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UNITED STATES
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 June 30, 1998
Commission file number 0-14438
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
CALIFORNIA 13-3239107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue, Greenwich, CT 06830
(Address of principal executive offices)
(203) 862-7444
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
INDEX
Part I. Financial Information:
Balance Sheets - June 30, 1998 and December 31, 1997
Statements of Operations -- Three and Six Months Ended
June 30, 1998 and 1997
Statement of Partners' Equity -- Six Months Ended
June 30, 1998
Statements of Cash Flows -- Six Months Ended
June 30, 1998 and 1997
Notes to Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information:
Legal Proceedings, Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
<CAPTION>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
BALANCE SHEETS
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
ASSETS
Real estate - net .......................... $33,557,174 $33,033,710
Cash and cash equivalents .................. 4,480,101 4,350,887
Other assets ............................... 1,934,858 2,033,252
Receivables ................................ 77,567 182,568
----------- -----------
$40,049,700 $39,600,417
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses ...... $ 1,576,146 $ 1,183,720
Distributions payable ...................... 395,799 395,799
Due to affiliates .......................... 276,110 577,739
----------- -----------
2,248,055 2,157,258
----------- -----------
Commitments and contingencies
PARTNERS' EQUITY:
Limited partners' equity (400,010
units issued and outstanding) ..... 35,910,612 35,570,050
General partners' equity .............. 1,891,033 1,873,109
----------- -----------
37,801,645 37,443,159
----------- -----------
$40,049,700 $39,600,417
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
STATEMENTS OF OPERATIONS
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental Revenue ......................... $2,186,065 $2,398,074 $4,766,610 $4,754,602
---------- ---------- ---------- ----------
Costs and Expenses:
Operating expenses ................ 1,068,805 857,590 1,905,620 1,729,608
Depreciation and amortization ..... 329,293 309,935 658,586 619,870
Partnership management fee ........ 227,043 227,043 454,086 454,086
Administrative expenses ........... 330,192 204,098 555,942 406,358
Property management fee ........... 64,102 71,264 140,686 140,333
---------- ---------- ---------- ----------
2,019,435 1,669,930 3,714,920 3,350,255
---------- ---------- ---------- ----------
Income before interest and other income 166,630 728,144 1,051,690 1,404,347
Interest income ................... 52,743 48,429 78,944 91,095
Other income ...................... 16,250 31,340 19,450 46,630
---------- ---------- ---------- ----------
Net income ............................. $ 235,623 $ 807,913 $1,150,084 $1,542,072
========== ========== ========== ==========
Net income attributable to:
Limited partners .................. $ 223,842 $ 767,517 $1,092,580 $1,464,968
General partners .................. 11,781 40,396 57,504 77,104
---------- ---------- ---------- ----------
Net income ............................. $ 235,623 $ 807,913 $1,150,084 $1,542,072
========== ========== ========== ==========
Net income per unit of limited
partnership interest (400,010 units
outstanding) ...................... $ 0.56 $ 1.92 $ 2.73 $ 3.66
========== ========== ========== ==========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
STATEMENT OF PARTNERS' EQUITY
General Limited
Partners' Partners'
Equity Equity Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1998 ......................... $ 1,873,109 $ 35,570,050 $ 37,443,159
Net income for the six
months ended June 30, 1998 .................. 57,504 1,092,580 1,150,084
Distributions as a return of capital for the six
months ended June 30, 1998 ($1.88 per limited
partnership unit) ........................... (39,580) (752,018) (791,598)
------------ ------------ ------------
Balance, June 30, 1998 ........................... $ 1,891,033 $ 35,910,612 $ 37,801,645
============ ============ ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
STATEMENTS OF CASH FLOWS
For the Six Months Ended
June 30,
--------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income .................................. $ 1,150,084 $ 1,542,072
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization ........... 658,586 619,870
Straight-line adjustment for stepped
Lease rentals ......................... 2,000 (26,456)
Changes in assets and liabilities:
Accounts payable and accrued expenses ... 392,426 267,444
Receivables ............................. 105,001 (14,418)
Due to affiliates ....................... (301,629) (879,453)
Other assets ............................ (39,986) (125,219)
----------- -----------
Net cash provided by operating activities ... 1,966,482 1,383,840
----------- -----------
Cash Flows From Investing Activities:
Improvements to real estate ................. (1,045,670) (474,190)
----------- -----------
Cash Flows From Financing Activities:
Distributions to partners ................... (791,598) (568,435)
----------- -----------
Increase In Cash And Cash Equivalents ............ 129,214 341,215
Cash And Cash Equivalents, Beginning of Year ..... 4,350,887 4,870,517
----------- -----------
Cash And Cash Equivalents, End of Quarter ........ $ 4,480,101 $ 5,211,732
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
l. GENERAL
The accompanying financial statements, notes and discussions should be
read in conjunction with the financial statements, related notes and
discussions contained in the Partnership's annual report on Form 10-K
for the year ended December 31, 1997.
The financial information contained herein is unaudited; however, in
the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such
financial information have been included.
2. SIGNIFICANT ACCOUNTING POLICIES
Impairment of Assets
The Partnership evaluates the recoverability of the net carrying value
of its real estate and related assets at least annually, and more often
if circumstances dictate. If this review indicates that the carrying
value of the property may not be recoverable, the Partnership estimates
the future cash flows expected to result from the use of the property
and its eventual disposition, generally over a five-year holding
period. In performing this review, management takes into account, among
other things, the existing occupancy, the expected leasing prospects of
the property and the economic situation in the region where the
property is located.
If the sum of the expected future cash flows, undiscounted, is less
than the carrying amount of the property, the Partnership recognizes an
impairment loss, and reduces the carrying amount of the asset to its
estimated fair value. Fair value is the amount at which the asset could
be bought or sold in a current transaction between willing parties,
that is, other than in a forced or liquidation sale. Management
estimates fair value using discounted cash flows or market comparables,
as most appropriate for each property. Independent certified appraisers
are utilized to assist management, when warranted.
Impairment write-downs recorded by the Partnership do not affect the
tax basis of the assets and are not included in the determination of
taxable income or loss.
Because the expected cash flows used to evaluate the recoverability of
the assets and their fair values are based upon projections of future
economic events, such as property occupancy rates, rental rates,
operating cost inflation and market capitalization rates, the amounts
ultimately realized at disposition may differ materially from the net
carrying values at the balance sheet dates. The cash flows and market
comparables used in this process are based on good faith estimates and
assumptions developed by management. Unanticipated events and
circumstances may occur and some assumptions may not materialize;
therefore, actual results may materially vary from the estimates. The
Partnership may in the future provide additional write-downs, which
could be material, if real estate markets or local economic conditions
change.
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain reclassifications were made to the prior year financial
statements in order to conform them to the current period presentation.
Results of operations for the six months ended June 30, 1998 are not
necessarily indicative of the results to be expected for the entire
year.
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Managing General Partner of the Partnership, Resources High Equity,
Inc. is a wholly-owned subsidiary of Presidio Capital Corp.,
("Presidio"). Presidio AGP Corp., which is a wholly-owned subsidiary of
Presidio is the Associate General Partner (together with the Managing
General Partner, the "General Partners"). The General Partners and
affiliates of the General Partners are also engaged in businesses
related to the acquisition and operation of real estate. Presidio is
also the parent of other corporations (and affiliated with other
entities) that are or may in the future be engaged in businesses that
may be in competition with the Partnership. Accordingly, conflicts of
interest may arise between the Partnership and such other businesses.
Subject to the right of the limited partners under the Limited
Partnership Agreement, Presidio controls the Partnership through its
indirect ownership of the General Partners. Effective July 31, 1998,
Presidio is indirectly controlled by NorthStar Capital Investment
Corp., a Maryland corporation.
Effective as of August 28, 1997, Presidio has a management agreement
with NorthStar Presidio Management Company LLC ("NorthStar Presidio"),
an affiliate of NorthStar Capital Investment Corp., pursuant to which,
NorthStar Presidio will provide the day-to-day management of Presidio
and its direct and indirect subsidiaries and affiliates. For the six
months ended June 30, 1998, reimbursable expense due NorthStar Presidio
amounted to $47,300.
The Partnership has a property management services agreement with
Resources Supervisory Management Corp. ("Resources Supervisory"), an
affiliate of the General Partners, to perform certain functions
relating to the management of the properties of the Partnership. A
portion of the property management fees were paid to unaffiliated
management companies which are engaged for the purpose of performing
the management functions for certain properties. For the quarters ended
June 30, 1998 and 1997, Resources Supervisory was entitled to receive
$64,102 and $71,264 respectively, of which $52,535 and $51,139 was paid
to unaffiliated management companies, respectively for on-site
management and the balance was retained by Resources Supervisory.
For the administration of the Partnership, the Managing General Partner
is entitled to receive reimbursement of expenses up to a maximum of
$150,000 per year. For each of the quarters ended June 30, 1998 and
1997, the Managing General Partner was entitled to receive $37,500.
For managing the affairs of the Partnership, the Managing General
Partner is entitled to receive an annual partnership management fee
equal to 1.05% of the amount of original gross proceeds paid or
allocable to the acquisition of property by the Partnership. For each
of the quarters ended June 30, 1998 and 1997, the Managing General
Partner was entitled to receive $227,043.
The General Partners are allocated 5% of the net income of the
Partnership, which amounted to $11,781 and $40,396 for the quarters
ended June 30, 1998 and 1997, respectively. They are also entitled to
receive 5% of distributions, which amounted to $19,790 for each of the
quarters ended June 30, 1998 and 1997.
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
During the liquidation stage of the Partnership, the Managing General
Partner or an affiliate may be entitled to receive certain fees, which
are subordinated to the limited partners receiving their original
invested capital and certain specified minimum returns on their
investment. All fees received by the General Partners are subject to
certain limitations as set forth in the Partnership Agreement.
From July 1996 through March 12, 1998, Millenium Funding II Corp., a
wholly owned indirect subsidiary of Presidio, purchased 39,123 units of
the Partnership from various limited partners, which represents
approximately 9.8% of the outstanding limited partnership units of the
Partnership.
In connection with a tender offer for units of the Partnership made
March 12, 1998 (the "Offer") by Olympia Investors, L.P., a Delaware
limited partnership controlled by Carl Ichan ("Olympia"), Olympia and
Presidio entered into an agreement, dated March 6, 1998 (the
"Agreement"). On July 28, 1998, Olympia announced that it had accepted
for payment 32,078 units properly tendered pursuant to the Offer. As a
consequence of the Agreement, Presidio may be deemed to beneficially
own the units owned by Olympia.
Subsequent to the expiration of the Offer, Millennium Funding II Corp.
purchased 3,000 limited partnership units in August 1998.
4. REAL ESTATE
The following table is a summary of the Partnership's real estate as
of:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------ ------------
<S> <C> <C>
Land ......................... $ 11,056,966 $ 11,056,966
Building and improvements .... 37,830,378 36,784,708
------------ ------------
48,887,344 47,841,674
Less: Accumulated depreciation (15,330,170) (14,807,964)
------------ ------------
$ 33,557,174 $ 33,033,710
============ ============
</TABLE>
No write-downs for impairment were recorded for the six months ended
June 30, 1998 or 1997.
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
5. DISTRIBUTIONS PAYABLE
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Limited partners ($.94 per unit) $ 376,009 $ 376,009
General partners 19,790 19,790
--------- ---------
$ 395,799 $ 395,799
========= =========
</TABLE>
Such distributions were paid in the quarters subsequent to June 30,
1998 and December 31, 1997, respectively.
6. DUE TO AFFILIATES
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Partnership management fee ..................... $227,043 $227,044
Reorganization and litigation cost reimbursement
(Note 7) ....................................... -- 210,000
Property management fee ........................ 11,567 103,195
Non-accountable expense reimbursement .......... 37,500 37,500
-------- --------
$276,110 $577,739
======== ========
</TABLE>
Such amounts were paid in the quarters subsequent to June 30, 1998 and
December 31, 1997, respectively.
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES
On or about May 11, 1993 High Equity Partners L.P. - Series 86
("HEP-86"), an affiliated partnership, was advised of the existence of
an action (the "California Action") in which a complaint (the "HEP
Complaint") was filed in the Superior Court for the State of California
for the County of Los Angeles (the "Court") on behalf of a purported
class consisting of all of the purchasers of limited partnership
interests in the Partnership. On April 7, 1994 the plaintiffs were
granted leave to file an amended complaint (the "Amended Complaint") on
behalf of a class consisting of all the purchasers of limited
partnership interest in HEP-86, the Partnership, and High Equity
Partners L.P. - Series 88 ("HEP-88"), another affiliated partnership.
On November 30, 1995, after the Court preliminarily approved a
settlement of the California Action but ultimately declined to grant
final approval and after the Court granted motions to intervene, the
original and intervening plaintiffs filed a Consolidated Class and
Derivative Action Complaint (the "Consolidated Complaint") against the
managing general partner of HEP-85 and HEP-88 and the Investment
General Partner of HEP-86; the Administrative General Partner of HEP-86
(the "General Partners"); a subsidiary of the indirect corporate parent
of the General Partners; and the indirect corporate parent of the
General Partners. The Consolidated Complaint alleged various state law
class and derivative claims, including claims for breach of fiduciary
duties; breach of contract; unfair and fraudulent business practices
under California Bus. & Prof. Code Sec. 17200; negligence; dissolution,
accounting and receivership; fraud; and negligent misrepresentation.
The Consolidated Complaint alleged, among other things, that the
General Partners caused a waste of the HEP partnership assets by
collecting management fees in lieu of pursuing a strategy to maximize
the value of the investments owned by the limited partners; that the
General Partners breached their duty of loyalty and due care to the
limited partners by expropriating management fees from the partnerships
without trying to run the HEP partnerships for the purposes for which
they are intended; that the General Partners acted improperly to enrich
themselves in their position of control over the HEP partnerships and
that their actions prevented non-affiliated entities from making and
completing tender offers to purchase units in the HEP partnership; that
by refusing to seek the sale of the HEP partnerships' properties, the
General Partners diminished the value of the limited partners' equity
in the HEP partnerships; that the General Partners took a heavily
overvalued partnership asset management fee; and that limited
partnership units were sold and marketed through the use of false and
misleading statements.
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Court entered an order on January 14, 1997 rejecting the settlement
and concluding that there had not been an adequate showing that the
settlement was fair and reasonable. On February 24, 1997, the Court
granted the request of one plaintiffs' law firm to withdraw as class
counsel. Thereafter, in June 1997, the plaintiffs again amended their
complaint (the "Second Amended Complaint"). The Seconded Amended
Complaint asserts substantially the same claims as the Consolidated
Complaint, except that it no longer contains causes of action for
fraud, for negligent misrepresentation, or for negligence. The
defendants served answers denying the allegations and asserting
numerous affirmative defenses. In February 1998, the Court certified
three plaintiff classes consisting of the current unit holders in each
of the three HEP partnerships. On March 11, 1998, the Court stayed the
California Action temporarily to permit the parties to engage in
renewed settlement discussions. On July 30, 1998, the Court lifted the
stay.
The Limited Partnership Agreement provides for indemnification of the
General Partners and their affiliates in certain circumstances. The
Partnership has agreed to reimburse the General Partners for their
actual costs incurred in defending this litigation and the costs of
preparing settlement materials. Through June 30, 1998, the Partnership
paid the General Partners a total of $1,034,510 for these costs.
The General Partners believe that each of the claims asserted in the
Second Amended Complaint is meritless and intend to continue to
vigorously defend the California Action. It is impossible at this time
to predict what the defense of the California Action will cost, the
Partnership's financial exposure as a result of the indemnification
agreement discussed above, and whether the costs of defending could
adversely affect the Managing General Partner's ability to perform its
obligations to the Partnership.
On February 6,1998, Everest Investors 8, LLC ("Everest") commenced an
action in the Superior Court of the State of California for the County
of Los Angeles (Case No. BC 185554), against, among others, the HEP
partnerships, Resources Pension Shares 5 LP (an affiliated
partnership), the general partners of each of the partnerships, and DCC
Securities Corp. In the action, Everest alleged, among other things,
that the partnerships and the general partners breached the provisions
of the applicable partnership agreements by refusing to recognize
transfers to Everest of limited partnership units purportedly acquired
pursuant to tender offers that had been made by Everest (the "Everest
Tender Units"). Everest sought injunctive relief (a) directing the
recognition of transfers to Everest of the Everest Tender Units and the
admission of Everest as a limited partner with respect to the Everest
Tender Units and (b) enjoining the transfer of the Everest Tender Units
to any either party. Everest seeks damages, including punitive damages,
for alleged breach of contract, defamation and intentional interference
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
with contractual relations. Everest's motion for a temporary
restraining order was denied on February 6, 1998. A hearing on
Everest's application for a preliminary injunction had been scheduled
for February 26, however, on February 20, 1998, Everest asked the Court
to take its application off calendar. The defendants served answers
denying the allegations and asserting numerous affirmative defenses.
On March 27, 1998, Everest commenced an action in the United States
District Court of the Central District of California against, among
others, the general partners of the HEP Partnerships. In the action,
Everest alleged, among other things, various violations of the Williams
Act Section 14(d) of the Securities Exchange Act of 1934 in connection
with the general partners' refusal to recognize transfers to Everest of
limited partnership units purportedly acquired pursuant to the Everest
tender offers and the letters sent by the general partners to the
limited partners advising them of the general partners' determination
that the Everest tender offers violated applicable securities laws.
During the quarter ended June 30, 1998, the litigations involving the
Partnership and Everest were discontinued with prejudice.
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Working capital reserves are temporarily invested in short-term instruments and,
together with cash flow from operations, are expected to be sufficient to fund
future capital improvements to the Partnership's properties. As of June 30,
1998, total working capital reserves amounted to approximately $3,426,000. The
Partnership intends to distribute to its partners less than all of its future
cash flow from operations in order to assure adequate reserves for capital
improvements and capitalized lease procurement costs.
During the six months ended June 30, 1998, cash and cash equivalents increased
$129,214 as a result of cash provided by operations in excess of capital
expenditures and distributions to partners. The Partnership's primary source of
funds is cash flow from the operation of its properties (principally rents
received from tenants) which amounted to $1,966,482 for the six months ended
June 30, 1998. The Partnership used $1,045,670 for capital expenditures related
to capital and tenant improvements to the properties and $791,598 for
distributions to partners for the six months ended June 30, 1998.
The Partnership expects to continue to utilize a portion of its cash flow from
operations to pay for various capital and tenant improvements to the properties
and leasing commissions. Capital and tenant improvements and leasing commissions
may in the future exceed the Partnership's cash flow from operations. In that
event, the Partnership would utilize the remaining working capital reserves,
reduce distributions, or sell one or more properties. Except as discussed above,
management is not aware of any other trends, events, commitments or
uncertainties that will have a significant impact on liquidity.
RESULTS OF OPERATIONS
The Partnership experienced a decrease in net income for the three and six
months ended June 30, 1998 compared to the same periods in the prior year. The
decrease during the three months ended June 30, 1998 was due primarily to lower
rental revenues, higher costs and expenses and lower other income during the
current period. For the six months ended June 30, 1998, higher costs and
expenses and lower interest and other income resulted in a decrease in net
income as compared to the six months ended June 30, 1997.
Rental revenues decreased at Southport during the three months ended June 30,
1998 compared to 1997, due to certain credits related to prior years that were
issued during 1998. In addition, rental revenues were lower at Westbrook, for
both the three and six months ended June 30, 1998 primarily due to lower
occupancy rates in 1998 as compared to the same periods in 1997.
Costs and expenses increased during the three and six month periods ended June
30, 1998 compared to the same periods in 1997, primarily due to increases
operating expenses, administrative expenses and depreciation expense. Operating
expenses increased during 1998 due to higher repair and maintenance costs
related to a waterproofing project at Southport. Administrative expenses
increased due to higher legal and accounting fees during 1998 related to ongoing
litigation and a possible reorganization of the Partnership. Depreciation
increased due to significant capital additions in 1997.
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Interest income increased slightly during the three months ended June 30, 1998
due to higher rates on invested balances during the second quarter of 1998
compared to the same period in 1997. For the six months ended June 30, 1998,
however, interest income decreased due to lower cash balances. Other income
decreased during the three and six months ended June 30, 1998 as compared to the
same periods in 1997 due to fewer investor transfers.
Inflation is not expected to have a material impact on the Partnership's
operations or financial position.
Legal Proceedings
The Partnership is a party to certain litigation. See Note 7 to the financial
statements for a description thereof.
Forward-looking Statements
When used in this quarterly report on Form 10-Q, the words "believes,"
"anticipates," "expects" and similar expressions are intended to identify
forward-looking statements. Statements looking forward in time are included in
this quarterly report on Form 10-Q pursuant to the "safe harbor" provision of
the Private Securities Litigation Reform Act of 1995. Such statements are
subject to certain risks and uncertainties which would cause actual results to
differ materially, including, but not limited to, those set forth in
"management's discussion and analysis of financial condition and results of
operations." Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
Partnership undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances occurring after the date hereof or
to reflect the occurrence of unanticipated events.
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
Part II. - Other Information
Item 1 - Legal Proceedings
(a) See Management's Discussion and Analysis of Financial
Condition and Results of Operations and Notes to Financial
Statements - Note 7 which is herein incorporated by reference.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits: There were no exhibits filed.
(b) Reports on Form 8-K:
None
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
FORM 10-Q - JUNE 30, 1998
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.
Integrated Resources High Equity
Partners, Series 85,
A California Limited Partnership
By: Resources High Equity, Inc.,
Managing General Partner
Dated: August 12, 1998 By: /S/ Richard Sabella
-------------------
Richard Sabella
President
(Duly Authorized Officer)
Dated: August 12, 1998 By: /S/ Lawrence Schachter
----------------------
Lawrence Schachter
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the June 30, 1998 Form 10-Q of Integrated Resources High Equity
Partners, Series 85 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
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