FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] 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.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 721
Receivables and deposits 255
Other assets 152
Investment property:
Land $ 621
Buildings and related personal property 9,810
10,431
Less accumulated depreciation (5,171) 5,260
$ 6,388
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 4
Tenant security deposit liabilities 124
Accrued property taxes 457
Other liabilities 143
Mortgage note payable 5,500
Partners' (Deficit) Capital
General partner $ (141)
Limited partners (15,698 units issued and
outstanding) 301 160
$ 6,388
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
b)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues: (Restated) (Restated)
<S> <C> <C> <C> <C>
Rental income $ 400 $ 389 $ 1,248 $ 1,190
Other income 46 21 141 99
Total revenues 446 410 1,389 1,289
Expenses:
Operating 173 165 467 441
General and administrative 82 74 233 227
Depreciation 133 152 412 382
Interest 40 -- 40 --
Property taxes 67 40 201 176
Total expenses 495 431 1,353 1,226
(Loss) income from continuing
operations (49) (21) 36 63
(Loss) income from
discontinued operations (4) (59) 12 (158)
Impairment loss on
discontinued operations -- (2,387) -- (2,387)
Net (loss) income $ (53) $(2,467) $ 48 $ (2,482)
Net (loss) income allocated
to general partner (2%) $ (1) $ (49) $ 1 $ (50)
Net (loss) income allocated
to limited partners (98%) (52) (2,418) 47 (2,432)
$ (53) $ (2,467) $ 48 $ (2,482)
Per limited partnership unit:
(Loss) income from continuing
operations $ (3.06) $ (1.34) $ 2.23 $ 3.95
(Loss) income from
discontinued operations (0.25) (3.69) 0.76 (9.87)
Impairment loss on
discontinued operations -- (149.00) -- (149.00)
$ (3.31) $(154.03) $ 2.99 $(154.92)
Distributions per limited
partnership unit $ 337.88 $ 1.53 $ 479.68 $ 1.53
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
c)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 15,698 $ -- $15,698 $15,698
Partners' (deficit) capital at
December 31, 1999 15,698 $ (110) $ 7,784 $ 7,674
Distributions paid to partners -- (32) (7,530) (7,562)
Net income for the nine months
ended September 30, 2000 -- 1 47 48
Partners' (deficit) capital
at September 30, 2000 15,698 $ (141) $ 301 $ 160
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
d)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ 48 $(2,482)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 412 602
Amortization of loan costs 1 --
Impairment loss on discontinued operations -- 2,387
Change in accounts:
Receivables and deposits 191 128
Other assets (1) (12)
Accounts payable (93) 19
Tenant security deposit liabilities 5 11
Accrued property taxes 202 (99)
Other liabilities 28 17
Net cash provided by operating activities 793 571
Cash flows used in investing activities:
Property improvements and replacements (79) (652)
Cash flows from financing activities:
Loan costs paid (127) --
Proceeds from mortgage note payable 5,500 --
Distributions to partners (7,562) (425)
Net cash used in financing activities (2,189) (425)
Net decrease in cash and cash equivalents (1,475) (506)
Cash and cash equivalents at beginning of period 2,196 1,354
Cash and cash equivalents at end of period $ 721 $ 848
</TABLE>
See Accompanying Notes to Financial Statements
<PAGE>
e)
HCW PENSION REAL ESTATE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of HCW Pension Real Estate Fund
Limited Partnership (the "Partnership" or "Registrant") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 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. The general partner of the Partnership is HCW General
Partner Ltd., whose sole general partner is IH, Inc. (the "Managing General
Partner"). 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 and nine month
periods ended September 30, 2000, are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 2000. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1999.
Certain reclassifications have been made to the 1999 information to conform to
the 2000 presentation.
Note B - Transfer of Control
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company ("AIMCO"), a publicly
traded real estate investment trust, with AIMCO being the surviving corporation
(the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in
the Managing General Partner. The Managing General Partner does not believe that
this transaction has had or will have a material effect on the affairs and
operations of the Partnership.
Note C - 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 (i) certain
payments to affiliates for services and (ii) reimbursement of certain expenses
incurred by affiliates on behalf of the Partnership. The following transactions
with the Managing General Partner and/or its affiliates were incurred during the
nine months ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $ 70 $ 61
Asset management fees (included in general and
administrative expenses) 107 107
Reimbursement for services of affiliates (included in
general and administrative expenses) 48 39
During the nine months ended September 30, 2000 and 1999, affiliates of the
Managing General Partner were entitled to receive 5% of gross receipts from the
Registrant's residential property for providing property management services.
The Registrant paid to such affiliates approximately $70,000 and $61,000 for the
nine months ended September 30, 2000 and 1999, respectively.
An affiliate of the Managing General Partner received reimbursement of asset
management fees amounting to approximately $107,000 for both the nine months
ended September 30, 2000 and 1999.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $48,000 and
$39,000 for the nine months ended September 30, 2000 and 1999, respectively.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 4,839 limited partnership
units in the Partnership representing 30.83% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO or its
affiliates. It is possible that AIMCO or its affiliates will make one or more
additional offers to acquire additional limited partnership interests in the
Partnership for cash or in exchange for units in the operating partnership of
AIMCO. Under the Partnership Agreement, unitholders holding a majority of the
Units are entitled to take action with respect to a variety of matters, which
would include without limitation, voting on certain amendments to the
Partnership Agreement and voting to remove the Managing General Partner. When
voting on matters, AIMCO would in all likelihood vote the units it acquired in a
manner favorable to the interest of the Managing General Partner because of
their affiliation with the Managing General Partner.
Note D - Discontinued Operation
Highland Professional Tower was the last commercial property in the commercial
segment of the Partnership. Due to the sale of this property in December 1999,
the results of this property have been classified as "(Loss) income from
discontinued operations" for the three and nine month periods ended September
30, 2000 and 1999. Revenues of this property were approximately $233,000 and
$663,000 for the three and nine months ended September 30, 1999. A loss from
operations of the property was approximately $4,000 for the three months ended
September 30, 2000 and approximately $59,000 for the three months ended
September 30, 1999. Income from operations of this property was approximately
$12,000 for the nine months ended September 30, 2000 and there was a loss of
approximately $158,000 for the nine months ended September 30, 1999.
Note E - Impairment Loss on Discontinued Operations
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", the Partnership records impairment losses on long-lived assets
used in operations when events and circumstances indicate that the assets might
be impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. During the three
months ended September 30, 1999, the Partnership determined that the Highland
Professional Tower located in Kansas City, Missouri, with a carrying value of
approximately, $4,637,000, was impaired and its value was written down by
approximately $2,387,000. The fair value was based upon current economic
conditions and projected future operational cash flows.
Note F - Distributions
During the nine months ended September 30, 2000, the Partnership declared and
paid distributions of approximately $7,562,000 (approximately $7,530,000 to the
limited partners or $479.68 per limited partnership unit) consisting of
approximately $1,622,000 of cash from operations (approximately $1,590,000 to
the limited partners or $101.29 per limited partnership unit), approximately
$1,073,000 to the limited partners from the sale of Highland Professional Tower
($68.35 per limited partnership unit), and approximately $4,867,000 to the
limited partners from the issuance of long term debt at Lewis Park Apartments
($310.04 per limited partnership unit). A distribution payable from operations
of approximately $400,000 (approximately $392,000 to the limited partners or
$24.97 per limited partnership unit) was recorded on December 31, 1998 and was
paid on January 20, 1999. A distribution of cash from operations of
approximately $25,000 (approximately $24,000 to the limited partners or $1.53
per limited partnership unit) was paid on July 1, 1999.
Note G - Financing
On August 30, 2000, the Partnership financed Lewis Park Apartments with a
mortgage of $5,500,000. The interest rate on the mortgage is 8.08% with monthly
payments of approximately $46,000 that matures on September 1, 2020. Capitalized
loan costs incurred for the financing were approximately $127,000.
Note H - Segment Information
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership had two reportable segments: residential property and commercial
property. The Partnership's residential property segment consists of one
apartment complex in Carbondale, Illinois. The Partnership rents apartment units
to tenants for terms that are typically twelve months or less. The commercial
property segment consisted of a professional office building located in Kansas
City, Missouri. On December 30, 1999, the commercial property held by the
Partnership was sold to an unrelated party. Therefore, the commercial segment is
reflected as discontinued operations (see "Note D - Discontinued Operation" for
further discussion).
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segments are the same as
those of the Partnership as described in the Partnership's Annual Report on Form
10-KSB for the year ended December 31, 1999.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segments consist of investment properties that
offer different products and services. The reportable segments are each managed
separately as they provide services with different types of products and
customers.
Segment information for the three and nine months ended September 30, 2000 and
1999 is shown in the tables below (in thousands). The "Other" column includes
Partnership administration related items and income and expense not allocated to
the reportable segments.
<TABLE>
<CAPTION>
Three Months Ended
September 30, 2000 Residential Commercial Other Totals
(discontinued)
<S> <C> <C> <C> <C>
Rental income $ 400 $ -- $ -- $ 400
Other income 45 -- 1 46
Interest expense 40 -- -- 40
Depreciation 133 -- -- 133
General and administrative
expense -- -- 82 82
Loss from discontinued
operations -- (4) -- (4)
Segment profit (loss) 32 (4) (81) (53)
Nine Months Ended
September 30, 2000 Residential Commercial Other Totals
(discontinued)
Rental income $ 1,248 $ -- $ -- $ 1,248
Other income 127 -- 14 141
Interest expense 40 -- -- 40
Depreciation 412 -- -- 412
General and administrative
expense -- -- 233 233
Income from discontinued
operations -- 12 -- 12
Segment profit (loss) 255 12 (219) 48
Total assets 6,215 -- 173 6,388
Capital expenditures for
investment property 79 -- -- 79
Three Months Ended
September 30, 1999 Residential Commercial Other Totals
(discontinued)
Rental income $ 389 $ -- $ -- $ 389
Other income 18 -- 3 21
Depreciation 152 -- -- 152
General and administrative
expense -- -- 74 74
Impairment loss on
discontinued operations -- (2,387) -- (2,387)
Loss from discontinued
operations -- (59) -- (59)
Segment profit (loss) 50 (2,446) (71) (2,467)
Nine Months Ended
September 30, 1999 Residential Commercial Other Totals
(discontinued)
Rental income $ 1,190 $ -- $ -- $ 1,190
Other income 80 -- 19 99
Depreciation 382 -- -- 382
General and administrative
expense -- -- 227 227
Impairment loss on
discontinued operations -- (2,387) -- (2,387)
Loss from discontinued
operations -- (158) -- (158)
Segment profit (loss) 271 (2,545) (208) (2,482)
Total assets 6,103 2,541 540 9,184
Capital expenditures for
investment property 632 20 -- 652
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-QSB 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-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operation. 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.
The Partnership's investment property consists of one apartment complex located
in Carbondale, Illinois. The average occupancy of the property was 79% for both
the nine months ended September 30, 2000 and 1999.
Results of Operations
The Partnership realized net income of approximately $48,000 for the nine months
ended September 30, 2000 compared to a net loss of approximately $2,482,000 for
the nine months ended September 30, 1999. The Partnership realized a net loss of
approximately $53,000 during the three months ended September 30, 2000 compared
to a net loss of approximately $2,467,000 for the three months ended September
30, 1999. The increase in net income for the nine month period and decrease in
net loss for the three month period ended September 30, 2000, respectively, is
primarily attributable to the impairment loss realized at Highlands Professional
Tower, as discussed below, during the three months ended September 30, 1999 and
the sale of the Partnership's last commercial property, also Highlands
Professional Tower, in December 1999, as discussed below.
Excluding the results of discontinued operations and the impairment loss on
discontinued operations, the Partnership had income from continuing operations
of approximately $36,000 for the nine months ended September 30, 2000, compared
to approximately $63,000 for the nine months ended September 30, 1999. For the
three months ended September 30, 2000, the Partnership had a loss of
approximately $49,000 from continuing operations and a loss of approximately
$21,000 for the comparable period in 1999. The decrease in income for the nine
month period and increase in loss for the three month period ended September 30,
2000, respectively, from continuing operations is primarily due to an increase
in total expenses partially offset by an increase in total revenues.
Total revenues increased for the three and nine months ended September 30, 2000,
due to an increase in rental and other income. Rental income increased due to an
increase in average rental rates at Lewis Park Apartments partially offset by an
increase in concessions. Other income increased due to an increase in interest
income as a result of higher average cash balances in interest bearing accounts
and an increase in application fees, lease cancellation fees, and auxillary
services at Lewis Park Apartments.
Total expenses increased for the three and nine months ended September 30, 2000
primarily due to an increase in operating, interest, and property tax expenses.
Operating expenses increased primarily due to an increase in administrative
expense at Lewis Park Apartments. Administrative expenses increased due to
credit collection and eviction costs and payroll bonuses. Interest expense
increased due to the issuance of a mortgage note payable during August 2000. The
increase in property tax expense is a result of the timing of receipt of the tax
bills for the year which affected the estimated accruals recorded for property
tax expense. Depreciation expense for the nine months ended September 30, 2000
increased due to capital improvements completed during the past twelve months
that are now being depreciated.
Included in general and administrative expense at both September 30, 2000 and
1999 are management reimbursements to the Managing General Partner allowed under
the Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.
Highland Professional Tower was the last commercial property in the commercial
segment of the Partnership. Due to the sale of this property in December 1999,
the results of this property have been classified as "(Loss) income from
discontinued operations" for the three and nine month periods ended September
30, 2000 and 1999. Revenues of this property were approximately $233,000 and
$663,000 for the three and nine months ended September 30, 1999. A loss from
operations of the property was approximately $4,000 for the three months ended
September 30, 2000 and there was a loss of approximately $59,000 for the three
months ended September 30, 1999. Income from operations of this property was
approximately $12,000 for the nine months ended September 30, 2000 and there was
a loss of approximately $158,000 for the nine months ended September 30, 1999.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", the Partnership records impairment losses on long-lived assets
used in operations when events and circumstances indicate that the assets might
be impaired and the undiscounted cash flows estimated to be generated by those
assets are less than the carrying amounts of those assets. During the three
months ended September 30, 1999, the Partnership determined that the Highland
Professional Tower located in Kansas City, Missouri, with a carrying value of
approximately, $4,637,000, was impaired and its value was written down by
approximately $2,387,000. The fair value was based upon current economic
conditions and projected future operational cash flows.
As part of the ongoing business plan of the Partnership, the Managing 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 Registrant from increases in expenses. As part of this
plan, the Managing 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
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At September 30, 2000, the Partnership had cash and cash equivalents of
approximately $721,000 as compared to approximately $848,000 at September 30,
1999. Cash and cash equivalents decreased approximately $1,475,000 from the
Partnership's year ended December 31, 1999, due to approximately $2,189,000 of
cash used in financing activities and approximately $79,000 of cash used in
investing activities, partially offset by approximately $793,000 of cash
provided by operating activities. Cash used in financing activities consisted of
distributions paid to the partners and, to a lesser extent, loan costs paid
partially offset by proceeds from the financing of Lewis Park Apartments. Cash
used in investing activities consisted of property improvements and
replacements. The Partnership invests its working capital reserves in money
market accounts.
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 and to comply with Federal, state,
and local legal and regulatory requirements. Capital improvements planned for
the Partnership's property are detailed below.
Lewis Park Apartments
During the nine months ended September 30, 2000, the Partnership completed
approximately $79,000 of budgeted and unbudgeted capital improvements at Lewis
Park, consisting primarily of cabinet replacements, air conditioning unit
replacements, and carpet and vinyl replacement. These improvements were funded
from operating cash flow. The Partnership has evaluated the capital improvement
needs of the property for the year 2000. The amount budgeted is approximately
$81,000, consisting primarily of air conditioning, cabinet, appliance, and
flooring replacements. Additional improvements may be considered and will depend
on the physical condition of the property as well as replacement reserves and
anticipated cash flow generated by the property.
The additional capital expenditures will be incurred only if cash is available
from operations or from Partnership reserves. To the extent that such budgeted
capital improvements are completed, the Partnership's distributable cash flow,
if any, may be adversely affected at least in the short term.
The Partnership's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Partnership. The mortgage
indebtedness of $5,500,000, which was financed on August 30, 2000, matures on
September 1, 2020. The Managing General Partner will attempt to refinance such
indebtedness and/or sell the property prior to such maturity date. If the
property cannot be refinanced or sold for a sufficient amount, the Partnership
will risk losing such property through foreclosure.
During the nine months ended September 30, 2000, the Partnership declared and
paid distributions of approximately $7,562,000 (approximately $7,530,000 to the
limited partners or $479.68 per limited partnership unit) consisting of
approximately $1,622,000 of cash from operations (approximately $1,590,000 to
the limited partners or $101.29 per limited partnership unit), approximately
$1,073,000 to the limited partners from the sale of Highland Professional Tower
($68.35 per limited partnership unit), and approximately $4,867,000 to the
limited partners from the issuance of long term debt at Lewis Park Apartments
($310.04 per limited partnership unit). A distribution payable from operations
of approximately $400,000 (approximately $392,000 to the limited partners or
$24.97 per limited partnership unit) was recorded on December 31, 1998 and was
paid on January 20, 1999. A distribution of cash from operations of
approximately $25,000 (approximately $24,000 to the limited partners or $1.53
per limited partnership unit) was paid on July 1, 1999. The Partnership's
distribution policy is reviewed on an annual basis. Future cash distributions
will depend on the levels of net cash generated from operations, the
availability of cash reserves, and the timing of debt maturity, refinancing,
and/or property sale. There can be no assurance, however, that the Partnership
will generate sufficient funds from operations after required capital
improvements to permit additional distributions to its partners during the
remainder of 2000 or subsequent periods.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 10.4, Multifamily Note date August 28, 2000 from GMAC
Commercial Mortgage Corporation, a California Corporation.
Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K filed during the quarter ended September
30, 2000:
None.
<PAGE>
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 Managing General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President
By: /s/Martha L. Long
Martha L. Long
Senior Vice President
and Controller
Date:
<PAGE>
Exhibit 10.4
FHLMC Loan No. 002724626
MULTIFAMILY NOTE
(MULTISTATE)
US $5,500,000.00 As of this _____day of August, 2000
FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, the principal sum of Five Million Five
Hundred Thousand and 00/100 Dollars (US $5,500,000.00), with interest on the
unpaid principal balance at the annual rate of Eight and eight hundreds percent
(8.08%).
1. Defined Terms. As used in this Note, (i) the term "Lender" means the holder
of this Note, and (ii) the term "Indebtedness" means the principal of, interest
on, or any other amounts due at any time under, this Note, the Security
Instrument or any other Loan Document, including prepayment premiums, late
charges, default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security Instrument. "Event of Default" and
other capitalized terms used but not defined in this Note shall have the
meanings given to such terms in the Security Instrument.
2. Address for Payment. All payments due under this Note shall be payable at 200
Witmer Road, P.O. Box 809, Horsham, Pennsylvania 19044, Attn: Servicing -
Account Manager, or such other place as may be designated by written notice to
Borrower from or on behalf of Lender.
3. Payment of Principal and Interest. Principal and interest shall be paid as
follows:
(a) Unless disbursement of principal is made by Lender to Borrower on the first
day of the month, interest for the period beginning on the date of disbursement
and ending on and including the last day of the month in which such disbursement
is made shall be payable simultaneously with the execution of this Note.
Interest under this Note shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.
(b) Consecutive monthly installments of principal and interest, each in the
amount of _________________ (US $_________________), shall be payable on the
first day of each month beginning on October 1, 2000, until the entire unpaid
principal balance evidenced by this Note is fully paid. Any accrued interest
remaining past due for 30 days or more shall be added to and become part of the
unpaid principal balance and shall bear interest at the rate or rates specified
in this Note, and any reference below to "accrued interest" shall refer to
accrued interest which has not become part of the unpaid principal balance. Any
remaining principal and interest shall be due and payable on September 1, 2020
or on any earlier date on which the unpaid principal balance of this Note
becomes due and payable, by acceleration or otherwise (the "Maturity Date"). The
unpaid principal balance shall continue to bear interest after the Maturity Date
at the Default Rate set forth in this Note until and including the date on which
it is paid in full.
(c) Any regularly scheduled monthly installment of principal and interest that
is received by Lender before the date it is due shall be deemed to have been
received on the due date solely for the purpose of calculating interest due.
4. Application of Payments. If at any time Lender receives, from Borrower or
otherwise, any amount applicable to the Indebtedness which is less than all
amounts due and payable at such time, Lender may apply that payment to amounts
then due and payable in any manner and in any order determined by Lender, in
Lender's discretion. Borrower agrees that neither Lender's acceptance of a
payment from Borrower in an amount that is less than all amounts then due and
payable nor Lender's application of such payment shall constitute or be deemed
to constitute either a waiver of the unpaid amounts or an accord and
satisfaction.
5. Security. The Indebtedness is secured, among other things, by a multifamily
mortgage, deed to secure debt or deed of trust dated as of the date of this Note
(the "Security Instrument"), and reference is made to the Security Instrument
for other rights of Lender as to collateral for the Indebtedness.
6. Acceleration. If an Event of Default has occurred and is continuing, the
entire unpaid principal balance, any accrued interest, the prepayment premium
payable under Paragraph 10, if any, and all other amounts payable under this
Note and any other Loan Document shall at once become due and payable, at the
option of Lender, without any prior notice to Borrower. Lender may exercise this
option to accelerate regardless of any prior forbearance.
7. Late Charge. If any monthly amount payable under this Note or under the
Security Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due, Borrower shall pay to Lender, immediately
and without demand by Lender, a late charge equal to five percent (5%) of such
amount. Borrower acknowledges that its failure to make timely payments will
cause Lender to incur additional expenses in servicing and processing the loan
evidenced by this Note (the "Loan"), and that it is extremely difficult and
impractical to determine those additional expenses. Borrower agrees that the
late charge payable pursuant to this Paragraph represents a fair and reasonable
estimate, taking into account all circumstances existing on the date of this
Note, of the additional expenses Lender will incur by reason of such late
payment. The late charge is payable in addition to, and not in lieu of, any
interest payable at the Default Rate pursuant to Paragraph 8.
8. Default Rate. So long as (a) any monthly installment under this Note remains
past due for 30 days or more, or (b) any other Event of Default has occurred and
is continuing, interest under this Note shall accrue on the unpaid principal
balance from the earlier of the due date of the first unpaid monthly installment
or the occurrence of such other Event of Default, as applicable, at a rate (the
"Default Rate") equal to the lesser of 4 percentage points above the rate stated
in the first paragraph of this Note or the maximum interest rate which may be
collected from Borrower under applicable law. If the unpaid principal balance
and all accrued interest are not paid in full on the Maturity Date, the unpaid
principal balance and all accrued interest shall bear interest from the Maturity
Date at the Default Rate. Borrower also acknowledges that its failure to make
timely payments will cause Lender to incur additional expenses in servicing and
processing the Loan, that, during the time that any monthly installment under
this Note is delinquent for more than 30 days, Lender will incur additional
costs and expenses arising from its loss of the use of the money due and from
the adverse impact on Lender's ability to meet its other obligations and to take
advantage of other investment opportunities, and that it is extremely difficult
and impractical to determine those additional costs and expenses. Borrower also
acknowledges that, during the time that any monthly installment under this Note
is delinquent for more than 30 days or any other Event of Default has occurred
and is continuing, Lender's risk of nonpayment of this Note will be materially
increased and Lender is entitled to be compensated for such increased risk.
Borrower agrees that the increase in the rate of interest payable under this
Note to the Default Rate represents a fair and reasonable estimate, taking into
account all circumstances existing on the date of this Note, of the additional
costs and expenses Lender will incur by reason of the Borrower's delinquent
payment and the additional compensation Lender is entitled to receive for the
increased risks of nonpayment associated with a delinquent loan.
9. Limits on Personal Liability.
(a) Except as otherwise provided in this Paragraph 9, Borrower shall have no
personal liability under this Note, the Security Instrument or any other Loan
Document for the repayment of the Indebtedness or for the performance of any
other obligations of Borrower under the Loan Documents, and Lender's only
recourse for the satisfaction of the Indebtedness and the performance of such
obligations shall be Lender's exercise of its rights and remedies with respect
to the Mortgaged Property and any other collateral held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair Lender's enforcement of its rights against any guarantor of the
Indebtedness or any guarantor of any obligations of Borrower.
(b) Borrower shall be personally liable to Lender for the repayment of a portion
of the Indebtedness equal to zero percent (0%) of the original principal balance
of this Note, plus any other amounts for which Borrower has personal liability
under this Paragraph 9.
(c) In addition to Borrower's personal liability under Paragraph 9(b), Borrower
shall be personally liable to Lender for the repayment of a further portion of
the Indebtedness equal to any loss or damage suffered by Lender as a result of
(1) failure of Borrower to pay to Lender upon demand after an Event of Default
all Rents to which Lender is entitled under Section 3(a) of the Security
Instrument and the amount of all security deposits collected by Borrower from
tenants then in residence; (2) failure of Borrower to apply all insurance
proceeds and condemnation proceeds as required by the Security Instrument; or
(3) failure of Borrower to comply with Section 14(d) or (e) of the Security
Instrument relating to the delivery of books and records, statements, schedules
and reports.
(d) For purposes of determining Borrower's personal liability under Paragraph
9(b) and Paragraph 9(c), all payments made by Borrower or any guarantor of this
Note with respect to the Indebtedness and all amounts received by Lender from
the enforcement of its rights under the Security Instrument shall be applied
first to the portion of the Indebtedness for which Borrower has no personal
liability.
(e) Borrower shall become personally liable to Lender for the repayment of all
of the Indebtedness upon the occurrence of any of the following Events of
Default: (1) Borrower's acquisition of any property or operation of any business
not permitted by Section 33 of the Security Instrument; (2) a Transfer
(including, but not limited to, a lien or encumbrance) that is an Event of
Default under Section 21 of the Security Instrument, other than a Transfer
consisting solely of the involuntary removal or involuntary withdrawal of a
general partner in a limited partnership or a manager in a limited liability
company; or (3) fraud or written material misrepresentation by Borrower or any
officer, director, partner, member or employee of Borrower in connection with
the application for or creation of the Indebtedness or any request for any
action or consent by Lender.
(f) In addition to any personal liability for the Indebtedness, Borrower shall
be personally liable to Lender for (1) the performance of all of Borrower's
obligations under Section 18 of the Security Instrument (relating to
environmental matters); (2) the costs of any audit under Section 14(d) of the
Security Instrument; and (3) any costs and expenses incurred by Lender in
connection with the collection of any amount for which Borrower is personally
liable under this Paragraph 9, including fees and out of pocket expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's books and records to determine the amount for which Borrower has
personal liability.
(g) To the extent that Borrower has personal liability under this Paragraph 9,
Lender may exercise its rights against Borrower personally without regard to
whether Lender has exercised any rights against the Mortgaged Property or any
other security, or pursued any rights against any guarantor, or pursued any
other rights available to Lender under this Note, the Security Instrument, any
other Loan Document or applicable law. For purposes of this Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or permitted by the Security Instrument prior to the
occurrence of an Event of Default or (2) Borrower was unable to apply as
required or permitted by the Security Instrument because of a bankruptcy,
receivership, or similar judicial proceeding.
10. Voluntary and Involuntary Prepayments.
(a) A prepayment premium shall be payable in connection with any prepayment made
under this Note as provided below:
(1) Borrower may voluntarily prepay all of the unpaid principal balance of this
Note on the last Business Day of a calendar month if Borrower has given Lender
at least 30 days prior notice of its intention to make such prepayment. Such
prepayment shall be made by paying (A) the amount of principal being prepaid,
(B) all accrued interest, (C) all other sums due Lender at the time of such
prepayment, and (D) the prepayment premium calculated pursuant to Schedule A.
For all purposes including the accrual of interest, any prepayment received by
Lender on any day other than the last calendar day of the month shall be deemed
to have been received on the last calendar day of such month. For purposes of
this Note, a "Business Day" means any day other than a Saturday, Sunday or any
other day on which Lender is not open for business. Borrower shall not have the
option to voluntarily prepay less than all of the unpaid principal balance.
(2) Upon Lender's exercise of any right of acceleration under this Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this Note outstanding at the time of the acceleration, (A) all accrued
interest and all other sums due Lender, and (B) the prepayment premium
calculated pursuant to Schedule A.
(3) Any application by Lender of any collateral or other security to the
repayment of any portion of the unpaid principal balance of this Note prior to
the Maturity Date and in the absence of acceleration shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium. The amount of any such partial prepayment shall be computed
so as to provide to Lender a prepayment premium computed pursuant to Schedule A
without Borrower having to pay out-of-pocket any additional amounts.
(b) Notwithstanding the provisions of Paragraph 10(a), no prepayment premium
shall be payable with respect to (A) any prepayment made no more than 180 days
before the Maturity Date, or (B) any prepayment occurring as a result of the
application of any insurance proceeds or condemnation award under the Security
Instrument.
(c) Schedule A is hereby incorporated by reference into this Note.
(d) Any permitted or required prepayment of less than the unpaid principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly installments or change the amount of such installments, unless Lender
agrees otherwise in writing.
(e) Borrower recognizes that any prepayment of the unpaid principal balance of
this Note, whether voluntary or involuntary or resulting from a default by
Borrower, will result in Lender's incurring loss, including reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments to third parties. Borrower agrees to pay to Lender upon demand
damages for the detriment caused by any prepayment, and agrees that it is
extremely difficult and impractical to ascertain the extent of such damages.
Borrower therefore acknowledges and agrees that the formula for calculating
prepayment premiums set forth on Schedule A represents a reasonable estimate of
the damages Lender will incur because of a prepayment.
(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the consideration for the Loan, and acknowledges
that the terms of this Note are in other respects more favorable to Borrower as
a result of the Borrower's voluntary agreement to the prepayment premium
provisions.
11. Costs and Expenses. Borrower shall pay all expenses and costs, including
fees and out-of-pocket expenses of attorneys and expert witnesses and costs of
investigation, incurred by Lender as a result of any default under this Note or
in connection with efforts to collect any amount due under this Note, or to
enforce the provisions of any of the other Loan Documents, including those
incurred in post-judgment collection efforts and in any bankruptcy proceeding
(including any action for relief from the automatic stay of any bankruptcy
proceeding) or judicial or non-judicial foreclosure proceeding.
12. Forbearance. Any forbearance by Lender in exercising any right or remedy
under this Note, the Security Instrument, or any other Loan Document or
otherwise afforded by applicable law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy. The acceptance by Lender of any
payment after the due date of such payment, or in an amount which is less than
the required payment, shall not be a waiver of Lender's right to require prompt
payment when due of all other payments or to exercise any right or remedy with
respect to any failure to make prompt payment. Enforcement by Lender of any
security for Borrower's obligations under this Note shall not constitute an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.
13. Waivers. Presentment, demand, notice of dishonor, protest, notice of
acceleration, notice of intent to demand or accelerate payment or maturity,
presentment for payment, notice of nonpayment, grace, and diligence in
collecting the Indebtedness are waived by Borrower and all endorsers and
guarantors of this Note and all other third party obligors.
14. Loan Charges. If any applicable law limiting the amount of interest or other
charges permitted to be collected from Borrower in connection with the Loan is
interpreted so that any interest or other charge provided for in any Loan
Document, whether considered separately or together with other charges provided
for in any other Loan Document, violates that law, and Borrower is entitled to
the benefit of that law, that interest or charge is hereby reduced to the extent
necessary to eliminate that violation. The amounts, if any, previously paid to
Lender in excess of the permitted amounts shall be applied by Lender to reduce
the unpaid principal balance of this Note. For the purpose of determining
whether any applicable law limiting the amount of interest or other charges
permitted to be collected from Borrower has been violated, all Indebtedness that
constitutes interest, as well as all other charges made in connection with the
Indebtedness that constitute interest, shall be deemed to be allocated and
spread ratably over the stated term of the Note. Unless otherwise required by
applicable law, such allocation and spreading shall be effected in such a manner
that the rate of interest so computed is uniform throughout the stated term of
the Note.
15. Commercial Purpose. Borrower represents that the Indebtedness is being
incurred by Borrower solely for the purpose of carrying on a business or
commercial enterprise, and not for personal, family or household purposes.
16. Counting of Days. Except where otherwise specifically provided, any
reference in this Note to a period of "days" means calendar days, not Business
Days.
17. Governing Law. This Note shall be governed by the law of the jurisdiction in
which the Land is located.
18. Captions. The captions of the paragraphs of this Note are for convenience
only and shall be disregarded in construing this Note.
19. Notices. All notices, demands and other communications required or permitted
to be given by Lender to Borrower pursuant to this Note shall be given in
accordance with Section 31 of the Security Instrument.
20. Consent to Jurisdiction and Venue. Borrower agrees that any controversy
arising under or in relation to this Note shall be litigated exclusively in the
jurisdiction in which the Land is located (the "Property Jurisdiction"). The
state and federal courts and authorities with jurisdiction in the Property
Jurisdiction shall have exclusive jurisdiction over all controversies which
shall arise under or in relation to this Note. Borrower irrevocably consents to
service, jurisdiction, and venue of such courts for any such litigation and
waives any other venue to which it might be entitled by virtue of domicile,
habitual residence or otherwise.
21. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A
TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF
RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.
ATTACHED SCHEDULES. The following Schedules are attached to this Note:
X Schedule A Prepayment Premium (required)
X Schedule B Modifications to Multifamily Note
IN WITNESS WHEREOF, Borrower has signed and delivered this Note or has
caused this Note to be signed and delivered by its duly authorized
representative.
HCW PENSION REAL ESTATE FUND LIMITED
PARTNERSHIP, a Massachusetts limited partnership
By: HCW General Partner, Limited Partnership
a Texas limited partnership,
its general partner
By: IH, Inc.,
a Delaware corporation,
its general partner
By:___________________________
Patti K. Fielding:
Senior Vice President
04-2825863
Borrower's Social Security/Employer ID Number
<PAGE>
PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE CORPORATION, WITHOUT RECOURSE,
THIS ____DAY OF AUGUST, 2000.
GMAC COMMERCIAL MORTGAGE CORPORATION, a
California corporation
By:_________________________________
Donald W. Marshall
Vice President
<PAGE>
SCHEDULE A
PREPAYMENT PREMIUM
Any prepayment premium payable under Paragraph 10 of this Note shall be
computed as follows:
(a) If the prepayment is made between the date of this Note and the date that is
180 months after the first day of the first calendar month following the date of
this Note (the "Yield Maintenance Period"), the prepayment premium shall be the
greater of:
(i) 1.0% of the unpaid principal balance of this Note; or
(ii) the product obtained by multiplying:
(A) the amount of principal being prepaid,
by
(B) the excess (if any) of the Monthly Note Rate over the Assumed Reinvestment
Rate,
by
(C) the Present Value Factor.
For purposes of subparagraph (ii), the following definitions shall
apply:
Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of
the Note, expressed as a decimal calculated to five digits.
Prepayment Date: in the case of a voluntary prepayment, the date on
which the prepayment is made; in any other case, the date on which
Lender accelerates the unpaid principal balance of the Note.
Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate as of
the date 5 Business Days before the Prepayment Date, on the
_________________% U.S. Treasury Security due _________________, as
reported in The Wall Street Journal, expressed as a decimal calculated
to five digits. In the event that no yield is published on the
applicable date for the Treasury Security used to determine the
Assumed Reinvestment Rate, Lender, in its discretion, shall select the
non-callable Treasury Security maturing in the same year as the
Treasury Security specified above with the lowest yield published in
The Wall Street Journal as of the applicable date. If the publication
of such yield rates in The Wall Street Journal is discontinued for any
reason, Lender shall select a security with a comparable rate and term
to the Treasury Security used to determine the Assumed Reinvestment
Rate. The selection of an alternate security pursuant to this
Paragraph shall be made in Lender's discretion.
<PAGE>
Present Value Factor: the factor that discounts to present value the
costs resulting to Lender from the difference in interest rates
during the months remaining in the Yield Maintenance Period, using
the Assumed Reinvestment Rate as the discount rate, with monthly
compounding, expressed numerically as follows:
[OBJECT OMITTED]
n = number of months remaining in Yield Maintenance Period
ARR = Assumed Reinvestment Rate
(b) If the prepayment is made after the expiration of the Yield Maintenance
Period but more than 180 days before the Maturity Date, the prepayment premium
shall be 1.0% of the unpaid principal balance of this Note.
<PAGE>
SCHEDULE B
MODIFICATIONS TO MULTIFAMILY NOTE
1. The first sentence of Paragraph 8 of the Note ("Default Rate") is hereby
deleted and replaced with the following:
So long as (a) any monthly installment under this Note remains past
due for more than thirty (30) days or (b) any other event of Default
has occurred and is continuing, interest under this Note shall
accrue on the unpaid principal balance from the earlier of the due
date of the first unpaid monthly installment or the occurrence of
such other Event of Default, as applicable, at a rate (the "Default
Rate") equal to the lesser of (1) the maximum interest rate which
may be collected from Borrower under applicable law or (2) the
greater of (i) three percent (3%) above the Interest Rate or (ii)
four percent (4.0%) above the then-prevailing Prime Rate. As used
herein, the term "Prime Rate" shall mean the rate of interest
announced by The Wall Street Journal from time to time as the "Prime
Rate".
2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):
(4) failure by Borrower to pay the amount of the water and sewer
charges, taxes, fire, hazard or other insurance premiums, ground
rents, assessments or other charges in accordance with the terms
of the Security Instrument.
