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 MARCH 31, 1997
-------------------------------------
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 2-93874
KFP 85-LTD.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2433930
(State of organization) (I.R.S. employer identification no.)
ONE SOUTHEAST THIRD AVENUE, 11TH FLOOR, MIAMI, FLORIDA 33131
- -------------------------------------------------------------------------------
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (305) 371-3592
NOT APPLICABLE
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve 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 ninety days.
Yes [ ] No [X]
1
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KFP 85-LTD.
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INDEX
PART I - FINANCIAL INFORMATION PAGE NO.
-------
Item 1 - Financial statements (unaudited):
Balance Sheets
March 31, 1997 and December 31, 1996...................... 3
Statements of Operations
For the three months ended March 31, 1997 and 1996........ 4
Statement of Partners' Equity
For the three months ended March 31, 1997................. 5
Statements of Cash Flows
For the three months ended March 31, 1997 and 1996........ 6
Notes to Financial Statements................................. 8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 10
PART II - OTHER INFORMATION
Items 1 through 6............................................. 12
Signatures.................................................... 13
2
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<TABLE>
<CAPTION>
KFP 85-LTD.
BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
MARCH 31,
1997 DECEMBER 31,
ASSETS (UNAUDITED) 1996
- ------ ----------- ----
<S> <C> <C>
Cash and interest-bearing deposits $ 184,623 $ 145,585
Escrow deposits 136,622 74,532
Accounts receivable (net of allowance
for doubtful accounts of $12,918 in
1997 and 1996) 29,441 39,700
Mortgage notes receivable (net of
allowance for doubtful accounts of
$43,673 in 1997 and 1996) 321,869 324,645
Rental properties, at lower of cost or
market, less accumulated depreciation 3,733,065 4,528,412
Land and land development, at cost
less accumulated depreciation 552,839 552,839
Prepaid expenses 7,560 7,670
Other assets 122,043 127,259
---------- ----------
Total assets $5,088,062 $5,800,642
========== ==========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accounts payable $ 5,965 $ 25,503
Accrued liabilities 146,158 133,543
Tenant security deposits and other
liabilities 49,145 59,902
Notes and mortgages payable 4,508,583 5,283,168
----------- -----------
Total liabilities 4,709,851 5,502,116
----------- -----------
CONTINGENCIES (Note 5)
PARTNERS' EQUITY:
General partners (117,687) (119,281)
Limited partners, 8,000 limited
partnership units authorized;
7,940 units issued and outstanding 495,898 417,807
------------ ------------
Total partners' equity 378,211 298,526
------------ ------------
Total liabilities and
partners' equity $5,088,062 $5,800,642
========== ==========
</TABLE>
The accompanying notes to financial statements are
an integral part of these balance sheets.
3
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<TABLE>
<CAPTION>
KFP 85-LTD.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
1997 1996
---- ----
<S> <C> <C>
REVENUES:
Rental income $ 226,568 $ 278,259
Real estate sales 892,250 -
Interest income 9,379 7,961
Other income 36,944 4,361
----------- -----------
Total revenues 1,165,141 290,581
----------- -----------
EXPENSES:
Interest and financing costs 124,233 158,959
Property expenses 70,257 115,950
Cost of real estate sold 812,881 -
Selling, administration and other 30,345 58,228
Depreciation and amortization 47,740 63,707
----------- -----------
Total expenses 1,085,456 396,844
----------- -----------
Net income (loss) $ 79,685 $(106,263)
=========== ============
PER UNIT AMOUNTS TO LIMITED PARTNERS:
Net income (loss) after allocations to general
partners of $1,594 and $(2,125), respectively $ 9.84 $ (13.12)
============= ============
Weighted average units outstanding 7,940 7,940
============= ===========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
4
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<TABLE>
<CAPTION>
KFP 85-LTD.
STATEMENT OF PARTNERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
GENERAL LIMITED
PARTNERS' EQUITY (DEFICIT) PARTNERS PARTNERS TOTAL
- -------------------------- -------- -------- -----
<S> <C> <C> <C>
December 31, 1996 $(119,281) $417,807 $298,526
Net income 1,594 78,091 79,685
--------- -------- --------
March 31, 1997 $(117,687) $495,898 $378,211
========= ======== ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
5
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<TABLE>
<CAPTION>
KFP 85-LTD.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 79,685 $(106,263)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities-
Depreciation and amortization 47,740 63,707
Gain on sale of real estate (79,369) -
Changes in assets and liabilities:
Increase in escrow deposits (62,090) (36,403)
Decrease in accounts receivable 10,259 -
Decrease in prepaid expenses 110 6,503
Decrease in other assets 5,216 7,475
Increase (decrease) in accounts payable (19,538) 32,474
Increase in accrued liabilities 12,615 42,961
Decrease in tenant security deposits
and other liabilities (10,757) -
---------- --------
Net cash provided by (used in)
operating activities (16,129) 10,454
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on mortgage notes 2,776 3,965
Proceeds from sale of real estate, net of
closing costs 74,476 -
--------- ---------
Net cash provided by investing activities 77,252 3,965
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes and mortgages payable (22,085) (14,745)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
INTEREST-BEARING DEPOSITS 39,038 (326)
CASH AND INTEREST-BEARING DEPOSITS,
BEGINNING OF THE PERIOD 145,585 68,412
-------- --------
CASH AND INTEREST-BEARING DEPOSITS,
END OF THE PERIOD $184,623 $ 68,086
======== ========
</TABLE>
(Continued)
6
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<TABLE>
<CAPTION>
KFP 85-LTD.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
(Continued)
1997 1996
---- ----
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $129,177 $158,261
======== ========
SUPPLEMENTAL SCHEDULE OF
NON-CASH FINANCING ACTIVITIES:
Purchase money mortgage loan
satisfied at closing $752,500 $ -
======== ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
7
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KFP 85-LTD.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
(1) BASIS OF PRESENTATION:
The balance sheet as of December 31, 1996, which has been derived from audited
statements, and the unaudited interim financial statements included herein, have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally included
in annual financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to those rules and regulations,
although the Partnership believes that the disclosures made are adequate to make
the information presented not misleading. It is suggested that these financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Partnership's annual report on Form 10-K as of December
31, 1996.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of the Partnership
as of March 31, 1997 and December 31, 1996, the results of operations for the
three-month periods ended March 31, 1997 and 1996, partners' equity for the
three-month period ended March 31, 1997 and cash flows for the three-month
periods ended March 31, 1997 and 1996.
(2) RELATED PARTY TRANSACTIONS:
Property management fees paid to Keyes Asset Management, Inc. for management of
various rental properties, totaled $9,740 and $14,247 for the three months ended
March 31, 1997 and 1996, respectively, and are included in property expenses in
the accompanying statements of operations.
During the three months ended March 31, 1997 and 1996, $6,878 and $7,849,
respectively, were paid to Keyes Asset Management, Inc. representing commissions
for leasing vacant space at various rental properties. These amounts are
included in other assets in the accompanying balance sheets and the amount of
leasing commissions paid are amortized over the respective life of each lease.
On January 31, 1997, the Partnership paid a selling commission of $26,767 to
Keyes Asset Management, Inc. in conjunction with the sale of Charlotte Commerce
Center, one of the commercial properties in the Partnership's investment
portfolio. This amount is included in the cost of real estate sold in the
accompanying statements of operations.
8
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(3) NOTES AND MORTGAGES PAYABLE:
Notes and mortgages payable were as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
Mortgage loan secured by Northpark Commerce Center,
bearing interest at 10.375%, payable in monthly installments
of $44,525 representing principal and interest, due May 1, 2017. $4,508,583 $4,524,933
Purchase money mortgage loan secured by Charlotte Commerce Center,
bearing interest at 9%, payable in monthly installments of $5,644
representing interest only, due March 31, 1997 - 752,500
Obligation under capital lease due in monthly installments
of $538 representing principal and interest at 18%,
through February 1995 - 5,735
----------- -----------
$ 4,508,583 $ 5,283,168
=========== ===========
</TABLE>
(4) DISPOSITION:
On January 31, 1997, the Partnership sold Charlotte Commerce Center located in
Altamonte Springs, Seminole County, Florida for a total of $892,250. The book
value of the Center was $747,608 which was net of a 1989 reduction of $35,959 in
the Center's carrying value. Expenses related to the sale of the Center totaled
$65,273 which included a real estate sales commission of $53,535, one-half of
which was paid to Keyes Asset Management, Inc. The Partnership's net gain on
this disposition was $79,369. At closing, the Partnership received cash of
$21,358 which was net of selling expenses, 1995 and 1996 real estate taxes,
tenant security deposits, the outstanding purchase money mortgage balance and
accrued interest.
(5) LIQUIDITY:
The Partnership has sustained significant losses in each of the last three
fiscal years. Operations of the Partnership consumed cash of $16,129 during the
three months ended March 31, 1997. However, as of March 31, 1997, cash on hand
and escrow deposits are sufficient to pay the Partnership's current accounts
payable and accrued liabilities.
9
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KFP 85-LTD.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
During the quarter ended March 31, 1997, the Partnership's cash and
interest-bearing deposits increased by $39,038 compared to a decrease of $326
for the first quarter of 1996. The increase in cash and interest-bearing
deposits for 1997 is primarily attributable to the sale of Charlotte Commerce
Center in January 1997.
Net cash used in operations for the first quarter of 1997 amounted to $16,129
compared to $10,454 provided by operations during the first quarter of 1996.
Cash consumed in operations during 1997 was used primarily to increase escrow
deposits which will be used to pay future real estate taxes and insurance for
rental properties.
There were no cash distributions to partners during either the first quarter of
1997 or 1996.
During the first quarter of 1997, the Partnership sold Charlotte Commerce
Center, one of the commercial rental properties in its investment portfolio. The
net book value of the Center was $747,608 which was net of accumulated
depreciation of $328,306. Upon the Center's sale, these amounts were removed
from the Partnership's records resulting in a decrease in the carrying value of
rental properties from December 31, 1996 levels.
Principal payments of notes and mortgages amounted to $22,085 during the quarter
ended March 31, 1997, excluding the payoff of the Charlotte Commerce Center
mortgage of $752,500 which took place at closing. During the same quarter of
1996, the Partnership made principal payments on its notes and mortgages of
$14,745. For the remainder of 1997, it is anticipated that principal payments of
notes and mortgages will approximate $51,600 which will be paid out of the
general funds of the Partnership.
The Partnership does not intend to acquire any additional properties for its
investment portfolio. However, certain improvements may be necessary at some of
the properties in order to retain or attract tenants to space that is vacant.
Other than those items discussed above, the Partnership does not anticipate any
material changes to its financial condition during the remainder of 1997.
10
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MATERIAL CHANGES IN RESULTS OF OPERATIONS
Rental and other income, when combined, decreased in the first quarter of 1997
compared to the same period of 1996. This decline is primarily attributable to
the disposal of two rental properties: Keyes Executive Center during the last
quarter of 1996; and Charlotte Commerce Center during the first quarter of 1997.
Interest income increased slightly during the first quarter of 1997 compared to
1996. This increase resulted, in part, to the increase of mortgage notes
receivable the Partnership accepted upon the sale of two LeJeune Industrial Park
condominium units during the last quarter of 1996. In addition, there were
slightly higher cash levels available for short-term investment.
Partnership expenses, excluding cost of real estate sold, decreased in the first
quarter of 1997 from 1996 levels primarily due to the disposal of Keyes
Executive Center during the last quarter of 1996 and Charlotte Commerce Center
during the first quarter of 1997.
During the first quarter of 1997, the Partnership sold Charlotte Commerce Center
for $892,250. After taking into consideration the Center's net book value of
$747,608 and selling expenses of $65,273, the Partnership realized a net gain of
$79,369 in the first quarter of 1997. There were no sales of condominium
warehouse units at LeJeune Industrial Park during the first quarter of 1997 or
1996.
During the remainder of 1997, the Partnership does not anticipate that revenues
or expenses will vary materially from the first three months of 1997.
11
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KFP 85-LTD.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) 27 Financial Data Schedule
(b) None
12
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KFP 85-LTD.
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.
KFP 85-Ltd.
(Registrant)
By: KPA, Inc.
Managing General Partner
Date: DECEMBER 17, 1997 By: /S/ TIMOTHY D. PAPPAS
-------------------------------- ---------------------
Timothy D. Pappas,
Vice President, Treasurer and
Principal Accounting Officer
13
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27 Financial Data Schedule
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-M0S
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 184,623
<SECURITIES> 0
<RECEIVABLES> 407,901
<ALLOWANCES> (56,591)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 5,726,239
<DEPRECIATION> (1,993,173)
<TOTAL-ASSETS> 5,088,062
<CURRENT-LIABILITIES> 0
<BONDS> 4,508,583
0
0
<COMMON> 0
<OTHER-SE> 378,211
<TOTAL-LIABILITY-AND-EQUITY> 5,088,062
<SALES> 892,250
<TOTAL-REVENUES> 1,165,141
<CGS> 0
<TOTAL-COSTS> 812,881
<OTHER-EXPENSES> 148,342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 124,233
<INCOME-PRETAX> 79,685
<INCOME-TAX> 0
<INCOME-CONTINUING> 79,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 79,685
<EPS-PRIMARY> 9.84
<EPS-DILUTED> 9.84
<FN>
NOTE: TOTAL CURRENT ASSETS AND TOTAL CURRENT LIABILITIES
ARE NOT APPLICABLE BECAUSE REGISTRANT DOES NOT
PRESENT A CLASSIFIED BALANCE SHEET.
</FN>
</TABLE>
