FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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 0-14570
MCCOMBS REALTY PARTNERS, LTD.
(Exact name of small business issuer as specified in its charter)
California 33-0068732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) 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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) MCCOMBS REALTY PARTNERS, LTD.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands)
June 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 459
Restricted--tenant security deposits 30
Accounts receivable 7
Escrow for taxes 41
Restricted escrows 154
Other assets 182
Investment properties:
Land $ 499
Buildings and related personal property 5,224
5,723
Less accumulated depreciation (2,943) 2,780
$ 3,653
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 23
Tenant security deposits 28
Accrued taxes 40
Other liabilities 95
Mortgage note payable 5,806
Partners' Capital (Deficit)
General partner $ 2
Limited partners (22,036 units
issued and outstanding) (2,341) (2,339)
$ 3,653
See Accompanying Notes to Consolidated Financial Statements
b) MCCOMBS REALTY PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 337 $ 301 $ 672 $ 620
Other income 26 26 57 45
Total revenues 363 327 729 665
Expenses:
Operating 106 106 220 200
General and administrative 14 13 24 21
Maintenance 35 27 95 43
Depreciation 47 41 93 81
Interest 122 222 285 406
Property taxes 20 30 40 65
Total expenses 344 439 757 816
Income(loss) before
extraordinary gain (loss) 19 (112) (28) (151)
Extraordinary loss on
retirement of debt -- (128) -- (128)
Extraordinary gain on
forgiveness of debt -- 552 -- 552
Net income (loss) $ 19 $ 312 $ (28) $ 273
Net income (loss) allocated
to general partner (1%) $ -- $ 3 $ -- $ 3
Net income (loss) allocated
to limited partners (99%) 19 309 (28) 270
$ 19 $ 312 $ (28) $ 273
Per limited partnership unit:
Net income (loss) before
extraordinary item $ .88 $(5.03) $(1.24) $(6.78)
Extraordinary loss on
retirement of debt -- (5.78) -- (5.78)
Extraordinary gain on
forgiveness of debt -- 24.81 -- 24.81
Net income (loss) per
limited partnership unit $ .88 $14.00 $(1.24) $12.25
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) MCCOMBS REALTY PARTNERS, LTD.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except for unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Partners' capital (deficit)
at December 31, 1995 22,036 $ 2 $ (2,313) $ (2,311)
Net loss for the six
months ended June 30, 1996 -- (28) (28)
Partners' capital (deficit)
at June 30, 1996 22,036 $ 2 $ (2,341) $ (2,339)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) MCCOMBS REALTY PARTNERS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (28) $ 273
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Depreciation 93 81
Amortization of discounts and loan costs 10 94
Extraordinary loss on retirement of debt -- 128
Extraordinary gain on forgiveness of debt -- (552)
Change in accounts:
Restricted cash (3) 4
Accounts receivable 3 (8)
Escrows for taxes (39) (1)
Other assets (3) (5)
Accounts payable (152) (16)
Tenant security deposit liabilities 3 --
Accrued taxes 40 39
Other liabilities 25 10
Net cash (used in) provided by
operating activities (51) 47
Cash flows from investing activities:
Property improvements and replacements (120) (9)
Deposits to restricted escrows (34) (92)
Net cash used in investing activities (154) (101)
Cash flows from financing activities:
Payments on mortgage note payable (24) (16)
Repayment of mortgage notes payable -- (5,163)
Proceeds of mortgage notes payable -- 5,850
Loan costs -- (178)
Net cash (used in) provided by
financing activities (24) 493
Net (decrease) increase in cash and cash equivalents (229) 439
Cash and cash equivalents at beginning of period 688 212
Cash and cash equivalents at end of period $ 459 $ 651
Supplemental disclosure of cash flow information:
Cash paid for interest $ 236 $ 312
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) MCCOMBS REALTY PARTNERS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of McCombs Realty
Partners, Ltd. ("Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 310(b) of Regulation S-B. Accordingly,
they 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.
Operating results for the three and six month periods ended June 30, 1996, are
not necessarily indicative of the results that may be expected for the fiscal
year ending December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the annual
report on Form 10-KSB for the year ended December 31, 1995, for the Partnership.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership Agreement provides for payments to affiliates for services and
as reimbursement of certain expenses incurred by affiliates on behalf of the
Partnership. Property management fees are included in operating expense on the
consolidated statement of operations. Reimbursements for services from
affiliates are included in general and administrative expense in the
consolidated statement of operations. The following transactions with Insignia
Financial Group, Inc. and affiliates were charged to expense in 1996 and 1995:
Six Months Ended
June 30,
1996 1995
Property management fees $ 36 $ 31
Reimbursement for services from affiliates 19 14
The Partnership insures its property under a master policy through an agency and
insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner who receives
payments on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
Note C - Mortgage Notes Payable
On June 29, 1995, the Partnership refinanced the four mortgages encumbering
Lakewood at Pelham Apartments. The total indebtedness refinanced was
approximately $5.7 million, net of discounts which carried stated interest rates
from 0 to 10.5% with maturity dates ranging from June 1995 to October 1998. The
new mortgage indebtedness of $5.85 million carries a stated interest rate of
8.1% and is amortized over 30 years with a balloon payment due July 1, 2005. As
a result of the refinancing, the Partnership recognized an extraordinary loss on
the retirement of debt of approximately $128,000 and an extraordinary gain on
the forgiveness of debt of approximately $552,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment property consists of one apartment complex. The
following table sets forth the average occupancy of the property for the six
month periods ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Lakewood at Pelham
Greenville, South Carolina 94% 95%
Results of Operations
The Partnership's net loss for the six months ended June 30, 1996, was
approximately $28,000 as compared to net income of approximately $273,000 for
the corresponding period in 1995. The Partnership recorded net income of
approximately $19,000 for the three months ended June 30, 1996, as compared to
net income of approximately $312,000 for the corresponding period in 1995. The
decrease in net income for the three month period ended June 30, 1996, and the
increase in net loss for the six month period ended June 30, 1996, is primarily
attributable to the refinancing of Pelham Place Apartments on June 29, 1995, an
increase in maintenance expense, and an increase in depreciation expense. As a
result of the refinancing during the second quarter of 1995, the Partnership
recognized an extraordinary gain on debt forgiveness of approximately $552,000
and an extraordinary loss on the retirement of debt of approximately $128,000.
Maintenance expense increased as a result of painting and repairs performed at
the investment property. Depreciation expense increased due to the acquisition
of property improvements and replacements. Finally, net loss for the six month
period ended June 30, 1996, increased due to an increase in general and
administrative expense resulting from an increase in professional expenses, an
increase in insurance expense and an increase in General Partner reimbursements.
The increase in insurance expense is due to the purchase of additional
partnership liability insurance that had not been purchased in previous periods.
Offsetting the items noted above was a decrease in interest expense due to a
decrease in the interest rate on the mortgage balance during the three and six
month periods ended June 30, 1996, resulting from the refinancing in June 1995.
Property tax expense for the three and six month periods ended June 30, 1996,
decreased as compared to the three and six month periods ended June 30, 1995,
due to an underpayment of 1993 taxes that were paid in the first quarter of
1995. Rental income increased for the three month period ended June 30, 1996,
due to a rental rate increase in May 1996. Other income increased for the six
months ended June 30, 1996, as compared to the six months ended June 30, 1995,
due to an increase in interest income. Cash balances throughout the first six
months of 1996 were higher as compared to the cash balances throughout the first
six months of 1995.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment property to assess the
feasibility of increasing rents, maintaining or increasing occupancy levels and
protecting the Partnership from increases in expense. As part of this plan, the
General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, these is no guarantee that the General Partner will
be able to sustain such a plan.
Liquidity and Capital Resources
At June 30, 1996, the Partnership had unrestricted cash of approximately
$459,000 compared to approximately $651,000 at June 30, 1995. Net cash used in
operating activities increased due to an increase in net loss as described
above, a decrease in accounts payable, and an increase in the escrows for
taxes. This increase in net cash used in operating activities was partially
offset by an increase in other liabilities. Net cash used in investing
activities increased as a result of increased purchases of property improvements
and replacements. This increase in net cash used in investing activities was
partially offset by decreased deposits to restricted escrows. Net cash used in
financing activities increased as a result of the debt refinancing of Lakewood
at Pelham in June 1995.
On June 29, 1995, the Partnership refinanced the four mortgages encumbering
Lakewood at Pelham Apartments. The total indebtedness refinanced was
approximately $5.7 million, net of discounts, which carried stated interest
rates from 0 to 10.5% with maturity dates ranging from June 1995 to October
1998. The new mortgage indebtedness of $5.85 million carries a stated interest
rate of 8.1% and is amortized over 30 years with a balloon payment due July 1,
2005. As a result of the refinancing, the Partnership recognized an
extraordinary loss on the retirement of debt of approximately $128,000 and an
extraordinary gain on the forgiveness of debt of approximately $552,000.
The Partnership has no material capital programs scheduled to be performed in
1996, although certain routine capital expenditures and maintenance expenses
have been budgeted. These capital expenditures and maintenance expenses will be
incurred only if cash is available from operations; is received from the capital
reserve account; or from cash and cash equivalents on hand.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership. Such assets are currently thought
to be sufficient for any near-term needs of the Partnership. The mortgage
indebtedness of approximately $5,806,000 has a maturity date of July 1, 2005, at
which time the property will be sold or refinanced. Future cash distributions
will depend on the level of net cash generated from operations, a property sale,
and the availability of cash reserves. No cash distributions were recorded in
the first six months of 1996 or 1995 and none are expected for the remainder of
1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MCCOMBS REALTY PARTNERS, LTD.
By: CRPTEX, INC.
the General Partner
By:/s/ Carroll D. Vinson
Carroll D. Vinson
President
By:/s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: July 31, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from McCombs
Realty Partners 1996 Second Quarter 10-QSB and is qualified in its entirety by
reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000759198
<NAME> MCCOMBS REALTY PARTNERS LTD
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 459
<SECURITIES> 0
<RECEIVABLES> 7
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 5,723
<DEPRECIATION> 2,943
<TOTAL-ASSETS> 3,653
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 5,806
0
0
<COMMON> 0
<OTHER-SE> (2,339)
<TOTAL-LIABILITY-AND-EQUITY> 3,653
<SALES> 0
<TOTAL-REVENUES> 729
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 757
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 285
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28)
<EPS-PRIMARY> (1.24)
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
</FN>
</TABLE>
