the "Partnership") was organized as a Limited
Partnership under the laws of the Commonwealth of Virginia pursuant to a
Certificate and Agreement of Limited Partnership dated and filed January 13,
1981 (the "Partnership Agreement"). The Partnership was formed for the purpose
of investing in and operating certain types of commercial real estate. The
General Partners of the Partnership are QP80 Real Estate Services Inc. ("QP80
Services"), which is an affiliate of Lehman Brothers Inc. (see below) and HS
Advisors, Ltd. ("HS Advisors"), which is an affiliate of Goodman Segar Hogan,
Inc. ("GSH"). The Partnership will continue until December 31, 2010, unless
sooner terminated in accordance with the terms of the Partnership Agreement.
On July 31, 1993, Shearson Lehman Brothers Inc. sold certain of its domestic
retail brokerage and asset management businesses to Smith Barney, Harris Upham
& Co. Incorporated ("Smith Barney"). Subsequent to the sale, Shearson Lehman
Brothers Inc. changed its name to Lehman Brothers Inc. The transaction did not
affect the ownership of the General Partners. However, the assets acquired by
Smith Barney included the name "Hutton." Consequently, effective October 22,
1993, Hutton Real Estate Services, Inc., a general partner, changed its name to
QP80 Real Estate Services Inc., and effective August 3, 1995, Hutton/GSH
Qualified Properties 80 changed its name to Qualified Properties 80, L.P. to
delete any reference to "Hutton."
On the 1st day of August, 1993, GSH transferred all of its leasing, management
and sales operations to Goodman Segar Hogan Hoffler, L.P., a Virginia limited
partnership ("GSHH"). On that date, the leasing, management and sales
operations of a portfolio of properties owned by the principals of
Armada/Hoffler ("HK") were also obtained by GSHH. The General Partner of GSHH
is Goodman Segar Hogan Hoffler, Inc., a Virginia corporation ("GSHH Inc."),
which has a one percent interest in GSHH. The stockholders of GSHH Inc. are
GSH with a sixty-two percent stock interest and H.K. Associates, L.P., an
affiliate of HK, with a thirty-eight percent stock interest. The remaining
ninety-nine percent interests in GSHH are limited partnership interests owned
fifty percent by GSH and forty-nine percent by HK. The transaction did not
affect the ownership of the General Partners.
On March 15, 1996, based upon, among other things, the advice of Partnership
counsel, Skadden, Arps, Slate, Meagher & Flom, the General Partners adopted a
resolution that states, among other things, if a Change of Control (as defined
below) occurs, the General Partners may distribute the Partnership's cash
balances not required for its ordinary course day-to-day operations. "Change
of Control" means any purchase or offer to purchase more than 10% of the Units
that is not approved in advance by the General Partners. In determining the
amount of the distribution, the General Partners may take into account all
material factors. In addition, the Partnership will not be obligated to make
any distribution to any partner and no partner will be entitled to receive any
distribution until the General Partners have declared the distribution and
established a record date and distribution date for the distribution. The
Partnership filed a Form 8-K disclosing this resolution on March 21, 1996.
2. Significant Accounting Policies
Consolidation - The consolidated financial statements include the accounts of
the Partnership and its ventures, 889 Ridge Lake Boulevard Partnership, Alpha
Building Associates Joint Venture ("Swenson Business Park") and 5300 Stevens
Creek Boulevard Joint Venture. Intercompany accounts and transactions between
the Partnership and the ventures are eliminated in consolidation.
Real Estate Investments - Real estate investments, which consist of commercial
buildings, are recorded at cost less accumulated depreciation. Cost includes
the initial purchase price of the property plus closing costs, acquisition and
legal fees, other miscellaneous acquisition costs and capital improvements.
Depreciation is computed using the straight-line method based upon the
estimated useful lives of the respective depreciable properties with the
exception of tenant improvements which are depreciated over the terms of the
respective leases.
Leases are accounted for as operating leases. Leasing commissions are
amortized over the term of the respective leases and are included in prepaid
expenses, net of accumulated amortization. Deferred rent receivable consists of
rental income which is recognized on a straight-line basis over the term of the
respective leases but will not be received until later periods as a result of
rental concessions.
Accounting for Impairment - In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("FAS 121"), which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. FAS 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The Partnership
adopted FAS 121 during the fourth fiscal quarter of 1995. Based on current
circumstances, the adoption of FAS 121 had no impact on the financial
statements.
Cash Equivalents - Cash equivalents consist of short-term highly liquid
investments which have maturities of three months or less from the date of
purchase. The carrying value approximates fair value because of the short
maturity of these instruments.
Restricted Cash - Restricted cash primarily represents cash held in connection
with tenant security deposits.
Income Taxes - No provision for income taxes has been made in the financial
statements of the Partnership since such taxes are the responsibility of the
individual partners rather than of the Partnership.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments - Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments"
("FAS 107"), requires that the Partnership disclose the estimated fair values
of its financial instruments. Fair values generally represent estimates of
amounts at which a financial instrument could be exchanged between willing
parties in a current transaction other than in forced liquidation.
Fair value estimates are subjective and are dependent on a number of
significant assumptions based on management's judgement regarding future
expected loss experience, current economic conditions, risk characteristics of
various financial instruments, and other factors. In addition, FAS 107 allows
a wide range of valuation techniques, therefore, comparisons between entities,
however similar, may be difficult.
3. Partnership Agreement
The Partnership Agreement provides that the net cash from operations, as
defined, for each fiscal year will be distributed on a quarterly basis 98% to
the Limited Partners and 2% to the General Partners until each Limited Partner
has received an 8% annual return. Remaining net cash from operations, if any,
will be distributed to the General Partners until they have received 10% of the
aggregate net cash from operations distributed to all partners. Thereafter,
any net cash from operations will be distributed 90% to the Limited Partners
and 10% to the General Partners. Net proceeds from sales or refinancings shall
be distributed 99% to the Limited Partners and 1% to the General Partners until
each Limited Partner has received an amount equal to his adjusted capital
investment, as defined, and a 9% cumulative annual return thereon, reduced by
any net cash from operations actually distributed to such Limited Partner. The
balance of net proceeds will be distributed 85% to the Limited Pa rtners and
15% to the General Partners.
Losses for any fiscal year shall be allocated 98% to the Limited Partners and
2% to the General Partners. Income for any fiscal year and all gain from sales
will be allocated to the General Partners in an amount equal to the net cash
from operations distributed or distributable to the General Partners for such
year, less 1% of the amount of net cash from operations that exceeds taxable
income for such year, if any, and the balance shall be allocated to the Limited
Partners, in accordance with their unit ownership. If net cash from operations
is not distributed or distributable to the General Partners, any income of the
Partnership for such year will be allocated 99% to the Limited Partners and 1%
to the General Partners.
Upon the dissolution of the Partnership, the General Partners shall contribute
to the capital of the Partnership, an amount not to exceed 1% of the total
capital contributions made by all the Partners less any prior capital
contributions made by the General Partners, in order to restore the negative
capital accounts of the General Partners. In no event shall the General
Partners be obligated to contribute an amount in excess of any negative balance
in their respective capital accounts.
4. Real Estate Investments
Since inception, the Partnership has acquired, directly or indirectly, the
following four commercial office buildings and an office/warehouse facility.
The purchase price amounts exclude acquisition fees and other closing costs.
Square Date Purchase
Property Name Feet Location Acquired Ownership Price
Diamond Springs 99,260 Virginia Beach, 1/27/81 Fee $2,060,250
Office/Warehouse
Facility Virginia Simple
959 Ridgeway 29,170 Memphis, 3/11/81 Fee $1,707,125
Office Building Tennessee Simple
889 Ridgelake 94,823 Memphis, 2/01/82 General $8,062,500
Office Building Tennessee Partnership
Swenson Business 26,907 San Jose, 4/06/84 Joint $2,250,000
Park - Building A California Venture
Stevens Creek 84,916 San Jose, 6/01/87 Joint $8,500,000
Office Building California Venture
The Partnership agreement for 889 Ridgelake Boulevard Partnership provides that
all losses, income, net cash from operations and net proceeds from a sale or
refinancing will be allocated 95% to the Partnership and 5% to the coventurer.
The Joint Venture agreement for Swenson Business Park substantially provides
that:
i. Net cash from operations will be distributed 100% to the
Partnership until it has received an annual, noncumulative 12%
return on its adjusted capital value, as defined. Any
remaining net cash from operations will be distributed 50% to
the Partnership and 50% to the coventurer.
ii. Net proceeds from a sale or refinancing of the properties will
be distributed 100% to the Partnership until it has received
120% of its capital value, as defined. Any remaining net
proceeds will be distributed 60% to the Partnership and 40% to
the coventurer.
iii. Losses will be allocated 100% to the Partnership. Income will
be allocated in substantially the same manner as net cash from
operations.
The Joint Venture agreement for 5300 Stevens Creek Boulevard, which owns the
Stevens Creek Office Building, substantially provides that:
i. Net cash from operations will first be distributed 100% to the
Partnership until it has received an annual, noncumulative 10
3/8% return on its capital contribution, as defined. Secondly,
net cash from operations will be distributed to the coventurers
until they have received an annual amount of $207,500. Any
remaining net cash from operations will be distributed 50% to
the Partnership and 50% to the coventurers.
ii. Net proceeds from a sale or refinancing will be distributed
100% to the Partnership until it has received 120.8% of its
capital contribution and a cumulative return of 10 3/8% on its
capital contribution as reduced by any prior distributions. The
next $2,000,000 of net proceeds will be distributed to the
coventurers. Any remaining net proceeds will be distributed
50% to the Partnership and 50% to the coventurers.
iii. Depreciation will be allocated 40% to the Partnership and 60%
to the coventurers. Income will be allocated in substantially
the same manner as net cash from operations. Losses will be
allocated 50% to the Partnership and 50% to the coventurers.
5. Mortgage Note Payable The mortgage note payable is collateralized by a first
deed of trust on the Ridgelake Office Building and is payable in monthly
installments of $42,174 including interest at 10-1/2% through 2014. Annual
maturities of the mortgage note principal over the next five years are:
1996 $ 79,510
1997 88,272
1998 98,000
1999 108,800
2000 120,790
Thereafter 3,603,031
$4,098,403
Based on the borrowing rates currently available to the Partnership for
mortgage loans with similar terms and average maturities, the fair value of
long-term debt approximates carrying value.
6. Rental Income Under Operating Leases
Future minimum rental income to be received on noncancellable operating leases,
as of December 31, 1995 is as follows:
1996 $ 3,362,866
1997 2,634,628
1998 2,164,817
1999 1,947,558
2000 1,890,096
Thereafter 855,125
$ 12,855,090
Generally, leases are for periods of 3 to 6 years and allow for increases in
certain property operating expenses to be passed on to the tenants.
Two tenants at two of the Partnership's properties generated rental revenue in
excess of 10% of the Partnership's 1995 and 1994 consolidated rental revenues.
The rental income derived from these leases in 1995 was $711,374 and $677,328,
respectively, or 20% and 19% of the Partnership's consolidated rental income.
In 1994, rental income from these leases was $702,202 and $669,500,
respectively, or 19% and 18% of the Partnership's 1994 consolidated rental
income. The leases are scheduled to expire on December 31, 2000 and July 31,
2001, respectively. As of December 31, 1995, both tenants are current in their
rent payments.
7. Transactions with the General Partners and Affiliates
The following is a summary of reimbursable amounts earned by the General
Partners and recorded in property operating and general and administrative
expense during the years ended December 31, 1995, 1994 and 1993:
1995 1994 1993
Reimbursement of out-of-pocket expenses and
administrative salaries $ 16,459 $ 12,826 $ 17,925
Property management and leasing fees 34,875 36,539 39,002
$ 51,334 $ 49,365 $ 56,927
At December 31, 1995 and 1994, $10,014 and $8,078 were payable to the General
Partners, respectively.
8. Reconciliation of Net Income (Loss) to Taxable Income
Taxable income exceeded the net income (loss) reported in the financial
statements by $970,710, $190,076 and $534,934 for the years ended December 31,
1995, 1994 and 1993, respectively. These variances are due to approximately
$550,000 of rental concessions granted in 1988 and differences in the tax basis
versus the financial statement basis of the buildings and improvements and
different methods of recognizing depreciation expense. The Partnership uses
accelerated methods for recognizing depreciation for tax purposes and the
straight-line method for financial statement purposes. In addition, rental
income is recognized when received or receivable for tax purposes and on a
straight-line basis for financial statement purposes.
9. Sale of Diamond Springs Warehouse
Diamond Springs Warehouse was sold on March 1, 1995 for a sale price, plus
non-refundable extension fees, totaling $3.195 million. Of the $3.195 million,
$70,000 relates to escrowed deposits applied to extension fees as a result of
the multiple extensions granted by the Partnership during sale negotiations.
During the fourth quarter of 1994, $60,000 of such deposits were recognized as
other income and the remaining $10,000 was recognized as other income in the
first quarter of 1995. The gain on disposition of the property totaled
$1,870,743.
REPORT OF INDEPENDENT AUDITORS
----------------------------------
General and Limited Partners
Qualified Properties 80, L.P.
and Consolidated Ventures
We have audited the accompanying consolidated balance sheet of Qualified
Properties 80, L.P. and Consolidated Ventures as of December 31, 1995 and 1994,
and the related consolidated statements of operations, partners' capital
(deficit) and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide reasonable basis
for our opinion.
In our opinion, the financial statements referred to above represent fairly, in
all material respects, the consolidated financial position of Qualified
Properties 80, L.P. and Consolidated Ventures at December 31, 1995 and 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 31, 1996
except for Note 1, as to which the date is
March 15, 1996
Comparison of Acquisition Costs to Appraised Value and Determination of
Net Asset Value Per $386 Unit at December 31, 1995 (Unaudited)
Acquisition Appraised
Property Date of Acquisition Cost (1) Value (2)
959 Ridgeway 03-11-81 1,815,517 1,750,000
Stevens Creek 04-14-82 8,907,693 9,900,000
Ridgelake Office Building 889 (3) 02-01-82 3,802,102 3,901,597
Swenson Business Park Building A 04-06-84 2,180,000 2,000,000
$ 16,705,312 $ 17,551,597
Cash and cash equivalents 1,062,602
Cash restricted 115,521
Rent and other receivables 29,658
Prepaid expenses 46,265
18,805,643
Less:
Accounts payable and accrued expenses (182,346)
Due to affiliates (10,938)
Security deposits payable (68,288)
Distribution payable (339,817)
Partnership Net Asset Value (4) $ 18,204,254
Net Asset Value Allocated:
Limited Partners $ 18,022,211
General Partners 182,043
$ 18,204,254
Net Asset Value Per Unit
(51,234 units outstanding) $351.76
(1) Purchase price plus General Partners' acquisition fees.
(2) This represents the Partnership's share of the December 31, 1995
Appraised Values which were determined by an independent property
appraisal firm. The Partnership's share of the December 31, 1995
Appraised Value takes into account the allocation provisions of the
joint venture agreements governing the distribution of sales proceeds
for Ridgelake Office Building 889, Swenson Business Park Building A,
and Stevens Creek.
(3) The Acquisition Cost and the Partnership's share of the December 31,
1995 Appraised Values are net of the outstanding mortgage loan balances
at the time of acquisition and at December 31, 1995, respectively.
(4) Based on the 1995 Appraised Values of the Properties by an independent
appraiser, and the remaining assets and liabilities of the Partnership
at December 31, 1995, the actual Net Asset Value of each unit is
$351.76. The Net Asset Value represents the amount each Limited
Partner would receive if the Properties were sold at their current
appraised values and net proceeds were distributed in the liquidation
of the Partnership. Real Estate brokerage commissions and other costs
associated with selling the Partnership's properties are not
determinable at this time and as such are not included in the
calculation. Since the Partnership would incur these expenses in the
sale of its Properties cash available for the distribution to the
Partners would be less than the Net Asset Value. The current market
value of the Units may differ substantially from their Net Asset Value.
Limited Partners should note that appraisals are only estimates of current
value and actual values realizable upon sales may be significantly different.
A significant factor in establishing an appraised value is the actual selling
price for properties which the appraiser believes are comparable. Further, the
appraised value does not reflect the actual costs which would be incurred in
selling the property. As a result of these factors and the illiquid nature of
an investment in Units of the Partnership, the variation between the appraised
value of the Partnership's properties and the price at which Units of the
Partnership could be sold is likely to be significant. Fiduciaries of Limited
Partners which are subject to ERISA or other provisions of law requiring
valuation of Units should consider all relevant factors, including, but not
limited to Net Asset Value per Unit, in determining the fair market value of
the investment in the Partnership for such purposes.
SCHEDULE III
--------------
QUALIFIED PROPERTIES 80, L.P.
and Consolidated Ventures
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Cost Capitalized
Subsequent
Initial Cost to Partnership To Acquisition
Buildings and Buildings and
Description Encumbrances Land Improvements Improvements (4)
Commercial Property:
959 Ridgeway Project
Memphis, TN $0 $424,954 $1,430,576 $582,728
Consolidated Ventures:
Ridgelake Office Project
Memphis, TN $4,098,403 $923,411 $7,792,436 $1,729,481
Swenson Business
Park Project
San Jose, CA $0 $603,480 $1,320,228 $542,430
Stevens Creek Project
San Jose, CA $0 $1,691,002 $7,146,336 $2,235,240
$4,098,403 $3,642,847 $17,689,576 $5,089,879
QUALIFIED PROPERTIES 80, L.P.
and Consolidated Ventures
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Gross Amount at Which Carried at Close of Period
Buildings and
Description Retirements (5) Land Improvements Total (2)
Commercial Property:
959 Ridgeway Project
Memphis, TN $0 $424,954 $2,013,304 $2,438,258
Consolidated Ventures:
Ridgelake Office Project
Memphis, TN $(666,733) $923,411 $8,855,184 $9,778,595
Swenson Business
Park Project
San Jose, CA $ (58,293) $603,480 $1,804,365 $2,407,845
Stevens Creek Project
San Jose, CA $(273,814) $1,691,002 $9,107,762 $10,798,764
$(998,840) $3,642,847 $21,780,615 $25,423,462
QUALIFIED PROPERTIES 80, L.P.
and Consolidated Ventures
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
Life on which
Depreciation
in Latest
Accumulated Date of Date Income Statements
Description Depreciation (1) Construction Acquired is Computed
Commercial Property:
959 Ridgeway Project
Memphis, TN $1,216,818 1977 (3) 1-25 years
Consolidated Ventures:
Ridgelake Office Project
Memphis, TN $4,559,281 1980 2/1/82 1-25 years
Swenson Business
Park Project
San Jose, CA $ 796,485 1983 4/6/84 1-25 years
Stevens Creek Project
San Jose, CA $3,613,617 1981 6/1/87 1-25 years
$10,186,201
(1) For Federal income tax purposes, the amount of accumulated depreciation
is $16,407,825.
(2) For Federal income tax purposes, the basis of land, buildings and
improvements is $25,113,272.
(3) Joint Venture interest acquired March 11, 1981. Minority partner's
interest acquired March 1, 1982. The Partnership is now sole owner
of the property.
(4) Tenant improvements are depreciated on a straight-line basis over
lives of the respective leases.
(5) Retirements are cumulative since acquisition.
QUALIFIED PROPERTIES 80, L.P.
and Consolidated Ventures
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1995
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1995, 1994 and 1993:
Real Estate investments: 1995 1994 1993
Beginning of year $27,255,047 $27,294,760 $26,788,544
Additions 680,193 607,547 547,137
Less retirements (310,659) (647,260) (40,921)
Dispositions (2,201,119) 0 0
End of year $25,423,462 $27,255,047 $27,294,760
Accumulated Depreciation:
Beginning of year $10,314,488 $ 9,555,114 $ 8,160,709
Depreciation expense 1,275,580 1,406,634 1,435,326
Less retirements (310,659) (647,260) (40,921)
Dispositions (1,093,208) 0 0
End of year $10,186,201 $10,314,488 $9,555,114
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Qualified Properties 80, L.P. of our report dated January 31, 1996 except
for Note 1, as to which the date is March 15, 1996, included in the 1995 Annual
Report of Qulified Properties 80, L.P. and Consolidated Ventures.
Our audit also included the financial statement schedule of Qualified
Properties 80, L.P. and Consolidated Ventures listed in Item 14(a). This
schedule is the responsibility of the Partnership's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
the financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth herein.
ERNST & YOUNG LLP
Boston, Massachusetts
January 31, 1996,
except for Note 1, as to which the date is
March 15, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,062,602
<SECURITIES> 000
<RECEIVABLES> 31,458
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 000
<PP&E> 25,423,462
<DEPRECIATION> (10,186,201)
<TOTAL-ASSETS> 17,327,719
<CURRENT-LIABILITIES> 182,346
<BONDS> 4,098,403
<COMMON> 000
000
000
<OTHER-SE> 12,725,437
<TOTAL-LIABILITY-AND-EQUITY> 17,327,719
<SALES> 3,488,485
<TOTAL-REVENUES> 4,145,016
<CGS> 000
<TOTAL-COSTS> 1,651,942
<OTHER-EXPENSES> 1,638,880
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 434,471
<INCOME-PRETAX> 421,057
<INCOME-TAX> 000
<INCOME-CONTINUING> 421,057
<DISCONTINUED> 000
<EXTRAORDINARY> 1,870,743
<CHANGES> 000
<NET-INCOME> 2,258,483
<EPS-PRIMARY> 44.08
<EPS-DILUTED> 44.08
</TABLE>
