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
For the fiscal year ended: December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-10222
QUALIFIED PROPERTIES 80, L.P.
(formerly Hutton/GSH Qualified Properties 80, L.P.)
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,
1997 filed as an exhibit under Item 14.
PART I
Item 1. Business
(a) General Development of Business
Qualified Properties 80, L.P. (the "Registrant" or the "Partnership")
(formerly Hutton/GSH Qualified Properties 80, L.P.) is a Virginia limited
partnership formed on January 13, 1981, of which QP80 Real Estate Services
Inc. ("QP80 Services"), formerly Hutton Real Estate Services, Inc. (See
Item 10 "Certain Matters Involving Affiliates of QP80 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 ("959 Ridgeway"), a two-story office
building located in Memphis, Tennessee; 889 Ridgelake Office Building ("889
Ridgelake"), a three-story office building located in Memphis, Tennessee;
Swenson Business Park - Building A ("Swenson A"), a one-story research and
development facility located in San Jose, California; and Stevens Creek
Office Building ("Stevens Creek"), a class-A office property located in San
Jose, California. The Partnership does not plan to invest in any
additional properties. Additional information regarding the historical
development of business is incorporated by reference to Note 1 of the Notes
to the Consolidated Financial Statements in the Partnership's Annual Report
to Unitholders for the year ended December 31, 1997 filed as an exhibit
under Item 14.
As of February 28, 1998, three of the Properties had been sold. Diamond
Springs was sold on March 1, 1995 for net proceeds of $3.0 million; Swenson
A was sold on November 10, 1997 for net proceeds of $2.9 million; and
Stevens Creek was sold on February 2, 1998 for net proceeds of $15.2
million. Additional information regarding these sales is incorporated by
reference to Item 7 and Note 4 of the Notes to the Consolidated Financial
Statements contained in the Partnership's Annual Report to Unitholders for
the year ended December 31, 1997 filed as an exhibit under Item 14
The Partnership is in the process of selecting a real estate brokerage firm
to assist in selling the Partnership's two remaining Properties, 889
Ridgelake and 959 Ridgeway.
(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:
* Capital appreciation.
* Distributions of Net Cash From Operations attributable to rental income.
* Preservation and protection of capital.
* Equity build-up through principal reduction of mortgage loans, if any,
on the Properties.
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, where the remaining Properties
are located, will also be important factors, especially with regard to the
achievement of capital appreciation.
The Registrant expects to sell its remaining Properties during 1998, taking
into consideration such factors as market conditions, leasing conditions,
net sales proceeds 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 partial 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.
(d) Competition
889 Ridgelake Office Building and 959 Ridgeway Office Building are subject
to competition from similar types of properties located in the same
vicinity. The business of owning and operating commercial office buildings
in the area where the Properties are located is highly competitive, and the
Partnership competes with a number of established companies, some of which
have greater resources than the Partnership. For a discussion of current
commercial real estate market conditions in the Memphis area, see the
section entitled "Message to Investors" in the Partnership's Annual Report
to Unitholders for the year ended December 31, 1997 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 "Message to Investors" and Note 4 and Note 6 of the
Notes to the Consolidated Financial Statements in the Partnership's Annual
Report to Unitholders for the year ended December 31, 1997, 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, 1997, no matter
was submitted to a vote of security holders through the solicitation of
proxies or otherwise.
PART II
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, 1997, the number of holders of Units was 1,899.
(c) Distributions Cash distributions paid to the Limited Partners for the two
years ended December 31, 1997 are 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, 1997 filed as an exhibit under
Item 14.
Item 6. Selected Financial Data
Incorporated by reference to the section entitled "Financial Highlights" in
the Partnership's Annual Report to Unitholders for the year ended December
31, 1997, 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
On November 10, 1997 the Swenson Property was sold for net proceeds of
$2,909,697 and resulted in a gain on sale of $1,336,788, which is reflected
in the Partnership's statement of operations for the year ending December
31, 1997. On February 2, 1998 a sale of the Stevens Creek Property was
completed. The Stevens Creek Property was sold for net proceeds of
$15,223,030 and resulted in a gain on sale of approximately $7.9 million,
which will be reflected in the Partnership's statement of operations for
the three months ending March 31, 1998.
The Partnership is in the process of selecting a real estate brokerage firm
to assist in marketing for sale the Partnership's two remaining Properties,
889 Ridgelake Office Building and 959 Ridgeway Office Building. While it
is currently anticipated that the Properties will be sold and the
Partnership liquidated in 1998, there can be no assurance that either
Property will be sold within this time frame, or that any sale, if
completed, will result in a particular price.
The Partnership had cash and cash equivalents totaling $1,023,370 at
December 31, 1997, compared with $383,531 at December 31, 1996. The
increase is primarily due to the sale of the Swenson Property in addition
to net cash provided by operating activities exceeding cash distributions
and mortgage principal payments. The Partnership also had a restricted
cash balance of $50,567 at December 31, 1997, compared with $187,237 at
December 31, 1996. The decrease is largely due to a refund of $139,031 of
excess cash which had been held in escrow for real estate taxes, partially
offset by escrow fundings.
Distribution payable totaled $0 at December 31, 1997, compared with
$339,817 at December 31, 1996. The decrease reflects the suspension of
quarterly cash distributions from operations in the second quarter of 1997.
Further information regarding cash distributions is incorporated herein by
reference to the section entitled "Message to Investors" contained in the
Partnership's Annual Report to Unitholders for the year ended December 31,
1997 filed as an exhibit under Item 14.
Accounts payable and accrued expenses totaled $220,073 at December 31,
1997, compared with $265,809 at December 31, 1996. The decrease is largely
due to the timing of payment of various invoices during 1997.
A discussion of material leases at the Partnership's two remaining
properties is incorporated herein by reference to the section entitled
"Message to Investors" contained in the Partnership's Annual Report to
Unitholders for the year ended December 31, 1997 filed as an exhibit under
Item 14.
The Partnership paid cash distributions to the Limited Partners of $54.00
per Unit for the year ended December 31, 1997, which includes net proceeds
from the sale of the Swenson Property in the amount of $50.00 per Unit. On
or about April 3, 1998, the Partnership will pay a special cash distribution
to Limited Partners from the net proceeds from the sale of Stevens Creek in
the amount of $261.45 per Unit to Unitholders of record as of April 1, 1998.
Further details regarding cash distributions are incorporated herein by
reference to the section entitled "Message to Investors" contained in
the Partnership's Annual Report to Unitholders for the year ended December
31, 1997 filed as an exhibit under Item 14.
Results of Operations
1997 versus 1996
The Partnership's operations for the year ended December 31, 1997 resulted
in net income of $1,693,288 compared with $259,629 for the year ended
December 31, 1996. The increase is primarily attributable to the
$1,336,788 gain recognized in 1997 on the sale of the Swenson Property.
Income before gain on sale of real estate was $356,500 for the year ended
December 31, 1997. The increase is primarily due to a decrease in
depreciation expense, which was partially offset by higher property
operating and general and administrative expenses, and lower rental income.
Rental income totaled $3,144,174 for the year ended December 31, 1997,
compared with $3,390,655 in 1996. The decrease is primarily due to lower
occupancy at 959 Ridgeway Office Building and the sale of the Swenson
Property. Other income totaled $339,357 for the year ended December 31,
1997, compared with $403,298 for the year ended December 31, 1996. The
decrease is primarily attributable to lower tenant reimbursable income at
959 Ridgeway, in addition to reimbursements for capital improvements
completed at 889 Ridgelake.
Property operating expenses totaled $1,915,443 for the year ended December
31, 1997, compared to $1,706,859 for the year ended December 31, 1996. The
increase primarily reflects roof repairs, carpeting and other non-
capitalizable improvements performed at the Stevens Creek Property in 1997.
Depreciation and amortization decreased to $563,501 for the year ended
December 31, 1997 from $1,240,363 a year earlier, largely due to the
reclassification of the Swenson A and Stevens Creek Properties as "Real
estate assets held for disposition." Additionally, certain tenant
improvements at 959 Ridgeway and 889 Ridgelake became fully depreciated in
1997.
General and administrative expenses for the year ended December 31, 1997,
totaled $253,729 compared with $185,101 for the 1996 period. During 1997,
certain expenses incurred by QP80 Real Estate Services Inc. and its
affiliates in servicing the Partnership, which were voluntarily absorbed by
affiliates of QP80 Real Estate Services, Inc. in prior periods, were
reimbursable to QP80 Real Estate Services, Inc. and its affiliates. Higher
legal expenses resulting from the sale of the Swenson property also
contributed to the increase. Further details regarding general and
administrative expenses are incorporated herein by reference to Note 7
"Transactions with Related Parties" of Notes to the Consolidated Financial
Statements contained in the Partnership's Annual Report to Unitholders for
the year ended December 31, 1997 filed as an exhibit under Item 14.
As of December 31, 1997, lease levels at each of the Properties were as
follows: Stevens Creek Office Building - 92%; 959 Ridgeway Office Building
- - 63%; and 889 Ridgelake Office Building - 100%.
Results of Operations
1996 versus 1995
The Partnership's operations for the year ended December 31, 1996 resulted
in net income of $259,629 compared with $2,291,800 for the year ended
December 31, 1995. The decrease is primarily attributable to the
$1,870,743 gain recognized in 1995 on the sale of Diamond Springs. Income
before gain on sale of real estate for the year ended December 31, 1996 was
$259,629 compared to $421,057 for the year ended December 31, 1995. The
decrease is due primarily to lower interest and other income.
Rental income totaled $3,390,655 for the year ended December 31, 1996,
compared with $3,488,485 a year earlier. The decrease is primarily due to
lower occupancy at 959 Ridgeway Office Building and the sale of Diamond
Springs. Other income totaled $403,298 for the year ended December 31,
1996, compared with $580,687 for the year ended December 31, 1995.
The decrease is primarily attributable to lower tenant reimbursable income
at all of the Properties and the sale of Diamond Springs Warehouse in 1995.
Interest income decreased to $19,441 for the year ended December 31, 1996
compared to $75,844 for the year ended December 31, 1995, reflecting the
Partnership's lower average cash balances.
Property operating expenses totaled $1,706,859 for the year ended December
31, 1996, relatively unchanged from $1,651,942 for the year ended December
31, 1995. Depreciation and amortization decreased to $1,240,363 for the year
ended December 31, 1996 from $1,432,461 for the year ended December 31, 1995,
largely due to tenant improvements totaling $757,990 at Stevens Creek Office
Building becoming fully depreciated in 1995.
General and administrative expenses totaled $185,101 for the year ended
December 31, 1996 compared with $206,419 for the year ended December 31, 1995.
The decrease is primarily attributable to the payment in 1996 of 1995
distributions to the coventurers of Stevens Creek Boulevard Joint Venture.
As of December 31, 1996, lease levels at each of the Properties were as
follows: Swenson Business Park-Building A - 100%; 959 Ridgeway Office
Building - 11%; Stevens Creek Office Building - 100% and 889 Ridgelake
Office Building - 100%.
Item 8. Financial Statements and Supplementary Data
Incorporated by reference to the Partnership's Annual Report to Unitholders
for the year ended December 31, 1997, 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
Item 10. Directors and Executive Officers of the Registrant
The General Partners of the Partnership are QP80 Real Estate Services Inc.
("QP80 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 QP80 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
Rocco F. Andriola Director
Jeffrey C. Carter Director and President
Michael T. Marron Vice President and Chief Financial Officer
Rocco F. Andriola, 39, is a Managing Director of Lehman Brothers in its
Diversified Asset Group and has held such position since October 1996.
Since joining Lehman in 1986, Mr. Andriola has been involved in a wide
range of restructuring and asset management activities involving real
estate and other direct investment transactions. From June 1991 through
September 1996, Mr. Andriola held the position of Senior Vice President in
Lehman's Diversified Asset Group. From June 1989 through May 1991, Mr.
Andriola held the position of First Vice President in Lehman's Capital
Preservation and Restructuring Group. From 1986 to 1989, Mr. Andriola
served as a Vice President in the Corporate Transactions Group of Shearson
Lehman Brothers' office of the general counsel. Prior to joining Lehman,
Mr. Andriola practiced corporate and securities law at Donovan Leisure
Newton & Irvine in New York. Mr. Andriola received a B.A. from Fordham
University, a J.D. from New York University School of Law, and an LL.M in
Corporate Law from New York University's Graduate School of Law.
Jeffrey C. Carter, 52, is a Senior Vice President of Lehman Brothers in the
Diversified Asset Group. Mr. Carter joined Lehman Brothers in September
1988. From 1972 to 1988, Mr. Carter held various positions with
Helmsley-Spear Hospitality Services, Inc. and Stephen W. Brener Associates,
Inc. including Director of Consulting Services at both firms. From 1982
through 1987, Mr. Carter was President of Keystone Hospitality Services, an
independent hotel consulting and brokerage company. Mr. Carter received
his B.S. degree in Hotel Administration from Cornell University and an
M.B.A. degree from Columbia University.
Michael T. Marron, 34, is a Vice President of Lehman Brothers and has been
a member of the Diversified Asset Group since 1990 where he has actively
managed and restructured a diverse portfolio of syndicated limited
partnerships. Prior to joining Lehman Brothers, Mr. Marron was associated
with Peat Marwick Mitchell & Co. serving in both its audit and tax
divisions from 1985 to 1989. Mr. Marron received a B.S. degree from the
State University of New York at Albany and an M.B.A. degree from Columbia
University and is a Certified Public Accountant.
HS Advisors, Ltd.
HS Advisors, 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
Mark P. Mikuta President
Jerry L. Moore Executive Vice President
Julie R. Adie Vice President, Treasurer and Secretary
Mark P. Mikuta, 44, 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.
Jerry L. Moore, 48, is Chief Executive Officer of Goodman Segar Hogan
Hoffler, L.P. ("GSHH"). GSHH currently has over 325 employees and offices
in Washington, D.C., Richmond, Norfolk, Newport News, Raleigh/Durham and
Atlanta. Mr. Moore is responsible for management of existing operations of
the company and is charged with building GSHH's presence in existing and
new markets. Prior to GSHH, Mr. Moore was Senior Vice President of
Dominion Land Management Co., the real estate development unit of Dominion
Capital, Inc. Dominion Capital is a wholly owned subsidiary of Dominion
Resources, Inc. Mr. Moore received a B.A. degree from Austin College in
1971. He is a member of the Urban Land Institute Small Scale Development
Council; is on the Executive Committee of GVA North Alliance; and is on the
Board of Directors of the Hampton Roads Economic Development Alliance.
Julie R. Adie, 43, is a Vice President, Secretary and Treasurer 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 the
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, 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 interests in GSHH are limited partnership interests owned by GSH,
HK and 23 employees of GSHH. 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, 1997, 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, First Trust Company, L.P., owns a total of 3,932 units or 7.67%
of the Units in one account. First Trust's address is 1211 Sixth Avenue,
29th Floor, New York, New York 10036.
(b) Security Ownership of Management
The General Partners own 200 Units (134 by QP80 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.
Effective as of January 1, 1997, the Partnership began reimbursing
certain expenses incurred by QP80 Services and its affiliates in
servicing the Partnership to the extent permitted by the Partnership
agreement. In prior years, affiliates of QP80 Services had voluntarily
absorbed these expenses. Disclosure relating to amounts paid to the
General Partners or their affiliates during the past three years is
incorporated herein by reference to Note 7 "Transactions with Related
Parties" of Notes to the Consolidated Financial Statements contained in
the Partnership's Annual Report to Unitholders for the year ended
December 31, 1997 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
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, 1997 and 1996 (1)
Consolidated Statements of Partners' Capital (Deficit) -
For the years ended December 31, 1997, 1996 and 1995 (1)
Consolidated Statements of Operations - For the years ended
December 31, 1997, 1996 and 1995 (1)
Consolidated Statements of Cash Flows - For the years ended
December 31, 1997, 1996 and 1995 (1)
Notes to the Consolidated Financial Statements (1)
(1) Incorporated by reference to the Partnership's Annual Report
to Unitholders for the year ended December 31, 1997, 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 consolidated financial statements
or notes thereto.
(a)(3) See Exhibit Index contained herein.
(b) Reports on Form 8-K filed in the fourth quarter of 1997:
No reports on Form 8-K were filed during the three months ended
December 31, 1997.
On February 17, 1998, the Partnership filed a Form 8-K reporting
the sale of the Stevens Creek Property.
(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, 1997.
(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.)
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.
QUALIFIED PROPERTIES 80, L.P.
Date: March 30, 1998 BY: HS Advisors, Ltd.
General Partner
BY: Hogan Stanton, Inc.
General Partner
BY: /s/Mark P. Mikuta
Name: Mark P. Mikuta
Title: President
Date: March 30, 1998 BY: QP80 Real Estate Services Inc.
General Partner
BY: /s/Jeffrey C. Carter
Name: Jeffrey C. Carter
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: March 30, 1998
BY: /s/Rocco F. Andriola
Rocco F. Andriola
Director
Date: March 30, 1998
BY: /s/Jeffrey C. Carter
Jeffrey C. Carter
Director and President
Date: March 30, 1998
BY: /s/Michael T. Marron
Michael T. Marron
Vice President and
Chief Financial Officer
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: March 30, 1998
BY: /s/Mark P. Mikuta
Mark P. Mikuta
President of Hogan Stanton
Investment, Inc., as general
partner of HS Advisors, Ltd.
Date: March 30, 1998
BY: /s/Jerry L. Moore
Jerry L. Moore
Executive Vice President
Hogan Stanton Investment, Inc.,
as general partner of
HS Advisors, Ltd.
Date: March 30, 1998
BY: /s/Julie R. Adie
Julie R. Adie
Vice President, Treasurer and Secretary of
Hogan Stanton Investments, Inc.
as general partner of HS Advisors, Ltd.
Exhibit (13)
Qualified Properties 80, L.P.
1997 Annual Report to Unitholders
Qualified Properties 80, L.P.
Qualified Properties 80, L.P., is a limited partnership formed in 1981 to
acquire, operate and hold for investment commercial real estate. The
Partnership's two remaining properties, 889 Ridgelake Office Building and
959 Ridgeway Office Building, are both located in Memphis, Tennessee.
Provided below is a comparison of lease levels at the properties as of
December 31, 1997 and 1996.
Percentage
Leased
Property Location 1997 1996
959 Ridgeway Office Building Memphis, TN 63% 11%
889 Ridgelake Office Building Memphis, TN 100% 100%
Contents
1 Message to Investors
3 Financial Highlights
4 Consolidated Financial Statements
7 Notes to the Consolidated Financial Statements
12 Report of Independent Auditors
13 Net Asset Valuation
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 800-223-3464
Message to Investors
We are pleased to present the 1997 Annual Report for Qualified Properties 80,
L.P. (the "Partnership"). Included in this report is a review of the
Partnership's property sales and an update on the operations and marketing
of the Partnership's remaining properties, 889 Ridgelake Office Building and
959 Ridgeway Office Building. Also included are financial highlights and the
Partnership's audited financial statements for the year ended December 31,
1997.
Sales/Marketing Update
Over the past few months, we completed the sale of two of the Partnership's
four properties. On November 10, 1997, the Partnership closed on the sale of
Swenson Business Park - Building A (the "Swenson Property") which was sold
for net proceeds of $2,910,342. In addition, the Partnership closed on the
sale of Stevens Creek Office Building the ("Stevens Creek Property"),
on February 2, 1998 for net proceeds of $15,223,030. As discussed later in
this report, the proceeds from the Swenson Property were paid to Limited
Partners in November 1997 and the proceeds from the Stevens Creek Property
will be paid in April 1998. With regard to the Partnership's remaining two
properties, we are in the process of engaging a real estate brokerage firm
to assist with our efforts in selling the properties. Once the properties
are sold, the General Partners will distribute the net proceeds together
with the Partnership's remaining cash reserves (after payment of or
provision for, the Partnership's liabilities and expenses), and dissolve
the Partnership. While we currently anticipate that they will be sold and
the Partnership liquidated in 1998, there can be no assurance that either
property will be sold within this time frame, or that the sales, will result
in a particular price.
Property Update
Market conditions for office properties in Memphis remained strong in 1997,
with vacancy in the East Memphis submarket, where both properties are
located, falling to 5% at year-end 1997, compared to 6% at year-end 1996
and absorption and rental rates increasing from a year earlier. Although
competition for tenants will likely intensify in the future as development
projects currently underway are completed, it is expected that operating
conditions and property values will remain strong in the near term.
These strong conditions spurred on leasing activity at 959 Ridgeway Office
Building. We are pleased to report the execution of a new five-year lease
for 15,300 square feet, increasing the property's lease level to 63% as of
December 31, 1997. The General Partners are aggressively marketing the
property's vacant space. No leases are scheduled to expire in 1998.
At 889 Ridgelake Office Building, operations remained stable and the property
was 100% leased at December 31, 1997. During the year, one tenant
representing 9,656 square feet, pursuant to a lease originally scheduled to
expire on February 1997, renewed its lease for an additional two years.
Another tenant leasing 1,978 square feet, pursuant to a lease originally
scheduled to expire in January 1998, renewed its lease for another two years.
One lease representing 8% of the total leasable area is scheduled to expire
in 1998.
Cash Distributions
On or about April 3, 1998, the Partnership will pay a special cash
distribution totaling $261.45 per Unit to Limited Partners of record as of
April 1, 1998. This distribution reflects your share of the net proceeds
received from the sale of the Stevens Creek Property. Another special
istribution of $50.00 per Unit was paid on November 28, 1997, representing
the net proceeds from the sale of the Swenson Property. Including these
distributions, Limited Partners have received cash distributions totaling
$813.25 per original $500 Unit. Since inception, the Partnership has paid
distributions of cash flow from operations in the amount of $387.80 per Unit
and return of capital payments in the amount of $425.45 per Unit.
Quarterly cash distributions from operations were suspended commencing in
the second quarter of 1997 in consideration of the Partnership's marketing
efforts and the need to fund several major capital improvements at the
properties to better position them for sale. As discussed above, the General
Partners are in the process of engaging a brokerage firm to assist with our
efforts in marketing 959 Ridgeway and 889 Ridgelake. Accordingly, cash
distributions will remain suspended until the properties are sold, at which
time the General Partners will distribute the net proceeds together with the
Partnership's remaining cash reserves (after payment of or provision for,
the Partnership's liabilities and expenses).
Cash Distributions Per Limited Partnership Unit
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
1996 $15.701 $ 6.50 $ 6.50 $ 6.50 $35.20
1997 $ 4.00 $ 0.00 $ 0.00 $ 50.002 $54.00
1 Includes a special cash distribution of $9.20 per Unit paid on March 29,
1996.
2 Includes $50 in return of capital resulting from the sale of Swenson
Business Park-Building A.
General Information
As you are probably aware, several third parties have commenced tender offers
to purchase Units of the Partnership at prices which are below the
Partnership's estimate of net asset value per Unit. In response, we
recommended that Limited Partners reject these offers because we believe that
they do not reflect the underlying value of the Partnership's assets.
According to published industry sources, most of the investors who hold units
of limited partnerships similar to the Partnership have rejected these types
of tender offers due to their inadequacy.
Summary
We are pleased to have successfully completed the sale of the Swenson and
Stevens Creek Properties, and hope our marketing efforts will result in a
sale of 889 Ridgelake Office Building and 959 Ridgeway Office Building during
1998. In the interim, we will continue to focus on leasing initiatives at
both properties. We will keep you apprised of significant developments in
future reports.
Very truly yours,
QP80 Real Estate Services Inc. Hogan Stanton Investment, Inc.
General Partner General Partner of HS Advisors, Ltd.
/s/Jeffrey C. Carter /s/ Mark P. Mikuta
Jeffrey C. Carter Mark P. Mikuta
President President
March 30, 1998
Financial Highlights
For The Years Ended December 31, 1997
(dollars in thousands except per Unit data)
1997 1996 1995 1994 1993
Total income $ 3,503 $ 3,813 $ 4,145 $ 4,359 $ 3,894
Gain on sale of real estate assets 1,337 _ 1,871 _ _
Net income (loss) 1,693 260 2,292 475 (55)
Net income (loss) per Unit 32.89 4.57 44.08 8.99 (1.04)
Net cash from operations 955 1,392 1,417 1,916 1,485
Total assets 14,148 15,759 17,328 19,267 20,303
Mortgage note payable 3,931 4,019 4,098 4,170 4,235
Cash distributions per
Limited Partnership Unit $54.001 $35.202 $77.503 $28.00 $ 22.00
1 Includes $50 in return of capital resulting from the sale of Swenson Business
Park - Building A.
2 Includes a special cash distribution of $9.20 per Unit paid on March 29,1996.
3 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
consolidated financial statements and related notes included in this report.
* Total income and net cash from operations decreased primarily due to lower
rental income in 1997 resulting from lower average occupancy at 959 Ridgeway
Office Building and the sale of the Swenson property.
* The increase in net income in 1997 is primarily attributable to the
recognition of the gain on the sale of the Swenson property. Income before
gain on sale of real estate was $356,500 ($6.89 per Unit) in 1997 compared
to $259,629 ($4.57 per Unit) in 1996. This increase is primarily due to a
decrease in depreciation expense.
Consolidated Balance Sheets At December 31, At December 31,
1997 1996
Assets
Real estate, at cost:
Land $ 1,348,365 $ 1,348,365
Buildings and improvements 10,562,735 10,908,774
11,911,100 12,257,139
Less accumulated depreciation (6,516,375) (6,341,461)
5,394,725 5,915,678
Real estate assets held for disposition 7,359,706 8,932,613
Cash and cash equivalents 1,023,370 383,531
Restricted cash 50,567 187,237
Prepaid expenses, net of accumulated
amortization of $132,997 in 1997
and $100,571 in 1996 205,922 208,383
Rent and other receivables 439 1,877
Deferred rent receivable 113,664 130,091
Total Assets $14,148,393 $15,759,410
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 220,073 $ 265,809
Prepaid rent _ 15,212
Due to affiliates 4,922 9,211
Security deposits payable 60,521 68,288
Distribution payable _ 339,817
Mortgage note payable 3,930,621 4,018,893
Total Liabilities 4,216,137 4,717,230
Minority interest 13,865 20,383
Partners' Capital (Deficit):
General Partners (156,069) (134,356)
Limited Partners (51,234 units outstanding) 10,074,460 11,156,153
Total Partners' Capital 9,918,391 11,021,797
Total Liabilities and Partners' Capital $14,148,393 $15,759,410
Consolidated Statement of Partners' Capital (Deficit)
For the years ended December 31, 1997, 1996 and 1995
General Limited
Partners Partners Total
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
Net income 25,476 234,153 259,629
Distributions (36,803) (1,803,437) (1,840,240)
Balance at December 31, 1996 (134,356) 11,156,153 11,021,797
Net income 8,345 1,684,943 1,693,288
Distributions (30,058) (2,766,636) (2,796,694)
Balance at December 31, 1997 $(156,069) $10,074,460 $ 9,918,391
Consolidated Statements of Operations
For the years ended December 31, 1997 1996 1995
Income
Rental $3,144,174 $3,390,655 $3,488,485
Other 339,357 403,298 580,687
Interest 19,046 19,441 75,844
Total Income 3,502,577 3,813,394 4,145,016
Expenses
Property operating 1,915,443 1,706,859 1,651,942
Depreciation and amortization 563,501 1,240,363 1,432,461
Interest 419,922 426,578 434,471
General and administrative 253,729 185,101 206,419
Total Expenses 3,152,595 3,558,901 3,725,293
Income before minority interest and
gain on sale of real estate 349,982 254,493 419,723
Minority interest 6,518 5,136 1,334
Income before gain on sale of real estate 356,500 259,629 421,057
Gain on sale of real estate 1,336,788 _ 1,870,743
Net Income $1,693,288 $ 259,629 $2,291,800
Net Income Allocated:
To the General Partners $ 8,345 $ 25,476 $ 33,317
To the Limited Partners 1,684,943 234,153 2,258,483
$1,693,288 $ 259,629 $2,291,800
Per limited partnership unit
(51,234 outstanding) $32.89 $4.57 $44.08
Consolidated Statements of Cash Flows
For the years ended December 31, 1997 1996 1995
Cash Flows From Operating Activities:
Net income $ 1,693,288 $ 259,629 $ 2,291,800
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 520,953 1,138,181 1,275,580
Amortization 42,548 102,182 156,881
Gain on sale of real estate (1,336,788) _ (1,870,743)
Minority interest in loss of
consolidated venture (6,518) (5,136) (1,334)
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Restricted cash 136,670 (71,716) (24,631)
Prepaid expenses (40,088) (145,727) (279,685)
Rent and other receivables 1,438 29,581 70,431
Deferred rent receivable 16,426 (11,655) (92,592)
Accounts payable and accrued expenses (45,736) 80,594 (85,368)
Prepaid rent (15,212) 15,212 _
Due to affiliates (4,289) 1,142 4,869
Security deposits payable (7,767) _ (28,192)
Net cash provided by operating activities 954,925 1,392,287 1,417,016
Cash Flows From Investing Activities:
Proceeds from sale of real estate 2,909,697 _ 2,978,654
Additions to real estate _ (151,608) (680,193)
Net cash provided by (used for)
investing activities 2,909,697 (151,608) 2,298,461
Cash Flows From Financing Activities:
Cash distributions (3,136,511) (1,840,240) (4,049,292)
Principal payments on mortgage note payable (88,272) (79,510) (71,593)
Net cash used for financing activities (3,224,783) (1,919,750) (4,120,885)
Net increase (decrease) in cash and
cash equivalents 639,839 (679,071) (405,408)
Cash and cash equivalents, beginning of year 383,531 1,062,602 1,468,010
Cash and cash equivalents, end of year $ 1,023,370 $ 383,531 $ 1,062,602
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest $ 419,922 $ 426,578 $ 434,471
Supplemental Disclosure of Non-Cash Investing Activities:
Write off of fully depreciated tenant
improvements $ 424,549 $ 789,514 $ 310,659
Due to the sale of Swenson Park Alpha Building, deferred rent receivable and
prepaid leasing in the amounts of $40,141, and $35,322 were reflected in the
calculation of gain on sale for year ended 1997.
Notes to the Consolidated Financial Statements
December 31, 1997, 1996 and 1995
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 L.P. 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.
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.
Real Estate Assets Held for Disposition Real estate assets held
for disposition are carried at the lower of carrying value or
fair market value less costs to sell. During the fourth quarter
of 1996, Swenson Building Park - Building A and Stevens Creek
Office Building real estate assets were reclassified as held for
disposition and were no longer depreciated.
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 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.
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.
Cash and Cash Equivalents Cash and 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 future real estate tax payments.
Income Taxes No provision for income taxes has been made in the
consolidated 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.
Reclassifications Certain prior year amounts have been
reclassified in order to conform to the current year's
presentation.
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
Partners 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
As of December 31, 1997, real estate investments consist of three
commercial office buildings acquired, directly or indirectly, by
the Partnership. Purchase price amounts exclude acquisition fees
and other closing costs.
Square Date Purchase
Property Name Feet Location Acquired Ownership Price
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
Stevens Creek 84,916 San Jose, 6/01/87 Joint $8,500,000
Office Building* California Venture
*Sold February 2, 1998.
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 sale of Swenson Business Park - Building A closed on November
10, 1997, to an unaffiliated third party for total proceeds,
before closing adjustments, of $3.01 million. The gain on the
sale of the property totaled $1,336,788. For the year ended
December 31, 1997, Swenson Business Park - Building A had income
from operations totaling approximately $61,000.
On February 2, 1998, the Partnership closed on the sale of
Stevens Creek Office Building. The property was sold for net
proceeds of $15,223,030 to 5300 Stevens Creek Boulevard Inc. (the
"Buyer"), a Delaware Corporation unaffiliated with the
Partnership. The selling price was determined by arm's length
negotiations between the Joint Venture and the Buyer. The
transaction resulted in a gain on sale of approximately $7.9
million, which will be reflected in the Partnership's statement
of operations for the three months ending March 31, 1998. The
property was reclassified on the Consolidated Balance Sheet as
"Real estate assets held for disposition" during 1996. For the
year ended December 31, 1997, Stevens Creek Office Building had
income from operations totaling approximately $857,000.
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 889 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:
Year Amount
1998 $ 98,000
1999 108,800
2000 120,790
2001 134,102
2002 148,880
Thereafter 3,320,049
Total $ 3,930,621
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, 1997 is as follows:
Year Amount
1998 1,590,538
1999 1,497,304
2000 1,438,122
2001 620,260
2002 354,233
Thereafter 68,850
Total $5,569,307
The rental income does not include rental income for Stevens Creek because
the property was sold on February 2, 1998.
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 (889 Ridgelake and Stevens
Creek) generated rental revenue in excess of 10% of the Partnership's 1997,
1996 and 1995 consolidated rental revenues. The rental income derived from
the Ridgelake tenant in 1997, 1996, and 1995 was $723,980, $717,713,
and $717,374 or 23%, 21%, and 19%, respectively, of the Partnership's
consolidated rental revenues for each year. The rental income derived from
the Stevens Creek Office Building tenant in 1997, 1996, and 1995 was $677,328
per year, or 22%, 20%, and 18%, respectively, of the Partnership's consolidated
rental revenues for each year. The Ridgelake lease is scheduled to expire on
December 31, 2000 and as of December 31, 1997, the tenant is current in its
rental payments. The Stevens Creek Office Building was sold on February 2,
1998 (see Note 4).
7. Transactions with Related Parties
The following is a summary of reimbursable amounts for out-of-pocket expenses
and property management fees earned by the General Partners which are recorded
in general and administrative expense during the years ended December 31, 1997,
1996 and 1995:
1997 1996 1995
Reimbursement of out-of-pocket expenses $ 1,425 $ 2,757 $ 3,487
Property management fees 28,715 37,979 34,875
$30,140 $40,736 $38,362
At December 31, 1997 and 1996, $4,922 and $6,920 were payable to the General
Partners, respectively.
8. Reconciliation of Net Income to Taxable Income
Taxable income exceeded net income reported in the financial
statements by $821,656, $263,337, and $970,710 for the years
ended December 31, 1997, 1996 and 1995, 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.
Report of Independent Auditors
General and Limited Partners
Qualified Properties 80, L.P.
and Consolidated Ventures
We have audited the accompanying consolidated balance sheets of
Qualified Properties 80, L.P. and Consolidated Ventures as of
December 31, 1997 and 1996, 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, 1997. 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 a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Qualified Properties 80, L.P. and
Consolidated Ventures at December 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Boston, Massachusetts
February 2, 1998
Net Asset Valuation
Comparison of Acquisition Costs to Appraised Value and Determination of
Net Asset Value Per $336 Unit at December 31, 1997 (Unaudited)
Date of Acquisition 1997 Appraised
Property Acquisition Cost (1) Value (2)
959 Ridgeway 03-11-81 $ 1,815,517 $ 2,050,000
Stevens Creek 04-14-82 8,907,693 15,223,030
889 Ridgelake (3) 02-01-82 3,802,102 4,844,379
$ 14,525,312 $ 22,117,409
Cash and cash equivalents 1,023,370
Restricted cash 50,567
Rent and other receivables 439
Prepaid expenses 39,530
23,231,315
Less:
Total liabilities - net of mortgage note payable (285,516)
Partnership Net Asset Value (4) $ 22,945,799
Net Asset Value Allocated:
Limited Partners $ 22,716,341
General Partners 229,458
$ 22,945,799
Net Asset Value Per Unit
(51,234 units outstanding) $443.38
(1) Purchase price plus General Partners' acquisition fees.
(2) This represents the Partnership's share of the December 31, 1997
Appraised Values which were determined by an independent property
appraisal firm. The Partnership's share of the December 31, 1997
Appraised Value takes into account the allocation provisions of the
joint venture agreements governing the distribution of sales proceeds
for 889 Ridgelake and Stevens Creek.
(3) The Acquisition Cost and Partnership's share of the December 31, 1997
Appraised Values are net of the outstanding mortgage loan balances at the
time of acquisition and at December 31,1997, respectively.
(4) Based on the 1997 Appraised Values of the Properties by an independent
appraiser and the remaining assets and liabilities of the Partnership at
December 31, 1997, the actual Net Asset Value of each unit is $443.38.
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 sale 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. In addition, the
appraised value does not reflect the actual costs which would be
incurred in selling the properties. 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 may be significant. Fiduciaries of
Limited Partners which are subject to ERISA or other provisions
of law requiring valuations 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 - Real Estate and Accumulated Depreciation
December 31, 1997
Held for disposition:
Commercial Property: 959 889 Stevens
Consolidated Ventures: Ridgeway Ridgelake Creek Total
Location Memphis, TN Memphis, TN San Jose, CA na
Construction date 1977 1980 1981 na
Acquisition date (1) 02-01-82 06-01-87 na
Life on which depreciation
in latest income statement
is computed (2) 1-25 years 1-25 years 1-25 years na
Encumbrances $ _ $ 4,018,893 $ _ $ 4,018,893
Initial cost to Partnership:
Land 424,954 923,411 1,691,002 3,039,367
Buildings and
improvements 1,430,576 7,792,436 7,146,336 16,369,348
Costs capitalized
subsequent to acquisition:
Land, buildings
and improvements 603,828 1,767,351 2,327,879 4,699,058
Deferred Rent Receivable _ _ 265,377 265,377
Prepaid Leasing Costs _ _ 256,765 256,765
Retirements (3) (346,039) (685,417) (1,123,154) (2,154,610)
Gross amount at which
carried at close of period (4):
Land $ 424,954 $ 923,411 $ 1,691,002 $ 3,039,367
Buildings and
improvements 1,688,365 8,874,370 8,873,203 19,435,938
$2,113,319 $ 9,797,781 $10,564,205 $22,475,305
Accumulated depreciation (5) $1,082,318 $ 5,434,057 $ 3,204,499 $ 9,720,874
(1) Joint Venture interest acquired March 11, 1981. Minority partner's
interest acquired March 1, 1982. The Partnership is now sole owner
of the property.
(2) Tenant improvements are depreciated on a straight-line basis over lives
of the respective leases.
(3) Retirements are cumulative since acquisition.
(4) For Federal income tax purposes, the basis of land, buildings and
improvements is $22,983,234.
(5) For Federal income tax purposes, the amount of accumulated depreciation
is $16,617,126.
A reconciliation of the carrying amount of real estate and accumulated
depreciation for the years ended December 31, 1997, 1996, and 1995 follows:
1997 1996 1995
Real estate investments:
Beginning of year $25,383,159 $25,423,462 $27,255,047
Additions _ 151,608 680,193
Deferred Rent Receivable _ 305,518 _
Prepaid Leasing Costs _ 292,085 _
Retirements (424,548) (789,514) (310,659)
Dispositions (2,483,306) _ (2,201,119)
End of year $22,475,305 $25,383,159 $25,423,462
Accumulated depreciation:
Beginning of year $10,534,868 $10,186,201 $10,314,488
Depreciation expense 520,953 1,138,181 1,275,580
Retirements (424,548) (789,514) (310,659)
Dispositions (910,399) _ (1,093,208)
End of year $ 9,720,874 $10,534,868 $10,186,201
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 February 2, 1998,
included in the 1997 Annual Report of Qualified 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 audit. 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 therein.
ERNST & YOUNG LLP
Boston, Massachusetts
February 2, 1998
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<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Dec-31-1997
<CASH> 1,023,370
<SECURITIES> 000
<RECEIVABLES> 439
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<OTHER-SE> 9,918,391
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