United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 1998
or
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Transition period from _____ to _____
Commission File Number: 0-10222
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, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3183
Registrant's Telephone Number, Including Area Code
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 ____
<PAGE>
2
<TABLE>
Consolidated Balance Sheets
<CAPTION>
At September 30, At December 31,
1998 1997
--------------- --------------
<S> <C> <C>
Assets Real estate at cost:
Land $ -- $ 1,348,365
Buildings and improvements -- 10,562,735
----------- -----------
-- 11,911,100
Less accumulated depreciation -- (6,516,375)
----------- -----------
-- 5,394,725
Real estate assets held for disposition 5,422,973 7,359,706
Cash and cash equivalents 2,046,117 1,023,370
Restricted cash 94,245 50,567
Prepaid expenses, net of accumulated
amortization of $132,997 in 1997 23,523 205,922
Rent and other receivables 4,675 439
Deferred rent receivable -- 113,664
----------- -----------
Total Assets $ 7,591,533 $14,148,393
=========== ===========
Liabilities and Partners' Capital (Deficit)
Liabilities:
Accounts payable and accrued expenses $ 172,561 $ 220,073
Due to affiliates 6,446 4,922
Security deposits payable -- 60,521
Mortgage note payable 3,858,090 3,930,621
----------- -----------
Total Liabilities 4,037,097 4,216,137
----------- -----------
Minority interest 17,951 13,865
----------- -----------
Partners' Capital (Deficit):
General Partners (992,372) (156,069)
Limited Partners (51,234 units outstanding) 4,528,857 10,074,460
----------- -----------
Total Partners' Capital 3,536,485 9,918,391
----------- -----------
Total Liabilities and Partners' Capital $ 7,591,533 $14,148,393
=========== ===========
</TABLE>
<TABLE>
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1998
<CAPTION>
General Limited
Partners Partners Total
--------- ------------ ------------
<S> <C> <C> <C>
Balance at December 31, 1997 $(156,069) $ 10,074,460 $ 9,918,391
Net income 79,288 7,849,548 7,928,836
Distributions (915,591) (13,395,151) (14,310,742)
--------- ------------ ------------
Balance at September 30, 1998 $(992,372) $ 4,528,857 $ 3,536,485
========= ============ ============
</TABLE>
<PAGE>
3
<TABLE>
Consolidated Statements of Operations
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Income
Rental $422,293 $798,121 $1,427,943 $2,364,941
Other 8,884 93,332 43,611 266,245
Interest 26,320 877 210,633 5,664
-------- -------- ---------- ----------
Total Income 457,497 892,330 1,682,187 2,636,850
-------- -------- ---------- ----------
Expenses
Property operating 237,533 541,871 741,427 1,530,186
Depreciation and amortization -- 140,644 285,572 423,118
Interest 101,711 104,173 307,035 314,234
General and administrative 104,528 51,125 245,171 169,785
-------- -------- ---------- ----------
Total Expenses 443,772 837,813 1,579,205 2,437,323
-------- -------- ---------- ----------
Income before minority
interest and gain on sale
of real estate 13,725 54,517 102,982 199,527
Minority interest (4,143) 1,714 (4,086) 4,764
-------- -------- ---------- ----------
Income before gain on sale
of real estate 9,582 56,231 98,896 204,291
Gain on sale of real estate -- -- 7,829,940 --
-------- -------- ---------- ----------
Net Income $ 9,582 $ 56,231 $7,928,836 $ 204,291
======== ======== ========== ==========
Net Income Allocated:
To the General Partners $ 96 $ 428 $ 79,288 $ 1,555
To the Limited Partners 9,486 55,803 7,849,548 202,736
-------- -------- ---------- ----------
$ 9,582 $ 56,231 $7,928,836 $ 204,291
======== ======== ========== ==========
Per limited partnership unit
(51,234 outstanding) $ .19 $ 1.09 $ 153.21 $ 3.96
----- ------ -------- ------
</TABLE>
<PAGE>
4
<TABLE>
Consolidated Statements of Cash Flows
For the nine months ended September 30,
<CAPTION>
1998 1997
------------ ---------
<S> <C> <C>
Cash Flows From Operating Activities
Net income $ 7,928,836 $ 204,291
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 285,572 423,118
Gain on sale of real estate (7,829,940) --
Minority interest in loss of consolidated venture 4,086 (4,764)
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Cash restricted (43,678) 167,465
Prepaid expenses (20,611) (43,246)
Rent and other receivables (4,236) (5,991)
Deferred rent receivable 7,546 12,931
Accounts payable and accrued expenses (44,280) (42,920)
Prepaid rent -- (15,212)
Due to affiliates 1,524 (6,711)
Security deposit payable (60,521) --
------------ ---------
Net cash provided by operating activities 224,298 688,961
------------ ---------
Cash Flows From Investing Activities
Proceeds from sale of real estate 15,223,030 --
Additions to real estate assets (41,308) --
------------ ---------
Net cash provided by investing activities 15,181,722 --
------------ ---------
Cash Flows From Financing Activities
Distributions paid to partners (14,310,742) (548,935)
Principal payments on mortgage note payable (72,531) (65,331)
------------ ---------
Net cash used for financing activities (14,383,273) (614,266)
------------ ---------
Net increase in cash and cash equivalents 1,022,747 74,695
Cash and cash equivalents, beginning of period 1,023,370 383,531
------------ ---------
Cash and cash equivalents, end of period $ 2,046,117 $ 458,226
============ =========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for interest $ 307,035 $ 314,234
------------ ---------
Prepaid rent - net of $3,232 included in accounts payable was classified to net
proceeds from sale of property.
Supplemental Disclosure of Non-Cash Investing Activities
Write-off of fully depreciated tenant improvements $ -- $ 346,039
------------ ---------
</TABLE>
Supplemental Disclosure of Non-Cash Operating Activities:
In connection with the General Partners' intent to sell the properties, real
estate held for investment, deferred rent receivable and prepaid leasing
commissions in the amounts of $5,135,464, $106,118, and $181,391, respectively,
were reclassified to "Real estate assets held for disposition" in 1998.
<PAGE>
5
Notes to the Consolidated Financial Statements
The unaudited consolidated financial statements should be read in conjunction
with Qualified Properties 80, L.P.'s (the "Partnership") annual 1997 audited
consolidated financial statements within Form 10-K.
The unaudited consolidated financial statements include all normal and
reoccurring adjustments which are, in the opinion of management, necessary to
present a fair statement of financial position as of September 30, 1998 and the
results of operations for the three and nine months ended September 30, 1998 and
1997, cash flows for the nine months ended September 30, 1998 and 1997, and the
statement of partners' capital (deficit) for the nine months ended September 30,
1998. Results of operations for the period are not necessarily indicative of the
results to be expected for the full year.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
The following significant events occurred subsequent to fiscal year 1997, which
require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5).
On February 2, 1998, the Partnership closed on the sale of Stevens Creek Office
Building (the "Property"). The Property was sold for net proceeds of $15,223,030
to an entity controlled by Invesco Realty Advisors, Inc. (the "Buyer"), a
Delaware Corporation unaffiliated with the Partnership. The selling price was
determined by arm's length negotiations between the Partnership and the Buyer.
The transaction resulted in a gain on sale of approximately $7.8 million, which
is reflected in the Partnership's statement of operations for the nine months
ended September 30, 1998.
The Partnership's remaining real estate assets, deferred rent receivable and
prepaid leasing costs were reclassified on the consolidated balance sheets at
September 30, 1998 to "Real estate assets held for disposition." Accordingly,
the Partnership has suspended depreciation and amortization in accordance with
the Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
<PAGE>
6
Part I, Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
On February 2, 1998 the sale of Stevens Creek Office Building was completed. The
property was sold for net proceeds of $15,223,030 and resulted in a gain on sale
of approximately $7.8 million, which is reflected in the Partnership's statement
of operations for the nine months ended September 30, 1998.
The Partnership has engaged real estate brokers to assist in selling the
Partnership's two remaining properties, 889 Ridgelake Office Building and 959
Ridgeway Office Building. It is currently anticipated that the properties will
be sold and the Partnership liquidated in 1999, however, 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. In view of the anticipated sale of the
properties in 1999, the Partnership's real estate has been recorded on the
Partnership's September 30, 1998 balance sheet as "Real estate assets held for
disposition."
The Partnership had cash and cash equivalents totaling $2,046,117 at September
30, 1998, compared to $1,023,370 at December 31, 1997. The increase is primarily
due to the receipt of net proceeds from the sale of Stevens Creek Office
Building, which, together with net cash flow from operating activities, exceeded
cash distributions and mortgage principal payments for the nine months ended
September 30, 1998.
Rent and other receivables totaled $4,675 at September 30, 1998, compared to
$439 at December 31, 1997. The increase primarily represents rent and escalation
income due from tenants at 889 Ridgelake Office Building. Security deposits
payable decreased from $60,521 at December 31, 1997 to $-0- at September 30,
1998, as a result of the sale of Stevens Creek Office Building.
Prepaid expenses totaled $23,523 at September 30, 1998, compared to $205,922 at
December 31, 1997. The decrease was primarily due to the sale of Stevens Creek
Office Building and the reclassification of the Partnership's real estate to
"Real estate assets held for disposition" as of September 30, 1998.
On April 7, 1998, the Partnership paid a special cash distribution to Limited
Partners from the net proceeds from the sale of Stevens Creek Office Building in
the amount of $261.45 per Unit to Unitholders of record as of April 1, 1998.
Results of Operations
For the three and nine months ended September 30, 1998, the Partnership's
operations resulted in net income of $9,582 and $7,928,836, respectively,
compared to net income of $56,321 and $204,291 for the corresponding periods in
1997. Net income for the 1998 nine-month period includes a gain on sale of real
estate in the amount of $7,829,940, resulting from the sale of Stevens Creek
Office Building. Excluding this gain, Partnership operations resulted in income
before gain on sale of real estate of $98,896 for the nine months ended
September 30, 1998 compared with $204,291 for the corresponding period in 1997.
The decrease is mainly due to a reduction in rental and other income partially
offset by an increase in interest income due to the sale of Swenson Business
Park Building A in November, 1997 and Stevens Creek Office Building in February,
1998.
<PAGE>
7
Primarily as a result of the sale of Swenson Business Park - Building A in
November 1997 and Stevens Creek Office Building in February 1998, the following
income and expense categories decreased in comparison to 1997: rental income,
other income and property operating expenses. Interest income totaled $26,320
and $210,633, respectively, for the three and nine months ended September 30,
1998, compared to $877 and $5,664 for the corresponding periods in 1997,
reflecting the Partnership's higher cash balances in 1998 as a result of the
sale of Swenson Business Park - Building A in November 1997 and Stevens Creek
Office Building in February 1998.
General and administrative expenses totaled $104,528 and $245,171 for the three
and nine months ended September 30, 1998, respectively, compared with $51,125
and $169,785 for the corresponding periods in 1997. The increase is primarily
attributable to higher legal expenses associated with the sale of Stevens Creek
Office Building, and to a lesser extent, an increase in Partnership
administrative expense.
As of September 30, 1998, lease levels at each of the Properties were as
follows: 959 Ridgeway Office Building - 63%; and 889 Ridgelake Office Building -
100%.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter ended September 30, 1998.
<PAGE>
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
QUALIFIED PROPERTIES 80, L.P.
BY: QP80 REAL ESTATE SERVICES, INC.
General Partner
Date: November 13, 1998 BY: /s/Michael T. Marron
Michael T. Marron
President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Sep-30-1998
<CASH> 2,140,362
<SECURITIES> 000
<RECEIVABLES> 4,675
<ALLOWANCES> 000
<INVENTORY> 000
<CURRENT-ASSETS> 2,168,560
<PP&E> 5,422,973
<DEPRECIATION> 000
<TOTAL-ASSETS> 7,591,533
<CURRENT-LIABILITIES> 179,007
<BONDS> 3,858,090
000
000
<COMMON> 000
<OTHER-SE> 3,536,485
<TOTAL-LIABILITY-AND-EQUITY> 7,591,533
<SALES> 1,427,943
<TOTAL-REVENUES> 1,682,187
<CGS> 000
<TOTAL-COSTS> 741,427
<OTHER-EXPENSES> 530,743
<LOSS-PROVISION> 000
<INTEREST-EXPENSE> 307,035
<INCOME-PRETAX> 98,896
<INCOME-TAX> 000
<INCOME-CONTINUING> 98,896
<DISCONTINUED> 000
<EXTRAORDINARY> 7,829,940
<CHANGES> 000
<NET-INCOME> 7,928,836
<EPS-PRIMARY> 153.21
<EPS-DILUTED> 153.21
</TABLE>
