<PAGE>
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 December 31, 1994
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 0-10878
Preferred Properties Fund 82
(Exact name of Registrant as specified in its charter)
California 94-2775846
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5665 Northside Drive N.W., Atlanta, Georgia 30328
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (404) 916-9090
N/A
Former name, former address and fiscal year, if changed since last report.
Indicate by check mark whether 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 / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a
court. Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date __________________.
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
December 31, September 30,
1994 1994
------------- -------------
(Unaudited) (Audited)
Assets
Cash and cash equivalents $ 3,781,000 $ 3,196,000
Restricted cash - 1,014,000
Accounts receivable, net 471,000 1,034,000
Inventories and operating supplies 74,000 327,000
Prepaid expenses and other assets 129,000 478,000
Note receivable from property sale 4,250,000 4,250,000
Real Estate:
Real estate 18,300,000 58,187,000
Accumulated depreciation (9,148,000) (20,039,000)
Allowance for impairment of value - (5,330,000)
------------- -------------
Real estate, net 9,152,000 32,818,000
Deferred costs, net 34,000 168,000
------------- -------------
Total assets $ 17,891,000 $ 43,285,000
============= =============
Liabilities and Partners' Equity
Notes payable $ 12,438,000 $ 33,679,000
Note payable to joint venture partner 518,000 529,000
Accrued interest, property taxes and other
liabilities 1,188,000 5,131,000
Accounts payable 210,000 748,000
------------- -------------
Total liabilities 14,354,000 40,087,000
------------- -------------
Minority interest in joint venture (171,000) (186,000)
------------- -------------
Commitments and Contingencies
Partners' Equity (Deficit):
General partners (5,097,000) (5,138,000)
Limited partners (58,400 units outstanding at
December 31, 1994 and September 30, 1994) 8,805,000 8,522,000
------------- -------------
Total partners' equity 3,708,000 3,384,000
------------- -------------
Total liabilities and partners' equity $ 17,891,000 $ 43,285,000
============= =============
See notes to consolidated financial statements.
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended
--------------------------
December 31, December 31,
1994 1993
------------- -------------
Revenues:
Room revenue $ 2,342,000 $ 3,452,000
Food and beverage revenues 1,224,000 2,112,000
Other operating revenues 206,000 442,000
Interest and other 145,000 120,000
Gain on sale of property 276,000 -
------------- -------------
Total revenues 4,193,000 6,126,000
------------- -------------
Expenses:
Room expense 610,000 946,000
Food and beverage expense 937,000 1,644,000
Other operating expense 1,506,000 2,424,000
Interest 424,000 551,000
Depreciation 263,000 266,000
General and administrative 77,000 94,000
Loss on disposition of property 37,000 -
------------- -------------
Total expenses 3,854,000 5,925,000
------------- -------------
Income before minority interest in
joint venture's operations 339,000 201,000
Minority interest in joint venture's
operations (15,000) (25,000)
------------- -------------
Net income $ 324,000 $ 176,000
============= =============
Net income per limited partnership unit $ 5 $ 3
============= =============
See notes to consolidated financial statements.
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
Consolidated Statement of Partners' Equity (Deficit) (Unaudited)
For the Three Months Ended December 31, 1994
General Limited Total
Partners' Partners' Partners'
(Deficit) Equity Equity
------------- ------------- -------------
Balance - October 1, 1994 $ (5,138,000) $ 8,522,000 $ 3,384,000
Net income 41,000 283,000 324,000
------------- ------------- -------------
Balance - December 31, 1994 $ (5,097,000) $ 8,805,000 $ 3,708,000
============= ============= =============
See notes to consolidated financial statements.
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended
--------------------------
December 31, December 31,
1994 1993
------------- -------------
Operating Activities:
Net income $ 324,000 $ 176,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 272,000 270,000
Minority interest in joint venture's operations 15,000 25,000
Gain on sale of property (276,000) -
Loss on disposition of property 37,000 -
Changes in operating assets and liabilities:
Accounts receivable 359,000 174,000
Inventories and operating supplies 26,000 (26,000)
Prepaid expenses and other assets 89,000 (201,000)
Accrued interest, property taxes, other
liabilities and accounts payable (578,000) 128,000
------------- -------------
Net cash provided by operating activities 268,000 546,000
------------- -------------
Investing Activities:
Net proceeds on sale of property 6,252,000 -
Additions to real estate (9,000) (604,000)
------------- -------------
Net cash provided by (used in) investing
activities 6,243,000 (604,000)
------------- -------------
Financing Activities:
Satisfaction of notes payable (5,858,000) -
Notes payable principal payments (68,000) (70,000)
------------- -------------
Cash (used in) financing activities (5,926,000) (70,000)
------------- -------------
Increase (Decrease) in Cash and Cash Equivalents 585,000 (128,000)
Cash and Cash Equivalents at Beginning of Period 3,196,000 3,377,000
------------- -------------
Cash and Cash Equivalents at End of Period $ 3,781,000 $ 3,249,000
============= =============
Supplemental Disclosure of Cash Flow Information:
Interest paid in cash during the period $ 415,000 $ 575,000
============= =============
Supplemental Disclosure of Non-Cash Investing and
Financing Activities:
Deed in lieu of foreclosure - Denver Hilton Inn - See Note 5(b).
See notes to consolidated financial statements.
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements, footnotes and
discussions should be read in conjunction with the consolidated financial
statements, related footnotes and discussions contained in the Partnership's
Annual Report for the year ended September 30, 1994. Certain accounts have
been reclassified in order to conform to the current period.
The financial information contained herein is unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial information have been included. All adjustments are of a normal
recurring nature, except as discussed in Note 5.
The results of operations for the three months ended December 31, 1994 and
1993 are not necessarily indicative of the results to be expected for the
full year.
2. Transactions with Related Parties
An affiliate of the Managing General Partner received reimbursement of
administrative expenses amounting to $50,000 during the three months ended
December 31, 1994. These reimbursements are included in general and
administrative expenses.
3. Allowance for Impairment of Value
The allowance for impairment of value of $5,330,000 at September 30, 1994
consisted of $2,283,000 on the Denver Hilton Inn - South in fiscal year 1988
and $3,047,000 on the Holiday Inn Marin - San Rafael during fiscal year
1993. As of December 31, 1994 both properties have been disposed
(see Note 5).
4. Contingency and Commitment
Cash and cash equivalents at September 30, 1994 consisted of approximately
$1,014,000 that was controlled by the Receiver of the Denver Hilton Inn.
These funds were not available to pay expenses of the Partnership or
expenses applicable to other properties (see Note 5(b)).
On October 21, 1994, the Partnership executed an option agreement to sell
its joint venture interest in the Cleveland Marriott to an affiliate of its
joint venture partner for $6,000,000 plus 65% of working capital in excess
of $1,550,000. Based on current projections, it does not appear that there
will be any excess working capital. If the option is not exercised prior to
June 15, 1995, the joint venture partner has agreed to waive its right of
first refusal and the joint venture partner's affiliated management company
has agreed to waive its termination fee. If the sale is consummated, the
Partnership, for financial statement purposes, would recognize a substantial
gain on sale.
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Disposition of Hotel Properties
a) On December 1, 1994, the Holiday Inn was sold for $6,900,000. After
repayment of the existing loan of $5,858,000 and closing expenses and
adjustments, net proceeds received by the Partnership were $394,000. For
financial statement purposes, the sale resulted in a gain of $276,000. A
provision for impairment of value of $3,047,000 was previously
recorded on this property.
b) In May 1994,a Receiver was appointed to administer the affair of the
Denver Hilton Inn. On December 14, 1994, the Partnership conveyed the
Denver Hilton Inn to the lender's nominee by deed in lieu of foreclosure
in exchange for a full release of the Partnership's obligations. For
financial statement purposes, the conveyance resulted in a loss on
disposition of property of $37,000. A provision for impairment of value
of $2,283,000 was previously recorded on this property.
7 of 14
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
This item should be read in conjunction with the Consolidated Financial
Statements and other Items contained elsewhere in this Report.
Liquidity and Capital Resources
Registrant's remaining property is a hotel. Registrant receives hotel operating
revenues and is responsible for operating expenses, administrative expenses,
capital improvements and debt service payments.
Registrant uses working capital reserves provided from any undistributed cash
flow from operations as its primary source of liquidity along with cash reserves
and proceeds from the Amfac Hotel insurance claim and subsequent sale. In order
to preserve working capital reserves required for necessary capital improvements
to the property and provide resources for potential debt modifications, cash
distributions from operations remained suspended during the three months of
fiscal year 1995. It is expected that cash distributions will continue to be
suspended until the disposition of the Cleveland Marriott.
The level of liquidity based upon cash and cash equivalents experienced a
$585,000 increase at December 31, 1994, as compared to September 30, 1994.
Registrant's $6,243,000 of net cash from investing activities and $268,000 of
net cash from operating activities were substantially offset by $5,926,000 of
cash used in financing activities. Cash from investing activities increased due
to net proceeds from the sale of the Holiday Inn Marin which was slightly offset
by additions to real estate at Registrant's remaining property. Cash used in
financing activities consisted of the satisfaction of the $5,858,000 mortgage
encumbering the Holiday Inn Marin and $68,000 of notes payable principal
payments. All other increases (decreases) in certain assets and liabilities are
the result of the timing of receipt and payment of various operating
activities. Registrant has agreed to spend approximately $1,000,000 for capital
improvements at its remaining property. Registrant's joint venture partner has
agreed to reimburse Registrant for its pro rata share of such expenditures.
Working capital reserves are invested in a money market account, U.S. Treasury
bills or in repurchase agreements secured by United States Treasury
obligations. As of December 31, 1994, Registrant had $1,700,000 invested in
overnight repurchase agreements at 5.25% per annum. The Managing General
Partner believes that, if market conditions remain relatively stable, cash flow
from operations, when combined with working capital reserves, would be
sufficient to fund required capital improvements and regular debt service
payments for the Cleveland Marriott in the foreseeable future. On October 21,
1994, Registrant executed an option agreement to sell its joint venture interest
in the Cleveland Marriott to an affiliate of its joint venture partner for
$6,000,000 plus 65% of working capital in excess of $1,550,000. Based on
current projections, it does not appear that there will be any excess working
capital. If the option is not exercised prior to June 15, 1995, the joint
venture partner has agreed to waive its right of first refusal and the joint
venture partner's affiliated management company has agreed to waive its
termination fee. If the sale is consummated, Registrant, for financial
statement purposes, would recognize a substantial gain on the sale.
8 of 14
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (Continued)
On December 1, 1994, the Holiday Inn was sold for $6,900,000. After repayment
of the existing loan of $5,858,000 and closing expenses and adjustments, net
proceeds received by Registrant were $394,000. For financial statement
purposes, the sale resulted in a gain of $276,000. A provision for impairment
of value of $3,047,000 was previously recorded on this property.
On December 14, 1994, Registrant conveyed the Denver Hilton Inn to the lender's
nominee by deed in lieu of foreclosure in exchange for a full release of
Registrant's obligations. For financial statement purposes, the conveyance
resulted in a loss on property of $37,000. A provision for impairment of value
of $2,283,000 was previously recorded on this property.
At this time, it appears that the investment objective of capital growth will
not be attained and that a significant portion of invested capital will not be
returned to investors. The extent to which invested capital is returned to
investors is dependent upon the success of the performance of Registrant's
remaining property and the market in which the property is located and on the
eventual sales price of the remaining property.
Real Estate Market
The income and expenses of operating the property owned by Registrant are
subject to factors outside of Registrant's control, such as over-supply of
similar properties resulting from over-building, increases in unemployment,
population shifts, or changes in patterns or needs of users. Expenses, such as
local real estate taxes and miscellaneous expenses, are subject to change and
cannot always be reflected in room rate increases due to market conditions. In
addition, there are risks inherent in owning and operating a lodging facility
because the property is management and labor intensive and is especially
susceptible to the impact of economic and other conditions outside the control
of Registrant.
There have been, and it is possible there may be other Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. Registrant is unable to predict the extent, if any, to which such
new legislation or regulations might occur and the degree to which such existing
or new legislation or regulations might adversely affect the property still
owned by Registrant.
Results of Operations
Three Months Ended December 31, 1994 vs. December 31, 1993
Operating results (before minority interest in joint venture's operations)
improved by $138,000 for the three months ended December 31, 1994, as compared
to 1993, due to decreases in revenues of $1,933,000 and in expenses of
$2,071,000. With respect to the remaining property, operating results improved
by $83,000 for the three months ended December 31, 1994, as compared to 1993,
due to an increase in revenues of $194,000 and in expenses of $111,000.
9 of 14
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Three Months Ended December 31, 1994 vs. December 31, 1993 (Continued)
The increase in revenues for the three months ended December 31, 1994, as
compared to 1993, with respect to the remaining property, is due to increases of
$168,000 in room, food and beverage and other revenues and $26,000 in interest
income. Room revenue increased due to higher room rates, which was partially
offset by a decrease in occupancy. Interest income increased due to an increase
in average working capital reserves available for investment and the effect of
higher interest rates.
The increase in expenses for the three months ended December 31, 1994, as
compared to 1993, with respect to the remaining property, is due to increases of
$110,000 in food and beverage and other operating expenses and $21,000 in
interest expense, which was partially offset by decreases of $3,000 in
depreciation expense and $17,000 in general and administrative expenses. Food
and beverage and other operating expenses increased due to increased costs
associated with operations. Interest expense increased due to an understatement
of expense in the 1993 comparative period. Depreciation expense remained
relatively constant. General and administrative expenses decreased primarily
due to a reduction in asset management costs.
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Properties
A description of the hotel properties in which Registrant has an ownership
interest during the period covered by this Report, together with occupancy and
room rate data, follows:
PREFERRED PROPERTIES FUND 82
OCCUPANCY AND ROOM RATE SUMMARY
Average Average
Occupancy Rate (%) Daily Room Rate ($)
------------------ -------------------
Three months Three months
Date Ended Ended
of December 31, December 31,
Name and Location Rooms Purchase 1994 1993 1994 1993
- - - ----------------- ----- -------- ---- ---- ---- ----
Cleveland Marriott
Inn - Airport
Cleveland, Ohio 379 09/83 61 66 85.68 72.49
Denver Hilton
Inn-South (1)
Englewood, Colorado 306 12/83 - 56 - 68.25
Holiday Inn Marin -
San Rafael (2)
San Rafael, California 227 06/84 - 60 - 60.44
(1) Property was conveyed by deed in lieu of foreclosure on December 14, 1994.
(2) Property was sold on December 1, 1994.
11 of 14
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit:
10.1 Earnest Money Contract between Registrant and Bedrock Marin
Investment Partners Level I, L.P. (incorporated by reference
to Registrant's Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 14, 1994).
(b) Reports on Form 8-K:
On October 12, 1994, a Current Report on Form 8-K was filed with the
Securities and Exchange Commission to provide for the sale by National
Property Investors, Inc. ("NPI"), the parent of NPI Equity Investments
II, Inc., of one-third of its stock to an affiliate of Apollo Real Estate
Advisors, L.P.
On December 1, 1994, a Current Report on Form 8-K was filed with the
Securities and Exchange Commission to provide for the sale of the Holiday Inn
Marin - San Rafael to Bedrock Marin Investment Partners Level I, L.P.
On December 14, 1994, a Current Report on Form 8-K was filed with the
Securities and Exchange Commission to account for the conveyance of the Denver
Hilton Inn by deed in lieu of foreclosure to the mortgage lenders' nominee.
No other reports on Form 8-K were filed during the period covered by this
Report.
12 of 14
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
SIGNATURE
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.
PREFERRED PROPERTIES FUND 82
By: MONTGOMERY REALTY COMPANY 80,
A California General Partnership,
its general partner
By: FOX REALTY INVESTORS,
A California General Partnership,
its managing general partner
By: NPI Equity Investments II, Inc.,
A Florida Corporation,
its managing partner
/S/ARTHUR N. QUELER
ARTHUR N. QUELER
Executive Vice President, Treasurer, Secretary
and Director (Principal Financial and Accounting
Officer)
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PREFERRED PROPERTIES FUND 82 - FORM 10-Q - DECEMBER 31, 1994
EXHIBIT INDEX
Exhibit Page No.
10.1 Earnest Money Contract between Registrant and
Bedrock Marin Investment Partners Level I, L.P. *
___________________________________
* Incorporated by reference to Registrant's Current Report on Form 8-K
filed with the Securities and Exchange Commission on December 14, 1994.
14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Preferred
Properties Fund 82 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,781,000
<SECURITIES> 0
<RECEIVABLES> 471,000
<ALLOWANCES> 0
<INVENTORY> 74,000
<CURRENT-ASSETS> 0
<PP&E> 18,300,000
<DEPRECIATION> (9,148,000)
<TOTAL-ASSETS> 17,891,000
<CURRENT-LIABILITIES> 0
<BONDS> 12,956,000 <F1>
<COMMON> 0
0
0
<OTHER-SE> 3,708,000
<TOTAL-LIABILITY-AND-EQUITY> 17,891,000
<SALES> 1,224,000
<TOTAL-REVENUES> 4,048,000
<CGS> 937,000
<TOTAL-COSTS> 3,353,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 424,000
<INCOME-PRETAX> 324,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 324,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 324,000
<EPS-PRIMARY> 5
<EPS-DILUTED> 5
<FN>
<F1>
Bonds include note payable to related party of $518,000.
</FN>
</TABLE>
