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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, 2000 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, 2000 AND 1999
PART I - FINANCIAL INFORMATION
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<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
-------------------------------- --------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Interest income......................... $ 451 $ 7,495 $ 4,002 $ 14,433
Expenses:
Interest................................ 1,336,433 2,449,302 2,549,364 4,837,978
Amortization............................ 9,681,629 101,158 9,781,953 202,315
Related party management fee............ 75,000 75,000 150,000 150,000
General and administrative.............. 43,371 32,353 94,771 46,347
------------ ----------- ------------ -----------
11,136,433 2,657,813 12,576,088 5,236,640
------------ ----------- ------------ -----------
Loss from Operations.......................... (11,135,982) (2,650,318) $(12,572,086) (5,222,207)
Equity in Income (Losses) of
Operating Partnerships....................... 33,482,654 (222,914) 31,373,369 (1,953,892)
------------ ----------- ------------ -----------
Net Income (Loss) $ 22,346,672 $(2,873,232) $ 18,801,283 $(7,176,099)
============ =========== ============ ===========
Net Income (Loss) Allocated to
General Partners............................ $ 223,467 $ (28,732) $ 188,013 $ (71,761)
============ =========== ============ ===========
Net Income (Loss) Allocated to
Limited Partners............................ $ 22,123,205 $(2,844,500) $ 18,613,270 $(7,104,338)
============ =========== ============ ===========
Net Income (Loss) per Unit of
Limited Partnership
Interest.................................... $ 36,872 $ (4,741) $ 31,022 $ (11,841)
============ =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
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JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999 (AUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
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<S> <C> <C>
ASSETS:
Cash and cash equivalents........................... $ 8,398 $ 474,167
Prepaid management fees............................. 150,000 -
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TOTAL ASSETS........................................ $ 158,398 $ 474,167
============= =============
LIABILITIES:
Purchase Money Note, plus accrued interest.......... $ 74,345,331 $ 72,599,997
Notes payable....................................... 9,873,978 9,873,978
Accrued interest on notes payable................... 23,132,063 22,328,033
Investments in Operating Partnerships............... - 21,591,416
Due to affiliate.................................... - 75,000
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107,351,372 126,468.424
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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.................. (105,594,763) (124,208,033)
General partners................................... (1,598,211) (1,786,224)
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(107,192,974) (125,994,257)
Total liabilities and partners' deficit.... $ 158,398 $ 474,167
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
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<TABLE>
<CAPTION>
June 30, June 30,
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................... $ 18,801,283 $(7,176,099)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Amortization................................................. 9,781,953 202,315
Equity in (income) losses of Operating Partnerships.......... (31,373,369) 1,953,892
Accrued interest on Purchase
Money Note............................................... 1,745,333 4,062,115
Increase in accrued interest on notes payable................ 804,031 775,862
Decrease in due to affiliates................................ (75,000) (295,000)
Increase in prepaid management fee........................... 150,000 -
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Net cash used in operating activities........................ (465,769) (476,915)
Cash flows used in financing activities:
Refinancing costs............................................... - (51,478)
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Net cash used in financing activities........................ - (51,478)
Decrease in cash and cash equivalents........................... (465,769) (528,393)
Cash and cash equivalents, beginning of period.................. 474,167 629,887
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Cash and cash equivalents, end of period........................ $ 8,398 $ 101,494
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (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, 1999............... 600 $(124,208,033) $(1,786,224) $(125,994,257)
Net Income............................... 18,613,270 188,013 18,801,283
--- ------------- ----------- -------------
Balance, June 30, 2000................... 600 $(105,594,763) $(1,598,211) $(107,192,974)
=== ============= =========== =============
Balance, December 31, 1998............... 600 $(109,778,909) $(1,640,475) $(111,419,384)
Net loss................................. (7,104,338) (71,761) (7,176,099)
--- ------------- ----------- -------------
Balance, June 30, 1999................... 600 $(116,883,247) $(1,712,236) $(118,595,483)
=== ============= =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 (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, 1999 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 for the year ended
December 31, 1999.
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, 2000.
2. RELATED PARTY TRANSACTIONS
Expenses for the six months ended June 30, 2000 and 1999 include a
management fee of $150,000 earned by an affiliate of the General
Partner. As of June 30, 2000, the Partnership had prepaid management
fees of $150,000, while at December 31, 1999 there were unpaid
management fees to the affiliate of $75,000.
3. INDEBTEDNESS
As previously reported, the Partnership is in default under its loan
made by Aetna, which was acquired, from Aetna by the Travelers Casualty
and Surety Company ("Travelers"). This loan was secured by the
Partnership's interests in Square 254 Limited Partnership ("Square
254"), National Place Land Limited Partnership ("National Land") and
The Shops LLC ("Shops"). Further, Square 254 was in default under its
existing mortgage loan secured by its assets. In order to avoid a
foreclosure on the Partnership's assets, the Partnership, as well as
the other partners in Square 254, National Place and The Shops
(collectively, the "Operating Partnerships"), finalized a transaction
on May 12, 2000 which provided for, among other things, the forbearance
by the holder of the Traveler's loan of the exercise of any rights
under the Traveler's loan for at least two years and entitles the
Partnership to an approximately $2,800,000 payment in November 2002
(the "Forbearance Amount"), as well as provided for
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the satisfaction of the Square 254 loans through a refinancing. In the
event that the Forbearance Amount is not paid to the Partnership, the
Partnership will receive a preferred interest in the New Hotel
Partnership. Further, it is anticipated that any foreclosure on the
collateral securing the Traveler's loan will not occur until 2003. In
connection with this transaction, the non-Hotel assets previously
owned by Square 254 were transferred to an affiliate of Quadrangle
Development Corporation (a partner in the Operating Partnerships) and
the Hotel previously owned by Square 254 was transferred to a newly
formed limited partnership (the "New Hotel Partnership"), in which the
partners of Square 254, as well as Host Marriott, L.P., received
ownership interests, and Square 254 was dissolved. The Partnership's
interest in the New Hotel Partnership secures its obligations under
the Travelers loan, which loan was acquired by the New Hotel
Partnership. The Forbearance Amount is not security for the Traveler's
loan. In addition, National Land and The Shops were also dissolved. As
a result, effective May 12, 2000, the Partnership's only asset is a
limited partnership interest in the New Hotel Partnership. With
respect to the loan encumbering the assets of National Place (the "AEW
Loan"), this loan was bifurcated such that a portion of the debt is
secured by the non-Hotel assets and a portion of the debt is secured
by the Hotel assets. If the transaction had not been consummated, it
was expected that the Partnership would have lost its assets through
foreclosure, which would have caused the limited partners to recognize
a gain for tax purposes. In addition to the forgoing, Host Marriott
has been granted an option to acquire the Partnership's interest in
the New Hotel Partnership, which option is exercisable from December
15, 2001 through September 30, 2002 (the "First Option Period"), and
from January 15, 2003 through June 30, 2003 (the "Second Option
Period"). The option price during the First Option Period is the
greater of (a) $5,800,000 plus the assumption of the Traveler's loan
or (b) the fair market value of the interest. The option price during
the Second Option Period is the fair market value of the interest. In
connection with the foregoing transaction it is anticipated that the
Partnership will recognize taxable income of approximately $38 million
or approximately $60,000 per unit as a result of the transfer of land
previously held by National Land.
4. LITIGATION
Clyde V. Alexander, Jr. M.D. v Two Winthrop Properties, Inc.,
Linnaeus-Lexington Associates Limited Partnership, Winthrop Financial
Associates and Twelve AMH Associates Limited Partnership, Superior
Court for the District of Columbia (Civil Action NO. 0005602-00). The
plaintiff filed an eleven count complaint against the defendants on or
about July 27, 2000. seeking to maintain the action as a class action
on behalf of all limited partners of the Partnership, and as a
derivative action as to certain claims. Although the complaint contains
allegations based upon the failure of the Partnership to achieve
results projected in the Confidential Memorandum in 1984, the claims
are primarily based upon the May, 2000 restructuring of the Partnership
debt. The plaintiff claims, in substance, that the debt restructuring
and related dissolution of the Operating Partnerships was done in
violation of the Partnership Agreement, and that the limited partners
were damaged as a result. The plaintiff also complains about fees paid
to the General Partners and their affiliates during the life of the
Partnership. The plaintiff has asserted claims for breach of fiduciary
duty, breach of contract, fraud and misrepresentation, civil
conspiracy, waste and unjust enrichment. The defendants have obtained
an enlargement of time within which they are to respond to the
complaint through September 8, 2000.
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
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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
Prior to May 12, 2000, the Partnership's only assets consisted of cash
and its general partnership interests in Square 254 Limited Partnership
("Square 254"), and National Place Land Limited Partnership ("National
Land") and its company interest in The Shops LLC ("Shops"). Square 254
and National Land owned a multiple-use complex located in Washington
D.C. known as National Place, and the underlying land, respectively.
The Shops, in turn, leased the retail space at the complex.
As previously reported, the Partnership is in default under its loan
made by Aetna, which was acquired, from Aetna by the Travelers Casualty
and Surety Company ("Travelers"). This loan was secured by the
Partnership's interests in Square 254, National Land and The Shops
(collectively, the "Operating Partnerships"). Further, Square 254 was
in default under its existing mortgage loan secured by its assets. In
order to avoid a foreclosure on the Partnership's assets, the
Partnership, as well as the other partners in the Operating
Partnerships, finalized a transaction on May 12, 2000 which provided
for, among other things, the forbearance by the holder of the
Traveler's loan of the exercise of any rights under the Traveler's loan
for at least two years and entitles the Partnership to an approximately
$2,800,000 payment in November 2002 (the "Forbearance Amount"), as well
as provided for the satisfaction of the Square 254 loans through a
refinancing. Further, it is anticipated that any foreclosure on the
collateral securing the Traveler's loan will not occur until 2003. In
the event that the Forbearance Amount is not paid to the Partnership,
the Partnership will receive a preferred interest in the New Hotel
Partnership. In connection with this transaction, the non-Hotel assets
previously owned by Square 254 were transferred to an affiliate of
Quadrangle Quadrangle Development Corporation (a partner in the
Operating Partnerships) and the Hotel previously owned by Square 254
was transferred to a newly formed limited partnership (the "New Hotel
Partnership"), in which the partners of Square 254, as well as Host
Marriott, L.P., received ownership interests, and Square 254 was
dissolved. The Partnership's interest in the New Hotel Partnership
secures its obligations under the Travelers loan, which loan was
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acquired by the New Hotel Partnership. The Forbearance Amount is not
security for the Traveler's loan. In addition, National Land and The
Shops were also dissolved. As a result, effective May 12, 2000, the
Partnership's only asset is a limited partnership interest in the New
Hotel Partnership. With respect to the loan encumbering the assets of
National Place (the "AEW Loan"), this loan was bifurcated such that a
portion of the debt is secured by the non-Hotel assets and a portion of
the debt is secured by the Hotel assets. If the transaction had not
been consummated, it was expected that the Partnership would have lost
its assets through foreclosure, which would have caused the limited
partners to recognize a gain for tax purposes. In addition to the
forgoing, Host Marriott has been granted an option to acquire the
Partnership's interest in the New Hotel Partnership, which option is
exercisable from December 15, 2001 through September 30, 2002 (the
"First Option Period"), and from January 15, 2003 through June 30, 2003
(the "Second Option Period"). The option price during the First Option
Period is the greater of (a) $5,800,000 plus the assumption of the
Traveler's loan or (b) the fair market value of the interest. The
option price during the Second Option Period is the fair market value
of the interest. In connection with the foregoing transaction it is
anticipated that the Partnership will recognize taxable income of
approximately $38 million or approximately $60,000 per unit as a result
of the transfer of land previously held by National Land.
Prior to May 12, 2000, the Partnership's primary source of revenue was
distributions from the Operating Partnerships. As a result of the May
12 transaction, the Partnership's primary source of revenue will be
distributions form the New Hotel Partnership and the payment of the
Forbearance Amount or any payment received by the Partnership as a
result of the exercise by Host Marriott of its option to acquire the
Partnership's interest in the New Hotel Partnership. However, it is
anticipated that as a result of the priority distributions to certain
of the other partners in the New Hotel Partnership, the Partnership
will not receive any distributions from the New Hotel Partnership in
the near future.
The Partnership requires cash to pay management fees and general and
administrative expenses. The Partnership received no cash distributions
from the Operating Partnerships during either of the six months ended
June 30, 2000 or June 30, 1999.
The Partnership's liquidity based on cash and cash equivalents declined
from $474,167 at December 31, 1999 to $8,398 at June 30, 2000. This
decrease in cash and cash equivalents was primarily the result of the
payment of general and administrative expenses of $94,771 and the
payment of management fees of $375,000 including $75,000 of accrued
fees from 1999 and $300,000 of fees due for 2000. The Partnership's
current reserves are not expected to be sufficient to fund
administrative expenses in the foreseeable future, and as a result, it
is anticipated that an affiliate of the general partner will advance
funds to cover these operating expenses. Further, as discussed in "Item
1. Financial Statements, Note 3", costs associated with the recent
litigation may impact the Partnership's liquidity.
Results of Operations
Loss from operations increased from $5,222,207 for the six months ended
June 30, 1999 to $12,572,086 for the six months ended June 30, 2000.
This increase is due to increases in partnership expenses of
$7,339,448, and a decrease in revenues of $10,431.
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Results of Operations (continued)
The increase in expenses resulted primarily from an increase in
amortization expense of $9,579,638 resulting from the write up of its
investment in Operating Partnerships as discussed below, and an
increase in general and administrative expenses of $48,424. These
increases were only partially offset by a decrease of $2,288,614 in
interest expense on the loans made to the Partnership to acquire its
interests in the Operating Partnerships. All interest on the loans is
accrued and will be due and payable upon the maturities of such loans.
All other expenses remained constant.
As a result of the transaction that occurred on May 12, 2000, the
Partnership has written up its investment in Operating Partnerships to
zero. Each of the Operating Partnerships have been dissolved, and
effective May 12, 2000, the Partnership's only asset is a Limited
Partnership interest in the New Hotel Partnership. Due to certain
priorities to the General Partner and other Limited Partners in the New
Hotel Partnership, it is anticipated that there will be no economic
effect on the Partnership for financial reporting purposes. As such,
equity in income of Operating Partnership of $31,373,369 and
amortization expense of $9,781,953 have been recognized during these
six months ended June 30, 2000 to write the investment balance up to
zero.
10
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TWELVE AMH ASSOCIATES LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
Clyde V. Alexander, Jr. M.D. v Two Winthrop Properties, Inc., Linnaeus-Lexington
Associates Limited Partnership, Winthrop Financial Associates and Twelve AMH
Associates Limited Partnership, Superior Court for the District of Columbia
(Civil Action NO. 0005602-00). The plaintiff filed an eleven count complaint
against the defendants on or about July 27, 2000. seeking to maintain the action
as a class action on behalf of all limited partners of the Partnership, and as a
derivative action as to certain claims. Although the complaint contains
allegations based upon the failure of the Partnership to achieve results
projected in the Confidential Memorandum in 1984, the claims are primarily based
upon the May, 2000 restructuring of the Partnership debt. The plaintiff claims,
in substance, that the debt restructuring and related dissolution of the
Operating Partnerships was done in violation of the Partnership Agreement, and
that the limited partners were damaged as a result. The plaintiff also complains
about fees paid to the General Partners and their affiliates during the life of
the Partnership. The plaintiff has asserted claims for breach of fiduciary duty,
breach of contract, fraud and misrepresentation, civil conspiracy, waste and
unjust enrichment. The defendants have obtained an enlargement of time within
which they are to respond to the complaint through September 8, 2000.
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 six months ended
June 30, 1999.
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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
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Michael L. Ashner
Chief Executive Officer
By: /s/ Thomas C. Staples
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Thomas C. Staples
Chief Financial Officer
DATED: August 17, 2000
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