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, 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: 0-14593
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
---------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 33-0104267
----------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100
San Mateo, California 94402-1708
------------------------------ -----------
(Address of principal executive offices) (Zip Code)
(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 March 31, 1995: 35,000
Page 1 of 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
March 31, December 31,
1995 1994
Assets ---------- ----------
------
Real estate investments, at cost:
Land $ 7,885 $ 7,885
Buildings and improvements 14,047 13,991
--------- ---------
21,932 21,876
Less accumulated depreciation and
amortization (4,316) (4,198)
--------- ---------
Net real estate investments 17,616 17,678
Real estate held pending foreclosure, net 7,365 7,468
Investment in unconsolidated joint venture 203 404
Cash and cash equivalents 2,150 2,297
Accounts receivable, net 146 147
Restricted cash 45 -
Prepaid expenses and other assets, net 180 107
Notes receivable from unconsolidated
joint venture 695 683
Deferred financing costs and other fees, net 175 203
--------- ---------
$ 28,575 $ 28,987
========= =========
Liabilities and Partners' Equity (Deficit)
------------------------------------------
Notes payable - secured $ 25,103 $ 25,205
Accounts payable 13 2
Accrued expenses 260 196
Deferred income and security deposits 69 59
--------- ---------
Total liabilities 25,445 25,462
--------- ---------
Partners' equity (deficit):
General Partner (197) (189)
Limited Partners, 35,000 limited
partnership units outstanding 3,327 3,714
--------- ---------
Total partners' equity 3,130 3,525
--------- ---------
$ 28,575 $ 28,987
========= =========
See accompanying notes to consolidated statements.
Page 2 of 12
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Operations
(in thousands, except per unit amounts)
(Unaudited)
Three months ended
March 31,
------------------
1995 1994
------- -------
Revenues:
Operating $ 1,058 $ 1,406
Interest and other 44 24
-------- --------
Total revenues 1,102 1,430
-------- --------
Expenses:
Operating (including $64 and $125
paid to affiliates in the three
months ended March 31, 1995 and
1994, respectively) 342 491
Interest 528 604
Depreciation and amortization 277 366
General and administrative (including
$146 and $152 paid to affiliates
in the three months ended March 31,
1995 and 1994, respectively) 175 169
-------- --------
Total expenses 1,322 1,630
-------- --------
Loss before equity in loss of
unconsolidated joint venture (220) (200)
Equity in loss of unconsolidated
joint venture (175) (176)
-------- --------
Net loss $ (395) $ (376)
======== ========
Net loss per limited partnership
"Current Unit" $ (31.47) $ (29.94)
======== ========
See accompanying notes to consolidated statements.
Page 3 of 12
<TABLE>
<CAPTION>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Partners' Equity (Deficit)
(in thousands)
For the three months ended March 31, 1995 and 1994
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Total
General Limited Partners Limited Partners'
Partner Current Deferred Growth Partners Equity
------- ------- -------- ------ -------- -------
Balance at
December 31, 1993 $ (557) $3,714 $ - $ - $3,714 $3,157
Net loss (8) (368) - - (368) (376)
------- ------ ----- ----- ------ ------
Balance at
March 31, 1994 $ (565) $3,346 $ - $ - $3,346 $2,781
====== ====== ===== ===== ====== ======
Balance at
December 31, 1994 $ (189) $3,714 $ - $ - $3,714 $3,525
Net loss (8) (387) - - (387) (395)
------ ------ ----- ----- ------ ------
Balance at
March 31, 1995 $ (197) $3,327 $ - $ - $3,327 $3,130
====== ====== ===== ===== ====== ======
</TABLE>
See accompanying notes to consolidated statements.
Page 4 of 12
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows (in thousands)
(Unaudited)
Three months ended
March 31,
------------------
1995 1994
------ ------
Cash flows from operating activities:
Net loss $ (395) $ (376)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 277 366
Equity in loss of unconsolidated joint venture 175 176
Changes in assets and liabilities:
Accounts receivable 1 (12)
Prepaid expenses and other assets (73) (98)
Deferred financing and other fees (3) (6)
Accounts payable 11 14
Accrued expenses 64 90
Deferred income and security deposits 10 6
------- -------
Net cash provided by operating activities 67 160
------- -------
Cash flows from investing activities:
Property additions (55) -
Payments received on notes receivable
from unconsolidated joint venture - 87
Additions to notes receivable from
unconsolidated joint venture (12) (6)
Net cash provided by (used in) investing activities (67) 81
------- -------
Cash flows from financing activities:
Notes payable principal payments (102) (107)
Increase in restricted cash (45) -
------- -------
Cash used in financing activities (147) (107)
------- -------
Net increase (decrease) in cash and cash equivalents (147) 134
Cash and cash equivalents at beginning of period 2,297 7
------- -------
Cash and cash equivalents at end of period $2,150 $ 141
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 499 $ 656
======= =======
See accompanying notes consolidated statements.
Page 5 of 12
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1995
(Unaudited)
Note 1. SIGNIFICANT ACCOUNTING POLICY
-----------------------------
In the opinion of Glenborough Realty Corporation, the managing
general partner, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only
normal accruals) necessary to present fairly the financial
position of Outlook Income/Growth Fund VIII, A California Limited
Partnership (the "Partnership"), at March 31, 1995 and
December 31, 1994, and the related consolidated statements of
operations, changes in partners' equity and cash flows for the
three months ended March 31, 1995 and 1994.
Certain items in the 1994 financial statements have been
reclassified to conform to the 1995 financial statement
presentation.
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
----------------------------
Glenborough Corporation ("Glenborough"), an affiliate of
Glenborough Realty Corporation, has been compensated for property
management services. The following amounts paid to Glenborough
are included in operating expenses for the three months ended
March 31, 1995 and 1994:
1995 1994
------ ------
Management fees $ 46,000 $ 72,000
Property salaries (reimbursed) 18,000 53,000
The Partnership also reimbursed Glenborough for expenses incurred
for services provided to the Partnership such as accounting,
investor services, data processing, duplicating and office
supplies, legal and administrative services, and the actual costs
of goods and materials used for or by the Partnership.
Glenborough was reimbursed $146,000 and $152,000 by the
Partnership for such expenses during the three months ended March
31, 1995 and 1994, respectively. Such amounts are included in
general and administrative expenses.
Page 6 of 12
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
March 31, 1995
(Unaudited)
Note 4. NOTES RECEIVABLE FROM UNCONSOLIDATED JOINT VENTURE
--------------------------------------------------
Notes receivable from an unconsolidated joint venture consist of
several notes receivable from the Huntington Breakers Apartments,
Ltd., A California Limited Partnership ("Breakers Partnership")
and interest accrued monthly on such advances. During 1995, the
Partnership accrued $12,000 in interest on a portion of the
outstanding notes balances.
Note 5. REAL ESTATE HELD PENDING FORECLOSURE
------------------------------------
On March 6, 1995, management of 175 South West Temple, a 145,075
square foot office building in Salt Lake City, Utah, owned by 175
South West Temple Associates, was turned over as part of a
pending completion of a negotiated foreclosure, to a receiver for
the lender, in advance of the debt's May 1, 1995 maturity. Cash
generated from the operations of the property while management
was under the receiver has been reflected as restricted cash.
Since the amount of the debt was in excess of the carrying and
market values of the property and the existing lender had shown
no willingness to extend the maturity date, or otherwise work
toward a realistic solution, the only prudent action was to
negotiate an amicable foreclosure. This was part of an agreement
which relieved the Partnership, as the general partner of the
joint venture owning the property, of its guarantee for a portion
of the outstanding debt.
On April 27, 1995, the deed of trust was foreclosed and the
lender obtained title to the property. The outstanding debt
(including previously deferred interest) was $10,022,000 while
net assets approximated $6,738,000 resulting in an extraordinary
gain on foreclosure of approximately $3,284,000 which will be
recorded in the second quarter of 1995.
Page 7 of 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
-------------------------------
Outlook Income/Growth Fund VIII was formed to invest in improved
real estate which would: (i) generate sufficient cash flow to pay
expenses and to provide funds for cash distributions; (ii)
increase equity through reduction of mortgages; and (iii) have
potential for appreciation.
The Partnership has three types of units: (i) Current Units; (ii)
Deferred Units; and (iii) Growth Units. Each type of unit was
designed to provide a different type of return to the investor.
Although the Partnership was structured as a highly-leveraged
investment, it anticipated paying high current cash distributions
(9%) on the Current Units because they represented only 35% of
the funds raised and the Partnership would be able to allocate
all current cash flow to them. The Partnership paid distributions
on the Current Units at a 9% annualized rate from the quarter
ended June 30, 1986 through the quarter ended December 31, 1987,
and at a 6% rate from January 1, 1988, through the quarter ended
June 30, 1988, at which time distributions were suspended. At
this time distributions remain suspended and management is unable
to predict when distributions will resume.
The Partnership experienced negative cash flow from operations
for the three months ended March 31, 1995, after debt service
payments, leasing expenses and capital and tenant improvements.
The Partnership's relatively high debt ratio has continued to be
a burden on its cash flow. The general partner has recognized
this and has been exploring various means by which the
Partnership may reduce its high debt ratio. In that regard, the
Partnership has retained a relatively high cash position to meet
future operating requirements and for possible future
deleveraging.
As of March 31, 1995, the balance in prepaid expenses and other
assets has increased by $73,000 from the balance as of
December 31, 1994, which in large part is the result of amounts
held by lenders in impound accounts for the payment of property
taxes for 175 South West Temple and Silver Creek Plaza which will
be paid later in 1995.
As of March 31, 1995, accrued expenses have increased by $64,000
from the balance as of December 31, 1994, which is the result of
an increase in accrued property taxes for all properties in the
Partnership. The taxes will be paid later in the year.
On April 25, 1995, ownership of 175 South West Temple, a property
in a joint venture where the Partnership was the general partner,
was turned over to the lender in a negotiated foreclosure sale
prior to the debt's May 1, 1995 maturity. Since the amount of the
debt was in excess of the carrying and market values of the
property and the existing lender had shown no willingness to
extend the maturity date, or otherwise work toward a realistic
Page 8 of 12
solution, the only prudent action was to negotiate an amicable
foreclosure. This negotiated foreclosure relieved the Partnership
of its guarantee for a portion of the outstanding debt.
Management's continuing overall goal is to preserve and protect
the Partnership's assets. As discussed above, the ongoing
business plan for the Partnership is to strive to improve its
cash flow within the limitations of local market conditions,
reduce debt and build reserves. Additionally, the general partner
is actively pursuing the restructuring of existing debt at lower
interest rates to help facilitate the overall plan. The
Partnership also continues to strive to maintain stable
operations and endure the challenges of the market by keeping
distributions suspended and offering experienced day to day
management of income and expenditures.
Results of Operations
---------------------
Despite relatively stable average occupancy at virtually all
remaining properties, total rental revenues decreased from
$1,406,000 during the three months ended March 31, 1994 to
$1,058,000 during the three months ended March 31, 1995. This
$348,000 decrease is primarily due to the June 1994 sale of the
Las Palomas Apartments. Also related to this sale is the increase
in interest and other revenue during the three months ended March
31, 1995 over the same period in 1994 due to the short-term
investment of the sale proceeds.
As would be expected as a result of the property sale, operating
expenses, interest expense and depreciation and amortization
decreased in the first quarter of 1995 compared to the first
quarter of 1994.
175 South West Temple:
175 South West Temple was in the process of being turned over to
the lender in a amicable foreclosure at March 31, 1995. A
receiver was appointed and began managing the property on March
6, 1995 as part of the completion of the foreclosure which
occurred on April 25, 1995. Extraordinary gain on this
foreclosure of approximately $3,284,000 will be recognized in the
second quarter of 1995.
San Mar Plaza:
San Mar Plaza was 98% occupied at March 31, 1995. Occupancy has
remained at this level since 1993 despite the stagnant economy of
the property's suburban Texas market. During this period,
management has also been able to increase the average annual rent
without jeopardizing the occupancy level. At March 31, 1995, the
property had 1,600 square feet of space vacant, two leases
totaling 2,100 square feet in which the tenants remained in the
space on month to month holdovers, and an additional 1,600 square
feet of projected lease expirations in 1995. The two leases
totaling 2,100 square feet were temporarily held over on month-
to-month leases while the tenant currently occupying the 1,600
Page 9 of 12
square feet of space expiring later in 1995 is expected to renew
their lease. Management continues to market its vacant spaces,
primarily targeting national franchises and multi-unit regional
operators. In 1995, the Partnership has budgeted $8,600 for
tenant improvements and leasing commissions to support this
activity and has allocated $30,500 for security lighting in the
parking areas.
Silver Creek:
Silver Creek was 83% occupied at March 31, 1995, which was one
percentage point less than the March 31, 1994 occupancy and
equivalent to the market average and activity level for it's San
Jose area. The surrounding market is stable but potential
tenants are rate and tenant improvement sensitive. Management
offered flexibility in marketing the vacant suites with build-to-
suit terms and below original proforma budget rent to move in.
In the first quarter of 1995, one tenant occupying 2,300 square
feet renewed its lease while a tenant occupying 7,000 square feet
of space has expressed an intent to vacate their space upon their
May 1995 lease expiration. Management has negotiated with a
prospective tenant to lease 10,370 square feet in the latter part
of 1995, which encompasses the anticipated 7,000 square foot
vacancy discussed above. In addition, management has been
actively marketing the vacant parcels and is currently
negotiating to fully lease the vacant parcels (ground leases).
The Partnership has budgeted $56,000 for tenant improvements and
leasing commissions to support these leasing activities and has
allocated $19,000 for capital improvements to the parking lot in
1995.
The Huntington Breakers Apartments:
The Huntington Breakers Apartments joint venture arrangement was
very complex and included an income guaranty from the developer
to the Partnership. The developer defaulted on the income
guaranty and no amounts were ever paid. Following lengthy
negotiations, the developer agreed to pay the guaranteed amounts,
but the Partnership allowed the payments to be deferred and
collected as a priority claim against future cash flow. Under
the joint venture agreement, the Partnership has an annual cash
flow priority of $700,000. The property has never reached this
cash flow and no guarantee amounts have ever been received.
The property was 92% occupied at March 31, 1995 and March 31,
1994 which is favorable when compared to the average occupancy
for competing apartment complexes in the same area. The City of
Huntington Beach underwent major redevelopment during 1992 and
1993 and the market has good potential but not without heavy
competition. Lower occupancies in competing complexes have led
the competition to offer heavy concessions and lower rental
rates, but management has been able to hold back from offering
rent concessions and major rate reductions of its own. If the
competition continues to cut their rental rates, management may
be driven to respond accordingly. Through all this, management
has continued an aggressive marketing campaign to attract new
tenants and maintain occupancy. Despite these efforts, the
property has operated at a negative cash flow so far during 1995
after reserving for semi annual and quarterly debt service
payments.
Page 10 of 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is not a party to, nor any of its
assets the subject of any material pending legal
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K
Registrant filed a Current Report on Form 8-K, dated
April 27, 1995 disclosing the foreclosure on the deed
of trust securing the 175 S.W. Temple property and its
related pro forma financial information representing
the Registrant's December 31, 1994 balance sheet and
statement of operations for the year ended December 31,
1994, adjusted to eliminate the balances and operating
results of the 175 S.W. Temple property.
Page 11 of 12
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.
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
By: Glenborough Realty Corporation,
a California corporation
Managing General Partner
Date: May 10, 1995 By:
Andrew Batinovich
Senior Vice President,
Chief Financial Officer
and Director
Page 12 of 12
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.
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
By: Glenborough Realty Corporation,
a California corporation
Managing General Partner
Date: May 10, 1995 By: /s/ Andrew Batinovich
Andrew Batinovich
Senior Vice President,
Chief Financial Officer
and Director
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 2195
<SECURITIES> 0
<RECEIVABLES> 841
<ALLOWANCES> 0
<INVENTORY> 7365
<CURRENT-ASSETS> 180
<PP&E> 21932
<DEPRECIATION> (4316)
<TOTAL-ASSETS> 28575
<CURRENT-LIABILITIES> 273
<BONDS> 25103
<COMMON> 0
0
0
<OTHER-SE> 3130
<TOTAL-LIABILITY-AND-EQUITY> 28575
<SALES> 0
<TOTAL-REVENUES> 1102
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 794
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 528
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (220)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (395)
<EPS-PRIMARY> (31.47)
<EPS-DILUTED> (31.47)
</TABLE>
