FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
------ ------
Commission File number 0-13448
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
--------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 33-0058349
--------------------------- ---------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100 94402-1708
San Mateo, California ------------
-------------------------------------------- (Zip Code)
(Address of principal executive offices)
(415) 343-9300
-----------------------------------
(Registrant's telephone number)
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
---- ----
Total number of units outstanding as of June 30, 1995: 118,942
NO EXHIBIT INDEX REQUIRED
Page 1 of 15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
June 30, December 31,
1995 1994
Assets --------- ------------
-------
Real estate investments:
Land $ 8,312 $ 6,456
Buildings and improvements, net
of accumulated depreciation of
$1,774 and $1,366 in 1995 and
1994, respectively 14,832 12,958
-------- --------
Net real estate investments 23,144 19,414
Cash and cash equivalents 179 382
Accounts receivable 172 106
Prepaid expenses and other assets,
net of accumulated amortization
of $213 and $129 in 1995 and 1994,
respectively 921 510
-------- --------
Total assets $ 24,416 $ 20,412
======== ========
Liabilities and Partners'
Equity (Deficit)
-------------------------
Accounts payable $ 110 $ 40
Accrued expenses 661 519
Note payable 4,000 -
-------- --------
Total liabilities 4,771 559
Partners' equity (deficit):
General Partner (57) (55)
Limited Partners - 118,942
limited partnership units
outstanding 19,702 19,908
-------- --------
Total partners' equity 19,645 19,853
-------- --------
Total liabilities and partners'
equity $ 24,416 $ 20,412
======== ========
See accompanying notes to consolidated financial statements.
Page 2 of 15
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
(in thousands, except per unit amounts)
(Unaudited)
Six Months Three Months
Ended Ended
June 30, June 30,
1995 1994 1995 1994
---- ---- ---- ----
Revenues:
Rental revenue $ 2,657 $ 2,091 $ 1,378 $ 1,063
Interest and other - 15 - 6
----- ----- ----- -----
Total revenues 2,657 2,106 1,378 1,069
----- ----- ----- -----
Expenses:
Operating (including $467
and $445 paid to affiliates
in the six months ended
June 30, 1995 and 1994,
respectively) 1,457 1,162 755 577
General and administrative
(including $133 and $111
paid to affiliates in the
six months ended June 30,
1995 and 1994, respectively) 193 190 99 89
Depreciation and
amortization 490 346 277 176
Interest 189 14 114 6
Other (including $40 paid
to affiliates in the six
months ended June 30, 1995) 86 - 53 -
---- ---- ---- ----
Total expenses 2,415 1,712 1,298 848
----- ----- ----- -----
Net income $ 242 $ 394 $ 80 $ 221
===== ===== ===== =====
Net income per limited
partnership unit $ 2.01 $ 3.28 $ 0.67 $ 1.84
===== ===== ===== =====
Distributions per
limited partnership unit:
From net income $ 2.01 $ 3.13 $ 0.67 $ 1.56
Representing return of
capital 1.74 - 1.20 -
----- ----- ----- -----
Total distributions per
limited partnership unit: $ 3.75 $ 3.13 $ 1.87 $ 1.56
===== ===== ===== =====
See accompanying notes to consolidated financial statements.
Page 3 of 15
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Partners' Equity (Deficit)
(in thousands)
For the six months ended June 30, 1995 and 1994
(Unaudited)
Total
General Limited Partners'
Partner Partners Equity
--------- --------- --------
Balance at December 31, 1993 $ (56) $ 19,874 $ 19,818
Distributions (4) (372) (376)
Net income 4 390 394
-------- -------- --------
Balance at June 30, 1994 $ (56) $ 19,892 $ 19,836
======== ======== ========
Balance at December 31, 1994 $ (55) $ 19,908 $ 19,853
Distributions (4) (446) (450)
Net income 2 240 242
-------- -------- --------
Balance at June 30, 1995 $ (57) $ 19,702 $ 19,645
======== ======== ========
See accompanying notes to consolidated financial statements.
Page 4 of 15
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows (in thousands)
(Unaudited)
Six months ended
June 30,
-------------
1995 1994
----- -----
Cash flows provided by operating activities:
Net income $ 242 $ 394
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 490 346
Other expenses 23 -
Changes in certain assets and liabilities:
Accounts receivable (66) (7)
Prepaid expenses and other assets (495) (125)
Accounts payable 70 -
Accrued expenses 142 30
-------- --------
Total adjustments 164 244
-------- --------
Net cash provided by operating activities 406 638
-------- --------
Cash flows used for investing activities:
Acquisitions of and additions to real estate (271) (185)
-------- --------
Net cash used for investing activities (271) (185)
-------- --------
Cash flows used for financing activities:
Distributions paid to partners (450) (376)
Note payable principal payments (3,908) -
Proceeds from refinancing 4,000 -
Distribution from acquired property 20 -
-------- --------
Net cash used for financing activities (338) (376)
-------- --------
Net increase (decrease) in cash and cash
equivalents (203) 77
Cash and cash equivalents at beginning
of period 382 342
-------- --------
Cash and cash equivalents at end
of period $ 179 $ 419
======== ========
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 39 $ 14
======== ========
-continued-
See accompanying notes to consolidated financial statements.
Page 5 of 15
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows (in thousands)
(Unaudited)
Six months ended
June 30,
--------------
1995 1994
----- -----
Supplemental disclosure of non cash
investing and financing activities:
Acquisition of real estate through
foreclosure and assumption of
first trust deed note payable $ 3,908 $ -
======== ========
See accompanying notes to consolidated financial statements.
Page 6 of 15
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
June 30, 1995
(Unaudited)
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
-----------------------------------------------------
POLICIES
--------
In the opinion of Glenborough Realty Corporation, the managing
General Partner, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal accruals)
necessary to present fairly the financial position of Glenborough
Pension Investors, A California Limited Partnership (the
"Partnership") as of June 30, 1995 and December 31, 1994, the
related statements of operations for the six and three months
ended June 30, 1995 and 1994, and the changes in partners' equity
and cash flows for the six months ended June 30, 1995 and 1994.
Note 2. REFERENCE TO 1994 AUDITED FINANCIAL STATEMENTS
----------------------------------------------
These unaudited financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements
included in the 1994 audited financial statements.
Note 3. TRANSACTIONS WITH AFFILIATES
----------------------------
In accordance with the limited partnership agreement, the
Partnership paid the General Partner and its affiliates
compensation for services provided to the Partnership.
Glenborough Corporation and Glenborough Hotel Group
("Glenborough"), affiliates of Glenborough Realty Corporation,
have been compensated for property management services. Included
in operating expenses for the six months ended June 30, 1995 and
1994 are the following amounts paid to Glenborough:
June 30, June 30,
1995 1994
-----------------------
Property management fees $ 65,500 $ 53,300
Property salaries (reimbursed) 55,400 24,000
Hotel management fees 44,000 39,600
Hotel salaries (reimbursed) 248,500 222,800
Property administrative services 53,500 105,200
The Partnership also reimbursed Glenborough for direct expenses
plus a 1% fee for general and administrative costs and services
provided to the Partnership such as accounting, investor
services, data processing, duplicating, office supplies, legal
and administrative services. Glenborough was paid $132,800 and
$111,400 by the partnership for these expenses in the six months
ended June 30, 1995 and 1994, respectively.
Page 7 of 15
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
June 30, 1995
(Unaudited)
In accordance with the partnership agreement, the General Partner
is entitled to a 1.00% refinancing fee. The Partnership paid
Glenborough Realty Corporation $40,000 in association with the
refinance of the Summerbreeze loan as discussed in Note 4. This
amount is included on the Partnership's 1995 statement of
operations as a portion of "other expenses".
Note 4. PROPERTY ACQUISITION
--------------------
On January 12, 1995, the Partnership acquired a property,
Summerbreeze Apartments (the "Property") (formerly owned by
Glenfed Summerbreeze Investors, Ltd., a California Limited
Partnership ("Summerbreeze Investors") by a deed-in-lieu of
foreclosure. Prior to January 12, 1995, the Partnership held a
note secured by a second deed of trust on the Property and an
unsecured note with unpaid balances of principal and accrued
interest as of September 30, 1993 aggregating approximately
$1,159,000. The Property was also encumbered by a first deed of
trust. Because the amount of the Summerbreeze Investors
partnership's total debt was approximately equal to the value of
its assets, the partnership had little or no net worth. Since
the limited partners of Summerbreeze Investors elected not to
contribute any capital to pay for new financing, they agreed to
give a deed-in-lieu of foreclosure to the Partnership in exchange
for $150,000. The Partnership recorded the property basis at the
balance of the first trust deed note plus the $150,000 paid in
cash.
The Partnership immediately began seeking new financing for the
Property while continuing to make payments on the first deed of
trust which matured on September 1, 1994 and was now in default.
The Partnership was informed by the first deed of trust lender
(Calfed Bank) that they were attempting to reduce their
commercial loan portfolio in accordance with federal regulations,
and that they therefore would not extend the loan and in fact had
scheduled a foreclosure sale to occur on March 29, 1995. The
General Partner had previously obtained a "term sheet" from a San
Francisco bank to provide the necessary financing to retire the
Calfed loan. However, on March 24, 1995, the San Francisco bank
advised the General Partner that an additional two weeks of time
was needed to close the loan, and there was no assurance of
closing. Given the foreclosure date of March 29, this approach
clearly was no longer viable, and the Partnership was facing the
possible loss of the property.
On March 28, 1995, the Partnership obtained short-term financing
from two sources to payoff Calfed. GPA West, a subsidiary of a
partnership whose general partner is also Glenborough Realty
Page 8 of 15
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
June 30, 1995
(Unaudited)
Corporation, loaned the Partnership $1,908,000, secured by a
first deed of trust on the Property. In addition, the
Partnership obtained a short-term $2,000,000 bank loan,
guaranteed personally by Robert Batinovich and Glenborough Realty
Corporation, and secured by a second deed of trust on the
Property and a collateral assignment of the Partnership's
mortgage on Park Center. On May 18, 1995, the debt was totally
refinanced with a $4,000,000 first mortgage loan from Wells Fargo
Bank, which is additionally secured by a mortgage on the Park 100
buildings. This loan matures on May 15, 1996, and bears interest
at prime plus 2.00%. The Partnership paid an initial loan fee of
1.00% and will pay an additional 1.00% fee if the loan has not
been paid off by November 17, 1995.
During negotiations with Calfed, $46,000 in costs were incurred
by Calfed and the Partnership in association with the potential
foreclosure proceedings, which the Partnership agreed to incur.
These costs are categorized as other expense, along with the
1.00% refinancing fee in the amount of $40,000 paid to
Glenborough and discussed in Note 3, on the Partnership's 1995
statement of operations.
Note 5. OTHER INFORMATION
-----------------
The Partnership has been named in a Registration Statement
proposing a consolidation by merger of several entities, which
has been filed with the Securities and Exchange Commission. In
that regard, as of June 30, 1995, the Partnership has advanced
$520,300 and accrued $186,00 (the aggregate of which is included
in prepaid expenses and other assets) toward its pro rata share
of the transaction costs associated with the consolidation. In
the event the proposal is not approved by the Partnership's
limited partners, and the consolidation goes forward with any of
the other entities, the amounts advanced will be fully reimbursed
by an affiliate of the general partners of the Partnership. If
the Consolidation, itself, does not go forward with any of the
other entities, the Partnership will bear a proportion of the
transaction costs based upon the number of limited partners who
voted for approval of the transaction as compared to those who
dissented or abstained. The limited partners are expected to
receive their solicitation materials for the potential
transaction in 1995.
Note 6. LEGAL PROCEEDINGS
-----------------
In June of 1995, a class action lawsuit was filed on behalf of
all limited partners of the Partnership. The lawsuit related to
a 1994 vote by the limited partners of the Partnership (which was
Page 9 of 15
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
June 30, 1995
(Unaudited)
then called Outlook Pension Investors, or "OPI") to approve a
restructuring of mortgage loans previously made by the
Partnership to a private partnership, called AFP Partners. The
principals of AFP Partners were the four original principals of
August Financial Corporation (John R. Provine, Luke V. McCarthy,
Carl Sigalos and D. A. Heil) (the "August Defendants") and a
subsidiary of Glenfed Bank ("Glenfed"). The August Defendants
and Glenfed also controlled API Partners, which was then the
general partner of the Partnership. The lawsuit made a number of
claims against the August Defendants and/or Glenfed, including a
claim that the proposed debt restructure constituted a breach of
fiduciary duty by the August Defendants and Glenfed. The lawsuit
also asserted that the disclosure materials were false and
misleading, either as a result of fraud or negligent
misrepresentation.
The proposal by which the debt restructure was approved also
included the substitution of Glenborough Realty Corporation
("GRC") and Robert Batinovich as the Partnership's new general
partners. Although there was no allegation that GRC received any
benefit from the debt restructure, the lawsuit alleged that GRC
and Robert Batinovich (i) aided and abetted the alleged breach of
fiduciary duty by the August Defendants and Glenfed, and (ii)
aided and abetted, or participated with, the August Defendants
and Glenfed in making misrepresentations and material omissions,
either as a result of negligent misrepresentation or as part of a
conspiracy to defraud. The firm of Houlihan, Lokey, Howard &
Zukin, Inc., which rendered a fairness opinion in connection with
the debt restructure, was also named as a defendant in connection
with the alleged misrepresentations and omissions. The law firm
of Proskauer, Rose, Goetz & Mendelsohn, which represented the
limited partners of the Partnership in reviewing the disclosure
materials for the transaction, has not as yet been named as a
defendant in the action. Plaintiffs seek unspecified damages to
be proved at trial, prejudgment interest and punitive damages
against all defendants.
Robert Batinovich and GRC take no position with respect to the
possible merits of the claims asserted against Glenfed, Houlihan,
Lokey and the August Defendants. However, the asserted factual
and legal bases for the claims against these other defendants
are, in the opinion of GRC and Robert Batinovich, completely
inapplicable to them. The lawsuit makes no allegation that
either GRC or Robert Batinovich participated in the organization
of the Partnership, were partners of the Partnership at its
formation or at any time prior to the vote, breached any
fiduciary duties or received any benefit in connection with the
debt restructure. Moreover, independent legal counsel for the
Page 10 of 15
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
June 30, 1995
(Unaudited)
limited partners and an independent fairness opinion were
obtained with respect to the restructuring. For these and other
reasons, GRC and Robert Batinovich believe that the claims
against them are completely without merit, and will, independent
of the other defendants, contest and seek dismissal of any and
all claims asserted against them.
In the opinion of the General Partners, the resolution of the
pending legal proceeding is not expected to have a material
adverse effect on the Partnership.
Note 7. NEW ACCOUNTING PRONOUNCEMENT
----------------------------
In March 1995, the Financial Accounting Standards Board (FASB)
issued Statment of Financial Accounting Standard (SFAS) No. 121,
"Accounting for Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of". This statement requires that
long-lived assets be reported at the lower of carrying amount or
fair value. The Partnership plans to adopt SFAS No. 121 in 1996
and believes that the adoption will not have a material impact
upon its financial statements.
Page 11 of 15
Item 2. Managements Discussion and Analysis of Financial
Conditions and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
The Partnership maintains nominal cash reserves and distributes
the net cash flow from operations to the partners. Distributions
to the Limited Partners were paid at an annual rate of 2.5% for
the six months ended June 30, 1994. After reviewing the effects
of the implementation of the workout between the Partnership and
the Borrower, management increased the distribution rate to 3%
effective for the distribution paid August 31, 1994. The
distributions paid in the six months ended June 30, 1994 were
provided by net income. Of the distributions paid in 1995,
$245,000 were distributed in excess of net income and therefore
represented a return of capital.
As discussed in Note 4 of the Notes to Consolidated Financial
Statements, the Partnership acquired the Summerbreeze property by
a deed-in-lieu of foreclosure on January 12, 1995 which primarily
accounts for the increase in net real estate investments from
December 31, 1994 to June 30, 1995. The cost basis of the
property when title transferred to the Partnership was the
equivalent of the note payable secured by a first deed of trust
and $150,000 that the Partnership paid for a deed-in-lieu of
foreclosure.
Accounts receivable increased approximately $66,000 from December
31, 1994 to June 30, 1995 due to an increase in accounts
receivable at the Country Suites - DFW property. Payments are
currently being received and all accounts receivable are expected
to be collected.
Prepaid expenses and other assets increased approximately
$311,000 from December 31, 1994 to June 30, 1995 primarily due to
advances made by the Partnership toward transaction costs
associated with the proposed consolidation by merger, as
discussed in Note 5 of the Consolidated Notes to Financial
Statements.
The note payable in the amount of $4,000,000 at June 30, 1995
represents the refinanced first trust deed note secured by the
Summerbreeze property that the Partnership acquired on January
12, 1995 (as discussed in Note 4 of the Notes to Consolidated
Financial Statements.)
RESULTS OF OPERATIONS
Rental revenue increased $566,000 in the six months ended June
30, 1995 compared to the same period in 1994 primarily due to the
acquisition of the Summerbreeze property on January 12, 1995,
which accounted for $392,000 of the increase. The remaining
$174,000 increase in rental revenue was primarily due to the
improved operations at Park 100, Buildings 42 and 46 (as a result
of increased occupancy and rental rates) and Country Suites - DFW
(as a result of a higher average daily room rate).
Page 12 of 15
Following is a comparison of occupancy (and average daily room
rate) of the individual properties:
Occupancy Level
Percentage
------------------
June 30, June 30,
1995 1994
--------- ---------
Park Center 93% 95%
Park 100, Building 42 98% 94%
Park 100, Building 46 100% 100%
Sea Tac 100% 100%
Eagan Mini-Storage 97% 95%
New Hope Mini-Storage 96% 98%
Summerbreeze Apartments 94% -
Atlanta Auto Care Centers:
College Park 100% 100%
Marietta 100% 100%
Norcross 100% 100%
Roswell 100% 76%
Smyrna 100% 100%
Snellville 75% 100%
Country Suites - DFW 79% 80%
Average Daily Room Rate $64.83 $56.78
Operating expenses increased $295,000 in 1995 over 1994, of which
$220,000 related to the Summerbreeze property. The remaining
$75,000 increase was primarily due to an increase in expenses at
the Sea Tac property relating to environmental surveys and
remediation in the amount of $50,000.
Depreciation and amortization expense increased by approximately
$144,000 primarily due to the acquisition of the Summerbreeze
property on January 12, 1995.
Interest expense in the amount of $189,000 in the six months
ended June 30, 1995 is the interest relating to the first deed of
trust on the Summerbreeze property (see Note 4 of the Notes to
Consolidated Financial Statements).
Other expenses in the amount of $86,000 for the six months ended
June 30, 1995 were costs incurred by the Partnership and the
original lender on the Summerbreeze property relating to the
potential foreclosure proceedings before the note payable was
refinanced and the 1.00% refinance fee (as discussed in Note 3 of
the Notes to Consolidated Financial Statements). The Partnership
agreed to assume these costs and recognized them on the 1995
statement of operations.
Page 13 of 15
PART II.
Item 1. Legal Proceedings
None.
Item 5. Other Information
The response to this item is incorporated by reference
to Note 6 of the Notes to Financial Statements
contained in Part I, Item 1.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
On June 13, 1995, the Partnership filed a report
on Form 8-K reporting the acquisition of
Summerbreeze Apartments on January 12, 1995.
Page 14 of 15
SIGNATURES
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.
GLENBOROUGH PENSION INVESTORS,
A CALIFORNIA LIMITED PARTNERSHIP
By: Glenborough Realty Corporation,
a California corporation
the Managing General Partner
Date: August 11, 1995 By: /s/ Andrew Batinovich
----------------------------
Andrew Batinovich
Senior Vice President,
Chief Financial Officer
and Director
