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
For the Fiscal Year Ended December 31, 1998
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 ___
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 F-18
<PAGE>
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.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, performance or achievements
of the Partnership to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements. Such factors include, among other things, (i) general economic and
business conditions; (ii) governmental regulation, including the interpretation
of tax, labor and environmental laws; (iii) required accounting changes; and
(iv) other factors over which the Partnership has little or no control.
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 Partnership was formed to operate and ultimately dispose of a diversified
portfolio of income-producing residential real properties directly or through
its joint venture interest in joint venturers which own such properties. On May
28, 1998 the Partnership sold its final property, Pinecliff, having sold two of
its properties during 1997. Descriptions of such properties are included below
in "Item 2. Properties" as well as in Note 5 of Notes to Consolidated Financial
Statements included in this report and incorporated herein by reference thereto.
As further discussed in Item 2 below and in Note 9 of the Notes to the
Consolidated Financial Statements, after 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, the General Partners
determined during 1997 that it would be in the best interests of the Partnership
and the partners to dissolve the Partnership and liquidate its assets (the
"Dissolution"). Under the provisions of the Partnership's Partnership Agreement,
the Dissolution of the Partnership requires the consent of a majority in
interest of the limited partners. In March 1998, the General Partners requested
the consent of the limited partners to the Dissolution pursuant to a Consent
Solicitation Statement first mailed to the limited partners on or about March
18, 1998. The consent of a majority in interest of the limited partners to the
Dissolution was obtained in May 1998.
The Partnership sold its final real estate asset, Pinecliff, on May 28, 1998.
The Villas Sin Vacas and Villa Antigua properties were sold during 1997 (see
Item 2. Properties and Note 5 of Notes to Consolidated Financial Statements).
The net proceeds from the sales were not reinvested by the Partnership, but were
distributed to the partners. The Partnership has retained approximately $275,000
as a reserve for contingencies and liquidation expenses.
Until its sale, on-site management of the Partnership's property, Pinecliff, was
provided by an affiliate of the General Partners. The terms of such property
management services between the Partnership and property manager were embodied
in a written management agreement. Property management fees were 4% of the gross
revenues from the property, plus reimbursement for allocable expenses. The
property manager was 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, constituted the property's operating cash
flow. The Partnership's administrative expenses are paid out of the
Partnership's share of such cash flow or Partnership reserves.
The operations of the Partnership were dependent upon factors which were
difficult to predict and many of which were 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 were 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.
The Partnership's investment in real estate was 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
property, (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 had little or no control.
The Partnership's investment was subject to competition in the rental, lease and
sale of similar types of properties in the locality in which the Partnership's
real property investment was located. Furthermore, the General Partners of the
Partnership are affiliated with other partnerships owning similar properties in
the vicinity in which the Partnership's property was located.
The Partnership considers itself to have been engaged in only one industry
segment, real estate investment.
ITEM 2. PROPERTIES
The Partnership owned and operated three properties: (1) L'Auberge Pinecliff,
formerly Autumn Ridge ("Pinecliff"), a 96-unit multifamily rental property in
Colorado Springs, Colorado, which was sold in May 1998; (2) Villas at Sin Vacas,
a 72-unit multifamily rental property in Tucson, Arizona, which was sold in
November 1997; (3) 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
On May 28, 1998, Pinecliff was sold pursuant to the terms of the Sale Agreement
and Escrow Instruction dated January 1998, as amended. Pinecliff was sold to G&I
Pinecliff LLC, a Delaware limited liability company unaffiliated with the
Partnership. The net selling price for Pinecliff was $6,248,652, subject to
certain customary adjustments, net of a credit to the purchaser of $360,000 for
capital improvements. The Partnership repaid mortgage financing in the amount of
$3,041,860 at closing utilizing a portion of proceeds from the sale. The
Partnership recorded a gain on sale for financial reporting purposes of
$452,214.
Villas at Sin Vacas
On November 25, 1997, Villas Sin Vacas was sold pursuant to the terms of a Sale
Agreement and Escrow Instruction 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 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.
Villa Antigua
On October 10, 1997, Villa Antigua was sold pursuant to the terms of a Sale
Agreement and Escrow Instructions 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 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.
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 1998.
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 Unit holders of as of December 31, 1998 was 1,902.
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 1998 and 1997, as well as
the Distributions from Proceeds of Sale were paid as follows:
Date of
Quarter Ended Payment Amount
- ------------- ------- ------
December 31, 1996 February 28, 1997 $ 97,263
March 31, 1997 May 15, 1997 $ 97,263
June 30, 1997 August 15, 1997 $ 97,263
September 30, 1997 $ -
December 31, 1997 December 31, 1997 $5,349,465
May 28, 1998 August 4, 1998 $3,242,100
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Partnership and consolidated
subsidiaries has been derived from consolidated financial statements audited by
PricewaterhouseCoopers, LLP, whose reports for the periods ended December 31,
1998, 1997 and 1996 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>
Year Ended
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12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
<S> <C> <C> <C> <C> <C>
Rental income $414,717 $2,255,625 $2,615,350 $2,725,119 $2,572,947
Net income (loss) $417,630 $2,009,610 ($ 167,778) $ 309,115 $ 260,976
Net income (loss) allocated to Partners:
Limited Partners - Per Unit- Basic and diluted:
Aggregate 32,421 Units $ 9.01 $59.52 ($ 5.12) $ 9.06 $ 7.65
General Partners $125,626 $79,805 ($1,678) $15,456 $13,049
Cash distributions to Partners:
Limited Partners:
Weighted average per Unit $100 $174.00 $12.00 $15.50 $17.75
General Partners $ 0 $15,358 $20,476 $26,449 $30,288
Total assets $273,377 $6,383,338 $15,644,667 $16,274,801 $16,587,271
Long term obligations $ 0 $3,058,800 $8,559,930 $8,695,278 $8,818,891
</TABLE>
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 the
General Partners' expectations regarding future financial performance and future
events. These forward-looking statements involve significant risks 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, 1998, $513,611
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 limited the aggregate mortgage
indebtedness which could be incurred in connection with the acquisition of
Partnership properties to 80% of the purchase price of such properties.
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.
At December 31, 1998, the Partnership had cash and cash equivalents of $273,377
compared with $421,580 at December 31, 1997. The aggregate net decrease of
$148,203 resulted primarily from proceeds from the sale of Pinecliff of
$6,248,652, plus $131,413 received from the escrow agent relating to the sale of
Villa Sin Vacas, plus a refund of deposits of $1,335, offset by distributions to
the limited partners of $3,242,100, principal payments on the mortgage notes
payable of $3,058,800, purchase of fixed assets of $1,290 and the cash needed
for operations of $227,413.
<PAGE>
Results of Operations
For the year ended December 31, 1998, the Partnership's operating results were
comprised of its share of the income and expenses from the Pinecliff (through
date of sale, May 28, 1998), as well as Partnership level interest income earned
on short-term investments, reduced by administrative expenses. A summary of
these operating results (unaudited) appears below:
<TABLE>
Pinecliff Partnership Total
<S> <C> <C> <C>
Revenue $418,001 $39,295 $457,296
Expenses:
General and administrative - 185,231 185,231
Operations 181,377 - 181,377
Depreciation and amortization 7,888 - 7,888
Interest 117,384 - 117,384
------------------ --------------- --------------
306,649 185,231 491,880
------------------ --------------- --------------
Net Gain (loss) from operations 111,352 (145,936) (34,584)
------------------ --------------- --------------
Gain from sale of property 452,214 452,214
------------------ --------------- --------------
Net income $563,566 ($145,936) $417,630
================== =============== ==============
</TABLE>
For the year ended December 31, 1997 the Partnership's operating results were
comprised of its share of the income and expenses from the Villas Sin Vacas
(through date of sale, November 25, 1997), Pinecliff and Villa Antigua
properties (through date of sale October 10, 1997), as well as Partnership level
interest income earned on short-term investments, reduced by administrative
expenses. A summary of these operating results (unaudited) appears below:
<TABLE>
Sin L'Auberge Villa Consolidated
Vacas Pinecliff Antigua Partnership Total
<S> <C> <C> <C> <C> <C>
Total revenue $642,630 $952,750 $666,734 $73,177 $2,335,291
Expenses:
General and administrative - - - 227,785 227,785
Operations 364,115 469,256 370,078 - 1,203,449
Depreciation and 126,222 200,626 98,092 - 424,940
amortization
Interest 220,852 284,112 246,126 - 751,090
-------------- -------------- --------------- --------------- --------------
711,189 953,994 714,296 227,785 2,607,264
-------------- -------------- --------------- --------------- --------------
Net loss from operations (68,559) (1,244) (47,562) (154,608) (271,973)
-------------- -------------- --------------- --------------- --------------
Gain from sale of property 974,637 - 1,306,946 2,281,583
-------------- -------------- --------------- --------------- --------------
Net income $906,078 ($1,244) $1,259,384 ($154,608) $2,009,610
============== ============== =============== =============== ==============
</TABLE>
<PAGE>
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, 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 (unaudited) appears below:
<TABLE>
Sin Villa Consolidated
Vacas Pinecliff Antigua Partnership 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>
Comparison of 1998 and 1997 Operating Results:
Partnership operations for 1998 generated net income of $417,630 compared with
net income of $2,009,610 for the corresponding period in 1997. Included in the
net income of $417,630 is the gain on the sale of Pinecliff in the amount of
$452,214. The loss from operations was $34,584. The total operating revenue
decreased by $1,877,995 or 80%, due to the fact that Villa Sin Vacas and Villa
Antigua were sold in the fourth quarter of 1997and Pinecliff was sold in May
1998. Likewise, operating expenses decreased in total by $1,022,072 or 85% due
to the sales of the properties. General and administrative expenses have
decreased by $42,554 or 19%, due primarily to lower legal and accounting
expenses.
Comparison of 1997 and 1996 Operating Results:
Partnership operations for 1997 generated net income of $2,009,610 compared with
net loss of $167,778 for the corresponding period in 1996. Included in the net
income of $2,009,610 is the gain on the sale of Villas Sin Vacas and Villa
Antigua in the amount of $2,281,583. The loss from operations was $271,973.
Total operating revenue decreased by $336,450 or 13%, primarily due to the sale
of Villas Sin Vacas and Villa Antigua on November 25, 1997 and October 10, 1997,
respectively. Operating expenses decreased by $34,379 or 3% primarily due to the
sale of those properties, as such reflecting only a portion of the year's
expenses in 1997. This was offset by one-time costs of preparing the properties
for disposition, including an increase in repairs and maintenance of $77,779.
General and administrative expenses have decreased by $155,488 or 41%, of which
$73,775 was due to the Evans Withycombe termination fee in 1996. A contributing
factor to the additional reduction of $81,713 was due to the re-stabilization of
costs associated with Partnership administrative, financial and investor
services functions following the office relocation to Colorado Springs,
Colorado.
Projected 1999 Operating Results:
The Partnership has sold all of its real estate assets and has distributed
substantially all of the net cash proceeds from the sales. A final liquidating
distribution, which on a per unit basis, is anticipated to be nominal in amount,
will be made once all remaining Partnership obligations and contingent
liabilities, if any, have been satisfied.
<PAGE>
Year 2000 Issues
The Partnership's management has addressed the Year 2000 issue of its financial
reporting systems.
The Partnership's only mission critical system is its financial reporting
software which is currently maintained on the Platinum accounting software
system, which has not been updated to handle the Year 2000 date change. Because
the Partnership is in its final liquidation stage and is anticipated to be
completely liquidated by the end of 1999, the year 2000 issue will not
materially affect the results of operations or financial condition of the
Partnership. However, if any financial information for the Partnership needs to
be maintained into the year 2000, the Partnership's management has already
purchased an accounting system, AMSI, that is Year 2000 compliant. The financial
records would be transferred to the AMSI accounting software prior to the end of
1999.
The accounting systems are run on the Novell network, which needs to be upgraded
for compliance with the Year 2000. The Partnership's anticipated share of the
cost of this upgrade is $450. The upgrade is scheduled to take place by the end
of March 1999.
Management anticipates that all essential functions relative to maintaining the
Partnership, if any remain at that time, will be operational and the costs
associated with Year 2000 compliance will not have a material impact on the
Partnership.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
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.
Individual General Partners
Stephen B. Boyle, age 58, 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.
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 51, 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 39, 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.
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 of March 1, 1999, no person of record owned or was known by the General
Partners to own beneficially more than 5% of the Partnership's outstanding
Units. Neither of the General Partners nor any of their directors and officers
owns Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended , 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 1998
to the General Partners $ -
Allocation of Income
to the General Partners $125,626
Property management fees paid to an affiliate of
the General Partners $ 16,095
Reimbursements to General Partners $ 47,555
<PAGE>
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
None
(c) See Exhibit Index contained herein
(d) See Page F-2.
<PAGE>
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 1, 1999
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, 1999
-------------------- Principal Executive
STEPHEN B. BOYLE Officer of L'Auberge
Communities, Inc.
__/s/ Earl C. Robertson_____ Executive Vice President March 26, 1999
--------------------- and Principal Financial
EARL C. ROBERTSON Officer of L'Auberge
Communities, Inc.
<PAGE>
APPENDIX A
CLUSTER HOUSING PROPERTIES
(A California Limited Partnership)
AND SUBSIDIARIES
---------
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For each of the three years in the period ended December 31, 1998
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, 1998 and 1997 F-4
Consolidated Statements of Operations for the years
ended December 31, 1998, 1997 and 1996 F-5
Consolidated Statements of Partners' Equity (Deficit)
for the years ended December 31, 1998, 1997 and 1996 F-6
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996 F-7 -- F-8
Notes to Consolidated Financial Statements F-9 -- F-17
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>
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, 1998 and 1997, and related consolidated statements of operations,
partner's equity (deficit) and cash flows for each of the three years then
ended. 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.
As described in Note 9 of the financial statements, the General and
Limited Partners of the Partnership approved a plan of liquidation on May 29,
1998 and the Partnership commenced liquidation shortly thereafter. As a result
the Partnership has changed its basis of accounting for the period subsequent to
May 29, 1998 from the going concern basis to a liquidation basis.
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, 1997, and the consolidated results of their operations and cash
flows for each of the two years in the period then ended and for the period from
January 1, 1998 to May 29, 1998, in conformity with generally accepted
accounting principles; and as of December 31, 1998 and for the period from May
30, 1998 through December 31, 1998 in conformity with generally accepted
accounting principles applied on the basis described in the preceding paragraph.
PricewaterhouseCoopers, LLP
Denver, Colorado
February 26, 1999
<PAGE>
CLUSTER HOUSING PROPERTIES
(A California Limited Partnership)
AND SUBSIDIARIES
<TABLE>
ASSETS
1998 1997
---- ----
Assets held for sale (Note 9)
<S> <C> <C>
Land $ - $1,242,061
Buildings and improvements - 6,063,055
Equipment, furnishings and fixtures - 642,239
--------------- ---------------
- 7,947,355
Less accumulated depreciation - (2,152,207)
--------------- ---------------
- 5,795,148
Cash and cash equivalents 273,377 421,580
Real estate tax escrows - 24,037
Deposits and prepaid expenses - 133,285
Accounts receivable - 1,400
Deferred expenses, net of accumulated
amortization of $213,035 and $205,147 - 7,888
--------------- ---------------
Total assets $273,377 $6,383,338
=============== ===============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Mortgage notes payable $ - $3,058,800
Accounts payable 13,037 83,637
Accrued expenses 17,228 131,588
Due to affiliates (Note 8) 9,884 16,076
Rents received in advance - 1,984
Tenant security deposits - 33,555
--------------- ---------------
Total 40,149 3,325,640
liabilities
General Partners' deficit (2,221) (127,847)
Limited Partners' equity 235,449 3,185,545
--------------- ---------------
Total liabilities and partners' equity $273,377 $6,383,338
=============== ===============
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Revenue:
<S> <C> <C> <C>
Rental income $414,717 $2,255,625 $2,615,350
Interest income 42,579 79,666 56,391
Gain from sale of properties 452,214 2,281,583 -
--------------- --------------- ---------------
Total Revenue 909,510 4,616,874 2,671,741
Expenses:
Operations 181,377 1,203,449 1,237,828
Interest expense 117,384 751,090 787,301
Depreciation and amortization 7,888 424,940 431,117
General and administrative 185,231 227,785 383,273
--------------- --------------- ---------------
Total Expenses 491,880 2,607,264 2,839,519
--------------- --------------- ---------------
Net income (loss) $417,630 $2,009,610 ($167,778)
=============== =============== ===============
Net income (loss) allocated to:
General Partners $125,626 $79,805 ($1,678)
Basic and diluted per unit Net income (loss) allocated to
Investor Limited Partner interest:
32,421 units issued $9.01 $59.52 ($5.12)
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
(DEFICIT) for the years ended December 31, 1998,
1997 and 1996
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
Cash distributions (20,476) (389,052) (409,528)
Minority interest absorbed - (8,895) (8,895)
Net loss (1,678) (166,100) (167,778)
--------------- --------------- ---------------
Balance at December 31, 1996 (192,294) 6,896,994 6,704,700
Cash distributions (15,358) (5,641,254) (5,656,612)
Net income 79,805 1,929,805 2,009,610
--------------- --------------- ---------------
Balance at December 31, 1997 (127,847) 3,185,545 3,057,698
Cash distributions - (3,242,100) (3,242,100)
Net income 125,626 292,004 417,630
--------------- --------------- ---------------
Balance at December 31, 1998 ($2,221) $235,449 $233,228
=============== =============== ===============
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1998, 1997 and 1996
Cash flows from operating 1998 1997 1996
activities: ---- ---- ----
<S> <C> <C> <C>
Interest received $42,579 $79,666 $80,257
Cash received from rental income 379,178 2,231,306 2,607,383
General and administrative (204,332) (243,185) (370,245)
expenses
Operations expense (315,824) (1,235,265) (1,179,822)
Interest paid (129,014) (772,006) (787,816)
--------------- --------------- --------------
Net cash (used in) provided by operating (227,413) 60,516 349,757
activities
Cash flows from investing activities:
Proceeds from sale of properties 6,248,652 11,093,617 -
Capital improvements (1,290) (490,710) (281,346)
Proceeds from maturities of short-term 0 0
investments
Deposit with escrow agent 131,413 (131,413) -
Cash received from short-term investments - - 1,043,580
--------------- -------------- --------------
Net cash provided by investing activities 6,378,775 10,471,494 762,234
Cash flows from financing activities:
Distributions to partners (3,242,100) (5,656,612) (389,052)
Deposits 1,335 2,482 (2,125)
Cash paid for loan refinancing - (21,025) -
Principal payments on mortgage notes payable (3,058,800) (5,501,130) (135,348)
--------------- --------------- ---------------
Net cash used in financing (6,299,565) (11,176,285) (526,525)
activities
--------------- --------------- ---------------
Net (decrease)increase in cash and cash (148,203) (644,275) 585,466
equivalents
Cash and cash equivalents at beginning of the 421,580 1,065,855 480,389
period
--------------- --------------- ---------------
Cash and cash equivalents at end of the period $273,377 $421,580 $1,065,855
=============== =============== ===============
Non cash financing activities:
Accrual of distributions to $0 $0 $20,476
partners
CLUSTER HOUSING PROPERTIES
(a California Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1998, 1997 and 1996
Reconciliation of net income (loss) to net cash (used in) provided by operating
activities:
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income (loss) $417,630 $2,009,610 ($167,778)
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization 7,888 424,940 431,117
Gain from sale of property (452,214) (2,281,583) -
Change in assets and liabilities net of effects
of investing and financing activities:
Decrease in real estate tax escrows 24,037 17,595 2,423
Decrease prepaid expenses 537 1,946 -
Decrease in accounts receivable 1,400 1,205 21,951
(Decrease) increase in accounts payable and accrued expenses (184,960) (95,979) 84,185
(Decrease) increase in due to affiliates (6,192) 7,101 (14,198)
Decrease in rent received in advance (1,984) (2,554) (5,957)
Decrease in tenant security deposits (33,555) (21,765) (1,986)
------------ ------------ -------------
Net cash (used in) provided by operating activities ($227,413) $60,516 $349,757
activities
============ ============ =============
</TABLE>
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, 1998, the
total number of Limited Partners was 1,902. Except under certain limited
circumstances, as defined in the Partnerhip 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.
As of December 31, 1998, the Partnership has sold substantially all of the
assets and is in its final liquidation. Once all Partnership obligations have
been satisfied, the remaining Partnership funds, if any, are anticipated to be
distributed to the Limited Partners. Such funds, if any, are expected to be
modest in amount. It is anticipated that the Partnership will be liquidated
during 1999.
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),
Pinecliff (Pinecliff), formerly Autumn Ridge Joint Venture, 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 Sin Vacas, Villa
Antigua and Pinecliff.
The Partnership follows the accrual basis of accounting.
The Partnership considers itself to have been engaged in only one
industry segment, real estate.
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
2. Significant Accounting Policies, continued:
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
As discussed further in Note 9, as of December 31, 1997, the
Partnership recorded its property as Assets Held for Sale on the
consolidated balance sheets. Accordingly the Partnership stopped
depreciating these assets effective January 1, 1998.
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.
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 utilizes the provisions of SFAS No. 121, Accounting for
the Impairment of Long -Lived Assets and for Long-Lived Assets to be
Disposed Of, to review for impairment. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset.
If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets. As further discussed
in Note 9, assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
I. Reclassification
Certain items in the financial statements for the years ended December
31, 1996 and 1997 have been reclassified to conform to the 1998
presentation.
<PAGE>
<TABLE>
3. Assets Held for Sale:
The changes in total assets held for sale for the years ended The change in accumulated depreciation for the years ended
December 31, 1998, 1997, and 1996 are as follows: December 31, 1998, 1997, and 1996 are as follows:
1998 1997 1996 1998 1997 1996
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning of year $7,947,355 $19,321,621 $19,040,329 Balance, beginning of year $2,152,207 $4,810,314 $4,418,093
Additions during the period:
Improvements $1,290 $490,710 $281,292 Depreciation for the period $0 $394,834 $392,221
Deductions during the period:
Sale of Pinecliff ($7,948,645) - - Disposition of Pinecliff ($2,152,207) - -
Sale of Sin Vacas - ($5,593,045) - Disposition of Sin Vacas - ($1,615,565)
Sale of Villa Antigua - ($6,271,931) - Disposition of Villa - ($1,437,376) -
---------------------------------------
Balance at end of year $0 $7,947,355 $19,321,621 Balance at end of year $0 $2,152,207 810,314
======================================= ======================================
</TABLE>
<PAGE>
4. Cash and Cash Equivalents:
Cash and cash equivalents at December 31, 1998 and 1997 consisted of the
following:
1998 1997
---- ----
Cash on Hand hand $ 273,377 $ 132,330
Money market accounts 289,250
----------- ----------
$273,377 $421,580
5. Joint Venture and Property Acquisitions:
The Partnership had invested in three properties located in Scottsdale and
Tucson, Arizona and Colorado Springs, Colorado. The Partnership held a majority
interest in these properties and controlled the operations of the joint
ventures.
Sin Vacas
On October 25, 1985, the Partnership acquired a majority interest in the Sin
Vacas Joint Venture, which owned and operated the Villas at Sin Vacas, a 72-unit
residential property located in Tucson, Arizona. Since the Partnership owned 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 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. 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.
5. Joint Venture 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 owned and operated 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. 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.
<PAGE>
5. Joint Venture and Property Acquisitions, continued:
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 during 1997.
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 during
1997.
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 owned 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.
<PAGE>
5. Joint Venture and Property Acquisitions, continued:
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, 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 MAY 28, 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.
On May 28, 1998, the Partnership sold Pinecliff, its final real estate asset.
Pinecliff was sold to G&I Pinecliff LLC, a Delaware limited liability company
unaffiliated with the Partnership. The net sales price for Pinecliff was
$6,248,652, subject to certain customary adjustments, net of a credit to the
purchaser of $360,000 for capital improvements. The Partnership repaid mortgage
financing in the amount of $3,041,860 at closing utilizing a portion of proceeds
from the sale. The Partnership recorded a gain on sale of $452,214 during 1998.
6. Mortgage Notes Payable:
Pinecliff
The original maturity date for the note 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. As discussed in Note 5, the Partnership sold Pinecliff and the outstanding
mortgage debt of $3,041,860 was paid. There was no prepayment penalty assessed
since the debt was paid within 60 days of maturity.
The property owned by the Partnership was pledged as collateral for the
nonrecourse mortgage notes payable outstanding December 31, 1997, which
consisted of the following:
1997
Pinecliff $3,058,800
Interest included in accrued expenses in the Consolidated Balance Sheets at
December 31, 1997 consisted of the following:
1997
Pinecliff $ 11,630
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 net proceeds on the sale of Pinecliff of $3,145,390 were allocated as
follows. The Limited Partners received 100% of the cash distribution from sale.
The total gain on sale of Pinecliff of $452,214 was allocated as follows. The
General Partner received a gain on sale allocation of $125,972 and the Limited
Partners received a gain on sale allocation of $326,242. These
distributions/allocations were in accordance with the terms of the Partnership
Agreement.
8. 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 December 31, 1998 and 1997 consisted of
reimbursable costs payable to L'Auberge Communities, Inc., an affiliate of the
General Partners, in the amounts of $9,884 and $16,076, respectively.
For the years ended December 31, 1998, 1997 and 1996, general and administrative
expenses included $47,555, $64,209 and $82,881, 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 EWI, 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.
During the years ended December 31, 1996, EWI received property management fees
of $32,475. These fees were 5% of rental revenue. In addition, for the years
ended December 31, 1998, 1997 and 1996, $16,095, $87,724 and $64,954,
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.
Villa Antigua reimbursed $35,885 for its proportionate share of the 1996 real
estate taxes to Villa Antigua Phase II, which is an affiliate of the General
Partners. For the year ended December 31, 1997, real estate taxes were settled
as part of the closing of the sale.
9. 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 was approximately $6,700,000. The Agreement was 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 consummated this sale in May 1998. The sale was
approved by the Limited Partners.
As it was the intent of the General Partners to pursue the sale of this
property, the Partnership had recorded the assets at the lower of carrying value
or net realizable value and included these amounts as Assets Held for Sale on
the Consolidated Balance Sheets at December 31, 1997. In accordance with SFAS
121, the Partnership stopped depreciating these assets effective January 1,
1998. The proceeds from sale of Pinecliff were allocated to the Partners in
accordance with the terms of the Partnership Agreement.
Under the provisions of the Partnership agreement, the dissolution of the
Partnership requires a consent of a majority in interest of the limited
partners. The consent of a majority in interest of the limited partners to the
dissolution was obtained on May 29, 1998. As a result, the Partnership has
changed its basis of accounting, for the period subsequent to May 29, 1998, from
the going concern basis to the liquidation basis. Under the liquidation basis of
accounting, net assets and equity are reported at their net realizable value,
which may result in a net write-up or write-down. The adoption of the
liquidation basis of accounting had no effect on the financial position or
results of operations of the Partnership. As of December 31, 1998, the net
assets available for distribution to the partners are approximately $233,230 or
$7.19 per unit. In the event future obligations are different than expected as a
result of factors unknown at this time, the net assets available for
distribution may change. The Partnership will likely be liquidated in 1999.
<PAGE>
EXHIBIT INDEX
Exhibit
No.
(4)(a)(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 30,
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
(included as an exhibit to the Partnership's Form 10-K for the fiscal
year ended December 31, 1996 and incorporated herein by reference).
(10)(h) Agreement regarding Villa Sin Vacas Joint Venture (included as an
exhibit to the Partnership's Form 10-K for the fiscal year ended
December 31, 1997 and incorporated herein by reference).
(10)(i) Agreement regarding Villa Antigua Joint Venture (included as an
exhibit to the Partnership's Form 10-K for the fiscal year ended
December 31, 1997 and incorporated herein by reference).
(10)(j) Purchase and Sale Agreement and Escrow Instructions between Cluster
Housing Properties and DRA Advisors, Inc. related to the sale of
Pinecliff dated January 15, 1998(included as an exhibit to the
Partnership's Form 10-K for the fiscal year ended December 31, 1997
and incorporated herein by reference).
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Dec-31-1998
<CASH> 273,377
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 273,377
<CURRENT-LIABILITIES> 40,149
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 273,377
<SALES> 0
<TOTAL-REVENUES> 909,510
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 374,496
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117,384
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 417,630
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
