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 March 31, 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)
(formerly Berry and Boyle Cluster Housing Properties)
(Exact name of registrant as specified in its charter)
California 04-2817478
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(State or other jurisdiction of (I.R.S. Employer incorporation
or organization) Identification No.)
5110 Langdale Way, Colorado Springs CO 80906
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(Address of principal executive offices) (Zip Code)
(719) 527-0544
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(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 ___
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<PAGE>
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------
<TABLE>
ASSETS ............................................. March 31,
1998 December 31,
(Unaudited) 1997
Assets held for sale/Property, at cost (Note 8)
<S> <C> <C>
Land ............................................................................. $ 1,242,061 $ 1,242,061
Buildings and improvements ....................................................... 6,063,055 6,063,055
Equipment, furnishings and fixtures .............................................. 643,757 642,239
----------- -----------
7,948,873 7,947,355
Less accumulated depreciation .................................................... (2,152,207) (2,152,207)
----------- -----------
5,796,666 5,795,148
Cash and cash equivalents .......................................................... 395,748 421,580
Real estate tax escrows ............................................................ 36,430 24,037
Deposits and prepaid expenses ...................................................... 100,709 133,285
Accounts receivable ................................................................ 1,400
Deferred expenses, net of accumulated
amortization of $208,788 and $205,147 ............................................ 4,247 7,888
----------- -----------
Total assets .............................................................. $ 6,333,800 $ 6,383,338
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Mortgage notes payable ............................................................. $ 3,044,542 $ 3,058,800
Accounts payable ................................................................... 37,188 83,637
Accrued expenses ................................................................... 76,989 131,588
Due to affiliates (Note 7) ......................................................... 49,541 16,076
Rents received in advance .......................................................... 1,984
Tenant security deposits ........................................................... 36,450 33,555
----------- -----------
Total liabilities ......................................................... 3,244,710 3,325,640
General Partners' deficit .......................................................... (126,277) (127,847)
Limited Partners' equity ........................................................... 3,215,368 3,185,545
----------- -----------
Total liabilities and partners' equity ..................................... $ 6,333,800 $ 6,383,338
=========== ===========
<PAGE>
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------
Three Months Ended
March 31,
1998 1997
-------- --------
Revenue:
<S> <C> <C>
Rental income ............................................................................ $261,865 $657,818
Interest income .......................................................................... 4,977 10,897
-------- --------
Total Revenue ............................................................................... 266,842 $668,715
Expenses:
Operations ............................................................................... 101,603 280,058
Interest expense ......................................................................... 69,671 195,002
Depreciation and amortization ............................................................ 3,640 107,780
General and administrative ............................................................... 60,535 42,234
-------- --------
Total Expenses .............................................................................. 235,449 625,074
-------- --------
Net income (loss) ........................................................................... $ 31,393 $ 43,641
======== ========
Net income (loss) allocated to:
General Partners ............ $1,570 $2,182
Basic and diluted per unit
Net income (loss) allocated
to Investor Limited Partner interest:
32,421 units issued .............. $ 0.92$ 1.28
<PAGE>
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
-------------
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1996 .................................................. ($ 192,294) $ 6,896,994 $ 6,704,700
Cash distributions ............................................................ (15,358) (5,641,254) (5,656,612)
Net loss ...................................................................... 79,805 1,929,805 2,009,610
----------- ----------- -----------
Balance at December 31, 1997 .................................................. (127,847) 3,185,545 3,057,698
Cash distributions ............................................................ -- -- --
Net income .................................................................... 1,570 29,823 31,393
----------- ----------- -----------
Balance at March 31, 1998 ..................................................... ($ 126,277) $ 3,215,368 $ 3,089,090
=========== =========== ===========
<PAGE>
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months
Ended
March 31,
Cash flows from operating activities: ........................................................... 1998 1997
----------- -----------
<S> <C> <C>
Interest received ............................................................................. $ 4,977 $ 10,897
Cash received from rental income .............................................................. 262,776 653,423
General and administrative expenses ........................................................... (48,188) (104,433)
Operations expense ............................................................................ (192,572) (253,449)
Interest paid ................................................................................. (69,671) (195,002)
----------- -----------
Net cash provided by operating activities ....................................................... (42,678) 111,436
Cash flows from investing activities:
Capital improvements .......................................................................... (2,261) (72,054)
Deposit with escrow agent ..................................................................... 33,367 --
----------- -----------
Net cash provided by investing activities ....................................................... 31,107 (72,054)
Cash flows from financing activities:
Distributions to partners ..................................................................... -- (97,263)
Deposits ...................................................................................... -- (9,725)
Principal payments on mortgage notes payable .................................................. (14,260) (35,805)
----------- -----------
Net cash used by financing activities ........................................................... (14,260) (142,793)
----------- -----------
Net increase (decrease) in cash and cash equivalents ............................................ (25,832) (103,411)
Cash and cash equivalents at beginning of the period ........................................... 421,580 1,065,855
----------- -----------
Cash and cash equivalents at end of the period .................................................. $ 395,748 $ 962,444
=========== ===========
<PAGE>
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------
Reconciliation of net income (loss) to net cash provided by operating
activities:
Three Months
Ended
March 31,
1998 1997
--------- ---------
<S> <C> <C>
Net income (loss) ................................................................................. $ 31,393 $ 43,641
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization ................................................................... 3,640 107,780
Change in assets and liabilities net of effects
of investing and financing activities:
Increase in real estate tax escrows ........................................................... (12,393) (28,457)
Increase prepaid expenses ..................................................................... (48) (2,337)
Decrease (increase) in accounts receivable .................................................... 1,400 (9,725)
(Decrease) in accounts payable and accrued expenses ........................................... (101,046) (2,070)
Increase in due to affiliates ................................................................. 33,465 6,999
Decrease in rent received in advance .......................................................... (1,984) (4,538)
Increase in tenant security deposits .......................................................... 2,895 143
--------- ---------
Net cash provided by operating activities ......................................................... ($ 42,678) $ 111,436
========= =========
</TABLE>
<PAGE>
CLUSTER HOUSING PROPERTIES
(A California Limited Partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------
1. Organization of Partnership:
Cluster Housing Properties (a California Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Cluster Housing Properties, was formed
on August 8, 1983. The Partnership issued all of the General Partnership
Interests to three General Partners in exchange for capital contributions
aggregating $2,000. Stephen B. Boyle and GP L'Auberge Communities, L.P., (a
California Limited Partnership), formerly Berry and Boyle Management, are the
General Partners. In September, 1995, with the consent of Limited Partners
holding a majority of the outstanding Units, as well as the consent of the
mortgage lenders for the Partnership's three properties, Richard G. Berry
resigned as a general partner of the Partnership.
A total of 2,000 individual Limited Partners owning 32,421 units have
contributed $16,210,500 of capital to the Partnership. At March 31, 1998, the
total number of Limited Partners was 1,902. 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 (See Note 8.)
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 and the sale of Villas Sin Vacas and Villa
Antigua.
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 or extending 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.
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
In 1996, the Partnership adopted Statement of Financial Accounting
Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets to be Disposed of." SFAS 121 requires that long-lived
assets be reviewed for impairment whenever events or changes in
circumstances indicate that their carrying value may not be
recoverable. The adoption of SFAS 121 had no effect on reported results
in 1996. As further discussed in Note 8, as of the year ended December
31, 1997, the Partnership recorded the assets at the lower of carrying
value or net realizable value and has included these amounts as Assets
Held for Sale.
For the three months ended March 31, 1998 and the year ended December
31, 1997, permanent impairment conditions did not exist at the
Partnership's property.
I. New Accounting Standards
In 1997, the Partnership adopted Statement of Financial Accounting
Standards No. 128 (SFAS 128), "Earnings Per Share." This accounting
standard specifies new computation, presentation, and disclosure
requirements for earnings per share to be applied retroactively. Among
other things, SFAS 128 requires presentation of basic and diluted
earnings per share on the face of the income statement. The computation
of basic and diluted earnings per share was based on income available
to the Limited Partners divided by the weighted average number of units
outstanding during the period. The Partnership has no dilutive type
securities. The adoption of SFAS 128 had no effect on the per unit
results previously reported.
<PAGE>
3. Cash and Cash Equivalents:
Cash and cash equivalents at March 31, 1998 and December 31, 1997 consisted of
the following:
March 31, December 31,
1998 1997
---- ----
Cash on hand $ 178,602 $ 132,330
Money market accounts 217,146 289,250
------- -------
$395,748 $421,580
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. The Partnership holds a
majority interest in these properties and controls the operations of the joint
ventures.
Villas 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 Villas 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.
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.
and Property Acquisitions, continued:
All profits from operations, to the extent of cash distributions were 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 incurred were $2,580,117 and $381,729, respectively.
JANUARY 1, 1996 THROUGH MAY 13, 1996
Net cash from operations (as defined in the joint venture agreement) was to be
distributed as available to each joint venture partner quarterly as follows:
First, to the Partnership, an amount equal to 10% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's adjusted capital
investment, as defined in the joint venture agreement;
Second, the balance 70% to the Partnership and 30% to the co-venturer.
All losses from operations and depreciation for the Villa Antigua Joint Venture
were allocated 99% to the Partnership and 1% to the co-venturer.
All profits from operations, to the extent of cash distributions, were 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
affected by the relative balances in the individual partners' capital accounts.
Sin Vacas and Villa Antigua
MAY 14, 1996 THROUGH NOVEMBER 25, 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.
On November 25, 1997, Villa Sin Vacas was sold pursuant to the terms of a Sale
Agreement and escrow Instructions (the "Agreement") dated May 6, 1997, as
amended. Villas Sin Vacas was sold to Villas Sin Vacas Townhome Ventures Limited
Partnership, an Arizona Limited Partnership unaffiliated with the Partnership,
the assignee of Capital Management Systems, Inc., a Pennsylvania Corporation.
The net selling price for Villas Sin Vacas was $4,952,091 subject to certain
customary adjustments. The Partnership repaid first mortgage financing in the
amount of $2,396,000 at closing utilizing a portion of proceeds from the sale.
The Partnership recorded a gain on sale of approximately $975,000.
On October 10, 1997, Villa Antigua was sold pursuant to the terms of a Sale
Agreement and escrow Instructions (the "Agreement") dated May 6, 1997, as
amended. Villa Antigua was sold to Villa Sin Antigua Condominium Ventures
Limited Partnership, an Arizona Limited Partnership unaffiliated with the
Partnership, the assignee of Capital Management Systems, Inc., a Pennsylvania
Corporation. The net selling price for Villa Antigua was $6,141,526 subject to
certain customary adjustments. The Partnership repaid first mortgage financing
in the amount of $3,010,362 at closing utilizing a portion of proceeds from the
sale. The Partnership recorded a gain on sale of approximately $1,307,000.
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.
4.Joint Venture and Property Acquisitions, continued:
At March 31, 1998, the total capital contributions and acquisition costs
incurred were $4,192,309 and $497,475, 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, were 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 MARCH 31, 1998
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 owned 100% of the underlying assets as
of December 31, 1996.
For the three months ended March 31, 1998 and 1997, Pinecliff had a net income
of $88,412 and $16,845, respectively.
5. Mortgage Notes Payable:
The property owned by the Partnership is pledged as collateral for the
nonrecourse mortgage notes payable outstanding March 31, 1998 and December 31,
1997, which consisted of the following:
1998 1997
---- ----
Pinecliff 3,044,542 3,058,800
Pinecliff
The original maturity date for these notes was July 15, 1997. On July 10, 1997,
the lender extended the terms of the mortgage note for a period of one year.
Under the modification agreement, the monthly principal and interest payment of
$27,976 and the original interest rate of 9.125% remained unchanged. The terms
of the agreement provide for a prepayment penalty of 0.5% of the outstanding
loan amount in the event the note is paid prior to 60 days before it becomes
due. The balance of the note will be due on July 15, 1998.
As discussed in Note 8, the Partnership entered into a Sale Agreement for this
property with an unaffiliated third party. The estimated sales price is
sufficient to cover the mortgage note balance. However, there can be no
assurance that the sale of the property will occur.
In the event that the sale of Pinecliff does not occur, the Partnership will
seek new sources of financing for the property on a long-term basis or seek to
renegotiate the mortgage note with its existing lender. If the general economic
climate for real estate in this location were to deteriorate resulting in an
increase in interest rates for mortgage refinancing 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 the
refinancing or sell the property.
As discussed in Note8, the Partnership entered into a Sale Agreement for this
property with an unaffiliated third party. The estimated sales price is
sufficient to cover the mortgage note balance. However, there can be no
assurance that the sale of the property will occur.
Interest included in Accrued expenses in the Consolidated Balance Sheets at
March 31, 1998 and December 31, 1997 consisted of the following:
1998 1997
---- ----
Pinecliff $11,630 $11,630
The principal balance of the mortgage notes payable appearing on the
consolidated balance sheets at March 31, 1998 and December 31, 1997 approximates
the fair value of the note.
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.
Gain from the sale of properties is to be allocated as defined in the
Partnership Agreement. The net proceeds on the sale of both Villas Sin Vacas and
Villa Antigua of $5.3 million were allocated as follows. The Limited Partners
received 100% of the cash distribution from sale. The total gain on sale of both
Villas Sin Vacas and Villa Antigua of $2.3 million was allocated as follows. The
General Partner received a gain on sale allocation of approximately $70,000 and
the Limited Partners received a gain on sale allocation of approximately $2.2
million. These distributions/allocations were in accordance with the terms of
the Partnership Agreement.
7. Related-Party Transactions:
L'Auberge Communities, Inc. is a General Partner of L'Auberge Communities, which
owns a 99% interest in GP L'Auberge Communities, L.P. (formerly Berry and Boyle
Management). Due to affiliates at March 31, 1998 and December 31, 1997 consisted
of reimbursable costs payable to L'Auberge Communities, Inc., an affiliate of
the General Partners, in the amounts of $49,541 and $16,076, respectively.
For the period ended March 31, 1998 and 1997, general and administrative
expenses included $19,289, and $14,547, respectively, of salary reimbursements
paid to the General Partners for certain administrative and accounting personnel
who perform services for the Partnership.
8. Assets held for Sale
During the fourth quarter of 1997, the General Partners of the Partnership
committed to a plan to dispose of Pinecliff in Colorado Springs, Colorado. On
January 15, 1998, the Partnership entered into a Sale Agreement (the
"Agreement") to sell Pinecliff to an unaffiliated third party. The selling price
for Pinecliff is approximately $6,700,000. The Agreement is subject to
completion of customary due diligence to the satisfaction of the purchaser, and
the purchaser obtaining a financing commitment on commercially reasonable terms
and conditions. The Partnership expects to consummate this sale in 1998. Under
certain conditions, the sale is contingent upon the approval by the Limited
Partners. As of May 13, 1998, the Partnership has received sufficient consents
from the Limited Partners, approving the sale of the property.
As it is the intent of the General Partners to pursue the sale of this property,
the Partnership has recorded the assets at the lower of carrying value or net
realizable value and has included these amounts as Assets Held for Sale on the
Consolidated Balance Sheet. In accordance with SFAS 121, the Partnership has
stopped depreciating these assets effective January 1, 1998. If closing of the
sale were to occur, any proceeds from sale will be allocated to the Partners in
accordance with the terms of the Partnership Agreement and the Partnership will
likely be liquidated.
<PAGE>
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
At March 31, 1998, the Partnership had cash and cash equivalents of $395,748
compared with $421,580 at December 31, 1997. The aggregate net decrease of
$25,832 resulted primarily from $33,367 received from the escrow agent relating
to the sale of Villa Antigua, offset by the cash needed for operations of
$42,678, purchase of fixed assets of $2,261, and $14,260 of principal payments
on mortgage notes payable.
Property Status
For the period ended March 31, 1998, the Partnership owned and operated
L'Auberge Pinecliff, formerly Autumn Ridge ("Pinecliff"), a 96-unit multifamily
rental property in Colorado Springs, Colorado, subject to first mortgage
financing in the original principal amount of $3,072,739. During the fourth
quarter of 1997, the Partnership sold two properties: (1) Villas at Sin Vacas, a
72-unit multifamily rental property in Tucson, Arizona, which was sold in
November 1997; and (2) Villa Antigua, an 88-unit multifamily rental property in
Scottsdale, Arizona, which was sold in October 1997. The ownership of each
property was formerly structured as a Joint Venture in which the Partnership
owned a majority interest. With regard to the termination of the Joint Ventures
and the sales of properties, see Note 5 of Notes to Consolidated Financial
Statements.
Pinecliff
As of March 31, 1998, the property was 92% occupied, compared to 81%
approximately one year ago. The market rents for the various unit types were as
follows:
Market Rents
March 31,
Unit Type 1998 1997
--------- ---- ----
One bedroom one bath $930 $905
Two bedroom two bath 1,155 1,109
As discussed in Note 8 of the Notes to the Consolidated Financial Statements, on
January 15, 1998, the Partnership entered into a purchase and sale agreement
(the "Agreement") to sell Pinecliff to an unaffiliated third party. The selling
price for Pinecliff is approximately $6,700,000. The Agreement is subject to
completion of customary due diligence to the satisfaction of the purchaser, and
the purchaser obtaining a financing commitment on commercially reasonable terms
and conditions. The Partnership expects to consummate this sale in the second
quarter of 1998. The sale is contingent on the consent of the Limited partners
to the dissolution. If closing of the sale were to occur, any proceeds from sale
will be allocated to the Partners in accordance with the terms of the
Partnership Agreement and the Partnership will be liquidated.
<PAGE>
Results of Operations
For the three months ended March 31, 1998 the Partnership's operating results
were comprised of its share of the income and expenses from Pinecliff, 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>
L'Auberge Investment Consolidated
Pinecliff Partnership Total
<S> <C> <C> <C>
Total revenue ........................................ $ 263,261 $ 3,581 $ 266,842
Expenses:
General and administrative ......................... 60,535 60,535
Operations ......................................... 101,538 65 101,603
Depreciation and amortization ...................... 3,640 6,640
Interest ........................................... 69,671 69,671
--------- --------- ---------
174,849 60,600 235,449
--------- --------- ---------
Net income ........................................... 88,412 (57,019) $ 31,393
========= ========= =========
For the three months ended March 31, 1997, the Partnership's operating results
were comprised of its share of the income and expenses from the Sin Vacas,
Pinecliff and Villa Antigua, as well as partnership level interest income earned
on short term investments, reduced by administrative expenses. A summary of
these operating results appears below.
Sin L'Auberge Villa Investment Consolidated
Vacas Pinecliff Antigua Partnership Total
<S> <C> <C> <C> <C> <C>
Total revenue ............................ $ 185,073 $ 235,026 $ 238,173 $ 10,443 $ 668,715
Expenses:
General and administrative ............. 42,252 42,252
Operations ............................. 86,962 101,820 91,258 280,040
Depreciation and ....................... 31,669 45,451 30,660 107,780
amortization
Interest ............................... 55,331 70,910 68,761 195,002
--------- --------- --------- --------- ---------
173,962 218,181 190,679 42,252 625,074
--------- --------- --------- --------- ---------
Net income ............................... $ 11,111 $ 16,845 $ 47,494 ($ 31,809) $ 43,641
========= ========= ========= ========= =========
</TABLE>
Comparison of Operating Results for the Three Months Ended March 31, 1998 and
1997:
Partnership operations for the three months ended March 31, 1998 generated net
income of $31,393 compared with net income of $43,641 for the corresponding
period in 1997. Total revenue decreased by $395,953 or 60%, due to the fact that
Villa Sin Vacas and Villa Antigua were sold in the fourth quarter of 1997. The
revenue from Pinecliff increased by $33,235 or 14% due to an increase in
occupancy. Operating expenses decreased in total by $178,437 or 64% due to the
sales of the properties, however the expenses for Pinecliff decreased by $282.
General and administrative expenses have increased by $18,283 or 43%, due
primarily to the administrative costs relating to the sale of the properties,
including legal fees and printing and mailing costs of the consent of the
Limited Partners for the Dissolution of the Partnership.
<PAGE>
PART II-OTHER INFORMATION
ITEM 1. Legal Proceedings
Response: None
ITEM 2. Changes in Securities
Response: None
ITEM 3. Defaults Upon Senior Securities
Response: None
ITEM 4. Submission of Matters to a Vote of Security Holders
Response: None
ITEM 5. Other Information
Response: None
ITEM 6. Exhibits and Reports on Form 8-K
(A.) Exhibit - None
(B.) Report on Form 8-K, Item 2, dated October 10, 1997 filed
October 23, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLUSTER HOUSING PROPERTIES
By: GP L'Auberge Communities, L.P., a California
Limited Partnership, General Partner
By: L'Auberge Communities, Inc., its General Partner
By: __/s/ Stephen B. Boyle______________________________
Stephen B. Boyle, President
Date: May 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Mar-31-1998
<CASH> 395,748
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 7,948,873
<DEPRECIATION> (2,152,207)
<TOTAL-ASSETS> 6,333,800
<CURRENT-LIABILITIES> 200,168
<BONDS> 3,044,542
0
0
<COMMON> 0
<OTHER-SE> 3,089,091
<TOTAL-LIABILITY-AND-EQUITY> 6,333,800
<SALES> 0
<TOTAL-REVENUES> 261,865
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 165,778
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,671
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,393
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
