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, 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: 0-14593
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, 1996: 35,000
Page 1 of 15
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
March 31, December 31,
1996 1995
-------- --------
Assets
-------
Real estate investments, at cost:
Land $ 7,885 $ 7,885
Buildings and improvements 13,036 13,036
-------- --------
20,921 20,921
Less accumulated depreciation and amortization (4,787) (4,671)
-------- --------
Net real estate investments 16,134 16,250
Investment in and advances to unconsolidated
joint venture 272 481
Cash and cash equivalents 1,722 1,816
Accounts receivable, net 97 51
Prepaid expenses and other assets, net 104 55
Deferred financing costs and other fees, net
of accumulated amortization of $468 and $456
for March 31, 1996 and December 31, 1995,
respectively 152 151
-------- --------
$ 18,481 $ 18,804
======== ========
Liabilities and Partners' Equity (Deficit)
------------------------------------------
Notes payable - secured $ 14,921 $ 14,959
Accounts payable and accrued expenses 202 195
Deferred income and security deposits 59 64
-------- --------
Total liabilities 15,182 15,218
-------- --------
Partners' equity (deficit):
---------------------------
General Partner (134) (128)
Limited Partners, 35,000 limited
partnership units outstanding 3,433 3,714
-------- --------
Total partners' equity 3,299 3,586
-------- --------
$ 18,481 $ 18,804
======== ========
See accompanying notes to financial statements.
Page 2 of 15
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
(in thousands, except per unit amounts)
(Unaudited)
Three months ended
March 31,
------------------
1996 1995
------ -----
Revenues:
Operating $ 605 $ 1,058
Interest and other 21 44
-------- --------
Total revenues 626 1,102
-------- --------
Expenses:
Operating (including $34 and $64
paid to affiliates in the three
months ended March 31, 1996 and
1995, respectively) 163 342
Interest 357 528
Depreciation and amortization 155 277
General and administrative
(including $118 and $146 paid
to affiliates in the three
months ended March 31, 1996
and 1995, respectively) 160 175
-------- --------
Total expenses 835 1,322
-------- --------
Loss before equity in loss of
unconsolidated joint venture (209) (220)
Equity in loss of unconsolidated
joint venture (78) (175)
-------- --------
Net loss $ (287) $ (395)
======== ========
Net loss per limited partnership
"Current Unit" $ (22.87) $ (31.47)
======== ========
See accompanying notes to financial statements.
Page 3 of 15
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity (Deficit)
(in thousands)
For the three months ended March 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Limited Partners Total
General ------------- Limited
Partners'
Partner Current Deferred Growth Partners Equity
-------- ------- -------- ------ -------- ------
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
====== ====== ====== ====== ====== ======
Balance at
December 31, 1995 $ (128) $3,714 $ --- $ --- $3,714 $3,586
Net loss (6) (281) --- --- (281)
(287)
------ ------ ------ ------ ------ ------
Balance at
March 31, 1996 $ (134) $3,433 $ --- $ --- $3,433 $3,299
====== ====== ====== ====== ====== ======
</TABLE>
See accompanying notes to financial statements.
Page 4 of 15
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows (in thousands)
(Unaudited)
Three months ended
March 31,
------------------
1996 1995
------ ------
Cash flows from operating activities:
Net loss $ (287) $ (395)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 155 277
Equity in loss of unconsolidated joint venture 78 175
Changes in assets and liabilities:
Accounts receivable (46) 1
Prepaid expenses and other assets (49) (73)
Deferred financing and other fees (13) (3)
Accounts payable and accrued expenses 6 75
Deferred income and security deposits (5) 10
------- -------
Net cash provided by operating activities (161) 67
------- -------
Cash flows from investing activities:
Property additions --- (55)
Payments received on notes receivable
from unconsolidated joint venture 105 ---
Additions to notes receivable from
unconsolidated joint venture --- (12)
------- -------
Net cash provided by (used in) investing activities 105 (67)
------- -------
Cash flows from financing activities:
Notes payable principal payments (38) (102)
Increase in restricted cash --- (45)
------- -------
Cash used in financing activities (38) (147)
------- -------
Net decrease in cash and cash equivalents (94) (147)
Cash and cash equivalents at beginning of period 1,816 2,297
------- -------
Cash and cash equivalents at end of period $ 1,722 $ 2,150
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 298 $ 499
======= =======
See accompanying notes to financial statements.
Page 5 of 15
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1996
(Unaudited)
Note 1. SIGNIFICANT ACCOUNTING POLICY
-------------------------------
In the opinion of Glenborough Corporation (formerly 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 Outlook Income/Growth
Fund VIII, A California Limited Partnership (the "Partnership"),
at March 31, 1996 and December 31, 1995, and the related
statements of operations, changes in partners' equity and cash
flows for the three months ended March 31, 1996 and 1995.
Note 2. REFERENCE TO 1995 AUDITED FINANCIAL STATEMENTS
----------------------------------------------
These unaudited financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements
included in the 1995 audited financial statements.
Note 3. TRANSACTIONS WITH AFFILIATES
----------------------------
Glenborough Corporation ("Glenborough") 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, 1996 and 1995:
1996 1995
------ ------
Management fees $ 28,000 $ 46,000
Property salaries (reimbursed) 6,000 18,000
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 $118,000 and $146,000 by the
Partnership for such expenses during the three months ended March
31, 1996 and 1995, respectively. Such amounts are included in
general and administrative expenses.
Note 4. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
------------------------------------------
On December 31, 1986, the Partnership purchased 49 existing
general partner units representing an undivided 49% interest in
the "Breakers Partnership". Concurrent with this purchase, the
Partnership acquired the right to obtain one additional general
partner unit. This right was exercised by the Partnership in
January 1988 for a purchase price of $20,000, which increased its
interest in the Breakers Partnership to 50%. The Breakers
Page 6 of 15
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1996
(Unaudited)
Partnership owns a 342-unit apartment complex located in
Huntington Beach, California which was completed in March 1986.
The investments in and advances to unconsolidated joint venture
is comprised of the following (in thousands):
March 31, December 31,
1996 1995
--------- ---------
Equity interest $ (2,267) $ (2,483)
Acquisition fees 553 553
Legal, appraisal and other costs 2,575 2,575
Amortization of acquisition fee,
legal and appraisal expenses (965) (938)
Advances to unconsolidated joint venture 272 481
Excess losses - reduction in advances
to Breakers 104 293
------- -------
Investments in and advances to
unconsolidated joint venture $ 272 $ 481
======= =======
Page 7 of 15
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1996
(Unaudited)
Summary condensed balance sheet information as of March 31, 1996
and December 31, 1995, and condensed statements of operations for
the three months ended March 31, 1996 and 1995, are as follows
(in thousands):
Huntington Breakers Apartments, Limited,
A California Limited Partnership
Balance Sheets
March 31, December 31,
1996 1995
------- -------
Net real estate investment $ 16,222 $ 16,386
Other assets 2,288 1,909
-------- --------
Total assets $ 18,510 $ 18,295
======== ========
Notes payable $ 20,500 $ 20,500
Notes payable to Outlook Income
Growth Fund VIII 669 774
Other liabilities 1,519 1,121
-------- --------
Total liabilities 22,688 22,395
-------- --------
Partner's Equity (Deficit):
Outlook Income Growth Fund VIII (2,560) (2,483)
Other Partners, net (1,618) (1,617)
-------- --------
Total Partners' Deficit (4,178) (4,100)
-------- --------
$ 18,510 $ 18,295
======== ========
Page 8 of 15
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1996
(Unaudited)
Huntington Breakers Apartments, Limited,
A California Limited Partnership
Statements of Operations
For the three months ended March 31, 1996 and 1995
1996 1995
-------- --------
Revenues $ 899 $ 796
Expenses 977 971
-------- --------
Net Loss $ (78) $
(175)
======== ========
A summary of notes payable are as follows (in thousands):
1996 1995
------- -------
7.2% note payable secured by a
first deed of trust and letter of
credit in the amount of
$16,640,000, payable in semi-annual
(interest only in the amount of
$576,000 installments until
maturity on July 1, 2014 at which
time all remaining principal and
interest will be due
and payable $ 16,000 $ 16,000
9.75% note payable secured by a
second trust deed, payable in
monthly interest only installments
of approximately $36,600 until July
1, 1996, at which time all
remaining principal and interest
will be due
and payable 4,500 4,500
------- -------
$ 20,500 $ 20,500
======= =======
The note payable in the amount of $16,000,000 was given by the
Partnership for the proceeds of City of Huntington Beach
Multifamily Mortgage Revenue Refunding Bonds, Issue of 1989 (the
"Bonds"). The Bonds bear the same interest rate and due date as
the 7.2% note payable and are limited obligations of the City of
Huntington Beach payable solely out of the proceeds from payments
Page 9 of 15
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
March 31, 1996
(Unaudited)
on the 7.2% note payable from the Partnership and from drawings
on the related letter of credit.
The Bonds are subject to mandatory tender and redemption on the
interest payment date immediately preceding the expiration of the
above mentioned letter of credit on July 15, 1996. The
Partnership must obtain and is currently working on a firm
commitment to purchase the Bonds prior to this date, or drawings
will be made on the letter of credit for redemption of the Bonds
at par value. Management believes that reasonable financing will
be secured prior to the July 15, 1996 letter of credit
expiration. If the Partnership obtains an extension, or
substitute, to the letter of credit, then the date of mandatory
tender and redemption will be likewise extended.
The Bonds are subject to optional redemption beginning July 1,
1999 at a premium of 2% above par, decreasing to par on July 1,
2003.
Note 5. PROPERTY DISPOSITION
--------------------
On March 6, 1995, management of 175 South West Temple, a 145,075
square foot office space 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. 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.
On April 28, 1995, the deed of trust was foreclosed and the
lender obtained title to the property. The outstanding debt
(including previously deferred interest) was $10,095,000 while
net assets totaled $7,448,000, resulting in an extraordinary gain
on debt forgiveness of $2,647,000.
Page 10 of 15
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
(12,297 units currently outstanding); (ii) Deferred Units (8,428
units currently outstanding); and (iii) Growth Units (14,275
units currently outstanding). 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
September 30, 1986 through the quarter ended December 31, 1987,
and at a 6% rate from January 1, 1988, through the quarter ended
September 30, 1988, at which time distributions were suspended.
At this time distributions remain suspended and management is
unable to predict when distributions will resume.
On April 28, 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 deed-in-lieu of
foreclosure 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 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.
The Huntington Breakers joint venture has generated losses in
excess of the Partnership's original investment. Such excess
losses have been applied as a reduction in the advances to the
unconsolidated joint venture. Any future excess losses exceeding
the balance in advances to the unconsolidated joint venture will
be suspended.
Management's continuing overall goal is to preserve and protect
the Partnership's assets. 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
Page 11 of 15
of the market by suspending distributions and offering
experienced day to day management of income and expenditures.
Results of Operations
---------------------
The April 1995 negotiated foreclosure on 175 South West Temple,
discussed above, accounts for the majority of the decrease in
total rental revenue from $1,058,000 during the three months
ended March 31, 1995 to $605,000 during the three months ended
March 31, 1996.
Interest and other revenue has decreased during the three months
ended March 31, 1996 over the same period in 1995 primarily due
to the 1996 elimination of interest accruals on the Huntington
Breakers Partnership note receivable.
As would be expected as a result of the property disposition
(discussed above) in 1995, operating expenses, general and
administrative expenses, interest expense and depreciation and
amortization decreased during the three months ended March 31,
1996 compared to the same period in 1995.
San Mar Plaza:
San Mar Plaza was 97% occupied at March 31, 1996, which was one
percent below the 98% occupancy level at March 31, 1995. At
March 31, 1996, the property had 2,650 square feet of vacant
space. One tenant, occupying a total of 1,050 square feet of
space is currently on month to month holdover, while another
tenant whose lease expired will vacate its 2,800 square foot
space. Management has re-leased the 2,800 square foot space.
Management continues to market its vacant space, primarily
targeting national franchises and multi-unit regional operators.
The loan secured by San Mar Plaza matures on July 31, 1996.
Management is negotiating with the current lender for a
refinance, but no conclusion has been reached. Due to the
estimated current fair value of the property being less than the
current loan balance, it does not appear likely that the loan can
be refinanced with an outside lender. Therefore, in 1995, the
Partnership recognized a loss provision for impairment of
investment in real estate of $1,015,000.
Silver Creek:
Silver Creek was 84% occupied at March 31, 1996, which was one
percentage point less than the March 31, 1995 occupancy. In
1996, two leases totalling 5,000 square feet of space had
expired. One lease renewal has been completed, while another
renewal is awaiting signature. Management also believes that the
market is strong enough that it can now concentrate on upgrading
the tenant mix to strengthen the center.
Huntington Breakers Apartments:
The Huntington Breakers Apartments joint venture arrangement
included an income guaranty from the developer to the
Page 12 of 15
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 guaranty amounts have ever been received.
The property was 93% occupied at March 31, 1996, which is one
percentage point above the March 31, 1995 occupancy. 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.
Page 13 of 15
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
No reports on Form 8-K were required to be filed during
this reporting period.
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.
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
By: Glenborough Corporation,
(formerly Glenborough Realty
Corporation)
a California corporation
Managing General Partner
Date: May 13, 1996 By: /s/ TERRI GARNICK
Terri Garnick
Chief Financial Officer
Page 15 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000771998
<NAME> OUTLOOK INCOME GROWTH FUND VIII
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1722
<SECURITIES> 0
<RECEIVABLES> 97
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1819
<PP&E> 20921
<DEPRECIATION> (4787)
<TOTAL-ASSETS> 18481
<CURRENT-LIABILITIES> 202
<BONDS> 14921
0
0
<COMMON> 0
<OTHER-SE> 3299
<TOTAL-LIABILITY-AND-EQUITY> 18481
<SALES> 0
<TOTAL-REVENUES> 626
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 556
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357
<INCOME-PRETAX> (287)
<INCOME-TAX> 0
<INCOME-CONTINUING> (287)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (287)
<EPS-PRIMARY> (22.87)
<EPS-DILUTED> (22.87)
</TABLE>
