<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998 Commission File Number 0-13493
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
-----------------------------------------
(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2833662
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Cambridge Center, Cambridge, MA 02142
- --------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
------------------
Indicate by check mark 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>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
(UNAUDITED) (NOTE 1)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
----------------------- ----------------------
<S> <C> <C> <C> <C>
Revenues:
Interest income............................ $ 1,976 $ 2,595 $ 10,711 $ 9,381
Expenses:
Interest................................... 2,272,724 2,060,588 6,653,508 6,035,636
Amortization............................... 101,157 101,157 303,472 303,472
Related party management fee............... 75,000 75,000 225,000 225,000
General and administrative................. 32,561 28,823 59,900 53,496
----------- ----------- ------------ ------------
2,481,442 2,265,568 7,241,880 6,617,604
----------- ----------- ------------ ------------
Loss from Operations............................. (2,479,466) (2,262,973) (7,231,169) (6,608,223)
Equity in Losses from
Operating Partnerships..................... (2,734,329) (2,083,957) (4,408,359) (4,749,973)
----------- ----------- ------------ ------------
Net Loss ........................................ $(5,213,795) $(4,346,930) $(11,639,528) $(11,358,196)
=========== =========== ============ ============
Net Loss Allocated to General Partners........... $ (52,138) $ (43,469) $ (116,395) $ (113,582)
=========== =========== ============ ============
Net Loss Allocated to Limited Partners........... $(5,161,657) $(4,303,461) $(11,523,133) $(11,244,614)
=========== =========== ============ ============
Net Loss per Unit of Limited Partnership
Interest....................................... $ (8,603) $ (7,172) $ (19,205) $ (18,741)
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
September 30, December 31,
1998 1997
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<S> <C> <C>
ASSETS:
Cash and cash equivalents............................................ $ 145,322 $ 2,012,003
Deferred financing fee, net of accumulated
amortization of $46,942 and $44,442 respectively.................. 3,058 5,558
--------------- --------------
TOTAL ASSETS................................................... $ 148,380 $ 2,017,561
=============== ==============
LIABILITIES:
Purchase Money Note, net of unamortized discount..................... $ 64,087,144 $ 58,597,428
Notes payable........................................................ 9,873,978 9,873,978
Accrued interest on operating deficit notes.......................... 20,388,379 19,224,587
Investments in Operating Partnerships................................ 12,290,931 7,581,600
Accrued expenses..................................................... -- 17,492
Due to affiliates.................................................... 1,225,000 2,800,000
--------------- --------------
TOTAL LIABILITIES.............................................. 107,865,432 98,095,085
--------------- --------------
PARTNERS DEFICIT:
Limited partners - Units of Limited
Partnership Interest, $96,250 stated
value per unit; authorized, issued
and outstanding - 600 Units....................................... (106,113,601) (94,590,468)
General partners..................................................... (1,603,451) (1,487,056)
--------------- --------------
(107,717,052) (96,077,524)
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TOTAL LIABILITIES AND PARTNERS DEFICIT............................... $ 148,380 $ 2,017,561
=============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENT OF CASH FLOWS
(UNAUDITED) (NOTE 1)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
For the Nine Months Ended
September 30, September 30,
1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................... $( 11,639,528) $(11,358,196)
Adjustments to reconcile net loss to net cash used
in operating activities:
Amortization........................................................ 303,472 303,472
Equity in loss of Operating Partnerships............................ 4,408,359 4,749,973
Changes in assets and liabilities:
Interest added to loan principal on Purchase Money Note............. 5,489,716 4,871,844
Increase in accrued interest on operating deficit notes............. 1,163,792 1,163,792
Decrease in accrued expenses........................................ (17,492) (15,010)
Decrease in due to affiliates....................................... (1,575,000) (575,000)
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Net cash used in operating activities............................... (1,866,681) (859,125)
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Cash and cash equivalents, beginning of period......................... 2,012,003 1,043,786
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Cash and cash equivalents, end of period............................... $ 145,322 $ 184,661
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
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<TABLE>
<CAPTION>
Units of
Limited Investor
Partnership Limited General
Interest Partners Partners Total
-------- -------- -------- -----
<S> <C> <C> <C> <C>
Balance, December 31, 1997 600 $ (94,590,468) $(1,487,056) $ (96,077,524)
Net loss (11,523,133) (116,395) (11,639,528)
--------- --------------- ------------ --------------
Balance, September 30, 1998 600 $ (106,113,601) $(1,603,451) $ (107,717,052)
========= ============== ============ ==============
Balance, December 31, 1996 600 $ (80,708,206) $(1,346,831) $ (82,055,037)
Net loss (11,244,614) (113,582) (11,358,196)
--------- --------------- ------------ --------------
Balance, September 30, 1997 600 $ (91,952,820) $(1,460,413) $ (93,413,233)
========= ============== ============ ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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1. ACCOUNTING AND FINANCIAL REPORTING POLICIES
The condensed financial statements included herein have been prepared by
Twelve AMH Associates Limited Partnership (the "Partnership"), without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. The Partnership's accounting and financial
reporting policies are in conformity with generally accepted accounting
principles and include adjustments in interim periods considered
necessary for a fair presentation of the results of operations. The
balance sheet at December 31, 1997 was derived from audited financial
statements at such date. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Partnership's Annual
Report on Form 10-KSB as of and for the year ended December 31, 1997.
The accompanying financial statements reflect the Partnership's results
of operations for an interim period and are not necessarily indicative
of the results of operations for the year ending December 31, 1998.
2. TAX LOSS
The Partnership's taxable loss for 1998 is expected to differ from that
for financial reporting purposes primarily due to accounting differences
in the recognition of depreciation and certain capitalized costs.
3. RELATED PARTY TRANSACTIONS
Expenses for the nine months ended September 30, 1998 and 1997 include a
management fee of $225,000 earned by an affiliate of the General
Partner. Aggregate unpaid management fees to the affiliate amounted to
$1,225,000 and $2,800,000 at September 30, 1998 and December 31, 1997
respectively. A payment of $1,800,000 was made to this affiliate during
the first quarter of 1998.
6
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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4. INVESTMENTS IN OPERATING PARTNERSHIPS
The condensed statements of operations of the Operating Partnerships
(presented on a combined basis with all significant inter-partnership
transactions eliminated) are as follows:
Condensed Statements of Operations
----------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Hotel Operations...................... $ 12,411,012 $ 11,466,776 $ 44,328,803 $ 41,084,453
Rental Operations..................... 3,137,326 3,173,645 10,296,971 9,631,245
Other................................. 139,970 149,641 420,864 350,854
------------ ------------ ------------ ------------
15,548,338 14,790,062 55,046,638 51,066,552
------------ ------------ ------------ ------------
Expenses:
Hotel Operations...................... 11,129,977 10,358,054 35,422,576 33,692,576
Rental Operations..................... 2,641,245 2,575,976 8,299,113 7,032,519
Interest.............................. 6,018,311 5,854,856 17,928,077 17,456,217
Other................................. 16 105 8,988 9,947
------------ ------------ ------------ ------------
19,789,549 18,788,991 61,658,754 58,191,259
------------ ------------ ------------ ------------
Net Loss................................... $(4,101,241) $(3,998,929) $(6,612,116) $(7,124,707)
============ ============ ============ ============
Net Loss Allocated to Twelve AMH
Associates Limited Partnership........ $(2,734,229) $(2,666,016) $(4,408,259) $(4,749,973)
============ ============ ============ ============
Net Loss Allocated to Other Partners....... $(1,367,012) $(1,332,913) $(2,203,857) $(2,374,734)
============ ============ ============ ============
</TABLE>
7
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
----------------------------------------------------------
This Item should be read in conjunction with the financial statements
and other items contained elsewhere in the report.
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.) The discussion of the Partnership'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 Partnership's business and results of 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.
Liquidity and Capital Resources
-------------------------------
The Partnership's only assets consist of cash and its general
partnership interests in Square 254 Limited Partnership ("Square
254"), National Place Land Limited Partnership ("National Land") and,
as of April 1, 1998, its membership interest in The Shops LLC
("The Shops"). Square 254 and National Land own a multiple-use complex
located in Washington D.C. known as National Place, and the
underlying land, respectively. The Shops, in turn, leases the retail
space at the complex.
The Shops LLC was formed to assume the lease with respect to The Shops
at National Place previously held by The Rouse Company. The
Partnership holds a 66.7% membership interest in The Shops. Effective
April 1, 1998 the Shops LLC began leasing the retail space under a
lease agreement with Square 254. The lease expires on May 15, 2014 with
two options to extend (first option for 30 years and second option
until the end of the ground lease, which expires in 2083). The minimum
annual rental consists of Base Rent of $1,368,100 plus Additional Rent
of $202,440. In addition, a Percentage Rent would be due based upon
meeting certain operational criteria.
The Partnership's primary source of cash flow is distributions from
Square 254, National Land and the Shops (collectively, the "Operating
Partnerships"). The Partnership requires cash to pay management fees
and general and administrative expenses and may require cash to
satisfy its obligations to fund any operating deficits of the
Operating Partnerships.
Based on the Partnership's current and expected cash flow, the
Partnership will not have sufficient funds to satisfy its existing
zero coupon, purchase money notes and notes payable at maturity in
August 1999. Accordingly, if the Partnership cannot refinance or
modify this
8
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- ------------------------------------------------------------------------------
Liquidity and Capital Resources (continued)
-------------------------------------------
indebtedness on favorable terms, or sell all or a portion of its
interest in the Operating Partnerships for sufficient value, the
Partnership may lose its interests in the Operating Partnerships
through foreclosure. The Managing General Partner has begun
preliminary discussions with The Travelers Insurance Company, the
holder of the Purchase Money Note, in an attempt to restructure these
loans and is exploring other alternatives to refinance or restructure
this indebtedness. As a result, at this time it appears that
investors in the Partnership will not receive a return of a
significant portion, or any, of their investment.
The Partnership received no cash distributions from the Operating
Partnerships during either of the nine months ended September 30,
1998 or September 30, 1997.
The Partnership's liquidity based on cash and cash equivalents
declined from $2,012,003 at December 31, 1997 to $145,322 at
September 30, 1998. This decrease was primarily the result of a
$1,800,000 payment to an affiliate of the General Partner for accrued
management fees (see Note 3). The Partnership's cash and cash
equivalents are invested primarily in money market mutual funds.
The Operating Partnerships are not expected to make any future
distributions until December 1998 or later, depending upon property
operating results in 1998. The Partnership's current reserves are
expected to be sufficient to fund administrative expenses in the
foreseeable future. All future distributions to the Partnership from
the Operating Partnerships will be applied first to pay
administrative expenses of the Partnership and then to repay unpaid
asset management fees, which at September 30, 1998 were $1,225,000.
The Partnership is dependent upon the Operating Partnerships for
day-to-day management. The Partners are currently assessing its
computer system to ensure the system will function with respect to
dates in the year 2000 and thereafter. The Partnership does not
expect to incur any material costs associated with, or be materially
affected by, the year 2000 issue.
Results of Operations
---------------------
Loss from operations increased from $6,608,223 for the nine months
ended September 30, 1997 to $7,231,169 for the nine months ended
September 30, 1998. This increase is due to increases in Partnership
expenses of $624,276, which was partially offset by an increase in
revenues of $1,330. The increase in expenses resulted primarily from
an increase of $617,872 in interest expense on the loans made to the
Partnership to acquire its interests in the Operating Partnerships.
All interest on such loans is accrued and will be due and payable
upon the maturities in August 1999 of such loans. All other expenses
remained relatively constant.
9
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
- ------------------------------------------------------------------------------
Results of Operations (continued)
---------------------------------
Equity in losses of Operating Partnerships for the nine months ended
September 30, 1998 decreased 7.2% from ($4,749,973) to ($4,408,359)
when compared to the same period last year. This decrease was
primarily due to an improvement in the operating results of Square
254, which was partially offset by a decline in the operating results
of National Land. Net operating income generated by the Hotel portion
of the mixed-use complex owned by Square 254 increased by $1,514,350
for the nine months ended September 30, 1998 compared to the nine
months ended September 30, 1997, due primarily to an increase in
occupancy. Rental operations revenue increased from $9,631,245 for
the nine months ended September 30, 1997 to $10,296,971 for the nine
months ended September 30, 1998 primarily as a result of the
inclusion of the Shops effective April 1, 1998. The operating results
for the office towers portion of rental operations, however,
decreased by $530,858 for the nine months ended September 30, 1998
primarily due to a decrease in office and retail revenues and an
increase in utilities expense, real estate and other taxes, legal and
professional services. These were only partially offset by increases
in parking and other revenues. Operating results for National Land
decreased by $547,868 for the nine months ended September 30, 1998
compared to the nine months ended September 30, 1997 primarily as a
result of an increase in interest expense.
10
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
- ------------------------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
A. Exhibits
Exhibit 27, Financial Data Schedule
B. Reports on Form 8-K
No Report on Form 8-K was filed during the period.
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
SIGNATURE
- --------------------------------------------------------------------------------
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.
TWELVE AMH ASSOCIATES LIMITED
PARTNERSHIP
(Registrant)
By: Two Winthrop Properties, Inc.
Managing General Partner
By: /s/ Michael L. Ashner
---------------------
Michael L. Ashner
Chief Executive Officer
By: /s/ Edward V. Williams
----------------------
Edward V. Williams
Chief Financial Officer
DATED: November 13, 1998
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from unaudited
financial statements for the nine month period ending September 30, 1998
and is qualified in its entirety by reference to such financial statements
</LEGEND>
<CIK> 0000748524
<NAME> TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 145,322
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 148,380
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (107,717,052)
<TOTAL-LIABILITY-AND-EQUITY> 148,380
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 528,472
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,653,508
<INCOME-PRETAX> (11,639,528)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,639,528)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,639,528)
<EPS-PRIMARY> (19,205.00)
<EPS-DILUTED> (19,205.00)
</TABLE>
