SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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 No. 0-13556
Cluster Housing Properties
(A California Limited Partnership)
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 04-2817478
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(State or other jurisdiction of (I.R.S. Employer incorporation
or organization) Identification No.)
5110 Langdale Way, Colorado Springs CO 80906
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(Address of principal executive offices) (Zip Code)
(719) 576-5122
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 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 ___
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<PAGE>
<TABLE>
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------
ASSETS
September 30
1997 December 31,
(Unaudited) 1996
Property, at cost:
<S> <C> <C>
Land $3,677,028 $3,677,028
Buildings and improvements 14,067,756 14,067,757
Equipment, furnishings and fixtures 1,811,930 1,576,836
---------------- -----------------
19,556,714 19,321,621
Less accumulated depreciation (5,123,653) (4,810,314)
---------------- -----------------
14,433,061 14,511,307
Cash and cash equivalents 691,777 1,065,855
Real estate tax escrows 55,667 41,632
Deposits 4,993 3,818
Accounts receivable 1,643 2,605
Deferred expenses, net of accumulated
amortization of $194,491 and $175,041 - 19,450
---------------- -----------------
Total assets $15,187,141 $15,644,667
================ =================
LIABILITIES AND PARTNERS' EQUITY
<S> <C> <C>
Mortgage notes payable $8,450,031 $8,559,930
Accounts payable 212,892 115,410
Accrued expenses 166,122 195,794
Due to affiliates (Note 7) 5,429 8,975
Rents received in advance - 4,538
Tenant security deposits 63,706 55,320
---------------- -----------------
Total liabilities 8,898,180 8,939,967
General Partners equity (193,533) (192,294)
Limited Partners equity 6,482,495 6,896,994
---------------- -----------------
Total liabilities and partners' equity $15,187,141 $15,644,667
================ =================
<PAGE>
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
---- ---- ---- ----
Revenue:
<S> <C> <C> <C> <C>
Rental income $612,106 $620,167 $1,895,970 $1,988,215
Interest Income 8,462 10,071 29,064 43,005
------------- --------------- ---------------- -----------------
Total Revenue 620,568 630,238 1,925,034 2,031,220
Expenses:
Operations 372,008 312,323 955,597 885,905
Interest expense 200,837 196,534 590,019 592,010
Depreciation and amortization 117,228 104,521 332,789 313,228
General and administrative 54,437 87,866 170,579 295,991
------------- --------------- ---------------- -----------------
Total Expenses 744,510 701,244 2,048,984 2,087,134
------------- --------------- ---------------- -----------------
Net income (loss) ($123,942) ($71,006) ($123,950) ($55,914)
============= =============== ================ =================
Net income (loss) allocated to:
General Partners ($1,239) ($710) ($1,240) ($559)
Per unit Net income (loss) allocated
to
Investor Limited Partner interest:
32,421 units ($3.78) ($2.17) ($3.78) ($1.71)
issued
<PAGE>
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
-------------
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1995 ($170,140) $7,461,041 $7,290,901
Minority interest absorbed - (8,895) (8,895)
Cash distributions (20,476) (389,052) (409,528)
Net Income (1,678) (166,100) (167,778)
--------------- ---------------- -----------------
Balance at December 31, 1996 ($192,294) $6,896,994 $6,704,700
Cash distributions - (291,789) (291,789)
Net income (1,240) (122,711) (123,950)
--------------- ---------------- -----------------
Balance at September 30, 1997 ($193,533) $6,482,495 $6,288,961
=============== ================ =================
<PAGE>
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30
Cash flows from operating activities: 1997 1996
---- ----
<S> <C> <C>
Interest received $29,064 $64,613
Cash received from rental income 1,900,718 1,980,606
General and administrative expenses (203,874) (326,839)
Operations expense (872,010) (830,475)
Interest paid (591,194) (593,482)
---------------- -----------------
Net cash provided by operating activities 262,704 294,423
Cash flows from investing activities:
Purchase of fixed assets (235,094) (164,643)
Cash received from short-term investments - 237,802
---------------- -----------------
Net cash provided by investing activities (235,094) 73,159
Cash flows from financing activities:
Distributions to partners (291,789) (291,789)
Deposits - (3,025)
Principal payments on mortgage notes payable (109,899) (100,349)
---------------- -----------------
Net cash used by financing activities (401,688) (395,163)
---------------- -----------------
Net increase (decrease) in cash and cash equivalents (374,078) (27,581)
Cash and cash equivalents at beginning of the period 1,065,855 480,389
---------------- -----------------
Cash and cash equivalents at end of the period $691,777 $452,808
================ =================
<PAGE>
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------
Reconciliation of net income (loss) to net cash provided by operating
activities:
Nine Months Ended
September 30
1997 1996
---- ----
<S> <C> <C>
Net income (loss) ($123,950) ($55,914)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 332,789 313,228
Change in assets and liabilities net of effects
of investing and financing activities:
Decrease in real estate tax escrows (14,035) (35,540)
(Increase) decrease in accounts and interest receivable 962 19,639
(Increase) decrease in deposits and prepaid expenses (1,175) (900)
Increase (decrease) in accounts payable and accrued expenses 66,910 83,604
Increase (decrease) in due to (3,545) (22,085)
affiliates
Decrease in rent received in advance (3,638) (10,495)
Increase in tenant security deposits 8,386 2,886
---------------- -----------------
Net cash provided by operating activities $262,704 $294,423
================ =================
</TABLE>
<PAGE>
CLUSTER HOUSING PROPERTIES
(A California Limited Partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. Organization of Partnership:
Cluster Housing Properties (a California Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Cluster Housing Properties, was formed
on August 8, 1983. The Partnership issued all of the General Partnership
Interests to three General Partners in exchange for capital contributions
aggregating $2,000. Stephen B. Boyle and GP L'Auberge Communities, L.P., (a
California Limited Partnership), formerly Berry and Boyle Management, are the
General Partners. In September, 1995, with the consent of Limited Partners
holding a majority of the outstanding Units, as well as the consent of the
mortgage lenders for the Partnership's three properties, Richard G. Berry
resigned as a general partner of the Partnership.
A total of 2,000 individual Limited Partners owning 32,421 units have
contributed $16,210,500 of capital to the Partnership. At September 30, 1997,
the total number of Limited Partners was 1,917. Except under certain limited
circumstances, as defined in the Partnership Agreement, the General Partners are
not required to make any additional capital contributions. The General Partners
or their affiliates will receive various fees for services and reimbursement for
various organizational and selling costs incurred on behalf of the Partnership.
The accompanying consolidated financial statements present the activity of the
Partnership for the nine months ended September 30, 1997 and 1996.
The Partnership will continue until December 31, 2010, unless terminated earlier
by the sale of all, or substantially all, of the assets of the Partnership, or
otherwise in accordance with the provisions of Section 16 of the Partnership
Agreement.
2. Significant Accounting Policies:
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its properties: Sin Vacas, Pinecliff and Villa Antigua.
All intercompany accounts and transactions have been eliminated in
consolidation. The Partnership follows the accrual basis of accounting.
B. Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. It
is the Partnership's policy to invest cash in income-producing
temporary cash investments. The Partnership mitigates any potential
risk from such concentration of credit by placing investments with high
quality financial institutions.
C. Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts 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.
D. Depreciation
Depreciation is provided for by the use of the straight-line method
over estimated useful lives as follows:
Buildings and improvements 39-40 years
Equipment, furnishings and fixtures 5-15 years
E. Deferred Expenses
Costs of obtaining the mortgages on the properties are being amortized
over the term of the related mortgage notes payable using the
straight-line method. Fees paid to certain of the property developers
were amortized over the term of the services provided using the
straight-line method. Any unamortized costs remaining at the date of a
refinancing are expensed in the year of refinancing.
F. Income Taxes
The Partnership is not liable for Federal or state income taxes because
Partnership income or loss is allocated to the Partners for income tax
purposes. If the Partnership's tax returns are examined by the Internal
Revenue Service or state taxing authority and such an examination
results in a change in Partnership taxable income (loss), such change
will be reported to the Partners.
G. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
H. Long-Lived Assets
The Partnership's long-lived assets include property and equipment and
deferred expenses. The Partnership evaluates rental properties for
impairment when conditions exist which may indicate that it is probable
that the sum of expected future cash flows (undiscounted) from rental
properties is less than its carrying value. Upon determination that a
permanent impairment has occurred, rental properties are reduced to
fair value. For the year ended December 31, 1996 and the quarter ended
June 30, 1997, permanent impairment conditions did not exist at any of
the Partnership's properties.
3. Cash and Cash Equivalents:
Cash and cash equivalents at September 30, 1997, and December 31, 1996,
consisted of the following:
1997 1996
---------- ----------
Cash on hand ............................. $ 158,161 $ 854,769
Certificate of deposit ................... 211,086
Money market account ..................... 533,616
---------- ----------
$ 691,777 $1,065,855
<PAGE>
4. Joint Venture and Property Acquisitions:
The Partnership has invested in three properties located in Scottsdale and
Tucson, Arizona and Colorado Springs, Colorado. The success of the Partnership
will depend upon factors which are difficult to predict including general
economic and real estate market conditions, both on a national basis and in the
areas where the Partnership's investments are located.
Sin Vacas
On October 25, 1985, the Partnership acquired a majority interest in the Sin
Vacas Joint Venture, which owns, and operates the Villas at Sin Vacas, a 72-unit
residential property located in Tucson, Arizona. Since the Partnership controls
and owns a majority interest in the Sin Vacas Joint Venture, the accounts and
operations of the Sin Vacas Joint Venture have been consolidated into the
Partnership.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI is
also the developer of the Villa Sin Vacas property.
The Partnership made initial cash payments in the form of capital contributions
totaling $2,458,507 and funded $398,949 of property acquisition costs which were
treated as a capital contribution to the joint venture. Since completion of
construction, the Partnership has made additional contributions totaling
$275,167. At September 30, 1997, the total capital contributions and acquisition
costs incurred were $2,713,937 and $418,686, respectively.
For the nine months ended September 30, 1997 and 1996, Sin Vacas had net loss of
$15,690 and $58,266, respectively.
JANUARY 1, 1996 THROUGH MAY 13, 1996
Net cash from operations (as defined in the joint venture agreement) was to be
distributed as available to each joint venture partner quarterly as follows:
First, to the Partnership, an amount equal to 8.75% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's capital investment, as
defined in the joint venture agreement;
Second, the balance 70% to the Partnership and 30% to the co-venturer.
All losses from operations and depreciation for the Sin Vacas Joint Venture were
allocated 99% to the Partnership and 1% to the co-venturer.
All profits from operations, to the extent of cash distributions, shall first be
allocated to the Partnership and co-venturer in the same proportion as the cash
distribution. Any remaining profits are allocated 70% to the Partnership and 30%
to the co-venturer.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
Villa Antigua
On June 11, 1987, the Partnership acquired a majority interest in the Villa
Antigua Joint Venture, which owns, and operates Villa Antigua, an 88-unit
residential property located in Scottsdale, Arizona. Since the Partnership
controls and owns a majority interest in the Villa Antigua Joint Venture, the
accounts and operations of the Villa Antigua Joint Venture have been
consolidated into the Partnership.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI is
also the developer of the Villa Antigua property.
The Partnership made initial cash payments in the form of capital contributions
totaling $2,494,677 and funded $381,729 of property acquisition costs which were
treated as a capital contribution to the Villa Antigua Joint Venture. Since
completion of construction, the Partnership has made additional contributions
totaling $85,440. At September 30, 1997, the total capital contributions and
acquisition costs were $2,580,117 and $381,729, respectively.
Villa Antigua had net income of $16,603 and $145,859 for the nine months ended
September 30, 1997 and 1996, respectively.
JANUARY 1, 1996 THROUGH MAY 13, 1996
Net cash from operations (as defined in the joint venture agreement) was to be
distributed as available to each joint venture partner quarterly as follows:
First, to the Partnership, an amount equal to 10% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's adjusted capital
investment, as defined in the joint venture agreement;
Second, the balance 70% to the Partnership and 30% to the co-venturer.
All losses from operations and depreciation for the Villa Antigua Joint Venture
were allocated 99% to the Partnership and 1% to the co-venturer.
All profits from operations, to the extent of cash distributions, shall first be
allocated to the Partnership and co-venturer in the same proportion as the cash
distributions; however, if for any taxable year there are no cash distributions,
profits are allocated 99% to the Partnership and 1% to the co-venturer.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
Sin Vacas and Villa Antigua
MAY 14, 1996 THROUGH SEPTEMBER 30, 1997
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI")
which separated the interests of EWI and the Partnership, thus affording the
Partnership greater flexibility in the operation and disposition of the
properties. In consideration of a payment by the Partnership to EWI of $73,775
and delivery of certain mutual releases, EWI (i) relinquished its contract to
manage Sin Vacas and Villa Antigua and its option to exercise its rights of
first refusal with regard to the sale of those properties and (ii) assigned all
of its interest in the Sin Vacas Joint Venture and the Villa Antigua Joint
Venture to the Partnership (while preserving the economic interests of the
venturer in these Joint Ventures), which resulted in the dissolution of the Sin
Vacas Joint Venture and the Villa Antigua Joint Venture. EWI may still share in
the cash flow distributions or proceeds from sale of the properties if certain
performance levels are met.
Pinecliff
On July 16, 1986, the Partnership acquired Pinecliff (formerly Autumn Ridge), a
96-unit residential property located in Colorado Springs, Colorado and
simultaneously contributed the property to the Autumn Ridge Joint Venture
comprised of the Partnership and an affiliate of the property developer. Since
the Partnership controls and owns a majority interest in the Autumn Ridge Joint
Venture, the accounts and operations of the Autumn Ridge Joint Venture have been
consolidated into the Partnership.
The co-venture partner was Highland Properties, Inc. ("Highland"), a Colorado
based residential development, construction and management firm.
Highland developed the property known as L'Auberge Pinecliff.
The Partnership made initial cash payments in the form of capital contributions
totaling $3,819,397 and funded $546,576 of property acquisition costs which were
treated as a capital contribution to the Autumn Ridge Joint Venture. Since
completion of construction, the Partnership has made additional contributions
totaling $323,811. At September 30, 1997, the total capital contributions and
acquisition costs incurred were $4,192,309 and $497,475, respectively.
For the nine months ended September 30, 1997 and 1996, L'Auberge Pinecliff had a
net income of $18,812 and $120,035, respectively.
JANUARY 1, 1996 THROUGH JULY 2, 1996:
Net cash from operations (as defined in the joint venture agreement) was to be
distributed as available to each joint venture partner quarterly as follows:
First, to the Partnership, an amount equal to 8% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's capital investment, as
defined in the joint venture agreement;
Second, the balance 82% to the Partnership and 18% to the co-venturer.
All losses from operations and depreciation for the Autumn Ridge Joint Venture
were allocated 100% to the Partnership.
All profits from operations, to the extent of cash distributions, shall first be
allocated to the Partnership and co-venturer in the same proportion as the cash
distribution. Any remaining profits are allocated 82% to the Partnership and 18%
to the co-venturer.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
affected by the relative balances in the individual partners' capital accounts.
JULY 3, 1996 THROUGH SEPTEMBER 30, 1997
On July 3, 1996, the Partnership and certain affiliates consummated an agreement
with Highland Properties, Inc. ("Highland") which separated the interests of
Highland and the Partnership, thus affording the Partnership greater flexibility
in the operation and disposition of the property. In consideration of a payment
by the Partnership to Highland totaling $7,718 and delivery of certain mutual
releases, Highland (i) relinquished its option to exercise its rights of first
refusal with regard to the sale of the property and (ii) assigned all of its
interest in the L'Auberge Pinecliff Joint Venture to the Partnership, (while
preserving the economic interests of the venturer in these Joint Ventures),
which resulted in the dissolution of the L'Auberge Pinecliff Joint Venture.
Highland may still share in the cash flow distributions or proceeds from sale of
the properties if certain performance levels are met.
The Sin Vacas Joint Venture, the Autumn Ridge Joint Venture and the Villa
Antigua Joint Venture are sometimes collectively referred to as the "Joint
Ventures". These joint ventures were effectively terminated on December 31,
1996. The Partnership has eliminated various minority interests related to these
joint ventures; as such, the Partnership owns 100% of the underlying assets at
December 31, 1996.
5. Mortgage Notes Payable:
All of the property owned by the Partnership is pledged as collateral for the
nonrecourse mortgage notes payable outstanding at September 30, 1997 and
December 31, 1996 which consisted of the following:
1997 1996
---------- ----------
Villas at Sin Vacas .................... $2,397,667 $2,428,851
Pinecliff .............................. 3,072,739 3,112,702
Villa Antigua .......................... 2,979,625 3,018,377
---------- ----------
$8,450,031 $8,559,930
========== ==========
Sin Vacas
On June 30, 1992, Villas at Sin Vacas refinanced its permanent loan using the
proceeds of a new first mortgage loan in the amount of $2,575,000. Under the
terms of the note, monthly principal and interest payments of $21,830, based on
a fixed interest rate of 9.125%, are required over the term of the loan. The
maturity date of the note is July 15, 1998.
Pinecliff
On June 30, 1992, Pinecliff refinanced its permanent loan using the proceeds of
a new first mortgage loan in the amount of $3,300,000. Under the terms of the
note, monthly principal and interest payments of $27,976 are required over the
term of the loan, based on a fixed interest rate of 9.125%. The maturity date of
the note is July 15, 1998.
Villa Antigua
On June 30, 1992, Villa Antigua refinanced its permanent loan using the proceeds
of a new first mortgage loan in the amount of $3,200,000. Under the terms of the
note, monthly principal and interest payments of $27,128, based on a fixed
interest rate of 9.125%, are required over the term of the loan, based on a
fixed interest rate of 9.125%. The maturity date of the note is July 15, 1998.
Interest accrued at September 30, 1997, and December 31, 1996, consisted of the
following:
1997 1996
------- -------
Villas at Sin Vacas ........................ $ 9,235 $ 9,235
Pinecliff .................................. 11,835 11,835
Villa Antigua .............................. 11,476 11,476
------- -------
$32,546 $32,546
======= =======
The principal balance of the mortgage notes payable appearing on the
consolidated balance sheet approximates the fair value of such notes.
<PAGE>
6. Partners' Equity:
Under the terms of the Partnership Agreement profits are allocated 95% to the
Limited Partners and 5% to the General Partners; losses are allocated 99% to the
Limited Partners and 1% to the General Partners.
Cash distributions to the partners are governed by the Partnership Agreement and
are made, to the extent available, 95% to the Limited Partners and 5% to the
General Partners.
The allocation of the related profits, losses, and distributions, if any, would
be different than described above in the case of certain events as defined in
the Partnership Agreement, such as the sale of an investment property or an
interest in a joint venture partnership.
7. Related-Party Transactions:
Due to affiliates at September 30, 1997, and December 31, 1996, consisted of
reimbursable costs payable to L'Auberge Communities Inc., an affiliate of the
General Partners, in the amounts of $5,429 and $8,975, respectively.
For the nine months ended September 30, 1997 and 1996, general and
administrative expenses included $45,064 and $66,026, respectively, of salary
reimbursements paid to the General Partners for certain administrative and
accounting personnel who performed services for the Partnership.
The officers and principal shareholders of Evans Withycombe, Inc., the developer
of the Villas at Sin Vacas and Villa Antigua properties and an affiliate of the
co-venturers of those joint ventures, together hold a two and one half percent
cumulative profit or partnership voting interest in LP L'Auberge Communities, a
California Limited Partnership, formerly Berry and Boyle, which is the principal
limited partner of GP L'Auberge Communities, L.P.
Residential Services - L'Auberge, formerly Berry and Boyle Residential Services,
the property manager of Pinecliff, Villas Sin Vacas and Villa Antigua, is an
affiliate of the General Partners of the Partnership. For the nine months ended
September 30, 1997, property management fees of $73,654 were paid to Residential
Services - L'Auberge. For the nine months ended September 30, 1996, Residential
Services-L'Auberge was paid $43,972 for the management of L'Auberge Pinecliff.
For the management of Villa Sin Vacas and Villa Antigua, $39,440 of property
management fees were paid to Evans Withycombe, Inc., until the termination of
the Management Agreement on May 15, 1996.
<PAGE>
8. Subsequent Event:
On May 6, 1997, the Partnership entered into a Purchase and Sales Agreement (
the "Agreement") to sell Villas Sin Vacas in Tucson, Arizona, to an unaffiliated
purchaser. The purchase price for Villas Sin Vacas is approximately $5,040,000.
The Agreement is subject to completion of customary due diligence to the
satisfaction of the purchaser, and the purchaser obtaining a financing
commitment for the purchase of the property on commercially reasonable terms and
conditions. Under the terms of the Agreement, it is anticipated that the closing
would occur within approximately 3 to 6 months after the date of the Agreement.
On October 10, 1997, Villa Antigua, Phase I was sold pursuant to the terms of a
Purchase and Sale Agreement and Escrow Instructions, dated as of May 6, 1997 as
amended. Villa Antigua was sold to Villa Antigua Condominium Ventures Limited
Partnership, an Arizona limited partnership unaffiliated with the Partnership.
The purchase price for Villa Antigua Phase I was $6,248,000 subject to certain
customary adjustments and the repayment of mortgage financing in the amount of
$3,010,362, paid at closing utilizing a portion of proceeds from the sale.
<PAGE>
17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
In connection with its capitalization, the Partnership admitted investors who
purchased a total of 32,421 Units aggregating $16,210,500. These offering
proceeds, net of organizational and offering costs of $2,431,575, provided
$13,778,925 of net proceeds to be used for the purchase of income-producing
residential properties, including related fees and expenses, and working capital
reserves. The Partnership expended $10,410,263 to (i) acquire its joint venture
interests in the Sin Vacas Joint Venture, the Villa Antigua Joint Venture, and
the Autumn Ridge Joint Venture, (ii) to pay acquisition expenses, including
acquisition fees to one of the General Partners, and (iii) to pay certain costs
associated with the refinancing of the Autumn Ridge permanent loan. The
Partnership distributed $1,731,681 to the Limited Partners as a return of
capital resulting from construction cost savings with respect to the Sin Vacas,
Autumn Ridge and Villa Antigua projects and other excess offering proceeds. The
remaining net proceeds of $1,636,981 have been used to establish initial working
capital reserves sufficient to meet future needs of the Partnership, including
contributions to the various properties that may be required. Through September
30, 1997, $373,990 cumulatively was contributed to the properties for this
purpose.
The working capital reserves of the Partnership consist of cash and cash
equivalents and short-term investments. Together these amounts provide the
Partnership with the necessary liquidity to carry on its day-to-day operations
and to make necessary contributions to the various properties. Thus far in 1997,
the aggregate net decrease in working capital reserves was $374,078. This
decrease resulted primarily from cash provided by operations of $262,704 offset
by distributions to partners of $291,789, purchase of fixed assets of $235,094,
and $109,899 of principal payments on mortgage notes payable.
On October 10, 1997, Villa Antigua Phase I was sold for $6,248,000. See Item 8.
Subsequent Event.
Property Status
Villas at Sin Vacas
As of September 30, 1997, the property was 94% occupied, compared to 84%
approximately one year ago. At September 30, 1997 and 1996, the market rents for
the various unit types were as follows:
Unit Type ............................... 1997 1996
- ---------------------------------------------- ------ ------
One bedroom one bath ......................... $ 835 $ 835
Two bedroom two bath ......................... 1,050 1,050
Three bedroom two bath ....................... 1,200 1,200
Pinecliff
As of September 30, 1997, the property was 82% occupied, compared to 91%
approximately one year ago. At September 30, 1997 and 1996, the market rents for
the various unit types were as follows:
Unit Type .................................... 1997 1996
- ---------------------------------------------- ------ ------
One bedroom one bath ....................... $ 925 $ 890
Two bedroom two bath ....................... 1,150 1,099
<PAGE>
Villa Antigua
As of September 30, 1997, the property was 86% occupied, compared to 85%
approximately one year ago. At September 30, 1997 and 1996, the market rents for
the various unit types were as follows:
Unit Type ............................... 1997 1996
- ---------------------------------------------- ------ ------
One bedroom one bath ......................... $ 760 $ 760
Two bedroom two bath ......................... 925 925
Three bedroom two bath ....................... 1,105 1,080
Results of Operations
For the three months ended September 30, 1997, the Partnership's operating
results were comprised of its share of the income and expenses from the Sin
Vacas, Pinecliff and Villa Antigua, as well as partnership level interest income
earned on short term investments, reduced by administrative expenses. A summary
of these operating results appears below.
<TABLE>
Sin L'Auberge Villa Investment Consolidated
Vacas Pinecliff Antigua Partnership Total
<S> <C> <C> <C> <C> <C>
Total revenue $180,182 $232,856 $200,053 $7,477 $620,568
Expenses:
General and administrative 54,436 54,437
Operations 110,364 123,269 138,375 372,008
Depreciation and amortization 33,983 50,575 32,670 117,228
Interest 57,359 72,804 70,674 200,837
------------- --------------- ---------------- ------------ ---------------
201,706 246,648 241,719 54,436 744,510
------------- --------------- ---------------- ------------ ---------------
Net income ($21,524) ($13,792) ($41,666) ($46,959) ($123,942)
============= =============== ================ ============ ===============
For the three months ended September 30, 1996, the Partnership's operating
results were comprised of its share of the income and expenses from the Sin
Vacas, Pinecliff and Villa Antigua, as well as partnership level interest income
earned on short term investments, reduced by administrative expenses. A summary
of these operating results appears below.
Sin L'Auberge Villa Partnership Consolidated
Vacas Pinecliff Antigua Level Totals
<S> <C> <C> <C> <C> <C>
Revenue: $160,684 $258,420 $201,159 9,975 $630,238
Expenses:
General and administrative - - - 87,866 87,866
Operations 115,086 111,538 78,533 7,166 312,323
Depreciation and amortization 30,497 44,058 29,966 104,521
Interest 55,783 71,489 69,262 - 196,534
---------------- --------------- --------------- --------------- ---------------
201,366 227,085 177,761 95,032 701,244
---------------- --------------- --------------- --------------- ---------------
Net income (loss) ($40,682) $31,335 $23,398 ($85,057) ($71,006)
================ ================================ =============== ===============
For the nine months ended September 30, 1997, the Partnership's operating
results were comprised of its share of the income and expenses from the Sin
Vacas, Pinecliff and Villa Antigua, as well as partnership level interest income
earned on short term investments, reduced by administrative expenses. A summary
of these operating results appears below.
Sin L'Auberge Villa Investment Consolidated
Vacas Pinecliff Antigua Partnership Total
<S> <C> <C> <C> <C> <C>
Total revenue $538,653 $715,030 $644,429 $26,922 $1,925,034
Expenses:
General and administrative 170,578 170,579
Operations 289,233 340,417 325,929 18 955,597
Depreciation and amortization 97,322 141,476 93,991 332,789
Interest 167,788 214,325 207,906 590,019
------------- --------------- ---------------- ------------- ---------------
554,343 696,218 627,826 170,596 2,048,984
------------- --------------- ---------------- ------------- ---------------
Net income ($15,690) $18,812 $16,603 ($143,674) ($123,950)
============= =============== ================ ============= ===============
For the nine months ended September 30, 1996, the Partnership's operating
results were comprised of its share of the income and expenses from the Sin
Vacas, Pinecliff and Villa Antigua, as well as partnership level interest income
earned on short term investments, reduced by administrative expenses. A summary
of these operating results appears below.
Sin L'Auberge Villa Partnership Consolidated
Vacas Pinecliff Antigua Level Totals
<S> <C> <C> <C> <C> <C>
Revenue: $518,594 $786,540 $685,416 40,670 $2,031,220
Expenses:
General and administrative 1,686 259 294,046 295,991
Operations 314,492 320,562 240,685 10,166 885,905
Depreciation and amortization 92,684 130,645 89,899 313,228
Interest 167,998 215,298 208,714 592,010
-------------- --------------- --------------- -------------- -------------
576,860 666,505 539,557 304,212 2,087,134
-------------- --------------- --------------- -------------- ---------------
Net income (loss) ($58,266) $120,035 $145,859 ($263,542) ($55,914)
============== =============================== ============== ===============
</TABLE>
Comparison of Operating Results for the Nine Months Ended September 30, 1997 and
1996:
Total revenue decreased by $106,186 or 5%, primarily due to a decrease in rental
income as a result of competitive pressure from new apartment properties in the
lease up phase in the local market. Operating expenses increased by $69,692 (8%)
primarily due to one-time costs of preparing the properties for disposition,
including an increase in advertising, promotions, repairs and maintenance.
General and administrative expenses have decreased by 42% or $125,412, of which
$73,775 was the Evans Withycombe termination fee in 1996. A contributing factor
to the additional reduction of $51,637 was due to the re-stabilization of costs
associated with Partnership administrative, financial and investor services
functions following the office relocation to Colorado Springs.
Thus far in 1997, the Partnership has made $291,789 of cash distributions to its
Limited Partners and $-0- to the General Partners.
<PAGE>
PART II-OTHER INFORMATION
ITEM 1. Legal Proceedings
Response: None
ITEM 2. Changes in Securities
Response: None
ITEM 3. Defaults Upon Senior Securities
Response: None
ITEM 4. Submission of Matters to a Vote of Security Holders
Response: None
ITEM 5. Other Information
Response: None
ITEM 6. Exhibits and Reports on Form 8-K
(A.) Exhibit - None
(B.) Report on Form 8-K, Item 2, dated October 10, 1997
filed October 23, 1997
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.
CLUSTER HOUSING PROPERTIES
By: GP L'Auberge Communities, L.P., a California
Limited Partnership, General Partner
By: L'Auberge Communities, Inc., its General Partner
By: __/s/ Stephen B. Boyle_________________________________
Stephen B. Boyle, President
Date: November 15, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-END> Sep-30-1997
<CASH> 691,777
<SECURITIES> 0
<RECEIVABLES> 1,643
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19,556,714
<DEPRECIATION> (5,123,653)
<TOTAL-ASSETS> 15,187,141
<CURRENT-LIABILITIES> 448,149
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 8,450,031
<TOTAL-LIABILITY-AND-EQUITY> 15,187,141
<SALES> 0
<TOTAL-REVENUES> 1,925,034
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,458,965
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 590,019
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (123,950)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
