UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission file number 0-15753
HIGH EQUITY PARTNERS L.P. - SERIES 86
(Exact name of registrant as specified in its charter)
DELAWARE 13-3314609
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue, Greenwich, CT 06830
(Address of principal executive offices)
(203) 862-7444
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check 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 [ ]
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
INDEX
Part I. Financial Information:
Balance Sheets--September 30, 1997 and December 31, 1996
Statements of Operations--Three and Nine Months Ended September 30,
1997 and 1996
Statement of Partners' Equity--Nine Months Ended September 30, 1997
Statements of Cash Flows--Nine Months Ended September 30, 1997 and 1996
Notes to Financial Statements
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Part II. Other Information:
Legal Proceedings, Other Events and Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
BALANCE SHEETS
September 30, December 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Real estate ................................ $49,527,982 $50,401,985
Cash and cash equivalents .................. 7,764,587 7,409,578
Other assets ............................... 4,031,932 3,867,372
Receivables ................................ 290,756 300,450
----------- -----------
$61,615,257 $61,979,385
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses ...... $ 2,113,370 $ 2,131,201
Distributions payable ...................... 714,897 383,754
Due to affiliates .......................... 410,583 1,325,213
----------- -----------
3,238,850 3,840,168
----------- -----------
Commitments and contingencies
PARTNERS' EQUITY:
Limited partners' equity (588,010
units issued and outstanding) ..... 55,456,640 55,231,308
General partners' equity ................... 2,919,767 2,907,909
----------- -----------
58,376,407 58,139,217
----------- -----------
$61,615,257 $61,979,385
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental Revenue ............................. $2,843,139 $3,078,250 $8,639,433 $8,935,277
---------- ---------- ---------- ----------
Costs and Expenses:
Operating expenses ................ 1,237,768 1,339,716 3,496,351 3,967,598
Depreciation and amortization ..... 524,845 511,061 1,534,535 1,531,912
Partnership management fee ........ 351,551 351,551 1,054,653 1,054,653
Administrative expenses ........... 138,974 141,631 599,748 406,119
Property management fee ........... 84,427 89,988 259,316 262,213
---------- ---------- ---------- ----------
2,337,565 2,433,947 6,944,603 7,222,495
---------- ---------- ---------- ----------
Income before interest and other income .... 505,574 644,303 1,694,830 1,712,782
Interest income ................... 93,918 64,254 256,784 167,303
Other income ...................... 38,135 47,374 68,175 93,894
---------- ---------- ---------- ----------
Net income ................................. $ 637,627 $ 755,931 $2,019,789 $1,973,979
========== ========== ========== ==========
Net income attributable to:
Limited partners .................. $ 605,746 $ 718,134 $1,918,800 $1,875,280
General partners .................. 31,881 37,797 100,989 98,699
---------- ---------- ---------- ----------
Net income ................................. $ 637,627 $ 755,931 $2,019,789 $1,973,979
========== ========== ========== ==========
Net income per unit of limited
partnership interest (588,010 units
outstanding) ...................... $ 1.03 $ 1.22 $ 3.26 $ 3.19
========== ========== ========== ==========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
STATEMENT OF PARTNERS' EQUITY
General Limited
Partners' Partners'
Equity Equity Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1997 ................... $ 2,907,909 $ 55,231,308 $ 58,139,217
Net income for the nine
months ended September 30, 1997 ............ 100,989 1,918,800 2,019,789
Distributions as return of
capital for the nine months ended
September 30, 1997 ($2.88 per
limited partnership unit) .................. (89,131) (1,693,468) (1,782,599)
------------ ------------ ------------
Balance, September 30, 1997 ................ $ 2,919,767 $ 55,456,640 $ 58,376,407
============ ============ ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
STATEMENTS OF CASH FLOWS
For The Nine Months Ended
September 30,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ................................... $ 2,019,789 $ 1,973,979
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ....... 1,534,535 1,531,912
Straight line adjustment for stepped
lease rentals .................. (123,024) (281,829)
Changes in asset and liabilities:
Accounts payable and accrued expenses (17,831) 707,959
Due to affiliates ................... (914,630) (66,077)
Receivables ......................... 9,694 194,076
Other assets ........................ (262,189) (436,497)
----------- -----------
Net cash provided by operating activities .... 2,246,344 3,623,523
----------- -----------
Cash Flows From Investing Activities:
Improvements to real estate .................. (439,879) (546,027)
----------- -----------
Cash Flows From Financing Activities:
Distributions to partners .................... (1,451,456) (1,151,262)
----------- -----------
Increase in Cash and Cash Equivalents ................. 355,009 1,926,234
Cash and Cash Equivalents, Beginning of Year .......... 7,409,578 4,752,024
----------- -----------
Cash and Cash Equivalents, End of Quarter ............. $ 7,764,587 $ 6,678,258
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
The accompanying financial statements, notes and discussions should be read in
conjunction with the financial statements, related notes and discussions
contained in the Partnership's annual report on Form l0-K/A for the year ended
December 3l, 1996.
The financial information contained herein is unaudited; however, in the opinion
of management, all adjustments necessary (consisting only of normal recurring
adjustments) for a fair presentation of such financial information have been
included.
2. SIGNIFICANT ACCOUNTING POLICIES
Impairment of Assets
The Partnership evaluates the recoverability of the net carrying value of its
real estate and related assets at least annually, and more often if
circumstances dictate. If this review indicates that the carrying value of a
property may not be recoverable, the Partnership estimates the future cash flows
expected to result from the use of the property and its eventual disposition,
generally over a five-year holding period. In performing this review, management
takes into account, among other things, the existing occupancy, the expected
leasing prospects of the property and the economic situation in the region where
the property is located.
If the sum of the expected future cash flows, undiscounted, is less than the
carrying amount of the property, the Partnership recognizes an impairment loss,
and reduces the carrying amount of the asset to its estimated fair value. Fair
value is the amount at which the asset could be bought or sold in a current
transaction between willing parties, that is, other than in a forced or
liquidation sale. Management estimates fair value using discounted cash flows or
market comparables, as most appropriate for each property. Independent certified
appraisers are utilized to assist management, when warranted.
Impairment write-downs recorded by the Partnership do not affect the tax basis
of the assets and are not included in the determination of taxable income or
loss.
Because the cash flows used to evaluate the recoverability of the assets and
their fair values are based upon projections of future economic events, such as
property occupancy rates, rental rates, operating cost inflation and market
capitalization rates, the amounts ultimately realized at disposition may differ
materially from the net carrying values at the balance sheet dates. The cash
flows and
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
market comparables used in this process are based on good faith estimates and
assumptions developed by management. Unanticipated events and circumstances may
occur and some assumptions may not materialize; therefore, actual results may
vary materially from the estimates. The Partnership may in the future provide
additional write-downs, which could be material, if real estate markets or local
economic conditions change.
Recently Issued Accounting Pronouncements
The Financial Accounting Standards Board has recently issued several new
accounting pronouncements. Statement No. 128, "Earnings per Share" establishes
standards for computing and presenting earnings per share, and is effective for
financial statements for both interim and annual periods ending after December
15, 1997. Statement No. 129, "Disclosure of Information about Capital Structure"
establishes standards for disclosing information about an entity's capital
structure, and is effective for financial statements for periods ending after
December 15, 1997. Statement No. 130, "Reporting Comprehensive Income"
establishes standards for reporting and display of comprehensive income and its
components, and is effective for fiscal years beginning after December 15, 1997.
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers, and is effective for financial statements
for periods beginning after December 15, 1997.
Management does not believe that these new standards will have a material effect
on the Partnership's reported operating results, per unit amounts, financial
position or cash flows.
Certain reclassifications were made to the prior period financial statements in
order to conform them to the current period presentation.
Results of operations for the nine months ended September 30, 1997 are not
necessarily indicative of the results to be expected for the entire year.
3. CONFLICTS INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Investment General Partner of the Partnership, Resources High Equity, Inc.
and the Administrative General Partner of the Partnership, Resources Capital
Corp., are wholly-owned subsidiaries of Presidio Capital Corp. ("Presidio").
Presidio AGP Corp., which is a wholly-owned subsidiary of Presidio, is the
Associate General Partner (together with the Investment and Administrative
General Partners, the "General Partners"). The General Partners and affiliates
of the General Partners are also engaged in businesses related to the
acquisition and operation of real estate. Presidio is also the parent of other
corporations that are or may in the future be engaged in businesses that may be
in competition with the Partnership. Accordingly, conflicts of interest may
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
NOTES TO FINANCIAL STATEMENTS
3. CONFLICTS INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
arise between the Partnership and such other businesses. Subject to the rights
of the Limited Partners under the Limited Partnership Agreement, Presidio
controls the Partnership through its indirect ownership of all the shares of the
General Partners. On November 2, 1997 the Administrative Services Agreement with
Wexford Management LLC ("Wexford"), the administrator for Presidio, expired
pursuant to its terms. Pursuant to that agreement, Wexford had authority to
designate directors of the General Partners. Effective November 3, 1997, Wexford
and Presidio entered into an Administrative Services Agreement dated as of
November 3, 1997 (the "ASA"). The ASA provides that Wexford will continue to
provide consulting and administrative services to Presidio and its affiliates
for a term of six months. During the quarter ended September 30, 1997,
reimburseable expenses to Wexford by the Partnership amounted to $25,500.
The Partnership has a property management services agreement with Resources
Supervisory Management Corp. ("Resources Supervisory"), an affiliate of the
General Partners, to perform certain functions relating to the management of the
properties of the Partnership. A portion of the property management fees were
paid to unaffiliated management companies which are engaged for the purpose of
performing certain of the management functions for certain properties. For the
quarters ended September 30, 1997 and 1996, Resources Supervisory was entitled
to receive $84,427 and $89,988, respectively, of which $75,395 and $67,521 was
paid to unaffiliated management companies, respectively.
For the administration of the Partnership, the Administrative General Partner is
entitled to receive reimbursement of expenses of a maximum of $200,000 per year
(exclusive of the reimbursement of expenses paid to Wexford). The Administrative
General Partner was entitled to receive $50,000 for each of the quarters ended
September 30, 1997 and 1996.
For managing the affairs of the Partnership, the Administrative General Partner
is entitled to receive an annual partnership asset management fee equal to 1.05%
of the amount of original gross proceeds paid or allocable to the acquisition of
property by the Partnership. For each of the quarters ended September 30, 1997
and 1996, the Administrative General Partner was entitled to receive $351,551.
The General Partners are allocated 5% of the net income of the Partnership,
which amounted to $31,881 and $37,797 for the quarters ended September 30, 1997
and 1996, respectively. They are also entitled to receive 5% of distributions,
which amounted to $38,686 and $19,188 for the quarters ended September 30, 1997
and 1996, respectively.
During the liquidation stage of the Partnership, the Investment General Partner
or an affiliate may be entitled to receive certain fees, which are subordinated
to the limited partners receiving their original invested capital and certain
specified minimum returns on their investment.
From July 1996 through October 1997, Millenium Funding III Corp., a wholly owned
indirect subsidiary of Presidio, purchased 9,513 units of the Partnership from
various limited partners. These units represent less than 1.7% of the
outstanding limited partnership units of the Partnership.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE
The following table is a summary of the Partnership's real estate as of:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- --------------
<S> <C> <C>
Land $ 12,305,557 $ 12,305,557
Buildings and improvements 58,612,823 58,172,943
------------- --------------
70,918,380 70,478,500
Less: Accumulated depreciation (21,390,398) (20,076,515)
-------------- --------------
$ 49,527,982 $ 50,401,985
============= ==============
</TABLE>
No write-downs for impairment were recorded for the nine months ended September
30, 1997 or 1996.
5. DISTRIBUTIONS PAYABLE
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------- --------
<S> <C> <C>
Limited partners ($1.15 and $.62 per unit) ....... $676,211 $364,566
General partners ................................. 38,686 19,188
-------- --------
$714,897 $383,754
======== ========
</TABLE>
Such distributions were paid in the quarters subsequent to September 30, 1997
and December 31, 1996, respectively.
6. DUE TO AFFILIATES
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---------- ----------
<S> <C> <C>
Partnership asset management fee .................... $ 351,551 $ 351,551
Settlement and litigation cost reimbursement (Note 7) -- 824,511
Property management fee ............................. 9,032 99,151
Non-accountable expense reimbursement ............... 50,000 50,000
---------- ----------
$ 410,583 $1,325,213
========== ==========
</TABLE>
Such amounts were paid in the quarters subsequent to September 30, 1997 and
December 31, 1996, respectively.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES
On or about May 11, 1993 the Partnership was advised of the existence of an
action (the "California Action") in which a complaint (the "HEP Complaint") was
filed in the Superior Court for the State of California for the County of Los
Angeles (the "Court") on behalf of a purported class consisting of all of the
purchasers of limited partnership interests in the Partnership. On April 7, 1994
the plaintiffs were granted leave to file an amended complaint (the "Amended
Complaint").
On November 30, 1995, after the Court preliminarily approved a settlement of the
California Action but ultimately declined to grant final approval and after the
Court granted motions to intervene, the original and Intervening Plaintiffs
filed a Consolidated Class and Derivative Action Complaint (the "Consolidated
Complaint") against the Administrative and Investment General Partners, the
managing general partner of HEP-85, the managing general partner of HEP-88 and
the indirect corporate parent of the General Partners. The Consolidated
Complaint alleged various state law class and derivative claims, including
claims for breach of fiduciary duties; breach of contract; unfair and fraudulent
business practices under California Bus. & Prof. Code Sec. 17200; negligence;
dissolution, accounting and receivership; fraud; and negligent
misrepresentation. The Consolidated Complaint alleged, among other things, that
the general partners caused a waste of HEP Partnership assets by collecting
management fees in lieu of pursuing a strategy to maximize the value of the
investments owned by the limited partners; that the general partners breached
their duty of loyalty and due care to the limited partners by expropriating
management fees from the partnerships without trying to run the HEP Partnerships
for the purposes for which they are intended; that the general partners are
acting improperly to enrich themselves in their position of control over the HEP
Partnerships and that their actions prevent non-affiliated entities from making
and completing tender offers to purchase HEP Partnership Units; that by refusing
to seek the sale of the HEP Partnerships' properties, the general partners have
diminished the value of the limited partners' equity in the HEP Partnerships;
that the general partners have taken a heavily overvalued partnership asset
management fee; and that limited partnership units were sold and marketed
through the use of false and misleading statements.
On February 24, 1997, after the Court again preliminarily approved a settlement
of the California Action but again ultimately declined to grant final approval,
the Court recused itself from considering a motion to intervene and to file a
new complaint in intervention by two of the objectors to the Revised Settlement,
granted the request of one plaintiffs' law firm to withdraw as class counsel and
scheduled future hearings on various matters.
Thereafter, the Intervening Plaintiffs filed and then revised an Amended
Consolidated Class Action and Derivative Action Complaint (the Second Amended
Consolidated Complaint) which asserts many of the same claims as the
Consolidated Complaint, eliminates certain legal infirmities from that
Consolidated Complaint, and presents more detailed factual allegations. In
particular, that pleading no longer asserts claims of fraud and negligent
misrepresentation. The General Partners believed that the Second Amended
Consolidated Complaint continued to be subject to challenge on legal grounds and
filed demurrers and a motion to strike. On October 7, 1997, the Court granted
substantial portions of these motions. Thereafter, the General Partners served
answers denying the allegations and asserting numerous affirmative defenses.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Limited Partnership Agreement provides for indemnification of the General
Partners and their affiliates in certain circumstances. The Partnership has
agreed to reimburse the General Partners for their actual costs incurred in
defending this litigation and the costs of preparing settlement materials.
Through December 31, 1996, the General Partners had billed the Partnership a
total of $824,511 for these costs which was paid in February 1997.
The General Partners believe that each of the claims asserted in the
Consolidated Complaint are meritless and intend to continue to vigorously defend
the California Action. It is impossible at this time to predict what the defense
of the California Action will cost, the Partnership's financial exposure as a
result of the indemnification agreement discussed above, and whether the costs
of defending could adversely affect the Managing General Partner's ability to
perform its obligations to the Partnership.
8. SUBSEQUENT EVENT
In October 1997, the Partnership sold the 230 East Ohio Street property to an
existing tenant in the building. The sales price of $2,800,000 resulted in a
gain of approximately $1,100,000 recorded during the fourth quarter of 1997.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Working capital reserves are temporarily invested in short-term money market
instruments and together with cash flow from operations, are expected to be
sufficient to fund future capital improvements to the Partnership's properties.
As of September 30, 1997, total working capital reserves amounted to
approximately $5,179,000. The Partnership intends to distribute to its partners
less than all of its future cash flow from operations in order to assure
adequate reserves for capital improvements and lease procurement costs.
During the nine months ended September 30, 1997, cash and cash equivalents
increased $355,009 as a result of net cash provided by operations in excess of
capital expenditures and distributions to partners. The Partnership's primary
source of funds is cash flow from the operation of its properties, principally
rents received from tenants, which amounted to $2,246,344 for the nine months
ended September 30, 1997. The Partnership used $439,879 for capital expenditures
related to capital and tenant improvements to the properties and $1,451,456 for
distributions to partners during the nine months ended September 30, 1997.
In October 1997, the Partnership sold the 230 East Ohio Street property for
$2,800,000 in cash. Management is currently evaluating the effect of this sale
on the fourth quarter distribution to limited partners. During the nine months
ended September 30, 1997, the Partnership's negative cash flow from this
property was approximately $261,000.
The Partnership expects to continue to utilize a portion of its cash flow from
operations to pay for various capital and tenant improvements to the properties
and leasing commissions, the amount of which cannot be predicted with certainty.
Capital and tenant improvements and leasing commissions may in the future exceed
the Partnership's cash flow from operations. In that event, the Partnership
would utilize the remaining working capital reserves or sell one or more
properties. Except as discussed herein, management is not aware of any trends,
events, commitments, or uncertainties that will have a significant impact on
liquidity.
RESULTS OF OPERATIONS
The Partnership experienced a slight increase in net income for the nine months
ended September 30, 1997 compared to the same period in 1996 primarily due to
lower costs and expenses and higher interest income in 1997, partially offset by
lower revenues. The Partnership experienced a decrease in net income for the
three months ended September 30, 1997 compared to the same period in 1996,
primarily due to lower rental revenues, partially offset by a decrease in costs
and expenses and higher interest income.
Rental revenues decreased during both the nine and three months ended September
30, 1997 at Melrose I and 230 East Ohio due to certain tenants vacating the
premises in late 1996 and early 1997. The decrease for the nine months ended
September 30, 1997 was partially offset by an increase in rental revenue at 568
Broadway and Commonwealth due to higher rental rates and occupancy rates,
respectively, as lease renewals and new leases were executed in the second half
of 1996 and in early 1997.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Costs and expenses decreased during the nine and three months ended September
30, 1997 compared to the same periods in 1996, primarily due to a decrease in
operating expenses. This decrease was partially offset by an increase in
administrative expenses for the nine months ended September 30, 1997. Operating
expenses decreased during both the nine and three months ended September 30,
1997 due to decreases in bad debt expenses and real estate taxes at certain
properties. Bad debt expenses decreased in the current periods at Commonwealth
and Melrose I because certain tenants vacated in 1996 at which time the
receivables deemed to be uncollectible were written off. No such bad debt
expenses were incurred in the current period. Real estate taxes decreased in the
current periods as tax appeals resulted in lower assessed values and lower real
estate taxes at Melrose I and certain other properties. Administrative expenses
for the nine months ended September 30, 1997 increased compared to the same
period in 1996 due to higher legal and accounting fees related to ongoing
litigation.
Interest income increased during the nine and three months ended September 30,
1997 as compared to the same periods in 1996 due to higher cash balances. Other
income decreased during both the nine and three months ended September 30, 1997
compared to the same periods in 1996 due to fewer investor transfers, which
result in transfers fees received by the Partnership.
Inflation is not expected to have a material impact on the Partnership's
operations or financial position.
Legal Proceedings
The Partnership is a party to certain litigation. See Note 7 to the financial
statements for a description thereof.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
PART II. - OTHER INFORMATION
Item 1 - Legal Proceedings
(a) See Management's Discussion and Analysis of Financial
Condition and Results of Operations and Notes to Financial
Statements - Note 7 which is herein incorporated by reference.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits: There were no exhibits filed
(b) Reports on Form 8-K:
Current Report on Form 8-K dated August 7, 1997 Current Report
on Form 8-K dated September 19, 1997
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - SEPTEMBER 30, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
High Equity Partners L.P. - Series 86
By: Resources Capital Corp.,
Administrative General Partner
Dated: November 14, 1997 By: /S/ Richard Sabella
--------------------
Richard Sabella
President
(Duly Authorized Officer)
Dated: November 14, 1997 By: /S/ Kevin Reardon
------------------
Kevin Reardon
Vice President, Secretary
and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the September 30, 1997 Form 10-Q of High Equity Partners
L.P.-Series 86 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,764,587
<SECURITIES> 0
<RECEIVABLES> 290,756
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 61,615,257
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 58,376,407
<TOTAL-LIABILITY-AND-EQUITY> 61,615,257
<SALES> 0
<TOTAL-REVENUES> 8,639,433
<CGS> 0
<TOTAL-COSTS> 3,496,351
<OTHER-EXPENSES> 3,448,252
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,019,789
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,019,789
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,019,789
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
