UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended December 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 (I.R.S. Employer
of incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100
San Mateo, California 94402-1708
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (415) 343-9300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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
No market for the Limited Partnership Units exists and therefore a market value
for such Units cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE: None
EXHIBIT INDEX LOCATED ON PAGE 27
Page 1 of 44
<PAGE>
PART I
Item 1. Business
Outlook Income/Growth Fund VIII, A California Limited Partnership ("the
Partnership"), was formed on June 21, 1985, under the California Revised Limited
Partnership Act. The Partnership's public offering commenced on January 24, 1986
and concluded on January 23, 1987, through the sale and issuance of 35,000
limited partnership units for a total of $35,000,000. The Partnership's
operations began on March 10, 1986, when its impound requirements were met. With
limited exceptions, Glenborough Corporation, as Managing General Partner, and
Robert Batinovich, as General Partner, (collectively "Glenborough" or "the
Managing General Partner") have exclusive control over the business of the
Partnership, including the right to manage the Partnership's assets.
The Partnership's primary business is to invest in and operate existing
income-producing properties (or interests therein), which are expected to
generate cash flow from operations as well as cover the expenses of the
Partnership. At December 31, 1996, the Partnership owned interests in three
properties (individually, a "Property" or collectively the "Properties"), which
are more fully described in Item 2. The Properties are managed on behalf of the
Partnership by Glenborough Corporation.
In December 1996, Glenborough Partners, an affiliate of the Partnership,
purchased 931 limited partnership units (a 2.7% interest) from an unaffiliated
limited partner for $163,000.
Management intends to present a plan of Partnership liquidation for an investor
vote in 1997. The carrying value of the investments in real estate at December
31, 1996 does not purport to represent the ultimate sales price the Partnership
will realize from the disposition of these assets nor are the amounts reflected
in the accompanying financial statements intended to represent the ultimate
amount to be distributed to partners if the plan is adopted.
Competition
The Managing General Partner believes that characteristics influencing the
competitiveness of a real estate project include the geographic location of the
property, the professionalism of the property manager and the maintenance and
appearance of the property, in addition to external factors such as general
economic circumstances, trends, and the existence of new, competing properties
in the vicinity. Additional competitive factors include the ease of access to
the property, the adequacy of related facilities, such as parking, and the
ability to provide rent concessions and tenant improvements commensurate with
local market conditions. Such competition may lead to rent concessions that
could adversely affect the Partnership's cash flow. Although the Managing
General Partner believes the Partnership's Properties are competitive with
comparable properties as to those factors within the Partnership's control,
over-building and other external factors could adversely affect the ability of
the Partnership to attract and retain tenants. The marketability of the
Properties may also be affected (either positively or negatively) by these
factors as well as by changes in general or local economic conditions, including
prevailing interest rates. Depending on market and economic conditions, the
Partnership may be required to retain ownership of its Properties for periods
longer than anticipated at acquisition, or may need to sell earlier than
anticipated or refinance a Property, at a time or under terms and conditions
that are less advantageous than would be the case if unfavorable economic or
market conditions did not exist.
Working Capital
The Partnership's practice is to maintain cash reserves for normal repairs,
replacements, working capital and other contingencies. The Partnership knows of
no statistical information which allows comparison of its cash reserves to those
of its competitors.
Page 2 of 44
<PAGE>
Other Factors
Federal, state and local statutes, ordinances and regulations which have been
enacted or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment do not presently have a
material effect on the operations of the Properties nor on the capital
expenditures, earnings or competitive position of the Partnership.
The Partnership does not directly employ any individuals. All regular employees
rendering services on behalf of the Partnership are employees of Glenborough or
its affiliates.
The business of the Partnership to date has involved only one industry segment,
real estate. The Partnership has no foreign operations and the business of the
Partnership is not seasonal.
Item 2. Properties
At December 31, 1996, the Partnership owns the following properties:
San Mar Plaza
On June 27, 1986, the Partnership purchased San Mar Plaza, a shopping center in
the City of San Marcos, Hays County, Texas. Total consideration paid of
$10,219,000 included cash of $3,219,000 and assumption of a first deed of trust
on the property in the original amount of $7,000,000.
The property is located at the intersection of Interstate 35 and Texas State
Highway 80 affording the property high visibility. San Marcos is approximately
halfway between the cities of Austin and San Antonio. San Mar Plaza is a
multi-tenant community retail center of concrete tilt-wall construction. The
center consists of seven buildings with approximately 96,206 rentable square
feet on 10.3 acres of land. The shopping center was constructed in 1982 and
expanded in early 1986, and has parking for approximately 446 cars.
San Marcos has experienced economic and business development growth during the
last six years as a result of growth in the high-tech, state government,
academia, medical, development and finance areas. An outlet mall constructed in
1993 is now the major retail draw for national and regional tenants in San
Marcos. San Mar Plaza has been unable to compete with the outlet mall due to the
lack of a non-grocery anchor and the relocation of an adjacent Wal-Mart store.
Management is targeting national franchises, multi-unit regional operators and
local operators as prospective tenants at San Mar Plaza.
According to research conducted by the property manager, comparable retail space
is leasing for $11.00 per square foot per year. The closest competing shopping
center to San Mar Plaza is San Marcos Place, which leases at an annual effective
rate of $10.00 per square foot. Overall, property rents are gradually improving,
but not significantly at this time.
At December 31, 1996, with 12,562 square feet of vacant space plus an additional
4,600 square feet of projected lease expirations in 1997, management continues
to negotiate renewals and market its vacant spaces. In August 1996, 11,000
square feet of the current vacancy of 12,562 square feet occurred when Hastings
Books, Music & Video terminated its lease and sub-leased the vacant grocery
store space currently leased by The Kroger Company. Although the Hastings Books,
Music and Video move created vacant space it provided San Mar Plaza with an
anchor tenant and improved marketing opportunities. Current prospects for the
11,000 square feet of vacant space include a restaurant, ladies apparel and
furniture stores. The Partnership has budgeted $105,000 for tenant improvements
and leasing commissions to support 1997 leasing activity.
Page 3 of 44
<PAGE>
The occupancy level at December 31, expressed as a percentage of the total net
rentable square feet, and the average annual effective rent per square foot for
the last five years were as follows:
Occupancy Level Average Annual Effective
Year Percentage Rent Per Square Foot
- ---- ---------- --------------------
1996 87% $9.90
1995 97% $9.81
1994 98% $9.64
1993 98% $9.55
1992 94% $8.87
Average annual rent increased in 1996, despite the decrease in occupancy, due to
rent increases on existing leases. Current annual effective rental rates for all
except one tenant range from $8.00 to $14.92 per square foot. One tenant has an
annual effective rent of $34.06 per square foot. The premium rent on this lease
is due to the small square footage leased by the tenant (575 square feet).
The following two tenants lease ten percent or more of the net rentable square
footage of the property at December 31, 1996. The principal provisions of their
leases and the nature of their businesses are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
The Kroger Company
Tenant sub-let to Hastings Lone Star Theaters
- ------ ------------------- ------------------
Nature of Business Supermarket Cinema
Lease Term 20 years 20 years
Expiration Date 10/31/02 4/30/03
Square Feet 34,019 13,800
(% of Total) 35.4% 14.3%
Annual Rent $272,150 $151,800
Rent Increases None 9% in May 1998
Percentage Rent 1%, based on gross sales over $27,200,000 7.5%, based on gross sales over $2,024,000
Renewal Options 6-5 year options 1-10 year option
</TABLE>
In the opinion of management, the property is adequately covered by insurance.
During 1996, San Mar Plaza was assessed property taxes of approximately $95,000
based on a tax rate of 2.322%.
The property is owned by the Partnership in fee, secured by a note and first
deed of trust and security agreement in the amount of $6,496,000. The note bears
interest at an annual rate of 9.38% payable in monthly installments of principal
and interest of $60,600 until the maturity date of April 1, 1997, at which time
all principal and interest will be due and payable. The Partnership and the
lender are negotiating a five year extension beyond the maturity date of April
1, 1997.
Silver Creek Plaza
Silver Creek Plaza is a retail shopping center located in San Jose, California.
The Partnership purchased an undivided 66.21% interest in the property in 1986
and the remaining 33.79% interest in 1991.
The property is well designed with excellent exposure to Capitol Expressway (a
major thoroughfare) and Silver Creek Road in a residential neighborhood of San
Jose known as Evergreen Valley. Silver Creek Plaza consists of 154,000 square
feet of leasable space which is comprised of 83,000 square feet of ground leases
and 71,000 square feet of leaseable retail space. Silver Creek Plaza benefits
from strong neighboring anchor tenants including a 41,000 square foot Safeway
supermarket and a 65,000 square foot Orchard Supply Hardware store. Safeway and
Orchard Supply Hardware both own their respective facilities and are not
Page 4 of 44
<PAGE>
included in the property; however, these two stores have common area leases with
the Partnership and pursuant thereto pay a prorata share of common area
expenses.
According to research conducted by the Partnership's property manager, the
Evergreen Valley district consists of single family homes, mobile home parks and
apartment complexes, characterized as a highly diverse ethnic population. The
surrounding projects include Silver Creek Market Place, which is a strip center
to the south, Target Shopping Center and Aborn Square. Annual asking rental
rates for available space in the immediate area range from $13.80 to $14.40 per
square foot. Larger space (over 10,000 square feet) leases for approximately
$8.40 to $10.20 per square foot per year.
In early 1997, two leases totaling 5,000 square feet of space expired. One
tenant is currently on holdover while a lease amendment is being negotiated and
the second tenant has renewed their lease for one year. Management is optimistic
about leasing the vacant spaces since a number of potential tenants have
expressed interest in the shopping center.
The occupancy level at December 31, expressed as a percentage of the total net
rentable square feet, and the average annual effective rent per square foot
(both of which exclude the ground leases) for the last five years were:
Occupancy Level Average Annual Effective
Year Percentage Rent Per Square Foot
- ---- ----------------------- --------------------
1996 79% $14.40
1995 66% $15.84
1994 78% $18.36
1993 88% $18.89
1992 77% $19.64
Current annual effective rental rates (for all except three tenants, see below)
range from $12.30 to $24.83 per square foot for the retail space and $2.42 to
$13.33 per square foot for the ground leases.
Average annual rent decreased in 1996, despite the increase in occupancy, due to
a new tenant occupying 7,000 square feet of space with an annual effective
rental rate of $6.00 coupled with the January 1996 vacancy of 3,370 square feet
of space which previously rented at an annual effective rental rate of $15.00.
In addition, two existing tenants received rental reductions in 1996, one
reduction was given upon renewal of a lease, the other reduction occurred with a
lease amendment. The tenant with an annual effective rent of $6.00 per square
foot is on a month-to-month lease and will be vacating in 1997. Another tenant
who signed a lease in 1981 with fixed rental rate increases pays an annual
effective rental rate of $9.96, this lease expires in 2000. The third lease
provides for a premium rent of $30.96 per square foot per year as the square
footage leased by the tenant is only 310 square feet.
The following two tenants lease ten percent or more of the net leasable square
footage of the retail space. The principal provisions of the leases and the
nature of the tenants' businesses are as follows:
Tenant Walgreen's Wherehouse Entertainment
- ------ ---------- ------------------------
Nature of Business Retail/Pharmacy Retail
Lease Term 30 years 6 years
Expiration Date 7/31/12 1/31/02
Square Feet 16,000 8,400
(% of Total) 22.5% 11.8%
Annual rent $159,360 $143,220
Percentage rent 2% of sales up to $4,000,000 3% of sales, monthly
1.5% over $4,000,000 breakpoint $11,760
Future Rent Increases None July 28, 1997
Renewal Options Right to terminate None
in 2002 and 2007
Page 5 of 44
<PAGE>
In the opinion of management, the property is adequately covered by insurance.
During 1996, Silver Creek Plaza was assessed property taxes of approximately
$181,000 based on a tax rate of 1.285%.
The property is owned by the Partnership subject to first and second deeds of
trust notes. The first deed of trust note in the amount of $7,269,000 at
December 31, 1996, accrued interest at an annual rate of 9.75% and required
monthly principal and interest payments of $64,800 until maturity in January
1997, when the outstanding principal and interest became due. The second deed of
trust note in the amount of $1,007,000 at December 31, 1996, bore interest at
the Bank of America prime rate plus one percent (9.25% at December 31, 1996)
until the modified maturity date of December 31, 1996, at which time all
remaining principal and interest became due and payable.
On January 27, 1997, the Partnership refinanced the first and second deeds of
trust notes. The new note in the amount of $8,500,000, secured by a first deed
of trust on the property, bears interest at the Wells Fargo Bank prime rate plus
one and one half percent and is payable in monthly installments of interest only
until the maturity date of January 22, 1998.
Silver Creek was listed for sale at December 31, 1996 for $10,200,000 with a
commercial brokerage firm and is classified as held for sale on the
Partnership's 1996 balance sheet. The Partnership expects to sell the property
prior to the January 22, 1998 maturity of the new note.
Huntington Breakers Apartments
On December 31, 1986, the Partnership purchased 49 general partner units
representing an undivided 49% interest in a California limited partnership known
as Huntington Breakers Apartments, Limited, A California Limited Partnership
("Breakers Partnership"). The 49% interest was acquired for a purchase price of
$6,900,000 and assumption of a prorata share of the existing debt. Concurrent
with this purchase, the Partnership acquired the right to obtain one additional
general partner unit which it acquired in January 1988 for a purchase price of
$20,000, increasing its interest in the Breakers Partnership to 50%.
The joint venture arrangement included an income guarantee from the developer to
the Partnership. The developer defaulted on the income guarantee and no amounts
were ever paid. Following lengthy negotiations, the developer agreed to pay the
guaranteed amounts, but the Partnership allowed payments to be deferred and
collected as a priority claim against future cash flow. The Partnership's annual
cash flow priority is $700,000. To date, the property has never reached this
amount and no income guarantee has ever been paid.
The Breakers Partnership owns a 342-unit apartment complex located at 21270
Beach Boulevard, immediately north of Pacific Coast Highway in Huntington Beach,
Orange County, California. The property is located less than a quarter of a mile
from the beach at Huntington State Park on a major north-south thoroughfare,
Beach Boulevard, also known as State Highway 39.
The property is built in the Cape Cod design with well maintained landscaping
throughout the community. It was built over half basements which provide covered
parking for the residents, and the entire property is protected by a gated
entryway with card key system access. The property was developed in two phases;
the first was completed in September 1985 and the second in March 1986. The
construction of the property was financed with proceeds from the sale of
$16,000,000 of Multifamily Mortgage Revenue Refunding bonds issued by the City
of Huntington Beach on behalf of the Partnership.
Management continues to promote and market Huntington Breakers with its close
proximity to the ocean, fitness center, free cable television hookup, planned
activities, and gated access. According to research conducted by the
Partnership's property manager, the main competitive property is approximately
one mile inland and offers larger rooms, more closet space, washer and dryers in
apartments, balconies, and two assigned parking stalls per apartment. Other
complexes in the area that are competitive with Huntington Breakers are located
Page 6 of 44
<PAGE>
further inland, away from Huntington Beach. Residents attracted to the competing
complexes are interested in lower rents and larger apartments. In 1996,
occupancies in the competing complexes improved to approximately 94% and the
competition reduced rental concessions offered to draw in new tenants.
Management believes the market has improved and continues an aggressive
marketing campaign to attract new tenants and maintain occupancy.
The 1997 goal is to reduce the number of short-term leases and increase the
retention of residents. Management intends to offer new features including
activity programs, a putting green, fitness center and big screen TV in the
clubhouse. $74,000 in capital improvements have been budgeted in 1997 to
maintain the appearance and condition of the apartment complex.
The occupancy level at December 31, expressed as a percentage of the total
apartments available for rent, and the average monthly rental rate range (from
unfurnished to furnished 12 month leases) for the apartments for the last five
years were:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Occupancy Rate 92% 94% 85% 84% 90%
Rental Rate Ranges:
Studio $695-895 $695-895 $695-870 $695-870 $648-781
1-Bedroom/
1-Bath Flat $745-945 $745-945 $820-1,020 $820-1,020 $779-935
1-Bath Townhouse $840-1,040 $840-1,040 $820-1,020 $820-1,020 $787-913
2-Bedroom/
2-Bath Flat $1,075-1,125 $1,040-1,090 $1,020-1,270 $1,020-1,270 $1,007-1,110
2-Bath Townhouse $1,075-1,325 $1,040-1,290 $1,020-1,270 $1,020-1,270 $972-1,159
</TABLE>
In the opinion of management, the property is adequately covered by insurance.
During 1996, Huntington Breakers was assessed property taxes of approximately
$209,000 based on a tax rate of 1.119%.
The property secures first and second deeds of trust notes in the amounts of
$16,000,000 and $3,761,000, respectively, at December 31, 1996. The first deed
of trust note accrues interest at a 7 day variable rate (4.20% at December 31,
1996) and is payable in monthly interest only installments until maturity on
July 1, 2014, at which time all remaining principal and interest will be due and
payable. The second deed of trust note accrues interest at LIBOR plus 1.5%
payable in monthly interest only installments until June 1, 2001, at which time
all remaining principal and interest will be due and payable.
The Breakers Partnership must comply with certain covenants related to the
aforementioned notes, including maintenance of a Cash Collateral Account, as
defined, quarterly excess property income, and the holding open for lease at
least 20% of the property's units to tenants qualifying as "low income". It is
management's opinion that the Breakers Partnership is in compliance with all
required terms of the loan agreement.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Page 7 of 44
<PAGE>
PART II
Item 5. Market for Partnership's Common Equity and Related Stockholder Matters
Market Information
The units of limited partnership interest in the Partnership ("Units") have
limited transferability. There is no public market for the Units and it is not
expected that any will develop. There are restrictions upon the transferability
of Units, including requirements as to the minimum number of Units which may be
transferred, and that the General Partners must consent to any transferee
becoming a substituted limited partner (which consent may be granted or withheld
at the sole discretion of the General Partner). In addition, restrictions on
transfer may be imposed under certain state securities laws. Consequently,
holders of Units may not be able to liquidate their investments and the Units
may not be readily acceptable as collateral.
Holders
At December 31, 1996, 742 holders of record held 12,297 Current Units (Current
"A" Units); 855 holders of record held 8,424 Deferred Units (Deferred "A"
Units); and 1,339 holders of record held 14,271 Growth Units ("B" Units). During
1996, four deferred units and four growth units were abandoned. Units are
abandoned when the holder desires to no longer receive a K-1 from the
Partnership.
Cash Distributions
The Partnership paid distributions on the Current "A"Units at an annual rate of
9% from the quarter ended June 30, 1986 through the quarter ended December 31,
1987, and at an annual rate of 6% 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. Funds are not expected to become available for
distribution to the owners of the Deferred "A" and "B" Units until the
properties acquired by the Partnership are either refinanced or sold and all
specified priority entitlements have been satisfied.
At December 31, 1996, holders of Current "A" Units had an original capital
balance of $12,297,000 and accumulated priority returns of approximately
$9,599,800. Holders of Deferred "A" Units had an original capital balance of
$8,428,000 and accumulated priority returns of approximately $14,077,000.
Holders of "B" Units had an original capital balance of $14,275,000 and
accumulated priority returns of approximately $14,941,700.
The capital account balances to holders of Current "A" Units are continuing to
accrue a priority return at the rate of 9% per annum. The capital account
balances to holders of Deferred "A" Units are continuing to accrue a priority
return at the rate of 16% per annum. The capital account balances to holders of
"B" Units are continuing to accrue a priority return at the rate of 10% per
annum. These amounts, however, do not represent obligations of the Partnership,
but only represent the amounts which must be paid to the holders of the Units
before additional payments will be made to other partners. Reference should be
made to the Partnership's partnership agreement for a more complete description
of the preferential payments to be made.
Item 6. Selected Financial Data
The financial data should be read in conjunction with the financial statements
and related notes contained elsewhere in this report. This financial data is not
covered by the reports of the independent public accountants.
Page 8 of 44
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
(In thousands, except per Unit data)
For the year ended
December 31,
1996 1995 1994 1993 1992
---- ------- ------ ------ -----
<S> <C> <C> <C> <C> <C>
Revenue $ 2,390 $ 3,101 $ 6,928 $ 5,574 $ 6,297
Net income (loss) $ (1,724) $ 61 $ 368 $ (1,711) $ (2,099)
Net income (loss) per:
"Growth" Unit $ -- $ -- $ -- $ -- $ --
"Deferred" Unit $ -- $ -- $ -- $ -- $ --
"Current" Unit $ (137.43) $ -- $ -- $ (136.37) $ (194.33)
Total assets $ 16,828 $ 18,804 $ 28,987 $ 36,165 $ 38,322
Notes payable $ 14,773 $ 14,959 $ 25,205 $ 32,690 $ 33,108
</TABLE>
Item 7. 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 will: (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 (8,424 units currently outstanding);
and (iii) Growth Units (14,271 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 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 management is unable to predict when distributions will
resume.
On January 27, 1997, the Partnership borrowed $8,500,000 from Wells Fargo Bank
to pay-off the matured first and second deeds of trust on Silver Creek Plaza.
The new first deed of trust is secured by Silver Creek Plaza, with a maturity
date of January 22, 1998. The Silver Creek property is listed for sale and is
classified as rental property held for sale on the Partnership's 1996 balance
sheet.
Management intends to present a plan of Partnership liquidation for an investor
vote in 1997. The carrying value of the investments in real estate at December
31, 1996 does not purport to represent the ultimate sales price the Partnership
will realize from the disposition of these assets nor are the amounts reflected
in the accompanying financial statements intended to represent the ultimate
amount to be distributed to partners if the plan is adopted.
Management believes that the Partnership's available cash together with cash
generated from operations and net proceeds upon the eventual sales of the
properties will be sufficient to finance the cash requirements of the
Partnership.
Page 9 of 44
<PAGE>
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 losses
exceeding cash advances to the unconsolidated joint venture will be recognized
only upon a sale or other disposition of the joint venture interest as the
Partnership is not obligated nor does it intend to restore any deficits which
may accumulate in its joint venture capital account.
On April 28, 1995, ownership of an office building known as 175 South West
Temple, a property in a joint venture in which the Partnership was the general
partner, was turned over to the lender in a negotiated foreclosure prior to the
debt maturity date of May 1, 1995, which relieved the Partnership of its
guarantee for a portion of the outstanding debt and resulted in the recognition
of $2,647,000 in extraordinary gain on debt forgiveness.
Results of Operations
1996 versus 1995
The April 1995 negotiated foreclosure of 175 South West Temple, and an increased
vacancy rate at San Mar Plaza combined with a lower average annual rent per
square foot at Silver Creek Plaza account for the decrease in rental revenue
from $2,947,000 in 1995 to $2,333,000 in 1996.
Interest and other income decreased in 1996 by $97,000, or 63% when compared to
1995 due to the 1996 cessation of interest accrual on the note receivable from
the Breakers Partnership and a lower average invested cash balance.
Operating expense decreased by $279,000, or 28%, in 1996 compared to 1995,
primarily due to the negotiated foreclosure on 175 South West Temple, the loss
of management fees due to lower rental revenue and overall lower repairs and
maintenance at both San Mar and Silver Creek.
The decrease in interest expense of $222,000, or 13%, in 1996 over 1995 is
due to the negotiated foreclosure on 175 South West Temple.
Depreciation and amortization expense decreased by $239,000, or 31%, as a
result of the 1995 foreclosure on 175 South West Temple.
In 1996, general and administrative costs decreased by $78,000, or 12%, as a
result of lower administrative and legal costs primarily due to the 1995
negotiated foreclosure on 175 South West Temple.
Huntington Breakers Apartments, an unconsolidated joint venture, attached as an
exhibit hereto, experienced a $514,000 increase in net operating income in 1996,
as a result of higher annual occupancy rates and lower interest expense due to
the refinancing of debt in 1996.
1995 versus 1994
The June 1994 sale of the Las Palomas apartment complex and the April 1995
negotiated foreclosure of 175 South West Temple account for the majority of the
decrease in total rental revenue from $4,718,000 in 1994 to $2,947,000 in 1995.
Additionally, average annual rent per square foot decreased from $18.36 in 1994
to $15.84 in 1995 at Silver Creek Plaza.
In 1995, management conducted an internal cash flow appraisal which indicated
that the estimated fair value of the San Mar Plaza property was less than its
carrying value and that its carrying value could not be recovered prior to its
eventual disposition. This resulted in the Partnership recognizing a loss
provision for impairment in investment in real estate of $1,015,000 during the
year ended December 31, 1995.
Interest and other revenue had increased by $32,000, or 26%, in 1995 over 1994
due to the short-term investment of the June 1994 sale proceeds.
Page 10 of 44
<PAGE>
As a result of two property dispositions in 1994 and 1995, discussed above,
operating expenses, interest expense and depreciation and amortization decreased
in 1995 compared to 1994.
Page 11 of 44
<PAGE>
Item 8. Financial Statements and Supplementary Data
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Financial Statements:
Report of Independent Public Accountants..............................13
Balance Sheets at December 31, 1996 and 1995..........................14
Statements of Operations for the years ended
December 31, 1996, 1995 and 1994...................................15
Statements of Partners' Equity (Deficit) for the
years ended December 31, 1996, 1995 and 1994.......................16
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994...................................17
Notes to Financial Statements.........................................18
Schedule:
Schedule III - Real Estate Investments and
Related Accumulated Depreciation as of
December 31, 1996..................................................26
Financial Statement Exhibits:
Financial Statements of Significant Subsidiary.....................27
Financial statement schedules not included have been omitted because of the
absence of conditions under which they are required or because the information
is included elsewhere in this report.
Page 12 of 44
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
We have audited the accompanying balance sheets of OUTLOOK INCOME/GROWTH FUND
VIII, A CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1996 and 1995, and the
related statements of operations, partners' equity (deficit) and cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements and the schedule referred to below are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of OUTLOOK INCOME/GROWTH FUND
VIII, A CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedule listed in the
index to financial statements and schedule is presented for the purpose of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. This information has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
San Francisco, California
February 11, 1997
Page 13 of 44
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
December 31, 1996 and 1995
(in thousands, except units outstanding)
<S> <C> <C>
Assets 1996 1995
- ------ ------------ ----------
Investments in real estate:
Rental property, net of accumulated depreciation
of $2,808 and $4,671 at December 31, 1996
and 1995, respectively $ 6,301 $ 16,250
Rental property held for sale 9,490 --
---------- ----------
Total real estate investments 15,791 16,250
Cash and cash equivalents 773 1,816
Accounts receivable, net 79 51
Investment in and advances to unconsolidated
joint venture -- 481
Deferred financing costs and other fees, net of
accumulated amortization of $470 and $456
at December 1996 and 1995, respectively 122 151
Other assets 63 55
---------- ----------
Total assets $ 16,828 $ 18,804
========== ==========
Liabilities and Partners' Equity (Deficit)
Liabilities:
Notes payable $ 14,773 $ 14,959
Accounts payable and accrued expenses 127 135
Interest payable 8 60
Other liabilities 58 64
---------- ----------
Total liabilities 14,966 15,218
---------- ----------
Partners' equity (deficit):
General Partner (162) (128)
Limited Partners (34,992 and 35,000 limited
partnership units outstanding at
December 1996 and 1995, respectively) 2,024 3,714
---------- ----------
Total partners' equity 1,862 3,586
---------- ----------
Total liabilities and partners' equity $ 16,828 $ 18,804
========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 14 of 44
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
(in thousands, except per unit amounts and units outstanding)
<S> <C> <C> <C>
1996 1995 1994
---- ------ -----
Revenues:
Rental income $ 2,333 $ 2,947 $ 4,718
Gain on sale of property -- -- 2,088
Interest and other income 57 154 122
------------- ------------- --------------
Total revenues 2,390 3,101 6,928
------------- ------------- --------------
Expenses:
Operating, including $140, $180 and $383
paid to affiliates in 1996, 1995 and
1994, respectively 706 985 1,778
Interest 1,451 1,673 2,221
Depreciation and amortization 530 769 1,236
Provision for impairment of investment
in real estate -- 1,015 --
General and administrative, including
$473, $552 and $579 paid to
affiliates in 1996, 1995 and
1994, respectively 574 652 655
------------- ------------- --------------
Total expenses 3,261 5,094 5,890
------------- ------------- --------------
Income (loss) from operations (871) (1,993) 1,038
Loss in unconsolidated joint
venture (853) (593) (670)
------------- ------------- --------------
Income (loss) before extraordinary item (1,724) (2,586) 368
Extraordinary item:
Gain on forgiveness of debt -- 2,647 --
-------------- -------------- ---------------
Net income (loss) $ (1,724) $ 61 $ 368
=============== ============= ==============
Net loss per limited partnership
current unit: $ (137.43) $ -- $ --
============= ============= ==============
Number of limited partnership current
units outstanding during the period used
to compute net loss per limited
partnership current unit 12,297 -- --
=============== ============= ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 15 of 44
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity(Deficit)
For the years ended December 31, 1996, 1995, and 1994
(in thousands)
Total Total
General Limited Partners Limited Partners'
Partner Current Deferred Growth Partners Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1993 $ (557) $ 3,714 $ -- $ -- $ 3,714 $ 3,157
Net income 368 -- -- -- -- 368
---------- ---------- --------- -------- ---------- ----------
Balance at
December 31, 1994 (189) 3,714 -- -- 3,714 3,525
Net income 61 -- -- -- -- 61
---------- ---------- --------- -------- ---------- ----------
Balance at
December 31, 1995 (128) 3,714 -- -- 3,714 3,586
Net loss (34) (1,690) -- -- (1,690) (1,724)
----------- ----------- --------- -------- ----------- -----------
Balance at
December 31, 1996 $ (162) $ 2,024 $ -- $ -- $ 2,024 $ 1,862
========== ========= ======== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 16 of 44
<PAGE>
<TABLE>
<CAPTION>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
(in thousands)
<S> <C> <C> <C>
1996 1995 1994
---- ------ -----
Cash flows from operating activities:
Net income (loss) $ (1,724) $ 61 $ 368
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Gain on debt forgiveness -- (2,647) --
Gain on sale of property -- -- (2,088)
Provision for impairment of investment
in real estate -- 1,015 --
Loss in unconsolidated joint venture 853 593 670
Depreciation and amortization 530 769 1,236
Amortization of loan fees, included in
interest expense 29 39 64
Changes in assets and liabilities:
Accounts receivable (28) 58 70
Deferred financing costs and other fees 45 (112) (19)
Other assets (8) 47 (35)
Accounts payable and accrued expenses (8) 153 15
Interest payable (52) -- --
Other liabilities (6) 4 2
---------- --------- ---------
Net cash provided by (used in) operating activities (369) (20) 283
----------- --------- ---------
Cash flows from investing activities:
Additions to rental property (7) (70) (118)
Proceeds from sale of property -- -- 2,657
Increase in notes receivable from unconsolidated
joint venture (481) (91) (125)
----------- ---------- ----------
Net cash provided by (used in) investing activities (488) (161) 2,414
---------- --------- ---------
Cash flows from financing activities:
Notes payable principal payments (186) (300) (407)
----------- ---------- ----------
Net cash used in financing activities (186) (300) (407)
----------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (1,043) (481) 2,290
Cash and cash equivalents at beginning of period 1,816 2,297 7
---------- --------- ---------
Cash and cash equivalents at end of period $ 773 $ 1,816 $ 2,297
========== ========== =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,474 $ 1,474 $ 2,391
========== ========== =========
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page 17 of 44
<PAGE>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Outlook Income/Growth Fund VIII, A California Limited Partnership, (the
"Partnership") was organized on June 21, 1985 in accordance with the provisions
of the California Revised Limited Partnership Act for the purpose of purchasing,
holding, operating, leasing and selling various properties. The Partnership
commenced operations on March 10, 1986. Through a registered public offering,
35,000 units of limited partnership interests (the "Units") at $1,000 per Unit,
were authorized for sale. The sale of Units was concluded on January 23, 1987,
when 35,000 Units had been sold. During 1996, eight units were abandoned as a
result of partners no longer desiring to receive Partnership K-1's and to give
them the ability to write off their investments for income tax purposes. At
December 31, 1996 and December 31, 1995, limited partnership units issued and
outstanding were 34,992 and 35,000, respectively.
Glenborough Corporation and Robert Batinovich are the general partners
(collectively, the "General Partner") of the Partnership. In December 1996,
Glenborough Partners, an affiliate of the Partnership, purchased 931 limited
partnership units (a 2.7% interest) from an unaffiliated limited partner for
$163,000.
Unless terminated earlier under the terms of the Limited Partnership Agreement,
the Partnership will be dissolved on December 31, 2035. Management intends,
however, to present a plan of Partnership liquidation for an investor vote in
1997. The carrying value of the investments in real estate at December 31, 1996
does not purport to represent the ultimate sales price the Partnership will
realize from the disposition of these assets nor are the amounts reflected in
the accompanying financial statements intended to represent the ultimate amount
to be distributed to partners if the plan is adopted.
The Partnership Agreement provides for three types of limited partnership
interests: Current "A" Units, Deferred "A" Units and Growth "B" Units. The
Partnership Agreement also provides for varying allocations of net earnings or
net loss and distributions to the above limited partnership interests. See Note
8 for the provisions of the allocation of net income or loss pursuant to the
Partnership agreement.
Significant Accounting Policies
Basis of Accounting - The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles under the presumption that the Partnership will continue
as a going concern. As discussed above, management intends to present a plan of
Partnership liquidation for an investor vote in 1997. However, the liquidation
proceeds and the timing thereof are not currently estimable, nor is approval of
such plan assured. Accordingly, the accompanying financial statements do not
provide for any adjustments relating to the aforementioned plan of liquidation
if it is adopted.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported results of operations during the reported period.
Actual results could differ from those estimates.
Risks and Uncertainties - The Partnership's ability to (i) achieve positive cash
flow from operations, (ii) meet its debt obligations, (iii) provide
distributions either from operations or the ultimate disposition of the
Partnership's properties or (iv) continue as a going concern, may be impacted by
changes in interest rates, property values, geographic economic conditions, or
Page 18 of 44
<PAGE>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
the entry of other competitors into the market. The accompanying financial
statements do not provide for adjustments with regard to these uncertainties.
Investments in Real Estate - In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121 (SFAS 121),
"Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of." The Partnership adopted SFAS 121 in the fourth quarter of 1995.
SFAS 121 requires that long-lived assets be carried at the lower of carrying
amount or fair value and that an evaluation of an individual property for
possible impairment be performed whenever events or changes in circumstances
indicate that an impairment may have occurred. The specific accounting policies
for assets to be held and used and those to be disposed of are described in more
detail below.
Rental Property - Rental properties are stated at cost unless events or
circumstances indicate that cost cannot be recovered, in which case, the
carrying value is reduced to estimated fair value. Estimated fair value for
financial reporting purposes: (i) is based upon the Partnership's plans for
continued operation of each property; (ii) is computed using estimated sales
price, as determined by prevailing market values for comparable properties
and/or the use of capitalization rates multiplied by annualized rental income
based upon the age, construction and use of the building, and (iii) does not
purport, for a specific property, to represent the current sales price that the
Partnership could obtain from third parties for such property. The fulfillment
of the Partnership's plans related to each of its properties is dependent upon,
among other things, the presence of economic conditions which will enable the
Partnership to continue to hold and operate the properties prior to their
eventual sale. Due to uncertainties inherent in the valuation process and in the
economy, it is reasonably possible that the actual results of operating and
disposing of the Partnership's properties could be materially different than
current expectations.
Depreciation is provided using the straight line method over the useful lives of
the respective assets.
Rental Property Held for Sale - Rental property held for sale is stated at the
lower of cost or estimated fair value. Estimated fair value is computed using
estimated sales price or appraised value of the property and does not purport,
for a specific property, to represent the current sales price that the
Partnership could obtain from third parties for such property. Once the property
is classified as held for sale, the Partnership will cease depreciation of the
asset.
Cash Equivalents - The Partnership considers short-term investments, including
certificates of deposit with original maturities of less than ninety days to be
cash equivalents.
Deferred Financing Costs and Other Fees - The fees paid to the General Partner,
its affiliates, the lenders and the sellers in connection with the financing and
leasing of the Partnership's properties are amortized using the straight-line
method over the term of the related note payable or lease.
Rental income - Rental income is recognized as earned over the life of the
respective leases.
Income Taxes - No provision for income taxes is included in the accompanying
financial statements, as the Partnership's results of operations are passed
through to the partners for inclusion in their respective income tax returns.
Net income (loss) and partner's equity for financial reporting purposes differs
from the Partnership income tax return because of different accounting methods
used for certain items, principally the capitalization of carrying costs and the
provision for impairment of investments in real estate.
Page 19 of 44
<PAGE>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Consolidation and Joint Ventures - Joint ventures in which the Partnership had
an interest of greater than 50% were consolidated in the accompanying financial
statements for the years ended December 31, 1995 and 1994. All intercompany
transactions have been eliminated in consolidation.
Investments in joint ventures in which the Partnership has an interest of 50% or
less are accounted for using the equity method. Such investments are stated at
cost plus advances and the Partnership's proportionate share of earnings less
losses and cash distributions received from the joint ventures.
Reclassifications - Certain 1995 and 1994 balances have been reclassified to
conform with the current year presentation.
Note 2. TRANSACTIONS WITH AFFILIATES
In accordance with the Limited Partnership Agreement, the Partnership pays the
General Partner compensation for services provided to the Partnership.
Glenborough Corporation provided property management services and was
compensated as follows:
1996 1995 1994
---- ------ -----
Management fees $114,000 $143,000 $242,000
Property management salaries $26,000 $37,000 $141,000
The Partnership also reimbursed Glenborough Corporation 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 Corporation was reimbursed $473,000, $552,000 and
$579,000 for such expenses in 1996, 1995 and 1994, respectively.
Note 3. INVESTMENT IN UNCONSOLIDATED JOINT VENTURE
The Partnership holds an undivided 49% limited partner interest and a 1% general
partner interest in Huntington Breakers Apartments, Limited ("the Breakers
Partnership"). The Breakers Partnership owns a 342-unit apartment complex
located in Huntington Beach, California which was completed in March 1986.
The Partnership's share of losses from the Breakers Partnership has exceeded its
investments in and advances to the Breakers Partnership. These excess losses
have not been recognized by the Partnership as it has no plans or obligations to
fund such losses. In the event that the Breakers Partnership has net income in
future periods, only the Partnership's share of this income in excess of
unrecognized losses will be recorded.
Summary condensed balance sheet information as of December 31, 1996 and 1995,
and condensed statements of operations for the three years in the period ended
December 31, 1996, are as follows (in thousands):
Page 20 of 44
<PAGE>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Huntington Breakers Apartments, Limited,
A California Limited Partnership
Condensed Balance Sheets as of December 31, 1996 and 1995
1996 1995
--------------- -----------
Investments in real estate $ 15,763 $ 16,386
Other assets 1,279 1,909
----------- ------------
Total assets $ 17,042 $ 18,295
============ =============
Notes payable $ 19,761 $ 20,500
Notes payable to Outlook Income/Growth Fund VIII 1,014 774
Other liabilities 1,078 1,121
----------- -------------
Total liabilities 21,853 22,395
----------- -------------
Partner's Equity (Deficit):
Outlook Income/Growth Fund VIII $ (3,185) $ (2,483)
Other Partners, net (1,626) (1,617)
------------ ------------
Total Partners' Deficit (4,811) (4,100)
------------ ------------
$ 17,042 $ 18,295
============ =============
Huntington Breakers Apartments, Limited,
A California Limited Partnership
Condensed Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
1996 1995 1994
------------ ------------ --------
Revenues $ 3,703 $ 3,399 $ 3,238
Expenses (3,788) (3,998) (3,915)
Extraordinary loss on
refinancing of debt (822) --- ---
---------- ----------- --------
Net Loss $ (907) $ (599) $ (677)
========== ============ ==========
Note 4. DISPOSITION OF PROPERTY
On April 28, 1995, 175 South West Temple, a 145,075 square foot office building
in Salt Lake City, Utah, previously owned by a joint venture in which the
Partnership owned an 80% general partnership interest, was sold in a foreclosure
proceeding. 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.
On June 10, 1994, the Partnership sold the Las Palomas Apartments, a 272-unit
apartment complex located at 4040 Boulder Highway in Las Vegas, Nevada to Las
Palomas Associates, L.P., an unrelated party ("the buyer"), for $10,837,000. The
sale proceeds were used to payoff loans, which were secured by the property,
totaling $7,078,000 and settlement and other closing costs, including
transaction fees payable to the general partners. The remaining $2,657,000 of
net proceeds were added to the Partnership's reserves. The gain on sale totaled
$2,088,000.
Page 21 of 44
<PAGE>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Note 5. INVESTMENTS IN REAL ESTATE
The carrying value and the accumulated depreciation of real estate investments as of December 31, 1996 and 1995 are as
follows (in thousands):
Buildings
and
1996: Land Improvements Total
<S> <C> <C> <C>
San Mar Plaza $ 2,546 $ 6,563 $ 9,109
Silver Creek Plaza 5,339 6,480 11,819
-------- --------- --------
7,885 13,043 20,928
Less: Accumulated depreciation -- (5,137) (5,137)
------- ---------- ---------
$ 7,885 $ 7,906 $ 15,791
========= ========== ==========
Buildings
and
1995: Land Improvements Total
San Mar Plaza $ 2,546 $ 6,556 9,102
Silver Creek Plaza 5,339 6,480 11,819
-------- --------- --------
7,885 13,036 20,921
Less: Accumulated depreciation -- (4,671) (4,671)
------- -------- --------
$ 7,885 $ 8,365 $ 16,250
========= ========== ==========
</TABLE>
San Mar Plaza - In June 1986, the Partnership acquired San Mar Plaza, a shopping
center located in San Marcos, Texas. At December 31, 1996 the property is
encumbered by a first deed of trust with a balance of $6,496,000 (see Note 6).
In 1995, management computed an internal cash flow valuation which indicated
that the estimated fair value of the property was less than its carrying value
and that its carrying value could not be recovered prior to its eventual
liquidation. This resulted in the Partnership recognizing a loss provision for
impairment of investment in real estate of $1,015,000 during the year ended
December 31, 1995.
Silver Creek Plaza - Through two separate transactions, in 1986 and 1991, the
Partnership acquired a retail shopping center known as Silver Creek Plaza
("Silver Creek") located in San Jose, California. At December 31, 1996, the
shopping center was listed for sale.
The Partnership leases its commercial property under non-cancelable operating
lease agreements. Future minimum rents on non-cancelable operating leases as of
December 31, 1996 are as follows (in thousands):
1997 $ 1,831
1998 1,515
1999 1,439
2000 1,380
2001 1,289
Thereafter 4,817
----------
Total $ 12,271
=========
Page 22 of 44
<PAGE>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Note 6. SECURED NOTES PAYABLE
<S> <C> <C>
A summary of secured notes payable as of December 31, 1996 and 1995
are as follows (outstanding balances in thousands): 1996 1995
---- -----
9.38% note payable related to San Mar Plaza, secured by a first deed of trust;
payable in monthly principal and interest installments of $60,600 through the
maturity date of April 1,1997, at which time all remaining principal and
interest will be due and payable. In 1996, the Partnership obtained an extension
of the maturity date for eight months beyond the original maturity date of July
31, 1996. The terms of the extension are the same as those for the original
loan. Management and the lender are currently negotiating an amendment to the
loan which will include a five year extension beyond the maturity date of April
1, 1997. $ 6,496 $ 6,617
9.75% note payable related to Silver Creek Plaza, secured by a first deed of
trust; payable in monthly principal and interest installments of $64,800 through
January 1, 1997, at which time all remaining principal and interest become due
and payable. On January 27, 1997, the Partnership borrowed $8,500,000 from Wells
Fargo Bank and paid off the matured first and second deeds of trusts on Silver
Creek Plaza. The new loan, secured by a first deed of trust on Silver Creek
Plaza, bears interest at the Wells Fargo Bank prime rate plus one and one-half
percent, requires monthly interest only payments and has a maturity date
of January 22, 1998. 7,270 7,335
9.5% note payable related to Silver Creek Plaza, secured by a second deed of
trust; payable in monthly interest only installments, adjusting to the Bank of
America reference rate plus one percent (9.25% at December 31, 1996) until the
maturity date of December 31, 1996, at which time all remaining principal and
interest was due and payable. On January 27, 1997, the Partnership borrowed
$8,500,000 from Wells Fargo Bank and paid-off the matured first and second deeds
of trusts on Silver Creek Plaza. 1,007 1,007
Total secured notes payable $14,773 $14,959
</TABLE>
Note 7. TAXABLE INCOME
The Partnership's tax returns, the qualification of the Partnership as a
partnership for federal income tax purposes, and the amount of income or loss
are subject to examination by federal and state taxing authorities. If such
examinations result in changes to Partnership's taxable income or loss, the tax
liability of the partners could change accordingly.
Page 23 of 44
<PAGE>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
The following is a reconciliation for the years ended December 31, 1996, 1995
and 1994, of the net income for financial reporting purposes to the taxable
income determined in accordance with accounting practices used in preparation of
federal income tax returns (in thousands).
<TABLE>
<CAPTION>
1996 1995 1994
---- ------ -----
<S> <C> <C> <C>
Net income (loss) per financial statements $ (1,724) $ 61 $ 368
Provision for impairment of
investment in real estate -- 1,015 --
Gain on debt forgiveness -- (871) --
Amortization and depreciation (34) 52 (98)
Guaranteed and interest income 234 182 167
Bad debt expense/reserve (9) (21) 50
Basis adjustment 24 -- --
Joint Venture adjustment (797) (1,572) (1,057)
Capital gain adjustment -- -- (124)
Miscellaneous -- (3) (78)
--------- ------- --------
Net loss for federal income tax purposes $ (2,306) $ (1,157) $ (772)
=========== ========= ==========
</TABLE>
The following is a reconciliation as of December 31, 1996 and 1995 of partners'
capital for financial reporting purposes to partners' equity for federal income
tax purposes (in thousands).
1996 1995
---- -----
Partners' equity per financial statement $ 1,862 $ 3,586
Provision for impairment of investment
in real estate 1,015 1,015
Amortization and depreciation (1,212) (1,178)
Guaranteed income 2350 2,116
Bad debt expense/reserve 23 31
Syndication costs 4,544 4,544
Joint venture adjustment (9,375) (8,578)
Basis adjustment (451) (474)
---------- ---------
Partners' equity for federal income
tax purposes $ (1,244) $ 1,062
=========== ==========
Note 8. PARTNERSHIP ALLOCATIONS AND DISTRIBUTIONS
Cash available for distributions, to the extent deemed available by the General
Partner, is distributed 91% to the Limited Partners and 9% to the General
Partner. Distributions to the Limited Partners are made first to the holders of
Current "A" Units until they receive a 9% per annum cumulative return on their
adjusted capital investment. Further distributions, if available, are made to
holders of Growth "B" Units until they receive a cumulative return equal to 10%
per annum on their adjusted capital investment. Remaining distributions, if
available, are made to holders of Deferred "A" Units until they receive a
cumulative return of 16% per annum on their adjusted capital investment. Cash
available for distributions is defined as cash funds provided from operations
less operating disbursements and amounts set aside for restoration or reserves.
At December 31, 1996, holders of Current "A" Units had an original capital
balance of $12,297,000 and accumulated priority returns of approximately
$9,599,800. Holders of Deferred "A" Units had an original capital balance of
Page 24 of 44
<PAGE>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
December 31, 1996, 1995 and 1994
$8,428,000 and accumulated priority returns of approximately $14,077,000.
Holders of Growth "B" Units had an original capital balance of $14,275,000 and
accumulated priority returns of approximately $14,941,700.
Distributions from other sources shall be distributed 1% to the General Partner
and 99% to the Limited Partners in varying allocations to the Limited Partners
pursuant to the Partnership Agreement. Thereafter, all further distributions
shall be to the General Partner until the General Partner has received a total
of 15% of all distributions, and thereafter 15% to the General Partner and 85%
to the Limited Partners in varying allocations pursuant to the Partnership
Agreement.
Losses will generally be allocated 2% to the General Partner and 98% to the
Limited Partners. All losses allocable to the Limited Partners will first be
allocated to the holders of Growth Units; then to the holders of Deferred Units;
and finally to the holders of Current Units until their respective capital
accounts have been reduced to zero. Additional losses will be allocated to all
Limited Partners on a prorata basis.
Income will be allocated: (i) first, to those Partners who during the fiscal
year received, or within the first two and one-half months of the following
fiscal year are scheduled to receive, distributions from the Partnership, to the
extent of the amount of such distributions or such Partners' negative equity,
whichever is less; (ii) then, to those Partners who have negative equity and who
have received distributions from the Partnership in prior years, to the extent
of the amount of such distributions or such Partners' negative equity, whichever
is less; (iii) then, to those Partners who have negative equity, to the extent
of such negative equity; and (iv) finally, in accordance with Partners' right to
future distributions from the Partnership.
Page 25 of 44
<PAGE>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE INVESTMENTS AND RELATED ACCUMULATED DEPRECIATION
December 31, 1996
(In Thousands)
COLUMN A COLUMN B COLUMN C COLUMN D
Costs Capitalized
Initial Cost to Subsequent to
Partnership Acquisition
Buildings
and Carrying
Description Encumbrances Land Improvements (1) Improvements (1) Cost
- -------------------------------------------------------------------------------
Rental property
San Mar Plaza $6,496 $2,559 $7,608 $ 167 $(1,225)
Rental property
held for sale
Silver Creek Plaza 8,277 5,476 6,420 327 (404)
------ --------- ---------- -------- -------
$14,773 $ 8,035 $14,028 $ 494 $(1,629)
======= ======= ======== ======= ========
Following is a summary of real estate investments for the years ended Following
is a summary of changes in accumulated depreciation of real estate December 31,
1996, 1995 and 1994: investments for the years ended December 31, 1996, 1995 and
1994
1996 1995 1994
---- ---- ----
Balance at beginning of period $ 20,921 $ 21,876 $ 44,749
Improvements 7 70 118
Dispositions from foreclosure
or sale -- (12,379) (10,622)
Provision for impairment in
real estate investments -- (1,015) --
Real estate held for foreclosure
-- 12,369 (12,369)
---------- ------- -------
Balance at end of period $ 20,928 $ 20,921 $ 21,876
======== ======= =======
(1)Amounts include furniture, equipment and tenant improvements.
(2)Aggregate cost for Federal income tax purposes is $21,780 at
December 31, 1996.
Page 26 of 44
<PAGE>
OUTLOOK INCOME/GROWTH FUND VIII,
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE INVESTMENTS AND RELATED ACCUMULATED DEPRECIATION
December 31, 1996
(In Thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
Gross Amount Carried
at December 31, 1996
Buildings Date of Depreci-
and Total Accumulated Construc- Date able
Description Land Improvements (1) (2) Depreciation (1) tion Acquired Lives
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Rental property
San Mar Plaza $ 2,546 $ 6,563 $ 9,109 $(2,808) -- 6/86 5-30 yrs.
Rental property
held for sale
Silver Creek Plaza 5,339 6,480 11,819 (2,329) -- 10/86 5-30 yrs.
-------- -------- -------- ---------
$ 7,885 $13,043 $20,928 $(5,137)
======= ======== ======== ========
</TABLE>
1996 1995 1994
---- ---- ----
Balance at beginning of period $ 4,671 $ 4,198 $ 10,959
Additions charged to expense 466 473 1,052
Disposition from foreclosure
or sale -- (4,901) (2,912)
Real estate held for foreclosure -- 4,901 (4,901)
-------- ------- -------
Balance at end of period $ 5,137 $ 4,671 $ 4,198
======= ======= =======
(1)Amounts include furniture, equipment and tenant improvements.
(2)Aggregate cost for Federal income tax purposes is $21,780 at
December 31, 1996.
Page 26 of 44
<PAGE>
EXHIBITS: Financial Statements of Significant Subsidiary
HUNTINGTON BREAKERS APARTMENTS, LIMITED
A CALIFORNIA LIMITED PARTNERSHIP
INDEX OF FINANCIAL STATEMENTS AND SCHEDULE
Page
Report of Independent Public Accountants....................................28
Balance Sheets at December 31, 1996 and 1995................................29
Statements of Operations for the years ended
December 31, 1996, 1995 and 1994......................................30
Statements of Partners' Equity (Deficit) for the
years ended December 31, 1996, 1995 and 1994..........................31
Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994......................................32
Notes to Financial Statements...............................................33
Financial Statement Schedule:
Schedule III - Real Estate Investment and Related
Accumulated Depreciation at December 31, 1996.........................39
All other schedules are omitted as the required information is inapplicable
or is presented in the financial statements or related notes.
Page 27 of 44
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP:
We have audited the accompanying balance sheets of HUNTINGTON BREAKERS
APARTMENTS, LIMITED, A CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1996
and 1995, and the related statements of operations, partners' equity (deficit)
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements and the schedule referred to below are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HUNTINGTON BREAKERS APARTMENTS,
LIMITED, A CALIFORNIA LIMITED PARTNERSHIP as of December 31, 1996 and 1995, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedule listed in the
index to financial statements and schedule is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. This information has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
San Francisco, California
February 11, 1997
Page 28 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
December 31, 1996 and 1995
(in thousands)
1996 1995
---- -----
Assets
Investments in real estate:
Land $ 3,450 $ 3,450
Building and improvements, net of
accumulated depreciation of $7,132
and $6,476 at December 31,1996
and 1995, respectively 12,313 12,936
--------- ---------
Total real estate investments 15,763 16,386
Cash 138 60
Restricted cash 522 986
Accounts receivable 6 --
Deferred financing costs and other
fees, net of accumulated amortization
of $29 and $290 at December 31,1996
and 1995, respectively 558 841
Other assets 55 22
--------- ---------
$ 17,042 $ 18,295
========= =========
Liabilities and Partners' Equity (Deficit)
Liabilities:
Notes payable $ 19,761 $ 20,500
Note payable to Outlook Income/
Growth Fund VIII 1,014 774
Accrued interest payable -- 19
Accounts payable and other liabilities 65 93
Security deposits 138 134
Due to Wilmore City Development, Inc. 875 875
--------- --------
Total liabilities 21,853 22,395
Partners' equity (deficit):
Outlook Income/Growth Fund VIII (3,185) (2,483)
Other Partners, net (1,626) (1,617)
---------- ---------
Total partners' deficit (4,811) (4,100)
---------- ---------
Total liabilities and partners' deficit $ 17,042 $ 18,295
========= =========
The accompanying notes are an integral part of these statements
Page 29 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
For the years ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ------ -----
Revenues:
<S> <C> <C> <C>
Rental income $ 3,342 $ 3,119 $ 3,046
Other rental related income 276 210 152
Interest and other income 85 70 40
--------- --------- ---------
Total revenues 3,703 3,399 3,238
--------- --------- ---------
Expenses:
Operating, including $415, $352, and $337
paid to affiliates in 1996, 1995 and 1994,
respectively 1,461 1,438 1,389
Interest 1,581 1,846 1,824
Depreciation 656 645 644
General and administrative, including $47, $44
and $41 paid to affiliates in 1996, 1995 and
1994, respectively 90 69 58
--------- --------- ---------
Total expenses 3,788 3,998 3,915
--------- --------- ---------
Loss from operations before
extraordinary item (85) (599) (677)
----------- ----------- -----------
Extraordinary item:
Loss on refinancing of debt (822) -- --
---------- --------- ---------
Net loss $ (907) $ (599) $ (677)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements
Page 30 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners'Equity (Deficit)
For the years ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
Outlook Net due to Total
Income/Growth Other Other Partners'
Fund VIII Partners Partners Deficit
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ (1,220) $ (1,457) $ (147) $ (2,824)
Net loss (670) (7) -- (677)
-------- ------- ------ -------
Balance at December 31, 1994 (1,890) (1,464) (147) (3,501)
Net loss (593) (6) -- (599)
-------- ------- ------ -------
Balance at December 31, 1995 (2,483) (1,470) (147) (4,100)
Net loss (898) (9) -- (907)
Contribution 196 -- -- 196
-------- ------- ------ -------
Balance at December 31, 1996 $ (3,185) $ (1,479) $ (147) $ (4,811)
=========== ========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 31 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows
For the years ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ------ -----
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $ (907) $ (599) $ (677)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Loss on refinancing of debt 822 -- --
Depreciation 656 645 644
Amortization of loan fees, included in interest expense 29 46 45
Changes in certain assets and liabilities:
Restricted cash 464 (49) (10)
Accounts receivable (6) -- --
Other assets (33) 22 (39)
Deferred financing costs and other fees (568) -- --
Accrued interest payable (19) -- (2)
Accounts payable and other liabilities (28) 29 (43)
Security deposits 4 9 1
--------- --------- ----------
Net cash provided by (used for) operating activities 414 103 (81)
---------- ---------- -----------
Cash flows from investing activities:
Capital contribution from Outlook 196 -- --
Property additions (33) (136) (89)
----------- ---------- -----------
Net cash provided by (used for) investing activities 163 (136) (89)
----------- ----------- ------------
Cash flows from financing activities:
Notes payable principal payments (739) -- --
Additions to borrowings from Outlook 440 231 312
Payments on note payable to Outlook (200) (140) (187)
----------- ---------- -----------
Net cash provided by (used for) financing activities (499) 91 125
----------- ---------- -----------
Net increase (decrease) in cash 78 58 (45)
Cash at beginning of period 60 2 47
---------- ---------- -----------
Cash at end of period $ 138 $ 60 $ 2
========== ========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,571 $ 1,749 $ 1,746
========== ========== ===========
Supplemental disclosure on non-cash transaction:
Refinance of note payable $ 16,000 $ -- $ --
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
Page 32 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
For the years ended December 31, 1996, 1995 and 1994
Note 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Huntington Breakers Apartments, Limited, A California Limited Partnership
("Huntington Breakers") was reorganized on December 31, 1986 in accordance with
the provisions of the California Revised Limited Partnership Act. The
Partnership is governed by the Second Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement"), dated December 31, 1986. The Managing
General Partner of the Partnership is Outlook Income/Growth Fund VIII, A
California Limited Partnership ("Outlook"). Outlook was admitted to Huntington
Breakers on December 31, 1986. The other partners are Wilmore City Development,
Inc., a California Corporation ("Wilmore"), Joseph P. Mayer, III ("J. Mayer"),
Rose Marie Semingson ("R.M. Semingson"), Daniel H. Young ("Young"), Eleanor C.
Mayer ("E. Mayer"), and Huntington Breakers Managing Partnership, a California
general partnership comprised of Wilmore and J. Mayer ("Wilmore/Mayer
Partnership"), collectively "Other Partners". The structure of the Partnership
Units and their respective ownership is as follows:
General Partner Limited Partner Total
Units Units Units
Outlook 50.00 -- 50.00
Wilmore 3.00 -- 3.00
J. Mayer 1.00 0.68 1.68
R.M. Semingson -- 20.25 20.25
Young -- 13.50 13.50
E. Mayer -- 10.57 10.57
Wilmore/Mayer
Partnership 1.00 -- 1.00
----- ------ ------
Total Units 55.00 45.00 100.00
===== ===== ======
The purpose of the Partnership is to own and operate a 342 unit apartment
complex located in the City of Huntington Beach, Orange County, California (the
"Property"). The Property is encumbered by first and second trust deed
promissory notes in the amounts of $16,000,000 and $3,761,000, respectively.
Significant Accounting Policies
Basis of Accounting - The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles under the presumption that the Partnership will continue
as a going concern.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the results of operations during the reporting period. Actual
results could differ from those estimates.
Risks and Uncertainties - The Partnership's ability to (i) achieve positive cash
flow from operations, (ii) meet its debt obligations, (iii) provide
Page 33 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
For the years ended December 31, 1996, 1995 and 1994
distributions either from operations or the ultimate disposition of the
Partnership's properties or (iv) continue as a going concern, may be impacted by
changes in interest rates, property values, geographic economic conditions, or
the entry of other competitors into the market. The accompanying financial
statements do not provide for adjustments with regard to these uncertainties.
Investments in Real Estate - In March 1995, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 121 (SFAS 121),
"Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of." The Partnership adopted SFAS 121 in the fourth quarter of 1995.
SFAS 121 requires that long-lived assets be carried at the lower of carrying
amount or fair value and that an evaluation of an individual property for
possible impairment be performed whenever events or changes in circumstances
indicate that an impairment may have occurred.
Rental properties are stated at cost unless events or circumstances indicate
that cost cannot be recovered, in which case, the carrying value of the property
is reduced to estimated fair value. Estimated fair value for financial reporting
purposes: (i) is based upon the Partnership's plans for continued operation of
each property; (ii) is computed using estimated sales price, as determined by
prevailing market values for comparable properties and/or the use of
capitalization rates multiplied by annualized rental income based upon the age,
construction and use of the building, and (iii) does not purport, for a specific
property, to represent the current sales price that the Partnership could obtain
from third parties for such property. The fulfillment of the Partnership's plans
related to each of its properties is dependent upon, among other things, the
presence of economic conditions which will enable the Partnership to continue to
hold and operate the properties prior to their eventual sale. Due to
uncertainties inherent in the valuation process and in the economy, it is
reasonably possible that the actual results of operating and disposing of the
Partnership's properties could be materially different than current
expectations.
Depreciation is provided using the straight line method over the useful lives of
the respective assets.
Deferred Financing and Other Fees - The costs associated with obtaining
financing are amortized on a straight-line basis over the lives of the
respective notes.
Income Taxes - No provisions for income taxes is included in the accompanying
financial statements, as the Partnership's results of operations are passed
through to the partners for inclusion in their respective income tax returns.
Net income (loss) and partners' equity (deficit) for financial reporting
purposes differs from the Partnership income tax return because of different
accounting methods used for certain items, principally the depreciation and the
provisions for impairment of investments in real estate.
Huntington Breakers' tax returns, the qualification of Huntington Breakers as a
partnership for federal income tax purposes, and the amount of income or loss
are subject to examination by federal and state taxing authorities. If such
examinations result in changes to Huntington Breakers' taxable income or loss,
the tax liability of the partners could change accordingly.
Reclassifications - Certain 1995 and 1994 balances have been reclassified to
conform with the current year presentation.
Page 34 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
For the years ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Note 2. NOTES PAYABLE
A summary of notes payable as of December 31, 1996 and 1995 are as follows (outstanding balances in thousands):
<S> <C> <C>
1996 1995
7 day variable rate (4.20% at December 31, 1996) $16,000 note payable secured by
a first deed of trust and letter of credit in the amount of $16,184,000, payable
in monthly interest only installments until maturity on July 1, 2014 at which
time all remaining principal and interest will be due and payable. $ 16,000 $ ---
$16,000,000 note payable, secured by a first deed of trust on the property and a
letter of credit in the amount of $16,640,000, and accrued interest at 7.2%. On
July 1, 1996, this note was paid off. See information below regarding the July
1, 1996 note transactions. --- 16,000
Note payable secured by a second trust deed, accrues interest at LIBOR plus 1.5%
(6.89% at December 31, 1996), payable in monthly interest only installments
until June 1, 2001, at which time all remaining principal and interest will be
due and payable. At December 31, 1995, the $4,500,000 note payable was secured
by a second deed of trust on the property and accrued interest at 9.75%. On June
1, 1996 the note was amended and restated. 3,761 4,500
$ 19,761 $ 20,500
======== =========
</TABLE>
Principal maturities of the notes payable are scheduled as follows (in
thousands):
Year Ending
December 31,
2001 $ 3,761
Thereafter 16,000
-------
Total $19,761
On July 1, 1996, the $16,000,000 note payable was paid-off with proceeds from
the sale of Weekly Rate Demand Multifamily Housing Revenue Refunding Bonds, 1996
Series A ("the 1996 Bonds"), issued by the City of Huntington Beach of behalf of
the partnership. Concurrent with and as a result of the issuance of the 1996
Bonds, Huntington Breakers entered into a new loan agreement for $16,000,000.
Loan fees and issuance costs totaling $168,000 and $355,000, respectively, were
incurred in connection with the new note payable and the issuance of the 1996
Bonds. Huntington Breakers has projected an annual interest savings of
approximately $312,000 based on the December 31, 1996 effective interest rates.
The 1996 Bonds are limited obligations of the City of Huntington Beach payable
solely out of the proceeds from payments on the $16,000,000 note payable from
Page 35 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
For the years ended December 31, 1996, 1995 and 1994
Huntington Breakers and from drawings on the related letter of credit. The 1996
Bonds are subject to mandatory tender and redemption on various dates prior to
the expiration of the above mentioned letter of credit on June 15, 2001.
On June 1, 1996, Huntington Breakers amended and restated the $4,500,000 note
payable secured by a second trust deed. The partnership obtained favorable
variable rate financing and a five year extension of the maturity date. Loan
fees totaling $45,000 were incurred in connection with the refinancing of the
note. On July 1, 1996, a $500,000 principal payment was made on the note.
Total loan fees incurred in 1996 include $196,000 paid to Glenborough
Corporation, the Managing General Partner of Outlook, in connection with the
debt refinancing.
Huntington Breakers must comply with certain covenants relating to the
aforementioned notes which include maintenance of a Cash Collateral Account, as
defined, quarterly excess property income, and the holding open for lease at
least 20% of the property's units to tenants qualifying as "low income". For the
year ended December 31, 1996 the partnership paid $239,000 in excess property
income payments. It is management's opinion that the Partnership is in
compliance with all required terms of the loan agreement.
Note 3. NOTES PAYABLE TO OUTLOOK INCOME/GROWTH FUND VIII
The notes payable to Outlook represent original advances to Huntington Breakers
to support operations, and interest accrued on such advances. In 1992, Outlook
assumed the partnership's notes payable to August Financial Corporation and the
balance due to August Management, Inc. In 1996 and 1995, Huntington Breakers was
advanced an additional $440,000 and $231,000, respectively, and repaid $200,000
and $140,000, respectively, resulting in a net increase in notes payable to
Outlook of $240,000 and $91,000 in 1996 and 1995, respectively. Interest accrues
monthly on the outstanding balance less the original advances due August
Management, Inc. of $204,000, at the rate of prime plus 1 1/2% (9.75% at
December 31, 1996) and is added to principal. The advances are unsecured and
payment is due upon demand.
Note 4. DUE TO WILMORE CITY DEVELOPMENT
The amount due to Wilmore City Development ("Wilmore") represents unsecured
advances made by Wilmore to Huntington Breakers prior to December 31, 1986. This
liability has no fixed maturity and is subordinate to all distributions to
Outlook and will be repaid solely in lieu of other distributions to which
Wilmore would be entitled.
Note 5. MANAGEMENT FEES
Outlook, as Managing General Partner of Huntington Breakers, has contracted with
Glenborough Corporation ("Glenborough") for the provision of property management
services. Huntington Breakers paid management fees to Glenborough of 5% of total
rents collected for each of the years disclosed.
Note 6. PARTNERS' EQUITY (DEFICIT)
Allocation of Net Income and Net Loss - Net losses from operations are generally
allocated ninety-nine percent (99%) to Outlook and one percent (1%) to the Other
Partners in proportion to the number of units held by each of the Other
Page 36 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
For the years ended December 31, 1996, 1995 and 1994
Partners. Net income from operations will be allocated in the same amounts and
in the same ratios as any distributions made to the partners, and then in the
same amounts and in the same ratios that previous allocations of net losses from
operations were made to the partners.
Thereafter, allocations will be made to the partners in proportion to the number
of units held by each partner.
Allocations of income and loss from the sale or refinancing of the Property will
be made in accordance with priorities outlined in the Huntington Breakers
Partnership Agreement.
Distributions of Cash - Distributions of cash from operations will be paid first
to Outlook in an amount equal to the "Current Year Operational Preference
Account" (see discussion which follows), then to the partners in repayment of
any unpaid advances or loans, and interest accrued thereon, made by the partners
to Huntington Breakers, then to Outlook in an amount equal to the "Accrued
Operational Preference Account" (see discussion which follows), and then 25% to
Outlook and 75% to the Other Partners pro rata in accordance with their units.
Distributions from the sale or refinancing of the Property will be made in
accordance with priorities outlined in the Huntington Breakers Partnership
Agreement.
Operational Preference Account - Beginning January 1, 1990, Outlook was credited
with a preference for distributions of $850,000, and on the first day of each
Partnership year beginning January 1, 1990 the preference amount balance is
increased by $700,000 (aggregate preference of $6,450,000 at January 1, 1997).
(The balance is accounted for in memo form only and is not included in the
financial statements of Huntington Breakers or Outlook). Decreases in the
preference balance will occur as distributions are made to Outlook with
reference to this preference amount. The "Current Year Operational Preference
Account" is the operational preference amount applicable to the then current
calendar year. The "Accrued Operational Preference Account" is the total balance
in the Operational Preference Account as of the immediately preceding December
31st.
Guaranteed Payment - The Huntington Breakers Partnership Agreement provides for
payment to Outlook of $375,000 in each of 1987 and 1988, and $500,000 in 1989.
As of December 31, 1989, these guaranteed payments had not been made. At that
time, the Partners agreed that the unpaid amounts should accrue interest at the
rate of 8% per year, compounded annually, from the date the payment was due. The
Partners agreed that the total amount owed to Outlook as of December 31, 1989
was $1,342,000 and that the amount should continue to accrue interest at the
rate of 8% per year, compounded annually, commencing January 1, 1990 (aggregate
balance of $2,229,968 at December 31, 1996). (The balance is accounted for in
memo form only and is not included in the financial statements of Huntington
Breakers or Outlook). If by December 31, 1999, or the sale of all or
substantially all of the property by Huntington Breakers, Outlook has not
received payment in full of the entire Guaranteed Payment, together with accrued
interest, then the Other Partners will pay Outlook, outside Huntington Breakers,
the unpaid amount of such Guaranteed Payment plus interest.
Due to/from Other Partners - The net amount due to (from) Other Partners
included in Partners' Equity (Deficit) is comprised of the following:
<TABLE>
<CAPTION>
1. Amounts received by Other Partners that should have been received by Outlook
<S> <C>
Interest on funds held in escrow for September 1989 refinancing (104,100)
Partial release of amount held back (plus interest) from funding
of September 1989 refinancing (102,200)
Page 37 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
For the years ended December 31, 1996, 1995 and 1994
Funds released from September 1989 refinancing (300)
2. Pre-December 31, 1986 liabilities of the Other Partners paid by
Outlook subsequent to December 31, 1986 (272,800)
3. Amounts received by Outlook that should have been received by the Other Partners
Bond interest reserve applicable to original financing, released to
September 1989 refinancing escrow 100,000
Balance of bond principal reserve applicable to original financing,
as of December 31, 1986 197,000
4. Advance by Other Partners to September 1989 refinancing escrow 72,500
5. Amounts paid by Outlook related to the claims brought by
C.W. Driver against Outlook which are covered by Outlook
indemnification agreement (37,400)
Net amount due from Other Partners $ (147,300)
==========
</TABLE>
The amounts noted above have not been accepted by the Other Partners. Moreover,
some of the Other Partners have alleged in writing that Huntington Breakers has
wrongfully withheld payment of distributions payable to the Other Partners.
Huntington Breakers has denied these allegations in writing, but none of the
disagreements have been resolved.
Management believes that no additional liability will arise from these disputes.
Other Equity Transactions - A summary of transactions which have been included
in the Other Partners' capital account at December 31, 1989 are as follows:
Capital balance (deficit) at December 31, 1986 $ (1,389,400)
Other Partners' share of cumulative loss
- January 1, 1987 to December 31, 1989 (35,300)
Liabilities incurred prior to December 31, 1986 417,600
Funds held in original bond principal
reserve at December 31, 1986 (197,000)
Original bond interest reserve (228,300)
Balance at December 31, 1989 $ (1,432,400)
===========
Page 38 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE INVESTMENT AND RELATED ACCUMULATED DEPRECIATION
December 31, 1996
(in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D I
Costs Capitalized
Initial Cost to Subsequent to
Partnership Acquisition
Buildings
and (1) Improve- Carrying
Description Encumbrances Land Improvements ments(1) Cost
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Huntington Breakers $ 19,761 $ 3,450 $19,079 $ 366 $ --
Apartments
</TABLE>
Following is a summary of real estate investments for the years ended
December 31, 1996, 1995 and 1994:
1994:
1996 1995 1994
---- ---- ----
Balance at beginning of period $ 22,862 $ 22,726 $ 22,637
Improvements 33 136 89
-------- --------- --------
Balance at end of period $ 22,895 $ 22,862 $ 22,726
========= ======== ========
(1)Amounts include furniture, fixtures and equipment.
(2)Aggregate cost for Federal income tax purposes is $24,324 at
December 31, 1996.
Page 39 of 44
<PAGE>
HUNTINGTON BREAKERS APARTMENTS, LIMITED,
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE III - REAL ESTATE INVESTMENT AND RELATED ACCUMULATED DEPRECIATION
December 31, 1996
(in thousands)
<TABLE>
<CAPTION>
COLUMN A COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
Gross Amount Carried
at December 31, 1996
Building (1) Date of
and(1) (2) Accumulated Construc- Date Depreci-
Description Land Improvements Total Depreciation tion Acquired able Lives
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Huntington Breakers $ 3,450 $19,445 $22,895 $(7,132) -- 12/86 5-30
Apartments
</TABLE>
Following is a summary of changes in accumulated depreciation and amortization,
of real estate investments for the years ended December 31, 1996, 1995 and
1996 1995 1994
---- ---- ----
Balance at beginning of period $ 6,476 $ 5,831 $ 5,187
Additions charged to expense 656 645 644
--------- ------- -------
Balance at end of period $ 7,132 $ 6,476 $ 5,831
======= ======= =======
(1)Amounts include furniture, fixtures and equipment.
(2)Aggregate cost for Federal income tax purposes is $24,324 at
December 31, 1996.
Page 39 of 44
<PAGE>
Item 9. Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
General Partners
The Partnership has no directors or executive officers. The general partners of
the Partnership are Glenborough Corporation ("GC", the "Managing General
Partner", formerly known as Glenborough Realty Corporation) and Robert
Batinovich.
Robert Batinovich was the President, Chief Executive Officer and Chairman of
Glenborough Corporation from its inception in 1987 until his resignation
effective January 10, 1996. On August 31, 1994, Mr. Batinovich was elected
Chairman, President and Chief Executive Officer of Glenborough Realty Trust
Incorporated ("GLB"), a newly created Real Estate Investment Trust, which began
trading on the New York Stock Exchange on January 31, 1996. He was a member of
the Public Utilities Commission from 1975 to January 1979 and served as its
President from January 1977 to January 1979. He is a member of the Board of
Directors of Farr Company, a publicly held company that manufactures industrial
filters. He has extensive real estate investment experience. Mr. Batinovich's
business background includes managing and owning manufacturing, vending and
service companies and a national bank.
For informational purposes, the following are the names and a brief description
of the background and experience of each of the controlling persons, directors
and executive officers of the Managing General Partner as of March 1, 1997:
Name Age Position
Andrew Batinovich 38 Chief Executive Officer and Chairman of the Board
Robert E. Bailey 35 Secretary and Corporate Counsel
Sandra L. Boyle 48 President and Chief Operating Officer
June Gardner 45 Director
Terri Garnick 36 Chief Financial Officer
Judy Henrich 51 Vice President
Wallace A. Krone Jr. 65 Director
Andrew Batinovich was elected Chairman of the Board and Chief Executive Officer
of GC on January 10, 1996. He has been employed by GC since 1983, and had
functioned since 1987 as Chief Operating Officer and Chief Financial Officer.
Mr. Batinovich also serves as Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Director of GLB. He holds a California real estate
broker's license and is a Member of the National Advisory Council of BOMA
International. He received his B.A. in International Finance from the American
University of Paris. Prior to joining Glenborough Corporation, Mr. Batinovich
was a lending officer with the International Banking Group and the Corporate
Real Estate Division of Security Pacific National Bank.
Page 40 of 44
<PAGE>
Robert E. Bailey joined GC in 1989 as Associate Counsel and was elected
Secretary of GC on May 15, 1995. He is responsible for landlord/tenant
documentation, tenant litigation, corporate and partnership matters and
employment matters. In 1984, he received his Bachelor of Arts degree from the
University of California at Santa Barbara and his Juris Doctor degree from
Vermont Law School in 1987. From 1987 to 1989, Mr. Bailey was an associate with
the law firm of Pedder, Stover, Hesseltine & Walker, where he specialized in
business litigation. He is a member of the State Bar of California.
Sandra L. Boyle has been associated with GC or its associated entities since
1984 and has served as President and Chief Operating Officer of GC since January
10, 1996. She was originally responsible for residential marketing, and her
responsibilities were gradually expanded to include residential leasing and
management in 1985, and commercial leasing and management in 1987. She was
elected Vice President in 1989, and continues to supervise marketing, leasing,
property management operations and regional offices. Ms. Boyle also serves as a
Senior Vice President of GLB. Ms. Boyle holds a California real estate broker's
license and a CPM designation, and is a member of the National Advisory Council
and Finance Committee of BOMA International; and Board of Directors of BOMA San
Francisco and BOMA California.
June Gardner was elected a director of GC on January 10, 1996. She was
associated with GC from 1984 through 1995, as Senior Vice President, Corporate
Controller with responsibilities in the areas of corporate financial planning,
reporting, accounting and banking relationships. Before joining GC, Ms. Gardner
was Assistant Vice President of JMB Realty Corporation from 1977 to 1984, with
responsibilities in the areas of financial management and reporting.
Terri Garnick has served as Chief Financial Officer of GC since January 10,
1996. She is also Senior Vice President, Chief Accounting Officer and Treasurer
of GLB. Ms. Garnick is responsible for property management accounting, financial
statements, audits, Securities and Exchange Commission reporting, and tax
returns. Prior to joining GC in 1989, Ms. Garnick was a controller at August
Financial Corporation from 1986 to 1989 and was a Senior Accountant at Deloitte,
Haskins and Sells from 1983 to 1986. She is a Certified Public Accountant and
has a Bachelor of Science degree from San Diego State University.
Judy Henrich is a Vice President of GC, effective January 10, 1996 and is
responsible for the coordination of all due diligence, broker-dealer and
investor communications for partnerships managed by GC. Prior to joining GC, Ms.
Henrich, was associated with Rancon Financial Corporation from 1981 through
early 1995, as Senior Vice President since 1985, with responsibilities similar
to those at GC. Ms. Henrich also served as Executive Vice President of Rancon
Securities Corporation from 1988 to 1991, and thereafter as its Chief Executive
Officer. Prior to joining Rancon, Ms. Henrich was manager of public relations
and advertising for Kaiser Development Company, a diversified real estate
holding company.
Wallace A. Krone has been an entrepreneur in the restaurant business since 1965,
and owns a number of Burger King restaurants in the San Francisco area. Mr.
Krone has been associated with GC since 1982 as an investor in one or more
partnerships, and has been a member of the board of directors of GC since 1989.
Page 41 of 44
<PAGE>
Item 11. Executive Compensation
Compensation and Fees
The Partnership has no executive officers. For information relating to fees,
compensation, reimbursements and distributions paid to related parties,
reference is made to Item 13 below.
Item 12. Security Ownership of Certain Owners and Management
To the best knowledge of the Partnership, no person owned of record or
beneficially more than 5% of the outstanding Units at December 31, 1996.
The Partnership, as an entity, does not have any directors or officers. At
December 31, 1996, no Units were owned of record or beneficially by any officers
or directors of the General Partner.
Item 13. Certain Relationships and Related Transactions
(a) The Partnership holds a $204,000 non interest bearing note due from
Huntington Breakers Apartments, Ltd., an unconsolidated joint venture. To the
extent the Partnership's share of the loss in its unconsolidated joint venture
creates a negative investment in joint venture ("excess losses"), the excess
losses shall be applied as a reduction in the advances to the unconsolidated
joint venture. Any excess losses exceeding the balance in advances to the
unconsolidated joint venture shall then be suspended Partnership losses. The
carrying value of the note receivable at December 31, 1996, net of excess losses
from the Huntington Breakers joint venture, was $0.
(b) In accordance with the Limited Partnership Agreement, the Partnership
paid the Managing General Partner, Glenborough Corporation, compensation for
property management services as follows:
1996 1995 1994
---- ------ -----
Management fees $114,000 $143,000 $242,000
Property management salaries $26,000 $37,000 $141,000
The Partnership also reimbursed Glenborough Corporation 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 Corporation was reimbursed $473,000, $552,000 and
$579,000 for such expenses in 1996, 1995 and 1994, respectively.
(c) In December 1996, Glenborough Partners, an affiliate of the
Partnership, purchased 931 limited partnership units (a 2.7% interest) from an
unaffiliated limited partner for $163,000.
(d) None of the members of the General Partner were indebted to the
Partnership during this fiscal year.
Page 42 of 44
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements - See Index to Financial
Statements contained in Item 8
(2) Financial Statement Schedules - See Item 14(d) below
(3) Exhibits - Exhibit #27 - Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were
filed by the registrant in the fourth quarter of
1996.
(c) Exhibits - See Exhibit Index
(d) Financial Statement Schedules - The following
financial statement schedules of the Partnership
are included in Item 8:
Schedule III - Real Estate Investments and
Related Accumulated Depreciation
All other schedules for which provision is made in
the applicable accounting regulation of the
Securities and Exchange Commission are not
required under the related instructions or are
inapplicable, and therefore have been omitted.
Page 43 of 44
<PAGE>
SIGNATURES
Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned,
thereunto duly authorized.
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ Robert Batinovich By: Glenborough Corporation,
Robert Batinovich a California corporation,
General Partner (formerly known as Glenborough
Realty Corporation,
Date:March 31, 1997 a California corporation)
Date:March 31,1997 By: /s/ Andrew Batinovich
Andrew Batinovich
Chief Executive Officer
and Chairman of the Board
Date:March 31,1997 By: /s/ Terri Garnick
Terri Garnick
Chief Financial Officer
Date:March 31,1997 By: /s/ June Gardner
June Gardner
Director
(A Majority of the Board of Directors of the General Partner)
Page 44 of 44
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000771998
<NAME> Outlook Income/Growth Fund VIII
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1.000
<CASH> 773
<SECURITIES> 0
<RECEIVABLES> 79
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 852
<PP&E> 20,928
<DEPRECIATION> 5,137
<TOTAL-ASSETS> 16,828
<CURRENT-LIABILITIES> 14,966
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,862
<TOTAL-LIABILITY-AND-EQUITY> 16,828
<SALES> 0
<TOTAL-REVENUES> 2,390
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,663
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,451
<INCOME-PRETAX> (1,724)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,724)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,724)
<EPS-PRIMARY> (137.43)
<EPS-DILUTED> (137.43)
</TABLE>
