<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 June 30, 1998 Commission File Number 0-13493
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
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(Exact name of small business issuer as specified in its charter)
Massachusetts 04-2833662
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Cambridge Center, Cambridge, MA 02142
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 234-3000
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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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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS (UNAUDITED) (NOTE 1)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
PART I - FINANCIAL INFORMATION
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Interest income .................. $ 2,383 $ 2,833 $ 8,735 $ 6,786
Expenses:
Interest ......................... 2,217,293 2,011,397 4,380,784 3,975,048
Amortization ..................... 101,158 101,157 202,315 202,315
Related party management fee ..... 75,000 75,000 150,000 150,000
General and administrative ....... 21,710 15,124 27,339 24,673
----------- ----------- ----------- -----------
................................. 2,415,161 2,202,678 4,760,438 4,352,036
----------- ----------- ----------- -----------
Loss from Operations ................... (2,412,778) (2,199,845) (4,751,703) (4,345,250)
Equity in Income (Losses) of Operating
Partnerships ......................... 111,999 (436,445) (1,674,030) (2,083,957)
----------- ----------- ----------- -----------
Net Loss ............................... $(2,300,779) $(2,636,290) $(6,425,733) $(6,429,207)
=========== =========== =========== ===========
Net Loss Allocated to General Partners . $ (23,008) $ (26,363) $ (64,257) $ (64,292)
=========== =========== =========== ===========
Net Loss Allocated to Limited Partners . $(2,277,771) $(2,609,927) $(6,361,476) $(6,364,915)
=========== =========== =========== ===========
Net Loss per Unit of Limited Partnership
Interest ............................. $ (3,796) $ (4,350) $ (10,602) $ (10,608)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997 (UNAUDITED)
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<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
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<S> <C> <C>
ASSETS:
Cash and cash equivalents ......................... $ 180,996 $ 2,012,003
Deferred financing costs, net of accumulated
amortization of $46,109 and $44,442 respectively 3,891 5,558
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TOTAL ASSETS ...................................... $ 184,887 $ 2,017,561
============= =============
LIABILITIES:
Purchase Money Note, net of unamortized discount .. $ 62,202,350 $ 58,597,428
Notes payable ..................................... 9,873,978 9,873,978
Accrued interest on operating deficit notes ....... 20,000,449 19,224,587
Investments in Operating Partnerships ............. 9,456,278 7,581,600
Accrued expenses .................................. 5,089 17,492
Due to affiliate .................................. 1,150,000 2,800,000
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102,688,144 98,095,085
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PARTNERS' DEFICIT:
Limited partners - Units of Limited
Partnership Interest, $96,250 stated
value per unit; authorized, issued
and outstanding - 600 Units ................. (100,951,944) (94,590,468)
General partners ................................. (1,551,313) (1,487,056)
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(102,503,257) (96,077,524)
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TOTAL LIABILITIES AND PARTNERS' CAPITAL ........... $ 184,887 $ 2,017,561
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
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<TABLE>
<CAPTION>
June 30, June 30,
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ......................................... $(6,425,733) $(6,429,207)
Adjustments to reconcile net loss to net cash used
in operating activities:
Amortization .................................. 202,315 202,315
Equity in losses of Operating Partnerships .... 1,674,030 2,083,957
Interest added to loan principal on Purchase
Money Note ................................ 3,604,922 3,199,186
Increase in accrued interest on operating
deficit notes.............................. 775,862 775,862
Decrease in accrued expenses .................. (12,403) (13,220)
Decrease in due to affiliates ................. (1,650,000) (650,000)
----------- -----------
Net cash used in operating activities ......... (1,831,007) (831,107)
Cash and cash equivalents, beginning of period ... 2,012,003 1,043,786
----------- -----------
Cash and cash equivalents, end of period ......... $ 180,996 $ 212,679
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 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 ..................... (6,361,476) (64,257) (6,425,733)
------------- ------------- ------------- -------------
Balance, June 30, 1998 ....... 600 $(100,951,944) $ (1,551,313) $(102,503,257)
============= ============= ============= =============
Balance, December 31, 1996 ... 600 $ (80,708,206) $ (1,346,831) $ (82,055,037)
Net loss ..................... (6,364,915) (64,292) (6,429,207)
------------- ------------- ------------- -------------
Balance, June 30, 1997 ....... 600 $ (87,073,121) $ (1,411,123) $ (88,484,244)
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
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1. ACCOUNTING AND FINANCIAL REPORTING POLICIES
The condensed financial statements included herein have been prepared
by Twelve AMH Associates (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 six months ended June 30, 1998 and 1997 include a
management fee of $150,000 earned by an affiliate of the General
Partner. Aggregate unpaid management fees to the affiliate amounted to
$1,150,000 and $2,800,000 at June 30, 1998 and December 31, 1997,
respectively. A payment of $1,800,000 was made to this affiliate during
the first three months of 1998.
6
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
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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 Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Hotel Operations ......... $ 18,299,150 $ 16,237,386 $ 31,917,791 $ 29,617,677
Rental Operations ........ 3,924,552 3,120,193 7,159,645 6,457,600
Other .................... 186,914 96,702 280,894 201,213
------------ ------------ ------------ ------------
22,410,616 19,454,281 39,358,330 36,276,490
------------ ------------ ------------ ------------
Expenses:
Hotel Operations ......... 13,079,354 12,106,280 24,292,599 23,334,522
Rental Operations ........ 3,186,571 2,179,691 5,657,868 4,456,543
Interest ................. 5,975,676 5,821,098 11,909,766 11,601,361
Other .................... 937 1,806 8,972 9,842
------------ ------------ ------------ ------------
22,242,538 20,108,875 41,869,205 39,402,268
------------ ------------ ------------ ------------
Net Income (Loss) ............. $ 168,078 $ (654,594) $ (2,510,875) $ (3,125,778)
============ ============ ============ ============
Net Income (Loss) Allocated to
Twelve AMH Associates
Limited Partnership ...... $ 111,999 $ (436,445) $ (1,674,030) $ (2,083,957)
============ ============ ============ ============
Net Income (Loss) Allocated to
Other Partners ........... $ 56,079 $ (218,149) $ (836,845) $ (1,041,821)
============ ============ ============ ============
</TABLE>
7
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
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Item 2. Management's Discussion and Analysis or Plan of Operations
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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 ("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 members of
The Shops are the Partnership (66.67%), Quadrangle (16.665%) and
Marriott (16.665%). 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 revenue 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
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 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.
8
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
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Liquidity and Capital Resources (continued)
-------------------------------------------
The Partnership received no cash distributions from the Operating
Partnerships during either of the six months ended June 30, 1998 or
June 30, 1997.
The Partnership's liquidity based on cash and cash equivalents declined
from $2,012,003 at December 31, 1997 to $180,996 at June 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 June 30, 1998 were $1,150,000.
Results of Operations
---------------------
Loss from operations increased from $4,345,250 for the six months ended
June 30, 1997 to $4,751,703 for the six months ended June 30, 1998.
This increase is due to increases in Partnership expenses of $408,402,
which was partially offset by an increase in revenues of $1,949. The
increase in expenses resulted primarily from an increase of $405,736 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 of such loans.
All other expenses remained relatively constant.
Equity in losses of Operating Partnerships for the six months ended
June 30, 1998 decreased 19.7% (from $2,083,957 to $1,674,030) 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
Place. Net operating income generated by the Hotel portion of the
mixed-use complex owned by Square 254 increased by $1,342,037 for the
six months ended June 30, 1998 compared to the six months ended June
30, 1997, due primarily to an increase in occupancy. Rental operations
revenue increased from $6,457,600 for the six months ended June 30,
1997 to $7,159,645 for the six months ended June 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 $419,599 for the six months ended June 30, 1998
primarily due to a decrease in office and retail revenues and an
increase in utilities and depreciation and amortization expenses.
Operating results for National Land decreased by $360,231 for the six
months ended June 30, 1998 compared to the six months ended June 30,
1997 primarily as a result of an increase in interest expense.
9
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months
ended June 30, 1998.
10
<PAGE>
TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
SIGNATURES
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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: August 14, 1998
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
six month period ending June 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 180,996
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 184,887
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (102,503,257)
<TOTAL-LIABILITY-AND-EQUITY> 184,887
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 352,315
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,380,784
<INCOME-PRETAX> (6,425,733)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,425,733)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,425,733)
<EPS-PRIMARY> (10,602.46)
<EPS-DILUTED> (10,602.46)
</TABLE>
