FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 number 0-14578
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2825863
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) 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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
March 31, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 1,375
Restricted--tenant security deposits 170
Accounts receivable 120
Escrow for taxes 218
Other assets 11
Investment properties:
Land $ 1,121
Buildings and related personal property 13,119
14,240
Less accumulated depreciation (3,814) 10,426
$12,320
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 39
Tenant security deposits 165
Accrued taxes 345
Other liabilities 101
Partners' Capital (Deficit)
General partners $ (46)
Limited partners (15,698 units
issued and outstanding) 11,716 11,670
$12,320
See Accompanying Notes to Financial Statements
b) HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
1996 1995
Revenues:
Rental income $ 816 $ 815
Other income 32 28
Total revenues 848 843
Expenses:
Operating 180 190
General and administrative 76 82
Property management fees 48 46
Maintenance 94 68
Depreciation 134 140
Property taxes 99 102
Total expenses 631 628
Casualty loss -- (25)
Net income $ 217 $ 190
Net income allocated to general partners (2%) $ 4 $ 4
Net income allocated to limited partners (98%) 213 186
$ 217 $ 190
Net income per limited partnership unit $13.55 $11.89
See Accompanying Notes to Financial Statements
c) HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data and original contributions)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 15,698 $ 200 $15,698,000 $15,698,200
Partners' (deficit) capital
at December 31, 1995 15,698 $ (50) $ 11,503 $ 11,453
Net income for the three
months ended March 31, 1996 -- 4 213 217
Partners' (deficit) capital
at March 31, 1996 15,698 $ (46) $ 11,716 $ 11,670
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
d) HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 217 $ 190
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 134 140
Amortization of leasing commissions 1 1
Casualty loss -- 25
Change in accounts:
Restricted cash 2 (5)
Accounts receivable 30 --
Escrows for taxes (99) (119)
Accounts payable (88) (21)
Tenant security deposit liabilities (5) 4
Accrued taxes 99 101
Other liabilities (8) (17)
Net cash provided by operating activities 283 299
Cash flows from investing activities:
Property improvements and replacements (21) (90)
Insurance proceeds from property damage -- 92
Net cash (used in) provided by
investing activities (21) 2
Net increase in cash 262 301
Cash and cash equivalents at beginning of period 1,113 846
Cash and cash equivalents at end of period $1,375 $1,147
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
e) HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Article 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Managing General Partner, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three month
period ended March 31, 1996, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 1996. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-KSB for the year ended December 31,
1995.
Certain reclassifications have been made to the 1995 information to conform
to the 1996 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. Balances and other transactions with
Insignia Financial Group, Inc. and affiliates in 1996 and 1995 are as follows:
Three Months Ended
March 31,
1996 1995
(in thousands)
Property management fees $ 48 $ 46
Reimbursement for services of affiliates 60 74
The Partnership insures its properties under a master policy through an
agency and insurer unaffiliated with the Managing General Partner. An affiliate
of the Managing General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the current year's master policy. The current agent
assumed the financial obligations to the affiliate of the Managing General
Partner, who receives payments on these obligations from the agent. The amount
of the Partnership's insurance premiums accruing to the benefit of the affiliate
of the Managing General Partner by virtue of the agent's obligations is not
significant.
Note C - Casualty
During the first quarter of 1995, the Partnership recorded a casualty loss
resulting from ice damage at Lewis Park Apartments to the roofs and interiors of
two buildings. Although the damage was covered by insurance, the damage
resulted in a loss of $25,000, arising from proceeds received from the insurance
carrier of $181,000 which were less than the basis of the property plus expenses
to replace the roofs and interiors damaged.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of one apartment complex and
one office building. The following table sets forth the average occupancy of
the properties for the three months ended March 31, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Lewis Park Apartments
Carbondale, Illinois 93% 89%
Highland Professional Tower
Kansas City, Missouri 89% 92%
The Managing General Partner attributes the increase in occupancy at Lewis
Park to aggressive leasing and marketing efforts and the increase of units
available to rent due to improvements and repairs to the available units. The
decrease in occupancy at Highland Professional Tower is attributable to tenants
not renewing their leases due to deferred maintenance at the property. The
Managing General Partner is currently ascertaining how best to utilize the
Partnership's cash and invested reserves of $1,375,000 to address the deferred
maintenance and attract and retain tenants.
The Partnership's net income for the three months ended March 31, 1996, was
$217,000 versus $190,000 for the corresponding period of 1995. The increase in
net income is primarily attributable to an increase in other income and a
decrease in casualty loss. Other income increased due to increased interest
income as interest rates and cash balances are higher in 1996 as compared to the
corresponding period in 1995. The Partnership recorded a casualty loss at Lewis
Park Apartments resulting from ice damage to the roofs and interiors of two
buildings of $25,000 during the first quarter of 1995. Partially offsetting the
increase in income was an increase in maintenance expense at Lewis Park during
the first quarter of 1996 due to repair work performed on units for new tenants.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expense. As part of this plan, the
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
At March 31, 1996, the Partnership had unrestricted cash of $1,375,000
compared to $1,147,000 at March 31, 1995. Net cash provided by operating
activities decreased primarily as a result of a decrease in accounts payable due
to the timing of payments to vendors. Net cash used in investing activities
increased as a result of insurance proceeds being received in 1995. Property
improvements decreased in 1996 as the Partnership incurred a casualty loss at
Lewis Park during the first quarter of 1995.
The Partnership has no material capital programs scheduled to be performed in
1996, although certain routine capital expenditures and maintenance expenses
have been budgeted and the Managing General Partner is currently ascertaining
how to best address the deferred maintenance at Highland Professional Tower.
These capital expenditures and maintenance expenses will be incurred only if
cash is available from operations or is received from the capital reserve
account.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. Future cash
distributions will depend on the levels of net cash generated from operations,
capital expenditure requirements, property sales, financings, and the
availability of cash reserves. No cash distributions were made during the first
three months of 1996 or 1995.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HCW PENSION REAL ESTATE FUND
LIMITED PARTNERSHIP
By: HCW General Partner Ltd.,
the General Partner
By: IH, Inc.,
the General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: May 3, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from HCW
Pension Real Estate Fund LTD Partnership 1996 First Quarter 10-QSB and is
qualified in its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000745538
<NAME> HCW PENSION REAL ESTATE FUND LTD. PARTNERSHIP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,375
<SECURITIES> 0
<RECEIVABLES> 120
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 14,240
<DEPRECIATION> 3,814
<TOTAL-ASSETS> 12,320
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,670
<TOTAL-LIABILITY-AND-EQUITY> 12,320
<SALES> 0
<TOTAL-REVENUES> 848
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 217
<EPS-PRIMARY> 13.55
<EPS-DILUTED> 0
<FN>
<F1>The Partnership has an unclassified balance sheet.
</FN>
</TABLE>
