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 March 31, 1995
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., Ste. 370, 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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1 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
March 31, September 30,
1995 1994
(Unaudited) (Audited)
Assets
Cash and cash equivalents $ 3,255,000 $ 3,196,000
Restricted cash - 1,014,000
Accounts receivable, net 569,000 1,034,000
Inventories and operating supplies 81,000 327,000
Prepaid expenses and other assets 184,000 478,000
Note receivable from property sale 4,250,000 4,250,000
Real Estate:
Real estate 18,703,000 58,187,000
Accumulated depreciation (9,411,000) (20,039,000)
Allowance for impairment of value - (5,330,000)
----------- -----------
Real estate, net 9,292,000 32,818,000
Deferred costs, net 30,000 168,000
----------- -----------
Total assets $17,661,000 $43,285,000
=========== ===========
Liabilities and Partners' Equity
Notes payable $12,393,000 $33,679,000
Note payable to joint venture partner 511,000 529,000
Accrued interest, property taxes and other
liabilities 1,096,000 5,131,000
Accounts payable 273,000 748,000
----------- -----------
Total liabilities 14,273,000 40,087,000
----------- -----------
Minority interest in joint venture (237,000) (186,000)
----------- -----------
Commitments and Contingencies
Partners' Equity (Deficit):
General partners (5,105,000) (5,138,000)
Limited partners (58,400 units outstanding at
March 31, 1995 and September 30, 1994) 8,730,000 8,522,000
----------- -----------
Total partners' equity 3,625,000 3,384,000
----------- -----------
Total liabilities and partners' equity $17,661,000 $43,285,000
=========== ===========
See notes to consolidated financial statements.
2 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
Consolidated Statements of Operations (Unaudited)
For the Six Months Ended
March 31, 1995 March 31, 1994
Revenues:
Room revenue $4,178,000 $7,128,000
Food and beverage revenues 2,028,000 3,890,000
Other operating revenues 370,000 723,000
Interest income 267,000 245,000
Gain on sale of property 168,000 -
---------- -----------
Total revenues 7,011,000 11,986,000
---------- -----------
Expenses:
Room expense 1,050,000 2,020,000
Food and beverage expense 1,567,000 3,125,000
Other operating expenses 2,673,000 4,791,000
Interest 779,000 1,143,000
Depreciation 527,000 530,000
General and administrative 132,000 239,000
Loss on disposition of property 37,000 -
---------- -----------
Total expenses 6,765,000 11,848,000
---------- -----------
Income before minority interest in joint venture's
operations 246,000 138,000
Minority interest in joint venture's operations (5,000) 25,000
---------- -----------
Net income $ 241,000 $ 163,000
========== ===========
Net income per limited partnership unit $ 4 $ 2
========== ===========
See notes to consolidated financial statements.
3 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended
March 31, 1995 March 31, 1994
Revenues:
Room revenue $1,836,000 $3,676,000
Food and beverage revenues 804,000 1,778,000
Other operating revenues 164,000 281,000
Interest income 122,000 125,000
Adjustment to gain on sale of property (108,000) -
---------- -----------
Total revenues 2,818,000 5,860,000
---------- -----------
Expenses:
Room expense 440,000 1,074,000
Food and beverage expenses 630,000 1,481,000
Other operating expense 1,167,000 2,367,000
Interest 355,000 592,000
Depreciation 264,000 264,000
General and administrative 55,000 145,000
---------- -----------
Total expenses 2,911,000 5,923,000
---------- -----------
Loss before minority interest in joint venture's
operations (93,000) (63,000)
Minority interest in joint venture's operations 10,000 50,000
---------- -----------
Net loss $ (83,000) $ (13,000)
========== ===========
Net loss per limited partnership unit $ (1) $ -
========== ===========
See notes to consolidated financial statements.
4 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
Consolidated Statements of Partners' Equity (Unaudited)
For the Six Months Ended March 31, 1995
General Limited Total
partners' partners' partners'
(deficit) equity equity
Balance - October 1, 1994 $(5,138,000) $8,522,000 $3,384,000
Net income 33,000 208,000 241,000
----------- ---------- ----------
Balance - March 31, 1995 $(5,105,000) $8,730,000 $3,625,000
=========== ========== ==========
See notes to consolidated financial statements.
5 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended
March 31, 1995 March 31, 1994
Operating Activities:
Net income $ 241,000 $ 163,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 540,000 566,000
Minority interest in joint venture's operations 5,000 (25,000)
Gain on sale of property (168,000) -
Loss on disposition of property 37,000 -
Changes in operating assets and liabilities:
Accounts receivable 261,000 313,000
Inventories and operating supplies 19,000 4,000
Prepaid expenses and other assets 34,000 (454,000)
Accrued interest, property taxes, other
liabilities and accounts payable (567,000) 620,000
--------- ----------
Net cash provided by operating activities 402,000 1,187,000
--------- ----------
Investing Activities:
Net proceeds on sale of property 6,104,000 -
Additions to real estate (413,000) (822,000)
--------- ----------
Net cash provided by (used in) investing activities 5,691,000 (822,000)
--------- ----------
Financing Activities:
Satisfaction of notes payable (5,858,000) -
Notes payable principal payments (120,000) (129,000)
Joint venture partner distributions (56,000) -
--------- ----------
Cash (used in) financing activities (6,034,000) (129,000)
--------- ----------
Increase in Cash and Cash Equivalents 59,000 236,000
Cash and Cash Equivalents at Beginning of Period 3,196,000 3,377,000
--------- ----------
Cash and Cash Equivalents at End of Period $3,255,000 $3,613,000
========== ==========
Supplemental Disclosure of Cash Flow Information:
Interest paid in cash during the period $ 776,000 $1,077,000
========== ==========
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Deed in lieu of foreclosure - Denver Hilton Inn - See Note 4(b).
See notes to consolidated financial statements.
6 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
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.
The financial information contained herein is unaudited. In the opinion of
management, however, 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 4.
At March 31, 1995, the Partnership had approximately $1,634,000 invested in
overnight repurchase agreements earning approximately 6% per annum.
The results of operations for the six and three months ended March 31, 1995 and
1994 are not necessarily indicative of the results to be expected for the full
year.
2. Transactions with Related Parties
An affiliate of MGP received reimbursement of administrative expenses amounting
to $86,000 and $33,000 during the six months ended March 31, 1995 and 1994,
respectively. These reimbursements are included in general and administrative
expenses.
3. Contingency and Commitment
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.
4. 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 $246,000. For
financial statement purposes, the sale resulted in a gain of $168,000. 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 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
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 65% joint venture interest in 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 and cash reserves as its primary source of liquidity. 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
six months of fiscal year 1995. It is expected that cash distributions will
continue to be suspended until the disposition of Registrant's remaining asset.
The level of liquidity based upon cash and cash equivalents experienced a
$59,000 increase at March 31, 1995, as compared to September 30, 1994.
Registrant's $5,691,000 of net cash from investing activities and $402,000 of
net cash from operating activities were substantially offset by $6,034,000 of
cash used in financing activities. Cash from investing activities consisted of
proceeds from the sale of the Holiday Inn Marin which was only 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, $120,000 of notes payable principal payments
and $56,000 of joint venture partner distributions. Registrant has spent
approximately $400,000 of the $1,000,000 it has budgeted for capital
improvements at its remaining property. All other increases (decreases) in
certain assets and liabilities are the result of the timing of receipt and
payment of various operating activities.
Working capital reserves are invested in a money market account, U.S. Treasury
bills or in repurchase agreements secured by United States Treasury obligations
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.
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
8 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources (Continued)
$246,000. For financial statement purposes, the sale resulted in a gain of
$168,000. A provision for impairment of value of $3,047,000 was previously
recorded on this property.
Registrant's investment objective of capital growth will not be attained. As a
result, 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
Six Months Ended March 31, 1995 vs. March 31, 1994
Operating results, before minority interest in joint venture's operations,
improved by $108,000 for the six months ended March 31, 1995, as compared to
1994, due to decreases in revenues of $4,975,000 and in expenses of $5,083,000.
Revenues and expenses decreased due to the sale of the Holiday Inn property and
the disposition of the Denver Hilton property. With respect to the remaining
property, operating results improved by $283,000 for the six months ended March
31, 1995, as compared to 1994, due to an increase in revenues of $352,000 and in
expenses of $69,000.
9 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Six Months Ended March 31, 1995 vs. March 31, 1994 (Continued)
With respect to the remaining property, revenues increased by $352,000 due to
increases in room revenue of $300,000, other revenues of $48,000 and interest
income of $26,000, which were slightly offset by a decrease in food and beverage
revenue of $22,000. Room and other revenues increased due to higher room rates,
which was only partially offset by a decrease in occupancy. Food and beverage
revenues decreased slightly due to the decreased occupancy. Interest income
increased primarily due to the effect of higher interest rates.
With respect to the remaining property, expenses increased by $178,000 due to
increases of $145,000 in room, food and beverage and other operating expenses
and $33,000 in interest expense. Room, food and beverage and other expenses
increased due to increased costs associated with operations. Interest expense
increased due to an understatement of expense in the prior year comparative
period. Depreciation expense remained relatively constant. General and
administrative expenses decreased by $107,000 due to a reduction in asset
management costs, relating to the disposition of two hotels.
Three Months Ended March 31, 1995 vs. March 31, 1994
Operating results, before minority interest in joint venture's operations,
declined by $30,000 for the three months ended March 31, 1995, as compared to
1994, due to decreases in revenues of $3,042,000 and in expenses of $3,012,000.
Revenues and expenses decreased due to the sale of the Holiday Inn property and
the disposition of the Denver Hilton property. With respect to the remaining
property, operating results improved by $200,000 for the three months ended
March 31, 1995, as compared to 1994, due to an increase in revenues of $158,000
and a decrease in expenses of $42,000.
With respect to the remaining property, revenues increased by $158,000 due to an
increase in room revenue of $152,000 and other revenues of $22,000, which were
slightly offset by a decrease in food and beverage revenue of $16,000. Room and
other revenues increased due to higher room rates, which was only partially
offset by a decrease in occupancy. Food and beverage revenues decreased slightly
due to the decreased occupancy. Interest income remained relatively constant.
With respect to the remaining property, expenses increased by $48,000 due to
increases of $35,000 in room, food and beverage and other operating expenses,
$12,000 in interest expense and $1,000 in depreciation expense. Room, food and
beverage and other expenses increased due to increased costs associated with
operations. Interest expense increased due to an understatement of expense in
the prior comparative period. Depreciation expense remained relatively
constant. General and administrative expenses decreased by $90,000 due to a
reduction in asset management costs.
10 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Properties
A description of the hotel properties in which Registrant has an ownership
interest during the period covered by this report, together with occupancy and
room rate data, follows:
PREFERRED PROPERTIES FUND 82
OCCUPANCY AND ROOM RATE SUMMARY
Average Average
Occupancy Rate (%) Daily Room Rate ($)
Six Three Six Three
Months Months Months Months
Date Ended Ended Ended Ended
of March 31, March 31, March 31, March 31,
Name and Location Rooms Purchase 1995 1994 1995 1994 1995 1994 1995 1994
- ----------------- ----- -------- ---------- ---------- ---------- ----------
Cleveland
Marriott Inn -
Airport
Cleveland, Ohio 379 09/83 60 70 58 74 87.39 73.88 89.09 75.26
Denver Hilton
Inn-South(1)
Englewood,
Colorado 306 12/83 - 59 - 62 - 69.26 - 70.27
Holiday Inn
Marin -(2)
San Rafael
San Rafael,
California 227 06/84 - 65 - 70 - 59.23 - 58.02
(1) Property was conveyed by deed in lieu of foreclosure on December 14, 1994.
(2) Property was sold on December 1, 1994.
11 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
No report on Form 8-K was required to be filed during the period
covered by this Report.
12 of 13
PREFERRED PROPERTIES FUND 82 - FORM 10-Q - MARCH 31, 1995
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,
its general partner
By: FOX REALTY INVESTORS,
its managing general partner
By: NPI EQUITY INVESTMENTS II, INC.
its managing partner
------------------------------------------
ARTHUR N. QUELER
Secretary/Treasurer and Director
(Principal Financial Officer)
13 of 13
<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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 3,255,000
<SECURITIES> 0
<RECEIVABLES> 569,000
<ALLOWANCES> 0
<INVENTORY> 81,000
<CURRENT-ASSETS> 0
<PP&E> 18,703,000
<DEPRECIATION> (9,411,000)
<TOTAL-ASSETS> 17,661,000
<CURRENT-LIABILITIES> 0
<BONDS> 12,904,000 <F1>
<COMMON> 0
0
0
<OTHER-SE> 3,625,000
<TOTAL-LIABILITY-AND-EQUITY> 17,661,000
<SALES> 0
<TOTAL-REVENUES> 6,744,000
<CGS> 0
<TOTAL-COSTS> 5,854,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 779,000
<INCOME-PRETAX> 241,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 241,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241,000
<EPS-PRIMARY> 4
<EPS-DILUTED> 4
<FN>
<F1> Bonds include note payable to related party of $511,000.
</FN>
</TABLE>
