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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, 2000
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Commission file number 0-14438
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS, SERIES 85
A CALIFORNIA LIMITED PARTNERSHIP
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(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.)
5 Cambridge Center, 9th Floor, Cambridge, MA 02142
(Address of principal executive offices)
(617) 234-3000
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(Registrant's telephone number, including area code)
None
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(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
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<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
INDEX
Part I.
Item 1. Financial Information:
Balance Sheets - June 30, 2000 and December 31, 1999.............. 3
Statements of Operations - Three and Six Months Ended
June 30, 2000 and 1999......................................... 4
Statement of Partners' Equity - Six Months Ended June 30, 2000.... 5
Statements of Cash Flows - Six Months Ended
June 30, 2000 and 1999......................................... 6
Notes to Financial Statements..................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk........ 15
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K.................................. 16
Signatures ............................................................... 17
2
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
BALANCE SHEETS
JUNE 30, 2000 DECEMBER 31, 1999
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ASSETS
Real estate - net $31,931,074 $32,352,714
Cash and cash equivalents 10,775,882 8,521,370
Other assets 3,040,056 3,095,251
Receivables 304,493 209,418
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$46,051,505 $44,178,753
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $ 996,602 $ 1,224,373
Due to affiliates 213,448 107,255
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1,210,050 1,331,628
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Commitments and contingencies
PARTNERS' EQUITY:
Limited partners' equity (400,010
units issued and outstanding) 42,598,433 40,703,819
General partners' equity 2,243,022 2,143,306
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44,841,455 42,847,125
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$46,051,505 $44,178,753
=========== ===========
See notes to financial statements.
3
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental Revenue $2,216,883 $2,224,919 $5,099,110 $5,092,992
---------- ---------- ---------- ----------
Costs and Expenses:
Operating expenses 713,743 725,468 1,541,746 1,558,818
Depreciation and amortization 343,678 336,096 689,166 672,192
Partnership management fee 172,519 211,409 345,038 422,818
Administrative expenses 298,761 159,067 587,045 862,377
Property management fee 81,360 71,949 169,104 157,453
---------- ---------- ---------- ----------
1,610,061 1,503,989 3,332,099 3,673,658
---------- ---------- ---------- ----------
Income before interest and other income 606,822 720,930 1,767,011 1,419,334
Interest income 123,163 96,610 217,819 157,904
Other income 9,500 6,990 9,500 89,280
---------- ---------- ---------- ----------
Net income $ 739,485 $ 824,530 $1,994,330 $1,666,518
========== ========== ========== ==========
Net income attributable to:
Limited partners $ 702,511 $ 783,304 $1,894,614 $1,583,192
General partners 36,974 41,226 99,716 83,326
---------- ---------- ---------- ----------
Net income $ 739,485 $ 824,530 $1,994,330 $1,666,518
========== ========== ========== ==========
Net income per unit of limited
partnership interest (400,010 units
outstanding) $ 1.76 $ 1.96 $ 4.74 $ 3.96
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
4
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
STATEMENT OF PARTNERS' EQUITY
GENERAL LIMITED
PARTNERS' PARTNERS'
EQUITY EQUITY TOTAL
----------- ----------- -----------
Balance, January 1, 2000 $ 2,143,306 $40,703,819 $42,847,125
Net income for the six months
ended June 30, 2000 99,716 1,894,614 1,994,330
----------- ----------- -----------
Balance, June 30, 2000 $ 2,243,022 $42,598,433 $44,841,455
=========== =========== ===========
See notes to financial statements.
5
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
2000 1999
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Cash Flows From Operating Activities:
Net income $ 1,994,330 $ 1,666,518
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 689,165 672,192
Straight-line adjustment for stepped
lease rentals 21,674 17,038
Changes in assets and liabilities:
Accounts payable and accrued expenses (227,771) 693,060
Receivables (95,075) (34,410)
Due to affiliates 106,193 (94,952)
Other assets (92,247) (164,725)
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Net cash provided by operating activities 2,396,269 2,754,721
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Cash Flows From Investing Activities:
Improvements to real estate (141,757) (177,957)
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Cash Flows From Financing Activities:
Distributions to partners -- (791,598)
Increase In Cash And Cash Equivalents 2,254,512 1,785,166
Cash And Cash Equivalents, Beginning of Year 8,521,370 6,301,641
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Cash And Cash Equivalents, End of Quarter $ 10,775,882 $ 8,086,807
============ ============
See notes to financial statements.
6
<PAGE>
INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
1. 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, 1999.
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. Results of operations for the three and six
months ended June 30, 2000 are not necessarily indicative of the results to
be expected for the entire year.
2. SIGNIFICANT ACCOUNTING POLICIES
Investment in Joint Ventures
Certain properties were purchased in joint ventures with affiliated
partnerships that have the same, or affiliated, general partners as the
Partnership. The Partnership owns an undivided interest and is severally
liable for indebtedness it incurs in connection with its ownership interest
in those properties. Therefore, the Partnership's financial statements
present the assets, liabilities, revenues and expenses of the joint
ventures on a pro rata basis in accordance with the Partnership's
percentage of ownership.
Real Estate
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 prepares estimates of
the future undiscounted 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.
7
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 and the variances may be material. The Partnership
may in the future provide additional write-downs, which could be material,
if real estate markets or local economic conditions change.
3. RELATED PARTY TRANSACTIONS
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.
From August 28, 1997 to October 21, 1999, Presidio was party to a
management agreement with NorthStar Presidio Management Company LLC
("NorthStar Presidio"), an affiliate of NorthStar Capital Investment Corp.,
pursuant to which NorthStar Presidio provided the day-to-day management of
Presidio and its direct and indirect subsidiaries and affiliates, including
the Partnership. Effective October 21, 1999, Presidio entered into a
Services Agreement with AP-PCC III, L.P. (the "Agent") pursuant to which
the Agent was retained to provide Asset Management and Investor Relation
Services to the Partnership and other entities affiliated with the
Partnership.
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 was paid to unaffiliated management companies that are engaged for the
purpose of performing the management functions for certain properties.
8
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
3. RELATED PARTY TRANSACTIONS (CONTINUED)
For the quarters ended June 30, 2000 and 1999, Resources Supervisory was
entitled to receive $81,360 and $71,949 respectively, of which $77,930 and
$53,370 was paid to unaffiliated management companies, respectively, for
property management services and the balance was retained by Resources
Supervisory. For the sixth months ended June 30, 2000 and 1999, Resources
Supervisory was entitled to receive $169,104 and $157,453, respectively, of
which $154,478 and $121,781 was paid to unaffiliated management companies,
respectively, for property management services 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, 2000 and 1999, the
Managing General Partner received $37,500. For the six months ended June
30, 2000 and 1999, the Managing General Partner received $75,000.
For managing the affairs of the Partnership, the Managing General Partner
is also entitled to receive an annual partnership management fee. Pursuant
to the amendment to the Partnership Agreement, which became effective on
August 20, 1999, the annual partnership management fee for 1999 was reduced
to $418,769. Further, the Partnership Agreement was amended (for the year
2000 and beyond) so that the partnership management fee will be 1.25% of
the Gross Asset Value of the Partnership, defined as the appraised value of
all the assets of the Partnership based on the most recent appraisal.
For the quarters ended June 30, 2000 and 1999 the Managing General Partner
earned partnership management fees of $172,519 and $211,409, respectively.
For the six months ended June 30, 2000 and 1999, the Managing General
Partner earned partnership management fees of $345,038 and $422,818,
respectively.
The General Partners are allocated 5% of the net income of the Partnership,
which amounted to $36,974 and $41,226 for the quarters ended June 30, 2000
and 1999, respectively. Net income allocated to the General Partners
amounted to $99,716 and $83,326 for the six months ended June 30, 2000 and
1999, respectively. The General Partners are also entitled to receive 5% of
distributions, which amounted to $39,580 for the six months ended June 30,
1999.
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, Millennium Funding II Corp., a
wholly owned indirect subsidiary of Presidio, purchased 39,123 units of the
Partnership from various limited partners.
9
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
3. RELATED PARTY TRANSACTIONS (CONTINUED)
In connection with a tender offer for units of the Partnership made on
March 12, 1998 (the "Offer") by Olympia Investors, L.P. ("Olympia"),
Olympia and Presidio entered into an agreement dated March 6, 1998 (the
"Agreement"). Subsequent to the expiration of the offer, Olympia announced
that it had accepted for payment 31,132 units properly tendered pursuant to
the Offer. Pursuant to the Agreement, Presidio purchased 50% of those units
owned by Olympia as a result of the Offer, or 15,566 units, for $101.81 per
unit. In addition, Olympia has the right to cause Presidio to purchase its
remaining units for a price based on procedures set forth in the agreement.
Olympia recently exercised this right and it is anticipated that Presidio
or its affiliates will acquire an additional 15,556 units.
Subsequent to the expiration of the tender offer described above,
Millennium Funding II Corp. purchased an additional 18,042 limited
partnership units from August 1998 through July 1999. The total number of
units purchased by Millennium Funding II Corp. represents approximately
18.2% of the outstanding limited partnership units of the Partnership.
Pursuant to the settlement of a class action lawsuit (See Note 7), an
affiliate of the General Partners, Millennium Funding II, LLC, made a
tender offer to limited partners to acquire up to 26,936 Units
(representing approximately 6.7% of the outstanding Units) at a price of
$114.60 per Unit. The offer closed in January 2000 and all 26,936 Units
were acquired in the offer. As a result of these purchases as well as the
other purchases of Units by affiliates of the General Partners, affiliates
of the General Partners own 118,903 Units representing approximately
29.725% of the total outstanding Units.
4. REAL ESTATE
The following table is a summary of the Partnership's real estate as of:
JUNE 30, 2000 DECEMBER 31, 1999
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Land $ 10,370,965 $ 10,370,965
Building and improvements 37,857,836 37,716,078
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48,228,801 48,087,043
Less: Accumulated depreciation (16,297,727) (15,734,329)
------------ ------------
$ 31,931,074 $ 32,352,714
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10
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
5. DUE TO AFFILIATES
JUNE 30, 2000 DECEMBER 31, 1999
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Partnership management fee $172,519 $ --
Property management fee 3,429 32,255
Non-accountable expense reimbursement 37,500 75,000
-------- --------
$213,448 $107,255
======== ========
Such amounts were paid in the subsequent quarters.
6. COMMITMENTS AND CONTINGENCIES
A) 568 Broadway Joint Venture is currently involved in litigation with a
number of present or former tenants who are in default on their lease
obligations. Several of these tenants have asserted claims or counter
claims seeking monetary damages. The plaintiffs' allegations include
but are not limited to claims for breach of contract, failure to
provide certain services, overcharging of expenses and loss of profits
and income. These suits seek total damages in excess of $20 million
plus additional damages of an indeterminable amount. The Broadway
Joint Venture's action for rent against Solo Press was tried in 1992
and resulted in a judgement in favor of the Broadway Joint Venture for
rent owed. The Partnership believes this will result in dismissal of
the action brought by Solo Press against the Broadway Joint Venture.
Since the facts of the other actions which involve material claims or
counterclaims are substantially similar, the Partnership believes that
the Broadway Joint Venture will prevail in those actions as well.
B) A former retail tenant of 568 Broadway (Galix Shops, Inc.) and a
related corporation which is a retail tenant of a building adjacent to
568 Broadway filed a lawsuit in the Supreme Court of The State of New
York, County of New York, against the Broadway Joint Venture which
owns 568 Broadway. The action was filed on April 13, 1994. The
Plaintiffs allege that by erecting a sidewalk shed in 1991, 568
Broadway deprived plaintiffs of light, air and visibility to their
customers. The sidewalk shed was erected, as required by local law, in
connection with the inspection and restoration of the Broadway
building facade, which is also required by local law.
Plaintiffs further allege that the erection of the sidewalk shed for a
continuous period of over two years is unreasonable and unjustified
and that such conduct by defendants has deprived plaintiffs of the use
and enjoyment of their property. The suit seeks a judgement requiring
removal of the sidewalk shed (since removed), compensatory damages of
$20 million, and punitive damages of $10 million. The Partnership
believes that this suit is without merit and intends to vigorously
defend it.
11
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS
7. SETTLEMENT OF LAWSUIT
In April 1999, the California Superior Court approved the terms of the
settlement of a class action and derivative litigation involving the
Partnership. Under the terms of the settlement, the General Partners agreed
to take the actions described below subject to first obtaining the consent
of limited partners to amendments to the Agreement of Limited Partnership
of the Partnership summarized below. The settlement became effective in
August 1999 following approval of the amendments.
As amended, the Partnership Agreement (a) provides for a Partnership
Management Fee equal to 1.25% of the Gross Asset Value of the Partnership
and a fixed 1999 Partnership Management Fee of $418,769 or $426,867 less
than the amount that would have been paid for 1999 under the prior formula
and (b) fixes the amount that the General Partners will be liable to pay to
limited partners upon liquidation of the Partnership as repayment of fees
previously received (the "Fee Give-Back Amount"). As of December 31, 1999,
the Fee Give-Back Amount was $8.80 per Unit which amount will be reduced by
approximately $.98 per Unit for each full calendar year after 1999 in which
a liquidation does not occur. As amended, the Partnership Agreement
provides that, upon a reorganization of the Partnership into a real estate
investment trust or other public entity, the General Partners will have no
further liability to pay the Fee Give-Back Amount. In accordance with the
terms of the settlement, Presidio Capital Corp., an affiliate of the
General Partners, guaranteed payment of the Fee Give-Back Amount.
As required by the settlement, an affiliate of the General Partners,
Millennium Funding II, LLC, made a tender offer to limited partners to
acquire up to 26,936 Units (representing approximately 6.7% of the
outstanding Units) at a price of $114.60 per Unit. The offer closed in
January 2000 and all 26,936 Units were acquired in the offer.
The final requirement of the settlement obligated the General Partners to
use their best efforts to reorganize the Partnership into a real estate
investment trust or other entity whose shares were listed on a national
securities exchange or on the NASDAQ National Market System. A Registration
Statement was filed with the Securities and Exchange Commission on February
11, 2000 with respect to the restructuring of the Partnership into a
publicly-traded real estate investment trust. The Registration Statement
has not yet become effective and the consent of a majority of limited
partners will be needed to effect the restructuring.
12
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The matters discussed in this form 10-Q contain certain
forward-looking statements and involve risks and uncertainties
(including changing market conditions, competitive and regulatory
matters, etc.) detailed in the disclosures contained in this Form 10-Q
and the other filings with the Securities and Exchange Commission made
by the Partnership from time to time. The discussion of the
Partnership's liquidity, capital resources and results of operations,
including forward-looking statements pertaining to such matters, does
not take into account the effects of any changes to the Partnership's
operations. Accordingly, actual results could differ materially from
those projected in the forward-looking statements as a result of a
number of factors, including those identified herein.
This item should be read in conjunction with the consolidated
financial statements and other items contained elsewhere in the
report.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership had $10,775,882 in cash and cash equivalents at June
30, 2000. Cash and cash equivalents 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.
The Partnership's level of liquidity based upon cash and cash
equivalents increased by $2,254,512 for the six months ended June 30,
2000 as compared to December 31, 1999. The increase is due to
$2,396,269 of cash provided by operating activities which was
partially offset by $141,757 of cash used in investing activities for
capital expenditures. The Partnership's primary source of funds is
cash flow from the operation of its properties, principally rents
received from the tenants less property operating expenses.
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 its 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.
As discussed in "Item 1. Financial Statements-Note 7", the Partnership
entered into a settlement agreement relating to a class action
lawsuit. In light of the current implementation of the settlement and
the filing of the Registration Statement pursuant to which the General
Partners are using their best efforts to reorganize the Partnership
into a real estate investment trust, the General Partners have
suspended any distributions until such reorganization is either
approved or disapproved.
13
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
The Partnership experienced a decrease in net income of $85,045 for
the three months ended June 30, 2000 and an increase in net income of
$327,812 for the six months ended June 30, 2000 as compared to the
same periods in the prior year.
The three-month decrease in net income was due to an increase in costs
and expenses of $106,072 and a decrease in rental revenue of $8,036,
which more than offset an increase in interest and other income of
$29,063. The six-month increase in net income was due to a decrease in
costs and expenses of $347,677 and an increase in rental revenue of
$6,118 that was partially offset by a decrease in interest and other
income of $19,865.
Rental revenues decreased during the three months ended June 30, 2000
compared to June 30, 1999 due to 1999 operating expense and real
estate tax abatements given to tenants being greater than the previous
years. Rental revenues increased for the six months ended June 30,
2000 compared to the same period in 1999 due to higher overall rental
rates at Southport and Seattle Tower.
The increase in costs and expenses for the three months ended June 30,
2000 as compared to the three months ended June 30, 1999 is primarily
due to legal costs associated with the conversion of the Partnership
to a Real Estate Investment Trust (REIT).
The decrease in cost and expenses for the six months ended June 30,
2000 as compared to the six months ended June 30, 1999 is due to
decreases in partnership management fees and administrative expense
which more than offset an increase in depreciation and amortization
expense. The decrease in administrative expense is primarily
attributable to the costs incurred during the six months ended June
30, 1999 in connection with the settled class action litigation.
Partnership management fees paid during the first two quarters of 2000
decreased by $77,780 as compared to the first two quarters of 1999 as
a result of an amendment to the Partnership Agreement which changed
the calculation of such fee. See, Item 1. Financial Statements, Note
3. Property operating expenses and property management fees remained
relatively stable. The Partnership experienced higher depreciation
expense due to real estate improvements in 1999.
Interest income increased during the three months and six months ended
June 30, 2000 due to higher cash balances during both periods as
compared to the comparable periods in 1999. Other income increased
during the three months ended June 30, 2000 and decreased during the
six months ended June 30, 2000 as compared to the same periods in 1999
due to an increase/decrease in investor transfer fees, respectively.
Inflation is not expected to have a material impact on the
Partnership's operations or financial position.
14
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership is not subject to market risk as its cash and cash
equivalents are invested in short term money market mutual funds. The
Partnership has no loans outstanding.
15
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits: There were no exhibits filed.
27. Financial data schedule is filed as an Exhibit to this
report
(b) Reports on Form 8-K:
No report of Form 8-K was filed during the period.
16
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INTEGRATED RESOURCES HIGH EQUITY PARTNERS - SERIES 85
FORM 10-Q - JUNE 30, 2000
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 14, 2000 By: /s/ MICHAEL L. ASHNER
-----------------------------
Michael L. Ashner
President and Director
(Principal Executive Officer)
Dated: August 14, 2000 By: /s/ CAROLYN B. TIFFANY
----------------------------------
Carolyn B. Tiffany
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
17
