FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended September 30, 1998
Commission File Number: 2-94509
LIF
(Exact name of registrant as specified in its governing instruments)
California 94-2969720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P. O. Box 130, Carbondale, Colorado 81623
(Address of principal executive offices)
(970) 963-8007
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LIF
CONSOLIDATED BALANCE SHEETS, SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(Unaudited) (Dollars in thousands)
<CAPTION>
September 30, December 31,
1998 1997
<S> <C> <C>
ASSETS
INVESTMENTS IN REAL ESTATE:
Rental properties $ 10,349 $ 10,327
Accumulated depreciation (2,869) (2,607)
Rental properties - net 7,480 7,720
CASH AND CASH EQUIVALENTS (including
Interest bearing deposits of $454
in 1998 and $434 in 1997) 460 570
OTHER ASSETS:
Accounts receivable 147 49
Prepaid expenses and deposits 112 19
Deferred organization costs and loan costs
(net of accumulated amortization of $244
in 1998 and $212 in 1997) 80 84
Notes receivable 1,892 1,851
Total other assets 2,231 2,003
TOTAL $ 10,172 $10,293
LIABILITIES AND PARTNERS' EQUITY LIABILITIES:
Notes payable $ 8,021 $ 7,679
Accounts payable 7 21
Liability for future improvement 641 828
Deferred gain on sale of real estate 69 69
Other liabilities 241 217
Total liabilities 8,979 8,814
PARTNERS' EQUITY
Limited Partners 1,370 1,632
General Partners (177) (153)
TOTAL $ 10,172 $10,293
Equity Units Authorized - Limited Partners 12,820 12,820
- General Partners 0 0
Equity Units Outstanding - Limited Partners 12,820 12,820
- General Partners 0 0
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
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<TABLE>
LIF
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (In thousands except per Unit amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUE:
Rental $ 404 $ 421 $1,244 $1,297
Interest 4 49 20 50
Total revenue 408 470 1,265 1,347
EXPENSE:
Interest 136 164 419 527
Operating 158 169 485 507
Depreciation and amortization 96 90 287 260
General and administrative 39 34 144 150
Total expense 429 457 1,335 1,444
Gain from property sale 0 563 1 563
NET INCOME (LOSS) - Limited Partners $ (20) $ 576 (69) 467
- General Partners 0 0 0 0
NET INCOME (LOSS) PER PARTNERSHIP UNIT
- Limited Partners (2) 45 (5) 36
- General Partners 0 0 0 0
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
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<TABLE>
LIF
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
(Unaudited)(Dollars in thousands)
<CAPTION>
..LIMITED PARTNERS..
NUMBER OF GENERAL TOTAL
PARTNERSHIP PARTNER PARTNERS'
UNITS AMOUNT AMOUNT DEFICIT
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 12,820 $1,759 $ (153) $1,606
Net Loss - 1997 (127) 0 (127)
BALANCE, DECEMBER 31, 1997 12,820 $1,632 $ (153) $1,479
Net loss (69) 0 (69)
Distribution (192) (24) (216)
BALANCE, SEPTEMBER 30, 1998 12,820 $1,370 $ (177) $1,193
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
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<TABLE>
LIF
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
NINE MONTHS ENDED SEPTEMBER 31, 1998 AND 1997
(Unaudited) (Dollars in thousands)
<CAPTION>
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (69) $ (97)
Adjustments to reconcile net increase to net
cash provided by operating activities:
Depreciation and amortization 287 238
Change in operating assets and liabilities:
Increase (decrease) in other liabilities 27 835
Increase (decrease) in accounts payable (2) (1)
Increase in accounts receivable (98) (837)
(Increase) decrease in deferred expenses (20) 21
Increase in prepaid expenses (94) (93)
Net provided by operating activities 31 66
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (82) (470)
Sale of property 18 790
Net cash used in investing activities (64) 320
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Financing 244 48
Payment on notes payable (105) (350)
Net (distribution) contribution (216) 0
Net cash provided by financing activities (77) (302)
Decrease in cash and cash equivalents (110) 84
Cash and cash equivalents at beginning of period 570 387
Cash and cash equivalents at end of period $ 460 $ 471
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<PAGE>
LIF
FINANCIAL NOTES
(Dollars in thousands)
The accompanying unaudited financial statements should be read in
conjunction with the Partnership's 1997 Annual Report. These
statements have been prepared in accordance with the instructions
to the Securities and Exchange Commission form 10-Q and do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of the general partner, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations for the
nine months ended September 30, 1998 and 1997 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1998.
Organization - LIF (the "Partnership") is a limited partnership
organized under the laws of the state of California for the purpose
of investing in income properties and making short-term loan and
capital contributions to operating entities formed to acquire or
develop and operate one or more income producing real properties.
The General Partner is Partners '85 (the "General Partner"), a
California limited partnership, whose General Partner is Landsing
Equities Corporation. LIF was formed in June 1984, and shall
continue until December 31, 2034, unless sooner terminated.
Investment In Real Estate Partnership - At September 30, 1998 and
1997, the Partnership was invested in Landsing Private Fund
("P-21"), a 99%-owned real estate partnership. In 1997, Cattle
Creek Development Partners (CCDP) was liquidated into the
Partnership. CCDP was originally formed in 1994. For a portion of
1996, the Partnership was invested in Prince Creek Partners ("PCP")
and Thompson Creek Partners ("TCP"). In 1996, the properties owned
by these partnerships were sold and the partnerships terminated.
During 1996, the Partnership invested into 95% of a new entity -
Alpine Center Partners ("ACP"). ACP acquired rental real estate
in Colorado in 1996. The Partnership interest in ACP was sold in
1998.
Consolidation of Investment in Real Estate Partnerships - For
financial reporting purposes, the Partnership consolidates the
operations of it's investment in real estate partnerships with that
of the Partnership. All significant intercompany transactions,
including notes payable/receivable and short-term loans/receivables,
and balances have been eliminated.
Rental Property - Rental property is stated at cost. Depreciation is
computed by the straight-line method over estimated useful lives
ranging from five to forty years. Major additions and betterments
are capitalized at cost, while maintenance and repairs which do not
improve or extend the life of the respective assets are expensed
currently. When assets are retired or otherwise disposed of, the
costs and related accumulated depreciation are removed from the
accounts, and any gain or loss on disposal is included in the
results of operations.
Deferred Loan Costs - Loan fees are deferred and amortized over the
life of the related note payable.
Cash and Cash Equivalents - The Partnership considers all highly
liquid investments with a maturity of three months or less at the
time of purchase to be cash equivalents.
Short-Term Investments - The Partnership invests in short-term
federally insured certificates of deposits which mature on a date
in excess of three months from the date of purchase. The cost of
these investments approximate market value.
Income Taxes - No provision for federal or state income taxes has
been made in the consolidated financial statements because these
taxes are the obligation of the partners.
Net Income (Loss) Per Partnership Unit - Net Income (Loss) per
partnership unit is based on weighted average units outstanding of
12,820 in 1998 and 1997, after giving effect to net income
(loss) allocated to the General Partner. Cash distributions of $15
per unit were paid to holders in 1998. No cash distributions were
paid in 1997.
Concentrations of Credit Risk - The Partnership's financial
instruments that are exposed to concentrations of credit risk
consist primarily of its cash and cash equivalents. The
Partnership's cash and cash equivalents are maintained in various
accounts in FDIC insured institutions. This investment policy limits
the Partnership's exposure to concentrations of credit risk.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Impairment of Long-Lived Assets - The Partnership adopted Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be
Disposed Of" during 1996. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles to be held and used
or disposed of by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. During 1998 and 1997, the
Partnership determined that no impairment loss need be recognized
for applicable assets of continuing operations.
Accounting Pronouncements - In June 1996, the Financial Accounting
Standards Board issued Statement No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities"
(SFAS No.125). This Statement is effective for transactions
occurring after December 31, 1996. However, transactions such as
securities lending, repurchase agreements, dollar rolls, and similar
secured financing arrangements are not subject to the provisions of
SFAS No. 125 until January 1, 1998. The standard provides that,
following a transfer of financial assets, an entity is to recognize
the financial and servicing assets it controls and the liabilities
it has incurred, derecognize financial assets when control has been
surrendered and derecognize liabilities when extinguished. The
adoption of SFAS No. 125 had no impact on the Partnership's
consolidated financial statements. The impact of the delayed
provisions is also not expected to be material.
In June 1997, the FASB issued Statement No. 130, "Reporting
Comprehensive Income" (SFAS No. 130) and Statement No. 131,
"Disclosures about Segments of an Enterprise and Related
Information" (SFAS No. 131). Each of the new statements is
effective for periods beginning after December 15, 1997, and
requires that certain additional information be reported in the
financial statements and related notes. The Partnership will adopt
these in 1998 but does not expect an impact on its 1998 consolidated
financial statements.
Year 2000 - The Partnership is aware of the Year 2000 conversion
issue. It is Management's assertion that the current accounting
system utilized by the Partnership has the capability to accommodate
the Year 2000 issue.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INTRODUCTION
The Partnership was organized to acquire real properties, including
commercial, residential and agricultural properties, located primarily
within the western portion of the United States, and to make
short-term loans and capital contributions to other limited
partnerships formed to acquire or develop and operate one or more
income-producing real properties.
The Partnership currently has a 99% investment in Landsing Private
Fund-21 ("P-21") which owns one multi-family rental property. The
partnership also owns two retail rental properties, which were
formerly owned by CCDP. For financial reporting purposes the
Partnership's investments are presented on a consolidated basis.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998, the Partnership's consolidated cash balance
totaled $460,000. Cash not required for current operations is placed
in federally insured financial instruments, certificates of deposit,
and money market funds which can be liquidated as needed. It is the
Partnership's intention to maintain adequate cash reserves for its
operations.
Through the first three quarters of 1998, the Partnership experienced
a net decrease in cash and cash equivalents of $110,000. As of September
30, 1998, cash and cash equivalents totaled $460,000 versus $570,000
at December 31, 1997.
The Short-Term Loan made to Cattle Creek Development Partners, a
Colorado limited partnership ("CCDP"), was partially repaid in
December 1996. The remaining loan balance, including accrued and
unpaid interest, as of December 31, 1996 was $550,000. The loan
was past due and was thus in default as of December 31, 1997.
In 1997, per the terms of the loan agreement between LIF and CCDP,
the properties securing the loan, Valley View Business Park and
701 Cooper, became 100% owned by LIF. These inter-company
transactions were eliminated in consolidation.
The balance of the short-term loan, and the related interest income
and expense, between LIF and CCDP was eliminated in the
consolidation of the Partnership's financial statements.
On June 3, 1996, the Partnership made a Short-Term Loan in the
principal amount of $550,000 to Alpine Center Partners, a Colorado
limited partnership ("ACP"). ACP was organized to acquire one
commercial property located in Carbondale, Colorado. The
Partnership also made a capital contribution to ACP in the amount
of $10,000 and became a Co-General Partner of ACP.
On September 30, 1997, the Partnership's investment in ACP sold
40.20% of the Alpine Center Building to Gary K. Barr (GKB). GKB is
the president of the General Partner of LIF. This sale resulted in
cash to ACP of $370,000. On September 30, 1997, ACP also sold 45.90%
of the Alpine Center Building to Open World Investors (OWI), of which
Gary K. Barr is a General Partner. This sale generated cash to ACP
of $420,000. ACP deferred a gain on sale from these two transactions
of $69,000. ACP provided seller financing to GKB and OWI in the
amounts of $864,300 and $986,850 respectively. The partnership's
investment in ACP owned 1.96% of the Alpine Center Building on
December 31, 1997. ACP reduced its short-term note payable to LIF
by $358,000. The balance of the note payable at December 31, 1997
was $227,000. ACP repaid the balance of this note to LIF in June 1998.
On June 29, 1998, ACP sold its remaining 1.96% interest in the
Alpine Center Building to Gary K. Barr for $59,000. Cash received
in this transaction was $18,000 and ACP provided seller financing
in the amount of $41,000 to Mr. Barr.
For financial reporting purposes, results of operations for P21
and ACP have been shown on a consolidated basis.
RESULTS OF OPERATIONS
Rental revenues were $1,244,000 for the nine months ended September
30, 1998, a decrease of $53,000 compared to the same period in 1997.
The decline in rental revenues in 1998 versus 1997 was the result of
a decrease in rent payments at 701 cooper, and the sale of the
Alpine Center Building.
Operating expenses were $485,000 for the period ended September 30,
1998, a decrease of $22,000 compared to the same period in 1997.
Net operating income of properties (rental revenue less operating
expenses) was $780,000 in 1998, a decrease of $60,000 from 1997.
Management believes net operating income is the best indication of
the properties' performance.
Interest expense decreased by $108,000 for the first three quarters
of 1998, compared to the same period in 1997.
Interest income and interest expense on loans by and between LIF and
its investments were eliminated in the consolidation of the Company's
financial statements.
Entity level general and administrative expenses, exclusive of that at
the property level, decreased $6,000 in 1998 compared to 1997.
Portfolio management fees remained unchanged.
PROPERTY OPERATIONS
Residential Property - The remaining residential property, Whistler
Point Apartments, continues to operate at a profit. In 1997, the
Partnership continued to make capital improvements to the property
to allow it to compete effectively with new competition. The
Partnership is continuing this program in 1998 with an expected cost
of $150,000. Specific capital expenditures are for new washers and
dryers in all units, new microwaves, new carpet and vinyl flooring,
carports, and exterior deck improvements. Whistler Point Apartments
are currently under contract for sale. The sale is scheduled to
occur in early 1999. There is no guarantee that such sale will take
place. Proceeds from such sale will be distributed.
Commercial Property - The 701 Cooper Building and the Valley View
Business Center had stable occupancy during 1997. However, at the
end of the year, the sole tenant of 701 Cooper and CCDP agreed to
cancel the remaining term of the lease for a payment of $61,000.
Both properties, Valley View Business Center and 701 Cooper are
currently listed for sale on the market.
OCCUPANCY
Occupancy at all of the Partnership's properties remain high during
the first three quarters of 1998. As of September 30, 1998,
occupancy at Whistler Point Apartments was 96%. This occupancy
level is expected to be achieved through 1998. Occupancy at
properties formerly owned by CCDP averaged 70% as of September
30, 1998. It is expected that all Partnership properties will
maintain stable to improved occupancy during 1998.
DISTRIBUTIONS
In March 1998, the Partnership paid a cash distribution of $15 per
unit to unit holders of record on February 28, 1998.
INFLATION
The effect of inflation on the Partnership's operations have been
no greater than the effect on the economy as a whole. Because of
competitive conditions, market rate rents may increase or decrease
disproportionately with inflation while property operating costs
continue to follow inflationary trends. Inflationary conditions
are not expected to have a major impact on the Partnership during
1998.
<PAGE>
PART II. OTHER INFORMATION
All items in Part II have been omitted since they are inapplicable or
the answer is negative.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
L I F
Date: November 15, 1998 /s/ Gary K. Barr
Gary K. Barr, President & Director
Landsing Equities Corporation
Managing Partner of the General Partner,
Partners '85
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 460
<SECURITIES> 0
<RECEIVABLES> 147
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 112
<PP&E> 10,349
<DEPRECIATION> 2,869
<TOTAL-ASSETS> 10,172
<CURRENT-LIABILITIES> 248
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,193
<TOTAL-LIABILITY-AND-EQUITY> 10,172
<SALES> 0
<TOTAL-REVENUES> 1,265
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 916
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 419
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
