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SCHEDULE 14A INFORMATION
Consent Solicitation Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Consent Solicitation
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Consent Solicitation
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240,14a-12
CLUSTER HOUSING PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
- --------------------------------------------------------------------------------
(Name of Registrant As Specified in Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Consent Solicitation Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies: Units of Limited Partnership Interest ("Units")
(2) Aggregate number of securities to which transaction applies:
32,421 Units
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined): $3,543,000, equal to the estimated amount of
cash to be distributed to the partners upon liquidation of the
Registrant.
(4) Proposed maximum aggregate value of transaction: $3,543,000
(5) Total fee paid: $709
[X] Fee paid previously with preliminary
materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CLUSTER HOUSING PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
5110 Langdale Way
Colorado Springs, Colorado 80906
(719) 527-0544
March 18, 1998
Dear Limited Partner:
We are pleased to let you know that, during the last quarter of 1997, Cluster
Housing Properties (A California Limited Partnership) (the "Partnership")
implemented and completed a competitive bidding process for the disposition of
Pinecliff, its remaining real property investment. The competitive bidding
process included the participation of a number of well-screened and
fully-qualified institutional real property purchasers and resulted in the
Partnership receiving and accepting an offer to purchase Pinecliff.
The Partnership is now in a position, subject to the approval of a majority in
interest of the limited partners, to sell its remaining property and dissolve
the Partnership. Accordingly, pursuant to the enclosed Consent Solicitation, the
Partnership is seeking the consent of the limited partners to dissolve the
Partnership and liquidate its remaining property (the "Dissolution"). The
Dissolution and the principal terms of the offer are discussed in more detail in
the Consent Solicitation under "Description of Dissolution."
In addition, pursuant to the enclosed Consent Solicitation the General Partners
are seeking the consent of the Limited Partners to an amendment (the
"Amendment") to the Partnership's Amended and Restated Certificate and
Agreement of Limited Partnership (the "Partnership Agreement") to eliminate the
General Partners' obligation, under certain circumstances, to contribute
additional capital to the Partnership upon its liquidation. This unintended and
onerous obligation arises because of certain technical provisions of the
Partnership Agreement for allocation of income and loss which predated the
issuance of final Treasury Regulations with respect to partnership allocations.
The Amendment is discussed in more detail in the Consent Solicitation under
"Description of Proposed Amendment."
FOR THE REASONS SET FORTH IN THE ENCLOSED CONSENT SOLICITATION, THE GENERAL
PARTNERS RECOMMEND THAT THE LIMITED PARTNERS CONSENT TO THE DISSOLUTION AND THE
AMENDMENT.
Accompanying the Consent Solicitation is the Partnership's Form 10-K for the
year ended December 31, 1996 and its most recent Form 10-Q for the quarter ended
September 30, 1997.
We urge you to read the enclosed document carefully and to return your signed
consent as soon as possible to GP L'Auberge Communities, L.P., c/o Gemisys, 7103
South Revere Parkway, Englewood, Colorado 80112. You may also return your
Consent to L'Auberge Communities, L.P., c/o Gemisys, via facsimile at (303)
705-6171. For your convenience a postage-paid return envelope has been included.
If you have any questions about the enclosed material, please call our Investor
Services line at (800) 262-7778.
Very truly yours,
STEPHEN B. BOYLE GP L'AUBERGE COMMUNITIES, L.P.,
General Partner General Partner
By: L'Auberge Communities, Inc., its
general partner
By: Stephen B. Boyle, President
YOUR VOTE IS IMPORTANT
PLEASE SIGN AND DATE THE ENCLOSED CONSENT AND
RETURN IT IMMEDIATELY SO THAT YOUR VOTE CAN BE COUNTED.
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CLUSTER HOUSING PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
5110 Langdale Way
Colorado Springs, Colorado 80906
CONSENT SOLICITATION
March 18, 1998
INTRODUCTION
This solicitation of written consents (the "Consent Solicitation") is
furnished by GP L'Auberge Communities, L.P., a California limited partnership
(formerly known as Berry and Boyle Management, a California limited
partnership), and Stephen B. Boyle, the general partners (the "General
Partners") of Cluster Housing Properties (A California Limited Partnership) (the
"Partnership"), in connection with the Partnership's solicitation of consents
from the Partnership's limited partners (the "Limited Partners") to two separate
and independent proposals ("the Proposals"). More specifically, the General
Partners are soliciting the consent of the Limited Partners to (i) dissolve the
Partnership and liquidate its remaining real property investment, Pinecliff in
Colorado Springs, Colorado (collectively, the "Dissolution"), pursuant to the
purchase and sale agreement (the "Purchase Agreement") described herein and (ii)
to amend Section 16.b. of the Partnership's Amended and Restated Certificate and
Agreement of Limited Partnership (the "Partnership Agreement") to eliminate the
General Partners' obligation, under certain circumstances, to contribute
additional capital to the Partnership upon its liquidation (the "Amendment").
The General Partners recommend that the Limited Partners consent to the
Dissolution and the Amendment.
This Consent Solicitation contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
This Consent Solicitation, and the enclosed consent form (the
"Consent"), are first being mailed to the Limited Partners on or about March 18,
1998.
DESCRIPTION OF DISSOLUTION
BACKGROUND AND REASONS FOR DISSOLUTION
The Partnership was organized in 1983 for the purpose of acquiring,
operating and ultimately selling or disposing of multifamily residential rental
properties. The Partnership's
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original investment objectives contemplated that the properties would be held
for approximately five to seven years, with decisions about the timing of
eventual property sales or other dispositions to be left to the General
Partners' discretion based on the anticipated economic benefits of continued
ownership and other factors. The national recession that extended through the
early 1990s had the effect of depressing real estate values. Subsequently, the
markets where the Partnership's properties were located experienced an
oversupply of new apartment developments. These conditions led the General
Partners to conclude that it was advisable for the Partnership to hold its
properties longer than initially anticipated.
Instead of selling the Partnership's properties during the downturn in
their markets, the Partnership continued to hold and operate its properties. As
improvement in the Partnership's markets became apparent, the General Partners
began to prepare the properties for sale and to devise and implement a
disposition strategy. In this regard, in the fourth quarter of 1997, the
Partnership sold Villa Antigua in Scottsdale, Arizona and Villas Sin Vacas in
Tucson, Arizona to a purchaser unaffiliated with either General Partner for
gross purchase prices of $6,248,000 and $5,040,000, respectively. The
Partnership realized approximately $5,349,465 of net proceeds from the two
sales, all of which was distributed to the Limited Partners in December 1997.
The General Partners did not receive a property disposition fee or other
compensation or distribution in connection with such sales.
The proposed Dissolution and sales transaction are the final step in
the disposition process. After considering various alternatives for marketing
Pinecliff, the General Partners determined that, given the quality of the
property, the most advantageous offers were likely to be obtained by approaching
a reasonable number of well-qualified institutional real estate purchasers in a
competitive bidding process. Accordingly, with the assistance of a licensed real
estate broker unaffiliated with either General Partner (the "Unaffiliated
Broker"), approximately 15 institutional real estate purchasers representing a
broad cross-section of the institutional real estate capital market were
approached. As a result of the competitive bidding process, the Partnership
received multiple offers to purchase Pinecliff. In order to maximize the sales
prices, the Partnership permitted each offeror the opportunity to increase its
offer. From the resubmitted offers, the General Partners selected the highest
and best offer and executed the Purchase Agreement, subject to the consent of
the Limited Partners to the Dissolution. Certain of the principal terms of the
Purchase Agreement are discussed in this Consent Solicitation under "Description
of Dissolution -- Liquidation Strategy; Pending Sale."
A sale of Pinecliff at this time will enable the Partnership to take
advantage of the improved local economy of Colorado Springs. The General
Partners have reviewed comparable sales and have determined that the accepted
offer for Pinecliff is fair and reasonable. Moreover, the General Partners
believe that the terms of the proposed sale described herein are advantageous to
the Partnership because of the price, the purchase of the property for all cash
without a financing contingency and the strength and reliability of the
purchaser.
For the foregoing reasons, the General Partners believe that it is in
the best interests of the Partnership and the Limited Partners to dissolve the
Partnership and seek to sell and liquidate
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Pinecliff and wind up the Partnership at this time rather than to continue to
hold and operate the property for later sale.
EFFECTS OF THE DISSOLUTION
Under the California Revised Uniform Limited Partnership Act, a limited
partnership may be dissolved at the time or upon the happening of events
specified in its partnership agreement. The Partnership's Partnership Agreement
provides that the Partnership shall be dissolved upon the vote or written
consent of a majority in interest of the Limited Partners. Under the terms of
the Partnership Agreement and applicable law, upon dissolution of the
Partnership the General Partners are to take full account of the Partnership's
assets and liabilities, liquidate the Partnership's remaining assets and apply
and distribute the liquidation proceeds in the order specified in the
Partnership Agreement. See "Liquidation and Winding Up" below. During the
winding up process, the Partnership's legal existence would continue solely for
purposes relating to the liquidation and winding up and the Limited Partners
would continue to have the voting and economic rights provided in the
Partnership Agreement.
Neither the Partnership Agreement nor California law provides for a
specified period of time for completing the liquidation and winding up of the
Partnership. If the Dissolution is consented to by a majority in interest of the
Limited Partners, the General Partners would be authorized and directed to
settle and close the Partnership's business and dispose of and convey the
Partnership's property as soon as practicable, pursuant to the Purchase
Agreement described herein or otherwise, consistent with obtaining reasonable
value for the property. In the event that the sale of Pinecliff pursuant to the
Purchase Agreement is not consummated (see "Liquidation Strategy; Pending Sale"
below), the General Partners would continue to have broad discretion to manage
the business and affairs of the Partnership and the winding up process and to
determine the timing, terms and conditions of the sale of property. Upon the
dissolution and completion of the winding up process, the Partnership will file
a certificate of cancellation with the California Office of the Secretary of
State and will be terminated. There are no federal or state regulatory
requirements that must be complied with or approvals that must be obtained in
connection with the Dissolution.
LIQUIDATION STRATEGY; PENDING SALE
The following table sets forth certain information regarding Pinecliff
and the Purchase Agreement.
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<TABLE>
<CAPTION>
Purchase Agreement
-------------------------------------
Projected
Mortgage
Property Name and Number of Indebtedness at Purchase Closing
Location Units 3/30/98 Price Purchaser Date(1)
- ----------------------- --------- --------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Pinecliff, 96 $3,044,540 $6,700,000(3) DRA 4/12/98
Colorado Springs, CO(2) Advisors,
Inc.
</TABLE>
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(1) Subject to the consent of the Limited Partners to the Dissolution
proposed herein.
(2) The Partnership holds fee simple title to the property. The
Partnership's former joint venture partner in the joint venture which
previously held title to the property retained an economic interest in
the property's cash flow and sales proceeds under certain
circumstances. The former joint venture partner will not be entitled to
receive any portion of the proceeds of the sale of Pinecliff.
(3) The parties have agreed to a $300,000 credit for the purchaser to
install air conditioning in the units.
The Purchase Agreement provides that the purchaser has a period of 30
days to conduct its "due diligence" review of the property. This review
includes, but is not limited to, a physical inspection and examination of title
and environmental matters. During the due diligence period, the purchaser has
the customary right to withdraw its offer for any reason. Because the sale of
Pinecliff is subject to the purchaser's due diligence review of the property,
there can be no assurance that the proposed sale described above will actually
occur. Alternatively, as is customary in similar real estate transactions, if,
during the due diligence period, the purchaser identifies conditions which are
unacceptable to it, the purchaser may seek a purchase price adjustment, which
the General Partners would consider and negotiate as they deem appropriate. The
Purchase Agreement provides that in the event that the purchaser defaults by
failing to close following the end of the due diligence period, the Partnership
will be entitled to retain the purchaser's deposit as liquidated damages.
Assuming, for purposes of illustration, that Pinecliff were sold for
an aggregate net price of $6,400,000 (the purchase price under the Purchase
Agreement less the $300,000 credit referred to in note (3) above), and assuming
the Limited Partners consent to the Amendment, the General Partners believe
that, after (i) repayment of mortgage indebtedness in the amount of
approximately $3,044,540, (ii) deducting estimated fees and expenses of the
sale, which currently are anticipated to total approximately $92,460,
including a real estate brokerage commission payable to the Unaffiliated Broker
in an amount equal to 1.25% of the sales price of the property, and (iii)
including the Partnership's estimated cash balance of $280,000, approximately
$3,243,000 (the "Dissolution Proceeds") would be available to the Partnership.
The Dissolution Proceeds, less a $300,000 wind-up reserve which the
General Partners intend to establish to cover various expenses of winding up
and liquidating the Partnership, would be distributed to the Limited Partners
as promptly as possible following the sale of Pinecliff. Assuming Dissolution
Proceeds of $3,243,000, for each $500 invested in the Partnership, the Limited
Partners would receive out of the Dissolution Proceeds approximately $100 (the
"Distribution Per Unit"). When added together with the $165 per Unit that was
distributed in December 1997 from the proceeds of the sale of Villa Antigua and
Villas Sin Vacas, the $151.10 per Unit that has been distributed from
operations and the $53.40 per Unit distributed from uninvested funds, Limited
Partners will have received aggregate distributions of approximately $469.50
per $500 Unit over the term of the investment.(1) In addition, upon final
winding up of the Partnership, any unexpended funds in the wind-up reserve will
be distributed to the Limited Partners.
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(1) Exhibit A attached to this Consent Solicitation sets forth certain
information regarding Partnership distributions on a quarterly basis
for the past three years and in the aggregate since inception.
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The foregoing estimates are presented for the Limited Partners'
reference only and should not be relied upon in determining whether to consent
to the Dissolution. The estimates assume that the sale of Pinecliff is
consummated pursuant to the terms of the Purchase Agreement and there can be no
assurance that such sale will occur. If the proposed sale does not occur, the
General Partners would seek a substitute purchaser, although there can be no
assurance as to when such purchaser would be located or the terms on which such
purchaser would agree to purchase the property. The Limited Partners would have
no right to approve the terms of any substituted sale. The estimates do not give
effect to the operating expenses or net income or net loss of the Partnership
for any period prior to the time Pinecliff is sold, which could affect the
amount of Dissolution Proceeds available for distribution. Additionally, the
estimates do not give effect to customary closing adjustments, credits and
prorations, the amounts of which are not known at this time. For these reasons,
the actual proceeds to be received by the Limited Partners may vary materially
from the Distribution Per Unit, and therefore possibly be substantially less.
The timing of the Limited Partners' receipt of any Dissolution Proceeds
will depend on when a sale or other disposition of Pinecliff can be completed.
If the property is sold pursuant to the terms of the Purchase Agreement, the
General Partners expect that the sale will be consummated during the second
quarter of 1998. The General Partners will endeavor to distribute funds as
expeditiously as possible after the sale.
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LIQUIDATION AND WINDING UP
Pursuant to the Partnership Agreement, if the Dissolution is consented
to by a majority in interest of the Limited Partners, the General Partners are
to take full account of the Partnership's assets and liabilities, liquidate the
Partnership's assets and discharge or make adequate provision for the
liabilities of the Partnership in the following order:
(a) First, to creditors, in the order of priority provided by law;
(b) Second, to the setting up of any reserve for contingencies which
the General Partners may consider necessary; and
(c) After all such liabilities have been either discharged or
adequately provided for, to the partners, in accordance with Section 10 of the
Partnership Agreement.
It is not anticipated that the General Partners will receive any of the
proceeds from the Dissolution. The General Partners are not aware of any
liabilities or obligations of the Partnership, contingent or otherwise, except
as set forth on the Partnership's balance sheet included as part of its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (a copy
of which accompanies this Consent Solicitation and is incorporated herein by
reference) and liabilities and obligations incurred since September 30, 1997 in
the ordinary course of the Partnership's business.
CERTAIN CONSIDERATIONS
The General Partners cannot predict when Pinecliff will actually be
sold or disposed of, or when the eventual liquidation will occur, nor can the
General Partners estimate with certainty the amount of Dissolution Proceeds that
will be available to distribute to the Limited Partners upon the sale or other
disposition of Pinecliff and completion of the liquidation. Moreover, there can
be no assurance that Pinecliff will be sold or disposed of at a price equal to
the purchase price contained in the Purchase Agreement described herein or that
the value of the property will not increase after it is sold or disposed of by
the Partnership.
In considering whether to approve the Dissolution, the Limited Partners
should bear in mind that the General Partners have broad discretion to manage
the business and affairs of the Partnership. If the Dissolution is not approved,
the General Partners intend to continue to manage the Partnership and its
property substantially as they are currently being managed and to continue to
entertain and consider indications of interest from third parties to acquire
Pinecliff. There can be no assurance that the Dissolution will result in greater
returns to the Limited Partners than a continuation of the Partnership and
eventual sale or disposition of Pinecliff at a later time.
Because of the General Partners' long-standing experience with
Pinecliff, the purchaser of Pinecliff has indicated its intention to retain the
property management affiliate of the General Partners
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to manage Pinecliff following its sale pursuant to an agreement terminable by
the purchaser on 30 days prior notice. If the Limited Partners consent to the
Dissolution, they also will be deemed to have consented to any transaction that
may be undertaken to accomplish the liquidation and winding up of the
Partnership and will not be entitled to approve or disapprove of any such
transaction, including a transaction which may involve the General Partners'
management affiliate continuing as property manager.
Neither California law nor the Partnership Agreement provides the
Limited Partners with any dissenter's rights, or the right to seek an
independent appraisal of the value of the Partnership or its assets. Thus, the
Limited Partners will be bound to accept the consideration upon the sale of the
Partnership's properties if the Dissolution is consented to by the Limited
Partners.
RECOMMENDATION OF THE GENERAL PARTNERS
THE GENERAL PARTNERS BELIEVE THAT THE DISSOLUTION IS IN THE BEST
INTERESTS OF THE LIMITED PARTNERS AND RECOMMEND THAT THE LIMITED PARTNERS VOTE
"FOR" AND CONSENT TO THE DISSOLUTION.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
If a majority of the Limited Partners consent to the Dissolution, the
General Partners intend to sell the Partnership's remaining property and, after
payment of certain Partnership expenses and liabilities (See "Description of
Dissolution -- Liquidation and Winding Up."), distribute the proceeds to the
Partners in liquidation of the Partnership. Such a sale and distribution will
result in certain federal income tax consequences to a Limited Partner as
described below. Section references below are to the Internal Revenue Code of
1986, as amended (the "Code").
IN GENERAL
As a partnership for federal income tax purposes, the Partnership is
not subject to federal income tax as a separate taxable entity. Instead, each
Partner is required to report on its own federal income tax return such
Partner's distributive share of the Partnership's items of income, gain, loss,
deduction and credit, including any gain or loss recognized by the Partnership
on the sale of Partnership properties. Accordingly, a Limited Partner may be
subject to tax on such Limited Partner's distributive share of Partnership
income irrespective of whether such Limited Partner receives any cash
distribution from the Partnership. A Limited Partner's adjusted basis in its
Units is increased by such Limited Partner's distributive share of income and
gain of the Partnership for each taxable year, is reduced by its distributive
share of loss for such taxable year and is reduced by the amount of any actual
or deemed distributions made to such Limited Partner during such year. A
reduction in a Limited Partner's allocable share of Partnership liabilities that
were included in such Limited Partner's adjusted basis in its Units (e.g., as a
result of the repayment of a nonrecourse mortgage secured by a Partnership
property) is treated as a deemed distribution of cash for this purpose.
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GAIN OR LOSS ON SALE OF PARTNERSHIP PROPERTY
The Partnership will separately recognize gain or loss for federal
income tax purposes with respect to the sale of each Partnership asset
(Pinecliff consists of multiple assets for federal income tax purposes). The
Partnership will recognize a gain for tax purposes with respect to the sale of
an asset if the amount realized for such asset (i.e., the cash proceeds and
other consideration, if any, received reduced by the expenses of sale) exceeds
the Partnership's adjusted basis for such asset. The Partnership will recognize
a loss with respect to the sale of an asset if the Partnership's adjusted basis
for such asset exceeds the amount realized by the Partnership for such asset.
Overall, the Partnership expects to realize a gain of approximately $559,761, of
which approximately $539,760 or $16.65 per Unit (assuming the Amendment is not
approved by the Limited Partners), will be allocated to the Limited Partners, in
connection with the sale of Pinecliff pursuant to the Purchase Agreement.
Approximately $431,992, or $13.32 per Unit, will be allocated to the Limited
Partners if the Amendment is approved.
Under Section 702(a)(3) of the Code, the Partnership is required to
separately state, and each Partner is required to account separately for, such
Partner's distributive share of any Section 1245 gain (depreciation recapture),
Section 1231 gain or loss and net taxable income or loss from Partnership
operations for any taxable year in which Partnership property is sold. Section
1231 gain or loss is gain or loss (apart from depreciation recapture, if any)
resulting from the sale or exchange of "Section 1231 property," which is defined
generally as depreciable property used in the trade or business and held for
more than one year and real property used in the trade or business and held for
more than one year which is not inventory or other property held for sale to
customers in the ordinary course of the trade or business.
Except for gain attributable to depreciation recapture under Section
1245 of the Code, any gain or loss on the sale of Partnership assets is expected
to be Section 1231 gain or loss. To the extent that for any taxable year Section
1231 loss exceeds Section 1231 gain, such net Section 1231 loss will be treated
as an ordinary loss, subject to any applicable passive activity loss limitations
under Code Section 465. Passive activity losses generally can only offset
passive activity income; however, upon completion of the liquidation of the
Partnership, a Limited Partner's share of passive activity losses of the
Partnership, including suspended passive activity losses, may be utilized in the
taxable year in which such liquidation occurs to offset non-passive income from
other sources. To the extent that for any taxable year Section 1231 gain exceeds
Section 1231 loss, such net Section 1231 gain will be treated as long-term
capital gain. However, Section 1231 gain will be treated as ordinary income to
the extent of prior Section 1231 losses from any source that were treated as
ordinary in any of the previous five years.
A Limited Partner will also realize gain or loss on the final
liquidation of the Partnership pursuant to the Dissolution to the extent that
the amount of any actual or deemed distribution to such Limited Partner differs
from such Limited Partner's adjusted basis for its Units. Any such loss (or
gain) will be long-term or short-term capital loss (or gain), depending on the
holding period of its Units. It is anticipated that a Limited Partner who
acquired its Units in the public offering will realize a capital loss of
approximately $74.17 per Unit in connection with the liquidation of the
Partnership.
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CAPITAL GAINS AND LOSSES
Individuals, trusts and estates are generally subject to tax on net
long-term capital gain with respect to property held for more than 18 months at
a maximum rate of 20% (28% in the case of property held for more than one year
but not more than 18 months), except that long-term capital gain from the sale
of real property that would otherwise qualify for the 20% maximum rate will
instead be subject to a 25% maximum rate to the extent of prior depreciation
deductions allowed with respect to such real property. Capital losses generally
may be utilized in any taxable year only to the extent of capital gains plus, in
the case of a non-corporate taxpayer, up to $3,000 of ordinary income ($1,500 in
the case of a married individual filing a separate return). Unused capital
losses may be carried forward and utilized in subsequent years subject to the
same limitations.
THE FOREGOING IS A SUMMARY ONLY, AND SPECIAL CONSIDERATIONS MAY BE
APPLICABLE TO PARTICULAR TYPES OF LIMITED PARTNERS. EACH LIMITED PARTNER IS
ADVISED TO CONSULT ITS OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES
OF THE DISSOLUTION, UNDER THE FEDERAL INCOME TAX LAWS, AS WELL APPLICABLE STATE,
LOCAL, FOREIGN OR OTHER TAX LAWS NOT DISCUSSED HEREIN.
DESCRIPTION OF PROPOSED AMENDMENT
The General Partners are proposing an amendment to Section 16.b. of
the Partnership's Partnership Agreement to eliminate the General Partners'
obligation, under certain circumstances, to contribute additional capital to
the Partnership upon its liquidation. Section 16.b. of the Partnership
Agreement as currently in effect, marked to show the proposed Amendment, is set
forth in its entirety on Exhibit B attached to this Consent Solicitation.
Section 16.b provides generally that each Partner shall look solely to
the assets of the Partnership for all distributions with respect to the
Partnership and its capital contribution and that no Partner has any recourse
therefor against any other Partner. Notwithstanding the foregoing, Section 16.b.
provides that upon dissolution and termination of the Partnership the General
Partners shall contribute to the Partnership the least of three amounts as set
forth therein. Assuming the Limited Partners consent to the Dissolution
proposed herein, and that Pinecliff is sold pursuant to the Purchase Agreement,
under current Section 16.b. the General Partners would be obligated to
contribute to the Partnership an additional approximately $107,474, which
amount is equal to the negative balances in the General Partners' capital
accounts. If contributed, the amount available as Dissolution Proceeds would be
increased by such amount, or $3.33 per Unit.
At the time the Partnership Agreement was drafted, counsel to the
Partnership was seeking to comply with complicated and technical rules under
proposed Treasury Regulations for partnership allocations, which were
significantly modified in the final Treasury Regulations adopted after the
formation of the Partnership. It was neither anticipated nor intended that the
application of the allocation and distribution provisions of the Partnership
Agreement would result in a negative balance in the General Partners' capital
accounts. The implementation of Section 16.b. is extremely onerous to the
General Partners given the fact that they will receive no distribution or
compensation of any kind in connection with the sale of Pinecliff or the
liquidation of the Partnership nor did they receive any distribution or
compensation of any kind in connection with the Partnership's sales in 1997 of
Villas Antigua and Villas Sin Vacas. Moreover, the General Partners have
devoted considerable time and effort to devising and implementing the
Partnership's disposition strategy, including negotiating what the General
Partners believe to be a very favorable and below market real estate brokerage
commission to the Unaffiliated Broker. In view of the foregoing, and the
General Partners' considerable efforts through 15 years of Partnership
operations, the General Partners believe that it is fair to request that the
Limited Partners release them from the additional capital contribution
obligation by consenting to the Amendment. Amending Section 16.b. of the
Partnership Agreement as proposed would make the Partnership Agreement
consistent with the partnership agreements of the other public partnerships of
which the General Partners are general partners. THE GENERAL PARTNERS RECOMMEND
THAT THE LIMITED PARTNERS VOTE "FOR" AND CONSENT TO THE AMENDMENT.
CONSENT REQUIREMENTS AND WRITTEN CONSENTS
RECORD DATE
The General Partners have fixed 5:00 P.M. Central Time on March 12,
1998, as the record date (the "Record Date") for determining the Limited
Partners entitled to notice of and to act on the Proposals. As of the close of
business on the Record Date, the General Partners anticipate that there will be
approximately 1,900 Limited Partners of record.
COMPLETION OF CONSENTS; DEADLINE FOR CONSENTING
A form of written consent (the "Consent") accompanies this Consent
Solicitation. EACH LIMITED PARTNER IS URGED TO COMPLETE, SIGN, DATE AND RETURN
THE CONSENT BY NOT LATER THAN APRIL 15, 1998 (THE "CONSENT DEADLINE"). This date
may be extended from time to time by the General Partners in its discretion
until not later than June 1, 1998, subject to applicable requirements to update
this Consent Solicitation.
A postage-paid, pre-addressed envelope has been provided for the
Limited Partners' convenience in returning Consents. Completed Consents should
be returned as soon as possible to GP L'Auberge Communities, L.P., c/o Gemisys,
7103 South Revere Parkway, Englewood, Colorado 80112. Limited Partners may also
return their Consents to GP L'Auberge Communities, L.P., c/o Gemisys, via
facsimile at (303) 705-6171; Attention: Cluster Housing Properties. Consents may
be marked either "FOR," "AGAINST," or "ABSTAIN" with respect to each Proposal.
If a
-9-
<PAGE> 12
Limited Partner fails to return a Consent, or returns a Consent marked "ABSTAIN"
as to either Proposal, it will have the same effect as a disapproval of the
Proposal. If a Consent is returned signed, but not marked "AGAINST" or
"ABSTAIN," the Limited Partner will be deemed to have consented to the
Proposals. THE GENERAL PARTNERS RECOMMEND THAT THE LIMITED PARTNERS VOTE "FOR"
AND CONSENT TO THE DISSOLUTION AND THE AMENDMENT.
APPROVAL OF PROPOSALS
Each Proposal will be approved if consented to by the Consent Deadline
by a majority in interest of the Limited Partners as determined based upon the
total number of Units outstanding. Each Unit is entitled to one vote.
Accordingly, each Proposal requires the approval of Limited Partners holding of
record not less than 16,211 of the total 32,421 Units outstanding.
REVOCATION OF CONSENTS
A Consent may be revoked by a Limited Partner by delivery to the
General Partners of a subsequent writing revoking the Consent. The writing must
bear a later date than the previously executed Consent and must be signed by the
Limited Partner. To be effective, any such revocation of a Consent with respect
to a Proposal must be received by Gemisys Corporation or the General Partners,
as described above, on or before the Consent Deadline or such earlier date as of
which such Proposal shall have been consented to by the requisite number of
Limited Partners.
EXPENSES OF SOLICITATION
The Partnership will bear all expenses of the solicitation of Consents,
whether or not the Proposals, or either of them, is approved. After this Consent
Solicitation is mailed to the Limited Partners, Consents may be solicited by
means of the mails, facsimile transmissions, telephone or telegraph by the
General Partners and their respective regular employees and affiliates, none of
whom will receive any special or additional compensation for their services. The
Partnership has retained Gemisys Corporation, an independent firm, to aid in the
solicitation of Consents. The cost to the Partnership of doing so is currently
estimated to be $3,000. The Partnership will also be required to reimburse
Gemisys Corporation for its mailing services, postage, printing and similar
pass-through costs.
The General Partners will request brokers, nominees and other
fiduciaries and custodians who hold Units in their names to furnish this
Consent Solicitation and any accompanying materials to the beneficial owners of
such Units.
IF YOU ARE A LIMITED PARTNER ON THE RECORD DATE, YOU ARE RESPECTFULLY
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING CONSENT IN THE
ENCLOSED ENVELOPE AT YOUR EARLIEST CONVENIENCE, BUT IN ANY EVENT PRIOR TO THE
CONSENT DEADLINE.
-10-
<PAGE> 13
INTEREST OF THE GENERAL PARTNERS IN THE PROPOSALS
Neither the General Partners nor any affiliate of a General Partner
will be entitled to receive any distribution, real estate brokerage or other fee
or compensation upon disposition of the Partnership's properties.
If approved, the Amendment would eliminate the General Partners'
obligation to contribute capital to the Partnership upon its liquidation.
POTENTIAL CONFLICTS OF INTEREST
The General Partners believe that neither they nor any of their
affiliates have any conflict of interest with the Limited Partners regarding the
recommendation to approve the Dissolution. In fact, if the Dissolution is not
approved, the General Partners would continue to receive 5% of all distributions
of net cash from operations and the General Partners' property management
affiliate would be entitled to continue to earn property management fees for its
services in managing Pinecliff.
The General Partners have a direct conflict of interest with the
Limited Partners regarding the recommendation to approve the Amendment. The
Amendment would have the effect of eliminating the General Partners' obligation
to contribute funds to the Partnership which, if contributed, would be
available for distribution to the Limited Partners.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
According to information available from the Partnership's transfer
agent and public records, as of the date of the Record Date, no person or entity
owned beneficially 5% or more of the outstanding Units. The Partnership has not
issued any options, warrants or other rights to purchase securities of the
Partnership, nor has either General Partner loaned money to the Partnership.
As of the Record Date, neither of the General Partners nor any director
or officer of L'Auberge owned beneficially any Units.
MANAGEMENT
The Partnership is a limited partnership and, as such, has no executive
officers or directors. The General Partners of the Partnership are Stephen B,
Boyle and GP L'Auberge Communities, L.P., a California limited partnership, of
which L'Auberge Communities Inc. (formerly known as Berry and Boyle Inc.)
("L'Auberge") is the general partner.
STEPHEN B. BOYLE
Stephen B. Boyle, age 57, is President, Executive Officer and Director
of L'Auberge and a general partner and co-founder of LP L'Auberge Communities, a
California limited partnership (formerly Berry and Boyle), a limited partnership
formed in 1983 to provide funds to various affiliated general partners of real
estate limited partnerships, one of which is GP L'Auberge Communities, L.P.
-11-
<PAGE> 14
GP L'AUBERGE COMMUNITIES, L.P.
GP L'Auberge Communities, L.P. was formed in 1983 for the purpose of
acting as a general partner in partnerships formed to invest directly or
indirectly in real property. L'Auberge is the sole general partner of GP
L'Auberge Communities, L.P. The following sets forth certain biographical
information with respect to the executive officers and directors of L'Auberge
other than Stephen B. Boyle who is discussed above. There are no familial
relationships between or among any officer or director and any other officer or
director.
Name Position
----------------- -----------------------------------------------------
Stephen B. Boyle President, Executive Officer and Director
Earl C. Robertson Executive Vice President and Chief Financial Officer
Donna Popke Vice President and Secretary
Earl C. Robertson, age 50, has been Executive Vice President of
L'Auberge since April 1995 and its Chief Financial Officer since May 1996. Mr.
Robertson joined L'Auberge in April 1995 as Executive Vice President. Prior to
joining L'Auberge, Mr. Robertson had over 20 years experience as a senior
development officer, partner and consultant in several prominent real estate
development companies, including Potomac Investment Associates, a developer of
planned golf course communities nationwide, where he was employed from 1989 to
June 1993. He also served as a consultant to Potomac Sports Properties from July
1993 to April 1995. Mr. Robertson was also a key member of the management team
that developed the nationally acclaimed Inn at the Market in Seattle.
Donna Popke, age 37, has been Vice President of L'Auberge since
November 1995. Ms. Popke joined L'Auberge in June 1994 as Accounting Manager.
Prior to joining L'Auberge, Ms. Popke was Accounting Manager for David R. Sellon
& Company, a Colorado Springs land development company, from August 1989 to June
1994 and for Intermec of the Rockies from September 1985 to July 1989.
TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS
The General Partners know of no termination or change-in-control
arrangement affecting the Partnership, except as contemplated by the Partnership
Agreement. The Partnership Agreement provides generally that the bankruptcy or
dissolution of a General Partner will cause a dissolution of the Partnership
unless there is a remaining general partner that elects to continue the business
of the Partnership. In the event there is no remaining general partner, the
Partnership may nonetheless be continued by vote of a majority in interest of
the Limited Partners. The Partnership Agreement also permits the General
Partners to withdraw from the Partnership subject to certain conditions. In such
event, the withdrawing General Partner is obligated to resell its interest in
the Partnership to the Partnership.
-12-
<PAGE> 15
ADDITIONAL INFORMATION
This Consent Solicitation is accompanied by copies of the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, as filed
with the Securities and Exchange Commission. The information in these reports is
incorporated herein by reference. The exhibits to such reports are not included
with this Consent Solicitation, but are available without charge to any person
entitled to receive this Consent Solicitation, upon written request, from the
General Partners, 5110 Langdale Way, Colorado Springs, Colorado 80906,
Attention: Cluster Housing Properties. A requested exhibit will be furnished by
first-class mail, or other equally prompt means, within one business day of such
request.
GP L'AUBERGE COMMUNITIES, L.P.,
General Partner
By: L'Auberge Communities Inc.,
its General Partner
STEPHEN B. BOYLE, By: Stephen B. Boyle,
General Partner President
-13-
<PAGE> 16
EXHIBIT A
DISTRIBUTIONS TO LIMITED PARTNERS
Following is a summary of distributions to the Limited Partners for the
periods shown:
<TABLE>
<CAPTION>
Per $500 Unit Aggregate Amount
--------------------------------------------- --------------------------------------
From Return of From Return of
From Property Unexpended From Property Unexpended
Quarter Ended Operations (1) Sales Funds Operations Sales Funds
- ------------- -------------- ----------- -------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1995 $3.75 $ 121,579
June 30, 1995 $3.75 $ 121,579
September 30, 1995 $3.75 $ 121,579
December 31, 1995 $3.00 $ 97,263
March 31, 1996 $3.00 $ 97,263
June 30, 1996 $3.00 $ 97,263
September 30, 1996 $3.00 $ 97,263
December 31, 1996 $3.00 $ 97,263
March 31, 1997 $3.00 $ 97,263
June 30, 1997 $3.00 $ 97,263
September 30, 1997
December 31, 1997 $165.00 $5,349,465
Since Inception $151.10 $165.00 $ 53.40 $4,780,603 $5,349,465 $1,731,281
</TABLE>
- ----------
(1) The amounts set forth above representing Per $500 Unit distributions
From Operations may vary slightly among Limited Partners depending on a
Limited Partner's date of admission to the Partnership. Operating
distributions for the first four quarters following the initial
admission of Limited Partners were prorated based on a Limited
Partner's date of admission to the Partnership. The amount set forth
for the calculation of total Per $500 Unit distributions From
Operations since inception is based on average distributions for those
first four quarters.
<PAGE> 17
EXHIBIT B
PROPOSED AMENDMENT
TO SECTION 16.b. OF THE PARTNERSHIP AGREEMENT
Set forth below is the language of Section 16.b. of the Partnership's
Agreement as currently in effect. The proposed Amendment, if it is approved by
the Limited Partners as described in the Consent Solicitation, would result in
the deletion of the italicized text, commencing on line four below.
b. Capital Contribution Upon Dissolution - Each Partner shall look
solely to the assets of the Partnership for all distributions with respect to
the Partnership and his Capital Contribution thereto, and shall have no
recourse therefor (upon dissolution or otherwise) against any General Partner
or any Limited Partner; PROVIDED, HOWEVER, THAT UPON DISSOLUTION AND
TERMINATION OF THE PARTNERSHIP THE GENERAL PARTNER SHALL CONTRIBUTE TO THE
CAPITAL OF THE PARTNERSHIP AN AMOUNT EQUAL TO THE LEAST OF (i) THE NEGATIVE
BALANCE IN THE GENERAL PARTNERS' CAPITAL ACCOUNTS, (ii) THE EXCESS, IF ANY, OF
THE SUM OF (a) THE LIMITED PARTNERS' CAPITAL CONTRIBUTIONS AND (b) AN AMOUNT
EQUAL TO THE GREATER OF (1) AN 8% CUMULATIVE ANNUAL RETURN WITH RESPECT TO
EACH LIMITED PARTNER'S ADJUSTED CAPITAL VALUE (12% WITH RESPECT TO EARLY
INVESTORS), CALCULATED COMMENCING WITH THE FIRST ANNIVERSARY DATE OF THE LAST
ADDITIONAL CLOSING DATE AND REDUCED BY ANY NET CASH FROM OPERATIONS DISTRIBUTED
TO SUCH LIMITED PARTNER, OR (2) A 6% CUMULATIVE ANNUAL RETURN WITH RESPECT TO
EACH LIMITED PARTNER'S ADJUSTED CAPITAL VALUE CALCULATED FROM THE DATE OF HIS
ADMISSION TO THE PARTNERSHIP AND REDUCED BY ANY NET CASH FROM OPERATIONS
DISTRIBUTED TO SUCH LIMITED PARTNER, OVER THE AGGREGATE DISTRIBUTIONS TO THE
LIMITED PARTNERS OF NET PROCEEDS FROM SALE OR REFINANCING, OR (iii) THE
AGGREGATE CASH DISTRIBUTIONS TO THE GENERAL PARTNERS.
<PAGE> 18
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5110 Langdale Way, Colorado Springs CO 80906
(Address of principal executive offices) (Zip Code)
(719) 527-0544
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting securities held by non-affiliates: Not
applicable, since securities are not actively traded on any exchange.
Documents incorporated by reference: None
The Exhibit Index is located on page ______
<PAGE> 19
PART I
ITEM 1. BUSINESS
This form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
Cluster Housing Properties (the "Partnership"), formerly Berry and Boyle Cluster
Housing Properties, is a California limited partnership formed on August 8,
1983. The General Partners are Stephen B. Boyle and GP L'Auberge Communities,
L.P., a California limited partnership, formerly Berry and Boyle Management.
The primary business of the Partnership is to operate and ultimately dispose of
a diversified portfolio of income-producing residential real properties through
its joint venture interest in such properties. Descriptions of such properties
are included below in "Item 2. Properties" as well as in note 5 of the Notes to
the Consolidated Financial Statements included in this report and incorporated
herein by reference thereto.
On October 25, 1985, the Partnership acquired a majority joint venture interest
in the Sin Vacas Joint Venture, which owns and operates a 72-unit multifamily
rental property located in Tucson, Arizona. The Partnership contributed
$2,520,954 to the Sin Vacas Joint Venture which was used to repay a portion of
the construction loan on the property. The balance of the construction loan was
repaid through the proceeds of a $2,575,000 permanent loan from a third party
lender. In accordance with the terms of the Partnership Agreement, the
Partnership paid an acquisition fee of $250,000 to GP L'Auberge Communities,
L.P. for its services in structuring and negotiating the acquisition. The
Partnership also incurred acquisition expenses relating to the acquisition which
totaled $168,686.
On June 11, 1987, the Partnership acquired a majority joint venture interest in
the Villa Antigua Joint Venture which owns and operates an 88-unit multifamily
rental property located in Scottsdale, Arizona. The Partnership contributed
$2,494,677 to the Villa Antigua Joint Venture which was used to repay a portion
of the construction loan on the property. The balance of the construction loan
was repaid through the proceeds of a $3,200,000 permanent loan from a third
party lender. In accordance with the terms of the Partnership Agreement, the
Partnership paid an acquisition fee of $350,000 to GP L'Auberge Communities,
L.P. for its services in structuring and negotiating the acquisition. The
Partnership also incurred acquisition expenses relating to the acquisition which
totaled $31,729.
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI"), a
Phoenix based residential development, construction and management firm and the
developer of the Villas at Sin Vacas and Villa Antigua properties, 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.
On July 16, 1986, the Partnership assigned its right to acquire a property known
as L'Auberge Pinecliff ("Pinecliff"), formerly Autumn Ridge, a 96-unit
multifamily rental property located in Colorado Springs, Colorado to a Colorado
joint venture (the Autumn Ridge Joint Venture) which acquired the property for a
purchase price of $7,320,760. The Partnership simultaneously contributed to the
Autumn Ridge Joint Venture an amount equal to the total purchase price less the
proceeds of a $3,300,000 permanent loan. In accordance with the terms of the
Partnership Agreement, the Partnership paid an acquisition fee of $400,000 to GP
L'Auberge Communities, L.P. for its services in structuring and negotiating this
acquisition. The Partnership also incurred acquisition expenses relating to the
acquisition which totaled $97,475.
On July 3, 1996, the Partnership and certain affiliates consummated an agreement
with Highland Properties, Inc. ("Highland"), a Colorado based residential
development, construction and management firm and developer of the property
known as L'Auberge Pinecliff, 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.
<PAGE> 20
The Partnership expects to sell the properties at some future time, taking into
consideration such factors as the price to be realized, the possible risks of
continued ownership and the anticipated advantages to be gained for the
partners. Proceeds from the sale, financing or refinancing of the properties
will not be reinvested by the Partnership or its joint ventures, but will be
distributed to the partners, so that the Partnership will, in effect, be
self-liquidating. Under the terms of the various termination agreements, the
Partnership has control over the decision to sell any property.
The success of the Partnership will depend upon factors which are difficult to
predict and many of which are beyond the control of the Partnership. Such
factors include, among others, general economic and real estate market
conditions, both on a national basis and in those areas where the Partnership's
investments are located, competitive factors, the availability and cost of
borrowed funds, real estate tax rates, federal and state income tax laws,
operating expenses (including maintenance and insurance), energy costs,
government regulations, and potential liability under and changes in
environmental and other laws, as well as the successful management of the
properties.
On-site management of all of the Partnership's properties, Villas at Sin Vacas,
Villa Antigua, and Pinecliff, is currently conducted by an affiliate of the
General Partners. The terms of such property management services between the
Partnership and property managers are embodied in a written management agreement
with respect to each property. The property manager in each case receives
management fees which are competitive with those obtainable in arm's-length
negotiations with independent parties providing comparable services in the
localities in which the properties are located. These fees do not exceed 4% of
the gross revenues from each property plus reimbursement for allocable expenses.
It is the responsibility of the General Partners to select or approve property
managers and to supervise their performance. Property managers are responsible
for on-site operations and maintenance, generation and collection of rental
income and payment of operating expenses.
The difference between rental income and expenses related to operations,
including items such as local taxes and assessments, utilities, insurance
premiums, maintenance, repairs and improvements (and reserves therefor),
bookkeeping and payroll expenses, legal and accounting fees, property management
fees and other expenses incurred, constitute the properties' operating cash
flow. The Partnership's administrative expenses are paid out of the
Partnership's share of such cash flow from the various properties and from
interest income which the Partnership earns on its short-term investments.
The Partnership's investments in real estate are also subject to certain
additional risks including, but not limited to, (i) competition from existing
and future projects held by other owners in the areas of the Partnership's
properties, (ii) possible reduction in rental income due to an inability to
maintain high occupancy levels, (iii) adverse changes in mortgage interest
rates, (iv) possible adverse changes in general economic conditions and adverse
local conditions, such as competitive overbuilding, or a decrease in employment
or adverse changes in real estate zoning laws, (v) the possible future adoption
of rent control legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent increases, and (vi) other
circumstances over which the Partnership may have little or no control.
The Partnership's investments are subject to competition in the rental, lease
and sale of similar types of properties in the localities in which the
Partnership's real property investments are located. Furthermore, the General
Partners of the Partnership are affiliated with other partnerships owning
similar properties in the vicinity in which the Partnership's properties are
located. In addition, other limited partnerships may be formed by affiliates of
the General Partners which will compete with the Partnership.
The Partnership considers itself to be engaged in only one industry segment,
real estate investment.
ITEM 2. PROPERTIES
The Partnership owns and operates three properties: (1) Villas at Sin Vacas, a
72-unit multifamily rental property in Tucson, Arizona, subject to first
mortgage financing in the original principal amount of $2,575,000; (2) L'Auberge
Pinecliff, a 96-unit multifamily rental property in Colorado Springs, Colorado,
subject to first mortgage financing in the original principal amount of
$3,300,000; and, (3) Villa Antigua, an 88-unit multifamily rental property in
Scottsdale, Arizona, subject to first mortgage financing in the original
principal amount of $3,200,000. The ownership was formerly structured as Joint
Ventures of which the Partnership owned a majority interest. With regard to the
termination of the Joint Ventures, see Note 5 of Notes to Consolidated Financial
Statements.
Villas at Sin Vacas
As of February 28, 1997, the property was 91% occupied, compared to 86%
approximately one year ago. At December 31, 1996 and 1995, the market rents for
the various unit types were as follows:
<TABLE>
<CAPTION>
Market Rents
December 31,
Unit
1996 1995
--------- ---- ----
<S> <C> <C>
One bedroom one bath $835 $835
Two bedroom two bath 1,050 1,050
Three bedroom two bath 1,200 1,200
</TABLE>
Pinecliff
As of February 28, 1997, the property was 86% occupied, compared to 95%
approximately one year ago. At December 31, 1996 and 1995, the market rents for
the various unit types were as follows:
<TABLE>
<CAPTION>
Market Rents
December 31,
Unit Type 1996 1995
- --------- ---- ----
<S> <C> <C>
One bedroom one bath $921 $898
Two bedroom two bath 1,125 1,102
</TABLE>
Villa Antigua
As of February 28, 1997, the property was 94% occupied, compared to 99%
approximately one year ago. At December 31, 1996 and 1995, the market rents for
the various unit types were as follows:
<TABLE>
<CAPTION>
Market Rents
December 31,
Unit Type 1996 1995
--------- ---- ----
<S> <C> <C>
One bedroom one bath $843 $760
Two bedroom two bath 1,080 1,028
Three bedroom two bath 1,130 1,090
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership or of
which any of the properties is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
<PAGE> 21
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is not
anticipated that any such public market will develop.
The number of holders of Units as of December 31, 1996 was 1,967.
Distributions are made to the Partners on a quarterly basis based upon Net Cash
from Operations, as calculated under Section 10 of the Partnership Agreement.
Total cash distributions to the Limited Partners for 1996 and 1995 were paid as
follows:
<TABLE>
<CAPTION>
Date of
Quarter Ended Payment Amount
- ------------- ------ ------
<S> <C> <C>
March 31, 1995 May 15, 1995 $ 121,579
June 30, 1995 August 15, 1995 $ 121,579
September 30, 1995 November 15, 1995 $ 121,579
December 31, 1995 February 15, 1996 $ 97,263
March 31, 1996 May 15, 1996 $ 97,263
June 30, 1996 August 15, 1996 $ 97,263
September 30, 1996 December 11, 1996 $ 97,263
December 31, 1996 February 28, 1997 $ 97,263
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Partnership and consolidated
subsidiaries has been derived from consolidated financial statement audited by
Coopers & Lybrand, L.L.P., whose reports for the periods ended December 31,
1996, 1995 and 1994 are included elsewhere in the Form 10K and should be read in
conjunction with the full consolidated financial statements of the Partnership
including the Notes thereto.
<TABLE>
<CAPTION>
Year Ended
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
Rental income $ 2,615,350 $ 2,725,119 $ 2,572,947 $ 2,391,911 $ 2,204,133
Net income (loss) ($ 167,778) $ 309,115 $ 260,976 $ 141,982 ($ 142,622)
Net income (loss) allocated to Partners:
Limited Partners - Per Unit
Aggregate 32,421 Units ($ 5.12) $ 9.06 $ 7.65 $ 4.16 ($ 4.36)
General Partners ($ 1,678) $ 15,456 $ 13,049 $ 7,099 ($ 1,426)
Cash distributions to Partners:
Limited Partners:
Weighted average per Unit $ 12.00 $ 15.50 $ 17.75 $ 9.50 $ 3.00
General Partners $ 20,476 $ 26,449 $ 30,288 $ 16,211 $ 5,119
Total assets $15,644,667 $16,274,801 $16,587,271 $17,032,336 $17,327,814
Long term obligations $ 8,559,930 $ 8,695,278 $ 8,818,891 $ 8,931,713 $ 9,034,755
</TABLE>
Long term obligations become due in 1997. The Partnership intends to refinance
these notes prior to the due date, although there can be no assurance that the
Partnership will be able to do so. See Note 6 of Notes to Consolidated
Financial Statements.
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Management's expectations regarding future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity; 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 Pinecliff 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, Pinecliff and
Villa Antigua projects and other excess offering proceeds. The remaining net
proceeds of $1,636,981 were used to establish initial working capital reserves.
These reserves have been used periodically to enable the Partnership to meet its
various financial obligations including contributions to the various Joint
Ventures that may be required. Cumulatively through December 31, 1996, $368,990
was contributed to the Joint Ventures for this purpose.
In addition to the proceeds generated from the public offering, the Partnership
utilized external sources of financing at the joint venture level to purchase
properties. The Partnership Agreement limits the aggregate mortgage indebtedness
which may be incurred in connection with the acquisition of Partnership
properties to 80% of the purchase price of such properties.
The Partnership's future ability to generate cash adequate to meet its needs is
dependent primarily on the successful operations of its real estate investments.
Such ability is also dependent upon the future availability of bank borrowings,
and upon the future refinancing or sale of the Partnership's real estate
investments and the collection of any mortgage receivable which may result from
such sales. These sources of liquidity will be used by the Partnership for
payment of expenses related to real estate operations, debt service and
professional and management fees and expenses. Net Cash From Operations and Net
Proceeds, if any, as defined in the Partnership Agreement, will then be
available for distribution to the Partners in accordance with Section 10 of the
Partnership Agreement. The General Partners believe that the current working
capital reserves together with projected cash flows for 1997 are adequate to
meet the Partnership's operating cash needs in the coming year. With regard to
certain balloon payments on existing first mortgage debt on the Partnership's
properties, the General partners do not anticipate sufficient cash flow from
operations to retire these mortgage notes. As these mortgage notes payable are
due in fiscal 1997, the Partnership will seek to renegotiate these mortgage
notes with its existing lenders or seek new sources of financing for these
properties on a long term basis, although there can be no assurance that the
Partnership will be able to do so. The General Partners believe that existing
cash flows from the properties will be sufficient to support a level of
borrowing that is at least equal to amounts outstanding as of December 31, 1996.
If the general economic climate for real estate in these respective locations
were to deteriorate resulting in an increase in interest rates for mortgage
financing or a reduction in the availability of real estate mortgage financing
or a decline in the market values of real estate it may affect the Partnership's
ability to complete these refinancings.
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 Joint Ventures. In 1996, the
aggregate net decrease in working capital reserves was $481,980. This decrease
resulted primarily from cash provided by operations of $349,757 offset by
$281,346 of fixed asset additions, distributions to partners of $389,052 and
$135,348 of principal payments on mortgage notes payable.
<PAGE> 23
In 1995, the aggregate net decrease in working capital reserves was $41,502.
This decrease resulted primarily from cash provided by operations of $758,756
offset by $148,127 of fixed asset additions, distributions to
partners of $528,974 and $123,613 of principal payments on mortgage notes
payable.
Results of Operations
For the year ended December 31, 1996, the Partnership's operating results were
comprised of its share of the income and expenses from the Sin Vacas, L'Auberge
Pinecliff (formerly Autumn Ridge) and Villa Antigua properties, 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>
<CAPTION>
Sin L'Auberge Villa Investment Consolidated
Vacas Pinecliff Antigua Total Total
<S> <C> <C> <C> <C> <C>
Total revenue $ 694,550 $ 1,022,283 $ 901,463 $ 53,445 $ 2,671,741
Expenses:
General and administrative 1,686 -- 259 381,328 383,273
Operations 410,622 437,646 363,192 26,368 1,237,828
Depreciation and 126,677 181,804 122,636 -- 431,117
amortization
Interest 223,411 286,313 277,577 -- 787,301
----------- ----------- -----------
----------- -----------
762,396 905,763 763,664 407,696 2,839,519
----------- ----------- -----------
=========== ===========
Net income (loss) ($ 67,846) $ 116,520 $ 137,799 ($ 354,251) ($ 167,778)
=========== =========== =========== =========== ===========
</TABLE>
For the year ended December 31, 1995, the Partnership's operating results were
comprised of its share of the income and expenses from the Sin Vacas, Autumn
Ridge and Villa Antigua Joint Ventures, 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>
<CAPTION>
Sin L'Auberge Villa Investment Consolidated
Vacas Pinecliff Antigua Total Total
<S> <C> <C> <C> <C> <C>
Total revenue $ 755,680 $ 1,041,402 $ 930,236 $ 81,023 $ 2,808,341
Expenses:
General and administrative 7,200 7,244 7,200 183,245 204,889
Operations 353,533 420,726 310,611 -- 1,084,870
Depreciation and 118,909 173,174 118,217 -- 410,300
amortization
Interest 226,761 290,606 281,800 -- 799,167
----------- ----------- -----------
----------- -----------
706,403 891,750 717,828 183,245 2,499,226
----------- ----------- -----------
=========== ===========
Net income (loss) $ 49,277 $ 149,652 $ 212,408 ($ 102,222) $ 309,115
=========== =========== =========== =========== ===========
</TABLE>
For the year ended December 31, 1994, the Partnership's operating results were
comprised of its share of the income and expenses from the Sin Vacas, Autumn
Ridge and Villa Antigua Joint Ventures, 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>
<CAPTION>
Sin Autumn Villa Investment Consolidated
Vacas Ridge Antigua Total Total
<S> <C> <C> <C> <C> <C>
Total revenue $ 757,490 $ 979,216 $ 838,362 $ 56,007 $ 2,631,075
Expenses:
General and administrative 7,494 7,793 7,862 143,532 166,681
Operations 339,483 353,665 298,421 -- 991,569
Depreciation and 115,612 169,787 116,476 -- 401,875
amortization
Interest 229,820 294,553 285,601 -- 809,974
----------- ----------- ----------- ----------- -----------
692,409 825,798 708,360 143,532 2,370,099
----------- ----------- ----------- -----------
Net income $ 65,081 $ 153,418 $ 130,002 ($ 87,525) $ 260,976
(Loss)
=========== =========== =========== =========== ===========
</TABLE>
<PAGE> 24
Comparison of 1996 and 1995 Operating Results:
In accordance with its dispositions strategy, (see "Projected 1997 Operating
Results" below). the Partnership incurred one time costs associated with the
Evans Withycombe termination ($73,775), the Highland termination (($7,718) and
their related legal costs. (Refer to Note 5 of the Consolidated Financial
Statements.) In additions, the Partnership incurred one-time costs associated
with its property interior and exterior refurbishment program, the change in
on-site management following the Evans Withycombe termination, the outsourcing
of much of the Partnership's administration work to an administrative agent and
the relocation of the remaining administration, financial and investor services
functions to a more cost efficient location in Colorado Springs, Colorado.
Consequently, competitive pressures and disposition-related activities led to
rental operating expenses (including advertising, promotion, apartment locator
and concession costs) to increase by $152,958 or 14% over the prior year and
total general and administrative expenses of the Partnership increased $178,384
(87%) over the prior year. Fixed asset purchases increased $281,346 from
$141,735 in the prior year and consisted of such items as carpet, appliances,
equipment for fitness and business centers facilities, and remodeling features.
As a result of the factors described above, distributions to partners decreased
$119,446, or 23%, from $528,974 in 1995 to $409,528 in 1996.
Comparison of 1995 and 1994 Operating Results:
Total revenue increased $177,266, or 7% over the prior year, due to increased
rental income of $152,172 or 6%, primarily as a result of rental rate increases
at the Partnership's properties. Interest income increased $25,094 or 43% in
1995, as a result of higher interest rates earned on money market accounts and
short-term investments. Rental operating expenses increased $93,301 or 9% over
the prior year primarily as a result of increases in maintenance and advertising
costs. General and administrative expenses increased $38,208 or 23%, due
primarily to increased salary expense allocations and legal costs and printing
and mailing costs associated with the voluntary withdrawal of a general partner
of the Partnership. Fixed asset purchases increased $141,735 from $6,392 in the
prior year to $148,127 and included such items as carpet, floor tile and other
replacements and exterior painting of Sin Vacas. As a result of the factors
described above, distributions to partners decreased $76,788, or 13%, from
$605,762 in 1994 to $528,974 in 1995
Projected 1997 Operating Results:
While there can be no assurance that the Partnership will dispose of any or all
of its properties in 1997, on March 25, 1997, the Partnership entered into
letters of intent to sell Villas Sin Vacas in Tucson, Arizona, and Villa
Antigua, Phase I, in Scottsdale, Arizona, to an unaffiliated purchaser. The
purchase price for Villas Sin Vacas would be $5,040,000 and the purchase price
for Villa Antigua, Phase I, would be $9,230,000. Each letter of intent is
subject to completion of customary due diligence to the satisfaction of the
purchaser, the purchaser obtaining a financing commitment for the purchase of
the property on commercially reasonable terms and conditions, the negotiation
and execution of a definitive purchase agreement, and certain other conditions.
Accordingly, there can be no assurance that the sale of such properties will be
consummated in accordance with the terms of the letters of intent or at all. As
a result of the foregoing, operating results of the Partnership may vary
significantly during 1997.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE> 25
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as to the
individual general partners of the Partnership and directors and executive
officers of L'Auberge Communities, Inc. (formerly Berry and Boyle Inc.), the
general partner of GP L'Auberge Communities, L.P., is set forth below.
Individual General Partners
Stephen B. Boyle, age 56, is President, Executive Officer and Director of
L'Auberge Communities, Inc. and a general partner and co-founder of LP L'Auberge
Communities, a California Limited Partnership (formerly Berry and Boyle), a
limited partnership formed in 1983 to provide funds to various affiliated
general partners of real estate limited partnerships, one of which is GP
L'Auberge Communities, L.P.
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.
GP L'Auberge Communities, L.P.
Information as to the directors and executive officers of L'Auberge Communities,
Inc., a general partner of GP L'Auberge Communities, L.P., which is a general
partner of the Partnership, and its affiliates, is set forth below. There are no
familial relationships between or among any officer and any other officer or
director.
Name Position
Stephen B. Boyle See above
Earl C. Robertson Executive Vice President and Chief
Financial Officer
Donna Popke Vice President and Secretary
Earl C. Robertson, age 48, has been a senior development officer, partner and
consultant in several prominent real estate development companies for over
twenty years, including Potomac Investment Associates, developers of planned
golf course communities nationwide. Mr. Robertson was also a key member of the
management team that developed the nationally acclaimed Inn at the Market in
Seattle. He joined L'Auberge Communities, Inc. in June 1995.
Donna Popke, age 37, joined L'Auberge Communities, Inc. in July, 1995 and holds
the title of Vice President and Secretary. Prior to joining L'Auberge
Communities, Inc., Ms. Popke was employed by Olive & Associates in Denver,
Colorado in the field of public accounting for six years and later from 1989 to
1995 with David R. Sellon & Company, a Colorado Springs land development
company.
ITEM 11. EXECUTIVE COMPENSATION
None of the General Partners or any of their officers or directors received any
compensation from the Partnership. See Item 13 below with respect to a
description of certain transactions of the General Partners and their affiliates
with the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As March 21, 1997, no person of record owned or was known by the General
Partners to own beneficially more than 5% of the Partnership's outstanding
Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1996, the Partnership paid or accrued
remuneration to the General Partners or their affiliates as set forth below. In
addition to the information provided herein, certain transactions are described
in notes 7 and 8 in the Notes to Financial Statements appearing in Appendix A,
which are included in this report and are incorporated herein by reference
thereto.
Net Cash From Operations distributed in 1996
to the General Partners $20,476
Allocation of Income and (Loss)
to the General Partners
$(1,678)
Property management fees paid to an affiliate of
the General Partners $64,954
Reimbursements to General Partners $82,881
<PAGE> 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1,2 See Page F-2
3 See Exhibit Index contained herein
(b) Reports on Form 8-K
The Partnership has not filed and was not required to file any reports
on Form 8-K during the last quarter of 1996.
(c) See Exhibit Index contained herein
(d) See Page F-2.
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
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/ Earl C. Robertson
- -------------------------------------------
Earl C. Robertson, Executive Vice President
and Chief Financial Officer
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
/s/ Stephen B. Boyle Director, President and March 26, 1997
-------------------- Principal Executive
STEPHEN B. BOYLE Officer of L'Auberge
Communities, Inc.
/s/ Earl C. Roberston Executive Vice President March 26, 1997
--------------------- and Principal Financial
EARL C. ROBERTSON Officer of L'Auberge
Communities, Inc.
<PAGE> 28
APPENDIX A
CLUSTER HOUSING PROPERTIES
(A California Limited Partnership)
AND SUBSIDIARIES
---------
CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1996
<PAGE> 29
CLUSTER HOUSING PROPERTIES
(A California Limited Partnership)
AND SUBSIDIARIES
---------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1996 and 1995 F-4
Consolidated Statements of Operations for the years
ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Partners' Equity (Deficit)
for the years ended December 31, 1996, 1995 and 1994 F-6
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994 F-7 -- F-8
Notes to Consolidated Financial Statements F-9 -- F-16
All Schedules are omitted as they are not applicable, not required, or the
information is provided in the financial statements or the notes thereto.
<PAGE> 30
Report of Independent Accountants
To the Partners of
Cluster Housing Properties
(a California Limited Partnership):
We have audited the accompanying consolidated balance sheets of Cluster
Housing Properties (a California Limited Partnership) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, partners' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the General Partners of the Partnership. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners of the Partnership, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Cluster
Housing Properties (a California Limited Partnership) and subsidiaries as of
December 31, 1996 and 1995 and the consolidated results of their operations and
their cash flows for each of the three years in the period ended December 31,
1996 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Denver , Colorado
February 28, 1997
<PAGE> 31
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
---------------
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Property, at cost:
Land $ 3,677,028 $ 3,677,028
Buildings and improvements 14,067,757 14,067,756
Equipment, furnishings and 1,576,836 1,295,545
fixtures
------------ ------------
19,321,621 19,040,329
Less accumulated depreciation (4,810,314) (4,418,093)
------------ ------------
14,511,307 14,622,236
Cash and cash equivalents 1,065,855 480,389
Short-term investments 1,067,446
------------
Real estate tax escrows 41,632 44,055
Deposits 3,818 1,693
Accounts receivable 2,605 631
Deferred expenses, net of accumulated
amortization of $175,041 and 19,450 58,351
$ 136,140 --
Total assets $ 15,644,667 $ 16,274,801
============ ============
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $ 8,559,930 $ 8,695,278
Accounts payable 115,410 42,245
Accrued expenses 195,794 164,298
Due to affiliates 8,975 23,173
(Note 8)
Rents received in advance 4,538 10,495
Tenant security 55,320 57,306
deposits
------------ ------------
8,939,967 8,992,795
liabilities
Minority interest (8,895)
------------
Partners' equity 6,704,700 7,290,901
------------ ------------
Total liabilities and partners' equity $ 15,644,667 $ 16,274,801
============ ============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 32
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
-------------
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenue:
Rental income $ 2,615,350 $ 2,725,119 $ 2,572,947
Interest Income 56,391 83,222 58,128
-----------
Total Revenue 2,671,741 2,808,341 2,631,075
Expenses:
Operations 1,237,828 1,084,870 991,569
Interest expense 787,301 799,167 809,974
Depreciation and amortization 431,117 410,300 401,875
General and administrative 383,273 204,889 166,681
-----------
Total Expenses 2,839,519 2,499,226 2,370,099
-----------
Net income (loss) ($ 167,778) $ 309,115 $ 260,976
===========
Net income (loss) allocated to:
General Partners ($ 1,678) $ 15,456 $ 13,049
Per unit Net income (loss) allocated
to Investor Limited Partner
interest:
32,421 units issued ($ 5.12) $ 9.06 $ 7.65
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 33
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) for the
years ended December 31, 1996, 1995 and 1994
-------------
<TABLE>
<CAPTION>
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1993 ($ 141,908) $ 7,997,454 $ 7,855,546
Cash distributions (30,288) (575,474) (605,762)
Net income 13,049 247,927 260,976
----------- ----------- -----------
Balance at December 31, 1994 (159,147) 7,669,907 7,510,760
Cash distributions (26,449) (502,525) (528,974)
Net income 15,456 293,659 309,115
----------- ----------- -----------
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
=========== =========== ===========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 34
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995, 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $ 80,257 $ 82,408 $ 55,610
Cash received from rental income 2,607,383 2,716,163 2,569,838
General and administrative (370,245) (201,143) (159,895)
expenses
Operations expense (1,179,822) (1,039,036) (968,373)
Interest paid (787,816) (799,636) (810,404)
----------- ----------- -----------
Net cash provided by operating activities 349,757 758,756 686,776
Cash flows from investing activities:
Purchase of fixed assets (281,346) (148,127) (6,392)
Cash received from short-term investments 1,043,580 327,298 32,545
----------- ----------- -----------
Net cash provided by investing activities 762,234 179,171 26,153
Cash flows from financing activities:
Distributions to partners (389,052) (528,974) (605,762)
Deposits (2,125) (358) (95)
Principal payments on mortgage notes payable (135,348) (123,613) (112,822)
----------- ----------- -----------
Net cash used by financing (526,525) (652,945) (718,679)
activities
----------- ----------- -----------
Net increase (decrease) in cash and cash 585,466 284,982 (5,750)
equivalents
Cash and cash equivalents at beginning of the period 480,389 195,407 201,157
----------- ----------- -----------
Cash and cash equivalents at end of the period $ 1,065,855 $ 480,389 $ 195,407
=========== =========== ===========
Non cash financing activities:
Accrual of distributions to $ 20,476
partners
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 35
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995, 1994
-------------
Reconciliation of net income (loss) to net cash provided by operating
activities:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net income (loss) ($167,778) $ 309,115 $ 260,976
Adjustments to reconcile net income (loss) to net cash
provided by operating
activities:
Depreciation and amortization 431,117 410,300 401,875
Change in assets and liabilities net of effects
of investing and financing
activities:
Decrease in real estate tax 2,423 7,750 14,568
escrows
(Increase) decrease in accounts and interest receivable 21,951 (1,445) (1,153)
(Increase) decrease in deposits and prepaid expenses -- 2,033 (2,033)
Increase in accounts payable and accrued expenses 84,185 35,871 8,679
Increase (decrease) in due to affiliates (14,198) 4,088 6,973
Increase (decrease) in rent received in (5,957) (3,526) 4,446
advance
Decrease in tenant security (1,986) (5,430) (7,555)
deposits
--------- --------- ---------
Net cash provided by operating activities $ 349,757 $ 758,756 $ 686,776
========= ========= =========
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 36
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 December 31, 1996, the
total number of Limited Partners was 1,967. 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 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 subsidiaries: Sin Vacas Joint Venture (Sin Vacas),
Autumn Ridge Joint Venture (Autumn Ridge) and Villa Antigua Joint
Venture (Villa Antigua). All intercompany accounts and transactions
have been eliminated in consolidation. The Partnership follows the
accrual basis of accounting. Refer to Note 5 regarding the termination
of the Joint Ventures.
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. Short-term Investments
At December 31, 1995, short term investments consisted solely of
various forms of U. S. Government backed securities, with an aggregate
par value of $1,075,000, which matured in February, 1996. As of
December 31, 1996, there were no short term investments. Investments
are recorded at amortized cost, which approximates market value.
D. 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.
E. 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
F. Deferred Expenses
Costs of obtaining mortgages on the properties are being amortized over
the mortgage term using the straight-line method, which approximates
the effective interest 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.
G. 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
<PAGE> 37
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.
H. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
I. Long-Lived Assets
The Partnership's long-lived assets include property and equipment. On
a quarterly basis, the partnership evaluates the recoverability of the
rental properties using undiscounted cash flows from operations.
J. Reclassification
Certain items in the financial statements for the years ended December
31, 1995 and 1994 have been reclassified to conform to the 1996
presentation.
<PAGE> 38
3. Property, at Cost
Property, at cost, consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
Initial Cost Costs Capitalized
to Subsequent to
Partnership Acquisition
--------------------------------------- -------------------------------------------------
Buildings Equipment Buildings Equipment
Property and Furniture and Furniture
Description Land Improvements & Fixtures Land Improvements & Fixtures Land
- ------------------------------------------------------------------- -------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Villas at Sin Vacas,
a 72-unit
residential
rental complex
located in Tucson,
Arizona $ 799,913 $ 3,948,060 $ 75,678 $190,059 $ 822,059
Pinecliff, a 96-unit
residential rental
located in
Colorado Springs,
Colorado 1,242,061 5,981,166 380,288 -- 81,889 169,811 1,242,061
Villa Antigua, an
88-unit
residential rental
complex located in
Scottsdale, Arizona 1,610,646 3,942,388 376,709 2,262 38,576 115,354 1,612,908
---------- ----------- ---------- ------- -------- -------- ----------
$3,652,620 $13,871,614 $1,101,612 $24,408 $196,143 $475,224 $3,677,028
========== =========== ========== ======= ======== ======== ==========
<CAPTION>
Gross Amount At Which Carried
at Close of Period
---------------------------------------
Buildings Equipment
Property and Furniture
Description Improvements & Fixtures Total
- --------------------- ---------------------------------------
<S> <C> <C> <C>
Villas at Sin Vacas,
a 72-unit
residential
rental complex
located in Tucson,
Arizona $ 4,023,738 $ 534,674 $ 5,380,471
Pinecliff, a 96-unit
residential rental
located in
Colorado Springs,
Colorado 6,063,055 550,099 7,855,215
Villa Antigua, an
88-unit
residential rental
complex located in
Scottsdale, Arizona 3,980,964 492,063 6,085,935
----------- ---------- -----------
$14,067,757 $1,576,836 $19,321,621
=========== ========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1995 and 1994 and
accumulated depreciation at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
Depreciation Accumulation Depreciation
Expense December 31,
1996 1995 1994 1996 1995
----------- ------------ ---------- ---- ----
<S> <C> <C> <C> <C> <C>
Buildings and improvements $351,694 $351,694 $351,695 $3,639,807 $3,288,113
Equipment, furnishings and 40,527 19,709 11,283 1,170,507 1,129,980
fixtures
------------------------------------------- ---------------------------
$392,221 $371,403 $362,978 $4,810,314 $4,418,093
=========================================== ===========================
</TABLE>
Each of the properties is encumbered by a nonrecourse mortgage note payable (see
Note 6).
<PAGE> 39
4. Cash and Cash Equivalents:
Cash and cash equivalents at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash on hand $ 854,769 $ 30,848
Certificate of depo 211,086 100,000
Money market accoun ________ 349,541
$1,065,855 $480,389
</TABLE>
5. 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 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 December 31, 1996, the total capital contributions and acquisition
costs incurred were $2,713,937 and $418,686, respectively.
For the years ended December 31, 1996, 1995 and 1994 the Sin Vacas Joint Venture
had net loss of $67,846 and net income of $49,277, and $65,081, 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 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 December 31, 1996, the total capital contributions and
acquisition costs were $2,580,117 and $381,729, respectively.
<PAGE> 40
The Villa Antigua Joint Venture had net income of $137,799, $212,408, and
$130,002 for the years ended December 31,1996, 1995 and 1994.
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.
<PAGE> 41
Sin Vacas and Villa Antigua
MAY 14, 1996 THROUGH DECEMBER 31, 1996
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 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 $318,811. At December 31, 1996 the total capital contributions and
acquisition costs incurred were $4,187,309 and $497,475, respectively.
For the years ended December 31, 1996, 1995 and 1994 the Autumn Ridge Joint
Venture had net income of $116,520, $149,652, and $153,418, 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 effected by the relative balances in the
individual partners' capital accounts.
JULY 3, 1996 THROUGH DECEMBER 31, 1996
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.
<PAGE> 42
6. Mortgage Notes Payable:
All of the property owned by the Partnership is pledged as collateral for the
nonrecourse mortgage notes payable outstanding at December 31, 1996 and 1995
which consisted of the following:
1996 1995
---- ----
Villas at Sin Vacas $2,428,851 $2,467,255
Pinecliff 3,112,702 3,161,919
Villa Antigua 3,018,377 3,066,104
---------- ----------
$8,559,930 $8,695,278
========== ==========
Sin Vacas
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 balance of the note will be due on July 15, 1997.
Pinecliff
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 balance of the note will be due on July 15, 1997.
Villa Antigua
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. The balance of the note will be due on July 15, 1997.
As these mortgage notes payable are due in fiscal 1997, the Partnership will
seek to renegotiate these mortgage notes with its existing lenders or seek new
sources of financing for these properties on a long term basis. The General
Partners believe that existing cash flows from the properties will be sufficient
to support a level of borrowing that is at least equal to amounts outstanding as
of December 31, 1996. If the general economic climate for real estate in these
respective locations were to deteriorate resulting in an increase in interest
rates for mortgage financing or a reduction in the availability of real estate
mortgage financing or a decline in the market values of real estate it may
affect the Partnership's ability to complete these refinancings.
Interest included in Accrued expenses in the Consolidated Balance Sheets at
December 31, 1996 and 1995 consisted of the following:
1996 1995
---- ----
Villas at Sin Vacas $ 9,235 $ 9,381
Pinecliff 11,835 12,022
Villa Antigua 11,476 11,658
------- -------
$32,546 $33,061
======= =======
The principal balance of the mortgage notes payable appearing on the
consolidated balance sheets at December 31, 1996 and 1995 approximates the fair
value of such notes.
7. 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.
8. Related-Party Transactions:
Due to affiliates at December 31, 1996 and 1995 consisted of reimbursable costs
payable to L'Auberge Communities, Inc., an affiliate of the General Partners, in
the amounts of $8,975, and $14,278, respectively. In 1995 distributions payable
to the Villa Antigua co-venturer totaled $8,895. There was no distribution
payable to the co-venturer in 1996.
For the years ended December 31, 1996, 1995 and 1994, general and administrative
expenses included $82,881, $84,643, and $68,625, respectively, of salary
reimbursements paid to the General Partners for certain administrative and
accounting personnel who perform 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.
<PAGE> 43
During the years ended December 31, 1996, 1995 and 1994, Evans Withycombe
received property management fees of $32,475, $84,187, and $79,692,
respectively. These fees were 5% of rental revenue in each time period. In
addition, for the years ended December 31, 1996, 1995 and 1994, $64,954,
$51,715, and $49,083, respectively, of property management fees were paid or
accrued to Residential Services - L'Auberge, an affiliate of the General
Partners. These fees were 4% of rental revenue in 1996, and 5% of rental revenue
in 1995 and 1994.
Villa Antigua reimbursed $35,885, $34,707 and $34,878, respectively for its
proportionate share of the 1996, 1995 and 1994 real estate taxes to Villa
Antigua Phase II, which is an affiliate of the General Partners.
<PAGE> 44
EXHIBIT INDEX
Exhibit
No.
(4)(1) Amended and Restated Certificate and Agreement of Limited Partnership
(included in Partnership's Registration Statement No. 2-86262,
declared effective on March 22, 1984 (the "Registration Statement")
and incorporated herein by reference).
(4)(a)(2) Seventeenth Amendment to Amended and Restated Certificate and
Agreement of Limited Partnership dated May 31, 1990 (included as an
exhibit to the Partnership's Form 10-K for the fiscal year ended
December 31, 1990 and incorporated herein by reference).
(4)(b) Subscription Agreement (included as an Exhibit in the Registration
Statement and incorporated herein by reference).
(10)(a) Property management agreement between Autumn Ridge Joint Venture and
Berry and Boyle Residential Services.(included as an exhibit to the
Partnership's Form 10-K for the fiscal year ended December 31, 1990
and incorporated herein by reference).
(10)(b) Property management agreement regarding Sin Vacas between Cluster
Housing Properties and L'Auberge Communities Inc. dated May 15, 1996.
(10)(c) Property management agreement regarding Villa Antigua between Cluster
Housing Properties and L'Auberge Communities Inc. dated November 1,
1996.
(10)(d) Documents pertaining to the permanent loan refinancing for the Sin
Vacas Joint Venture (included as an exhibit to the Partnership's Form
10-K for the fiscal year ended December 31, 1992 and incorporated
herein by reference).
(10)(e) Documents pertaining to the permanent loan refinancing for the Autumn
Ridge Joint Venture (included as an exhibit to the Partnership's Form
10-K for the fiscal year ended December 31, 1992 and incorporated
herein by reference).
(10)(f) Documents pertaining to the permanent loan refinancing for the Villa
Antigua Joint Venture (included as an exhibit to the Partnership's
Form 10-K for the fiscal year ended December 31, 1992 and
incorporated herein by reference).
(10)(g) First Amendment to Joint Venture Agreement of L'Auberge Pinecliff
Joint Venture and Related Assignment of Joint Venture Interest.
(10)(h) Agreement Re Villa Sin Vacas Joint Venture
(10)(i) Agreement Re Villa Antigua Joint Venture
(27) Financial Data Schedule
<PAGE> 45
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A-No.1
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
(State or other jurisdiction of (I.R.S.
Employer incorporation or organization)
Identification No.)
5110 Langdale Way, Colorado Springs CO 80906
(Address of principal executive offices) (Zip Code)
(719) 527-0544
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interests
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting securities held by non-affiliates: Not
applicable, since securities are not actively traded on any exchange.
Documents incorporated by reference: None
The Exhibit Index is located on page: n/a
<PAGE> 46
EXPLANATORY NOTE: This Amendment is being filed to correct a typographical
error and make certain other corrections to Item 7.
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Management's expectations regarding future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity; 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 Pinecliff 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, Pinecliff and
Villa Antigua projects and other excess offering proceeds. The remaining net
proceeds of $1,636,981 were used to establish initial working capital reserves.
These reserves have been used periodically to enable the Partnership to meet its
various financial obligations including contributions to the various Joint
Ventures that may be required. Cumulatively through December 31, 1996, $368,990
was contributed to the Joint Ventures for this purpose.
In addition to the proceeds generated from the public offering, the Partnership
utilized external sources of financing at the joint venture level to purchase
properties. The Partnership Agreement limits the aggregate mortgage indebtedness
which may be incurred in connection with the acquisition of Partnership
properties to 80% of the purchase price of such properties.
The Partnership's future ability to generate cash adequate to meet its needs is
dependent primarily on the successful operations of its real estate investments.
Such ability is also dependent upon the future availability of bank borrowings,
and upon the future refinancing or sale of the Partnership's real estate
investments and the collection of any mortgage receivable which may result from
such sales. These sources of liquidity will be used by the Partnership for
payment of expenses related to real estate operations, debt service and
professional and management fees and expenses. Net Cash From Operations and Net
Proceeds, if any, as defined in the Partnership Agreement, will then be
available for distribution to the Partners in accordance with Section 10 of the
Partnership Agreement. The General Partners believe that the current working
capital reserves together with projected cash flows for 1997 are adequate to
meet the Partnership's operating cash needs in the coming year. With regard to
certain balloon payments on existing first mortgage debt on the Partnership's
properties, the General partners do not anticipate sufficient cash flow from
operations to retire these mortgage notes. As these mortgage notes payable are
due in fiscal 1997, the Partnership will seek to renegotiate these mortgage
notes with its existing lenders or seek new sources of financing for these
properties on a long term basis, although there can be no assurance that the
Partnership will be able to do so. The General Partners believe that existing
cash flows from the properties will be sufficient to support a level of
borrowing that is at least equal to amounts outstanding as of December 31, 1996.
If the general economic climate for real estate in these respective locations
were to deteriorate resulting in an increase in interest rates for mortgage
financing or a reduction in the availability of real estate mortgage financing
or a decline in the market values of real estate it may affect the Partnership's
ability to complete these refinancings.
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 Joint Ventures. In 1996, the
aggregate net decrease in working capital reserves was $481,980. This decrease
resulted primarily from cash provided by operations of $349,757 offset by
$281,346 of fixed asset additions, distributions to partners of $389,052 and
$135,348 of principal payments on mortgage notes payable.
In 1995, the aggregate net decrease in working capital reserves was $41,502.
This decrease resulted primarily from cash provided by operations of $758,756
offset by $148,127 of fixed asset additions, distributions to
partners of $528,974 and $123,613 of principal payments on mortgage notes
payable.
Results of Operations
<PAGE> 47
For the year ended December 31, 1996, the Partnership's operating results were
comprised of its share of the income and expenses from the Sin Vacas, L'Auberge
Pinecliff (formerly Autumn Ridge) and Villa Antigua properties, 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>
<CAPTION>
Sin L'Auberge Villa Investment Consolidated
Vacas Pinecliff Antigua Total Total
<S> <C> <C> <C> <C> <C>
Total revenue $694,550 $1,022,283 $901,463 $53,445 $2,671,741
Expenses:
General and administrative 1,686 - 259 381,328 383,273
Operations 410,622 437,646 363,192 26,368 1,237,828
Depreciation and 126,677 181,804 122,636 - 431,117
amortization
Interest 223,411 286,313 277,577 - 787,301
------------ ------------- ------------- ------------ ------------
762,396 905,763 763,664 407,696 2,839,519
------------ ------------- ------------- ------------ ------------
Net income (loss) ($67,846) $116,520 $137,799 ($354,251) ($167,778)
============ ============= ============= ============ ============
</TABLE>
For the year ended December 31, 1995, the Partnership's operating results were
comprised of its share of the income and expenses from the Sin Vacas, Autumn
Ridge and Villa Antigua Joint Ventures, 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>
<CAPTION>
Sin L'Auberge Villa Investment Consolidated
Vacas Pinecliff Antigua Total Total
<S> <C> <C> <C> <C> <C>
Total revenue $755,680 $1,041,402 $930,236 $81,023 $2,808,341
Expenses:
General and administrative 7,200 7,244 7,200 183,245 204,889
Operations 353,533 420,726 310,611 - 1,084,870
Depreciation and 118,909 173,174 118,217 - 410,300
amortization
Interest 226,761 290,606 281,800 - 799,167
------------ ------------- ------------- ------------ -----------
706,403 891,750 717,828 183,245 2,499,226
------------ ------------- ------------- ------------ ------------
Net income (loss) $49,277 $149,652 $212,408 ($102,222) $309,115
============ ============= ============= ============ ============
</TABLE>
<PAGE> 48
For the year ended December 31, 1994, the Partnership's operating results were
comprised of its share of the income and expenses from the Sin Vacas, Autumn
Ridge and Villa Antigua Joint Ventures, 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>
<CAPTION>
Sin Autumn Villa Investment Consolidated
Vacas Ridge Antigua Total Total
<S> <C> <C> <C> <C> <C>
Total revenue $757,490 $979,216 $838,362 $56,007 $2,631,075
Expenses:
General and administrative 7,494 7,793 7,862 143,532 166,681
Operations 339,483 353,665 298,421 - 991,569
Depreciation and 115,612 169,787 116,476 - 401,875
amortization
Interest 229,820 294,553 285,601 - 809,974
------------ ----------- ------------ ------------ -----------
692,409 825,798 708,360 143,532 2,370,099
------------ ----------- ------------ ------------ -----------
Net income $65,081 $153,418 $130,002 ($87,525) $260,976
(Loss)
============ =========== ============ ============ ===========
</TABLE>
Comparison of 1996 and 1995 Operating Results:
In accordance with its dispositions strategy, (see "Projected 1997 Operating
Results" below). the Partnership incurred one time costs associated with the
Evans Withycombe termination ($73,775), the Highland termination (($7,718) and
their related legal costs. (Refer to Note 5 of the Consolidated Financial
Statements.) In additions, the Partnership incurred one-time costs associated
with its property interior and exterior refurbishment program, the change in
on-site management following the Evans Withycombe termination, the outsourcing
of much of the Partnership's administration work to an administrative agent and
the relocation of the remaining administration, financial and investor services
functions to a more cost efficient location in Colorado Springs, Colorado.
Consequently, competitive pressures and disposition-related activities led to
rental operating expenses (including advertising, promotion, apartment locator
and concession costs) to increase by $152,958 or 14% over the prior year and
total general and administrative expenses of the Partnership increased $178,384
(87%) over the prior year. Fixed asset purchases increased $281,346 from
$141,735 in the prior year and consisted of such items as carpet, appliances,
equipment for fitness and business centers facilities, and remodeling features.
As a result of the factors described above, distributions to partners decreased
$119,446, or 23%, from $528,974 in 1995 to $409,528 in 1996.
Comparison of 1995 and 1994 Operating Results:
Total revenue increased $177,266, or 7% over the prior year, due to increased
rental income of $152,172 or 6%, primarily as a result of rental rate increases
at the Partnership's properties. Interest income increased $25,094 or 43% in
1995, as a result of higher interest rates earned on money market accounts and
short-term investments. Rental operating expenses increased $93,301 or 9% over
the prior year primarily as a result of increases in maintenance and advertising
costs. General and administrative expenses increased $38,208 or 23%, due
primarily to increased salary expense allocations and legal costs and printing
and mailing costs associated with the voluntary withdrawal of a general partner
of the Partnership. Fixed asset purchases increased $141,735 from $6,392 in the
prior year to $148,127 and included such items as carpet, floor tile and other
replacements and exterior painting of Sin Vacas. As a result of the factors
described above, distributions to partners decreased $76,788, or 13%, from
$605,762 in 1994 to $528,974 in 1995
Projected 1997 Operating Results:
While there can be no assurance that the Partnership will dispose of any or all
of its properties in 1997, on March 25, 1997, the Partnership entered into
letters of intent to sell Villas Sin Vacas in Tucson, Arizona, and Villa
Antigua, Phase I, in Scottsdale, Arizona, to an unaffiliated purchaser. The
purchase price for Villas Sin Vacas would be approximately $5,040,000 and the
purchase price for Villa Antigua, Phase I, would be approximately $6,248,000.
Each letter of intent is subject to completion of customary due diligence to the
satisfaction of the purchaser, the purchaser obtaining a financing commitment
for the purchase of the property on commercially reasonable terms and
conditions, the negotiation and execution of a definitive purchase agreement,
and certain other conditions. Accordingly, there can be no assurance that the
sale of such properties will be consummated in accordance with the terms of the
letters of intent or at all. As a result of the foregoing, operating results of
the Partnership may vary significantly during 1997.
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
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/ Earl C. Robertson_________________________________
Earl C. Robertson, Executive Vice President
and Chief Financial Officer
Date: April 9, 1997
<PAGE> 50
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
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer incorporation or
organization) Identification No.)
5110 Langdale Way, Colorado Springs CO 80906
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(719) 576-5122
- --------------------------------------------------------------------------------
(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 ___
<PAGE> 51
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<PAGE> 52
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------
ASSETS
<TABLE>
<CAPTION>
September 30
(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
================ =================
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 53
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------
<TABLE>
<CAPTION>
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
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 54
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
-------------
<TABLE>
<CAPTION>
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
=============== ================ =================
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 55
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
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
================ =================
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 56
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:
<TABLE>
<CAPTION>
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>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 57
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.
<PAGE> 58
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:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Cash on hand ............................. $ 158,161 $ 854,769
Certificate of deposit ................... 211,086
Money market account ..................... 533,616
---------- ----------
$ 691,777 $1,065,855
</TABLE>
<PAGE> 59
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;
<PAGE> 60
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
<PAGE> 61
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:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Villas at Sin Vacas ........................ $ 9,235 $ 9,235
Pinecliff .................................. 11,835 11,835
Villa Antigua .............................. 11,476 11,476
------- -------
$32,546 $32,546
======= =======
</TABLE>
The principal balance of the mortgage notes payable appearing on the
consolidated balance sheet approximates the fair value of such notes.
<PAGE> 62
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> 63
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> 64
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:
<TABLE>
<CAPTION>
Unit Type ............................... 1997 1996
- ---------------------------------------------- ------ ------
<S> <C> <C>
One bedroom one bath ......................... $ 835 $ 835
Two bedroom two bath ......................... 1,050 1,050
Three bedroom two bath ....................... 1,200 1,200
</TABLE>
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:
<TABLE>
<CAPTION>
Unit Type .................................... 1997 1996
- ---------------------------------------------- ------ ------
<S> <C> <C>
One bedroom one bath ....................... $ 925 $ 890
Two bedroom two bath ....................... 1,150 1,099
</TABLE>
<PAGE> 65
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:
<TABLE>
<CAPTION>
Unit Type ............................... 1997 1996
- ---------------------------------------------- ------ ------
<S> <C> <C>
One bedroom one bath ......................... $ 760 $ 760
Two bedroom two bath ......................... 925 925
Three bedroom two bath ....................... 1,105 1,080
</TABLE>
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>
<CAPTION>
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)
============= =============== ================ ============ ===============
</TABLE>
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.
<TABLE>
<CAPTION>
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)
================ ================================ =============== ===============
</TABLE>
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.
<TABLE>
<CAPTION>
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)
============= =============== ================ ============= ===============
</TABLE>
<PAGE> 66
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.
<TABLE>
<CAPTION>
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> 67
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
<PAGE> 68
CLUSTER HOUSING PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
THIS CONSENT is solicited by and on behalf of the Partnership. The
General Partners recommend a vote "FOR" each Proposal. A vote "FOR" a Proposal
also will constitute your consent to all actions necessary to consummate all
transactions with respect to the Proposal contemplated by the Consent
Solicitation.
THIS CONSENT WILL BE RECORDED IN ACCORDANCE WITH THE INSTRUCTIONS
BELOW. IF NO INSTRUCTIONS ARE INDICATED, BY YOUR SIGNATURE BELOW YOU WILL BE
DEEMED TO HAVE CONSENTED TO THE PROPOSALS AS RECOMMENDED BY THE GENERAL
PARTNERS.
PLEASE MARK THE APPROPRIATE BOX FOR EACH PROPOSAL:
FOR AGAINST ABSTAIN
With the General Partners' recommendation to [ ] [ ] [ ]
dissolve the Partnership and settle and close the
Partnership's business and dispose of and convey the
Partnership's property as soon as practicable,
consistent with obtaining reasonable value therefor,
I vote:
With the General Partners' recommendation to amend [ ] [ ] [ ]
Section 16.b. of the Partnership Agreement to
eliminate the General Partners' obligation, under
certain circumstances, to contribute capital to the
Partnership upon its liquidation, I vote:
The undersigned acknowledges receipt of the Consent Solicitation dated
March 18, 1998 pertaining to the Proposals.
Dated:
--------------------------- ------------------------------------
Signature
------------------------------------
Signature (if held jointly)
------------------------------------
Title
Please sign exactly as name appears hereon. When Units are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS CONSENT PROMPTLY USING THE ENCLOSED
PRE-PAID ENVELOPE TO: GP L'Auberge Communities, L.P., c/o Gemisys, 7103 South
Revere Parkway, Englewood, Colorado 80112. If you have any questions, please
call THE L'AUBERGE INVESTOR SERVICES LINE at (800) 262-7778.
