================================================================================
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 June 30, 1998
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 - JUNE 30, 1998
INDEX
Part I. Financial Information:
Balance Sheets--June 30, 1998 and December 31, 1997
Statements of Operations--Three and Six Months Ended June 30, 1998 and 1997
Statement of Partners' Equity-- Six Months Ended June 30, 1998
Statements of Cash Flows-- Six Months Ended June 30, 1998 and 1997
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 - JUNE 30, 1998
BALANCE SHEETS
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
ASSETS
Real estate - net .......................... $47,605,921 $48,015,174
Cash and cash equivalents .................. 9,825,153 9,828,701
Other assets ............................... 3,814,989 3,827,957
Receivables ................................ 310,975 247,714
----------- -----------
$61,557,038 $61,919,546
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses ...... $ 2,043,255 $ 2,018,260
Distributions payable ...................... 711,801 711,801
Due to affiliates .......................... 383,572 699,043
----------- -----------
3,138,628 3,429,104
----------- -----------
Commitments and contingencies
PARTNERS' EQUITY:
Limited partners' equity (588,010
units issued and outstanding) ..... 55,496,543 55,564,973
General partners' equity ................... 2,921,867 2,925,469
----------- -----------
58,418,410 58,490,442
----------- -----------
$61,557,038 $61,919,546
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
STATEMENTS OF OPERATIONS
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental Revenue ............................. $2,782,329 $2,698,473 $5,575,564 $5,796,294
---------- ---------- ---------- ----------
Costs and Expenses:
Operating expenses ................ 1,156,045 1,138,015 2,097,314 2,258,583
Depreciation and amortization ..... 487,806 504,845 975,612 1,009,690
Partnership management fee ........ 321,358 351,551 642,716 703,102
Administrative expenses ........... 351,676 239,927 591,631 460,774
Property management fee ........... 82,583 82,063 165,514 174,889
---------- ---------- ---------- ----------
2,399,468 2,316,401 4,472,787 4,607,038
---------- ---------- ---------- ----------
Income before interest and other income .... 382,861 382,072 1,102,777 1,189,256
Interest income ................... 130,129 83,150 230,628 162,866
Other income ...................... 14,415 21,865 18,165 30,040
---------- ---------- ---------- ----------
Net income ................................. $ 527,405 $ 487,087 $1,351,570 $1,382,162
========== ========== ========== ==========
Net income attributable to:
Limited partners .................. $ 501,035 $ 462,733 $1,283,992 $1,313,054
General partners .................. 26,370 24,354 67,578 69,108
---------- ---------- ---------- ----------
Net income ................................. $ 527,405 $ 487,087 $1,351,570 $1,382,162
========== ========== ========== ==========
Net income per unit of limited
partnership interest (588,010 units
outstanding) ...................... $ .85 $ .79 $ 2.18 $ 2.23
========== ========== ========== ==========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
STATEMENT OF PARTNERS' EQUITY
General Limited
Partners' Partners'
Equity Equity Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1998 ....... $ 2,925,469 $ 55,564,973 $ 58,490,442
Net income for the six
months ended June 30, 1998 ..... 67,578 1,283,992 1,351,570
Distributions as return of
capital for the six months ended
June 30, 1998 ($2.30 per
limited partnership unit) ...... (71,180) 1,352,422) (1,423,602)
------------ ------------ ------------
Balance, June 30, 1998 ......... $ 2,921,867 $ 55,496,543 $ 58,418,410
============ ============ ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
STATEMENTS OF CASH FLOWS
For the Six Months Ended
June 30,
-----------------------------
1998 1997
----------- ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ................................... $ 1,351,570 $ 1,382,162
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ....... 975,612 1,009,690
Straight line adjustment for stepped
lease rentals .................. (38,910) (82,016)
Changes in asset and liabilities:
Accounts payable and accrued expenses 24,995 (51,935)
Due to affiliates ................... (315,471) (912,043)
Receivables ......................... (63,261) 13,445
Other assets ........................ (109,656) (158,795)
----------- -----------
Net cash provided by operating activities .... 1,824,879 1,200,508
----------- -----------
Cash Flows From Investing Activities:
Improvements to real estate .................. (404,825) (261,090)
----------- -----------
Cash Flows From Financing Activities:
Distributions to partners .................... (1,423,602) (857,256)
----------- -----------
(Decrease) Increase in Cash and Cash Equivalents ...... (3,548) 82,162
Cash and Cash Equivalents, Beginning of Year .......... 9,828,701 7,409,578
----------- -----------
Cash and Cash Equivalents, End of Quarter ............. $ 9,825,153 $ 7,491,740
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
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 for the year
ended December 3l, 1997.
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 expected 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 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.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain reclassifications were made to the prior year financial statements
in order to conform them to the current period presentation.
Results of operations for the six months ended June 30, 1998 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 (and affiliated with
other entities) that are or may in the future be engaged in businesses that
may be in competition with the Partnership. Accordingly, conflicts of
interest may arise between the Partnership and such other businesses.
Subject to the right of the limited partners under the Limited Partnership
Agreement, Presidio controls the Partnership through its indirect ownership
of the General Partners. Effective July 31, 1998, Presidio is indirectly
controlled by NorthStar Capital Investment Corp., a Maryland corporation.
Effective as of August 28, 1997, Presidio has a management agreement with
NorthStar Presidio Management Company LLC ("NorthStar Presidio"), an
affiliate of NorthStar Capital Investment Corp., pursuant to which,
NorthStar Presidio will provide the day-to-day management of Presidio and
its direct and indirect subsidiaries and affiliates. For the six months
ended June 30, 1998, reimbursable expense due NorthStar Presidio amounted
to $51,000.
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 June 30, 1998 and 1997, Resources
Supervisory was entitled to receive $82,583 and $82,063, respectively, of
which $70,369 and $70,444 was paid to unaffiliated management companies,
respectively, for on-site management and the balance was retained by
Resources Supervisory.
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 . The Administrative General Partner was entitled to
receive $50,000 for each of the quarters ended June 30, 1998 and 1997.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
3. CONFLICTS INTEREST AND TRANSACTIONS WITH RELATED PARTIES
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 June 30, 1998 and 1997, the Administrative General Partner was
entitled to receive $321,358 and $351,551, respectively.
The General Partners are allocated 5% of the net income of the Partnership,
which amounted to $26,370 and $24,354 for the quarters ended June 30, 1998
and 1997, respectively. They are also entitled to receive 5% of
distributions, which amounted to $35,590 and $29,711 for the quarters ended
June 30, 1998 and 1997, 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. All fees
received by the General Partners are subject to certain limitations as set
forth in the Partnership Agreement.
From July 1996 through March 12, 1998, Millenium Funding III Corp., a
wholly owned indirect subsidiary of Presidio, purchased 45,320 units of the
Partnership from various limited partners which represents approximately
7.7% of the outstanding limited partnership units of the Partnership.
In connection with a tender offer for units of the Partnership made March
12, 1998 (the "Offer") by Olympia Investors, L.P. a Delaware limited
partnership controlled by Carl Ichan ("Olympia"), Olympia and Presidio
entered into an agreement dated March 6, 1998 (the "Agreement"). On July
28, 1998, Olympia announced that it had accepted for payment 33,710 units
properly tendered pursuant to the Offer. As a consequence of the Agreement,
Presidio may be deemed to beneficially own the units owned by Olympia.
Subsequent to the expiration of the Offer, Millennium Funding III Corp.,
purchased 246 limited partnership units in August 1998.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE
The following table is a summary of the Partnership's real estate as of:
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Land $ 11,669,652 $ 11,669,652
Buildings and improvements 57,172,909 56,768,084
-------------- --------------
68,842,561 68,437,736
Less: Accumulated depreciation (21,236,640) (20,422,562)
-------------- --------------
$ 47,605,921 $ 48,015,174
============== ==============
</TABLE>
No write-downs for impairment were recorded for the six months ended June
30, 1998 or 1997.
5. DISTRIBUTIONS PAYABLE
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Limited partners ($1.15 per unit) ............ $676,211 $676,211
General partners ............................. 35,590 35,590
-------- --------
$711,801 $711,801
======== ========
</TABLE>
Such distributions were paid in the quarters subsequent to June 30, 1998
and December 31, 1997, respectively.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
6. DUE TO AFFILIATES
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Partnership asset management fee ........................ $321,358 $321,358
Reorganization and litigation cost reimbursement (Note 7) -- 234,000
Property management fee ................................. 12,214 93,685
Non-accountable expense reimbursement ................... 50,000 50,000
-------- --------
$383,572 $699,043
======== ========
</TABLE>
Such amounts were paid in the quarters subsequent to June 30, 1998 and
December 31, 1997 respectively.
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 behalf of a class consisting of all
the purchasers of limited partnership interest in the Partnership,
Integrated Resources High Equity Partners, Series 85 ("HEP-85") and High
Equity Partners L.P. - Series 88 ("HEP-88"), which are both affiliated
partnerships.
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 managing general
partner of HEP-85 and HEP-88 and the Investment General Partner of the
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Partnership; the Administrative General Partner of the Partnership (the
"General Partners"); a subsidiary of the indirect corporate parent of the
General Partners; 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 the 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 acted
improperly to enrich themselves in their position of control over the HEP
partnerships and that their actions prevented non-affiliated entities from
making and completing tender offers to purchase units in the HEP
partnership; that by refusing to seek the sale of the HEP partnerships'
properties, the General Partners diminished the value of the limited
partners' equity in the HEP partnerships; that the General Partners took a
heavily overvalued partnership asset management fee; and that limited
partnership units were sold and marketed through the use of false and
misleading statements.
The Court entered an order on January 14, 1997 rejecting the settlement and
concluding that there had not been an adequate showing that the settlement
was fair and reasonable. On February 24, 1997, the Court granted the
request of one plaintiffs' law firm to withdraw as class counsel.
Thereafter, in June 1997, the plaintiffs again amended their complaint (the
"Second Amended Complaint"). The Second Amended Complaint asserts
substantially the same claims as the Consolidated Complaint, except that it
no longer contains causes of action for fraud, for negligent
misrepresentation, or for negligence. The defendants served answers denying
the allegations and asserting numerous affirmative defenses. In February
1998, the Court certified three plaintiff classes consisting of the current
unit holders in each of the three HEP partnerships. On March 11, 1998, the
Court stayed the California Action temporarily to permit the parties to
engage in renewed settlement discussions. On July 30, 1998, the Court
lifted the stay.
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 June 30, 1998, the Partnership paid the
General Partners a total of $1,058,511 for these costs.
The General Partners believe that each of the claims asserted in the Second
Amended Complaint is meritless and intend to continue to vigorously defend
the California Action. It is impossible at this time to predict what the
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
On February 6, 1998, Everest Investors 8, LLC ("Everest") commenced an
action in the Superior Court of the State of California for the County of
Los Angeles (Case No. BC 185554), against, among others, the HEP
partnerships, Resources Pension Shares 5 LP (an affiliated partnership),
the general partners of each of the partnerships, and DCC Securities Corp.
In the action, Everest alleged, among other things, that the partnerships
and the general partners breached the provisions of the applicable
partnership agreements by refusing to recognize transfers to Everest of
limited partnership units purportedly acquired pursuant to tender offers
that had been made by Everest (the "Everest Tender Units"). Everest sought
injunctive relief (a) directing the recognition of transfers to Everest of
the Everest Tender Units and the admission of Everest as a limited partner
with respect to the Everest Tender Units and (b) enjoining the transfer of
the Everest Tender Units to any either party. Everest seeks damages,
including punitive damages, for alleged breach of contract, defamation and
intentional interference with contractual relations. Everest's motion for a
temporary restraining order was denied on February 6, 1998. A hearing on
Everest's application for a preliminary injunction had been scheduled for
February 26, however, on February 20, 1998, Everest asked the Court to take
its application off calendar. The defendants served answers denying the
allegations and asserting numerous affirmative defenses.
On March 27, 1998, Everest commenced an action in the United States
District Court for the Central District of California against, among
others, the general partners of the HEP Partnerships. In the action,
Everest alleged, among other things, various violations of the Williams Act
Section 14(d) of the Securities Exchange Act of 1934 in connection with the
general partners' refusal to recognize transfers to Everest of limited
partnership units purportedly acquired pursuant to the Everest tender
offers and the letters sent by the general partners to the limited partners
advising them of the general partners' determination that the Everest
tender offers violated applicable securities laws.
During the quarter ended June 30, 1998, the litigations involving the
Partnership and Everest were discontinued with prejudice.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
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 June 30, 1998, 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 capitalized lease procurement costs.
During the six months ended June 30, 1998, cash and cash equivalents decreased
$3,548 as a result of capital expenditures and distributions to partners in
excess of net cash provided by operations. The Partnership's primary source of
funds is cash flow from the operation of its properties (principally rents
received from tenants) which amounted to $1,824,879 for the six months ended
June 30, 1998. The Partnership used $404,825 for capital expenditures related to
capital and tenant improvements to the properties and $1,423,602 for
distributions to partners during the six months ended June 30, 1998.
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. 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,
reduce distributions, or sell one or more properties. Except as discussed above,
management is not aware of any other 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 three months
ended June 30, 1998 compared to the same period in 1997, primarily due to higher
interest income. For the six months ended June 30, 1998, net income decreased
slightly as a result of lower revenues, partially offset by lower costs and
expenses and higher interest income.
Rental revenues increased slightly during the three months ended June 30, 1998
due to higher percentage rents collected at Sutton Square. For both the six and
three month periods ended June 30, 1998, rental revenues decreased due to the
sale of the 230 East Ohio property in October 1997.
Costs and expenses increased slightly during the three months ended June 30,
1998 compared to the same period in 1997 primarily due to an increase in
operating expenses. Repair and maintenance expenses increased during the second
quarter of 1998 at Matthews, which offset decreases in real estate taxes during
1998 due to the sale of the 230 East Ohio property in 1997. In addition, for
both the three and six month periods in 1998, depreciation expenses and
partnership asset management fees decreased due to the sale of 230 East Ohio, as
previously discussed. These decreases were offset by an increase in
administrative expenses for the three and six months ended June 30, 1998 due to
higher legal and accounting fees related to ongoing litigation and a possible
reorganization of the Partnership.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Interest income increased during the three and six months ended June 30, 1998 as
compared to the same periods in 1997 due to higher cash balances. Other income
decreased during both the three and six month periods ended June 30, 1998 due to
fewer investor transfers.
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.
Forward-looking Statements
When used in this quarterly report on Form 10-Q, the words "believes,"
"anticipates," "expects" and similar expressions are intended to identify
forward-looking statements. Statements looking forward in time are included in
this quarterly report on Form 10-Q pursuant to the "safe harbor" provision of
the Private Securities Litigation Reform Act of 1995. Such statements are
subject to certain risks and uncertainties which would cause actual results to
differ materially, including, but not limited to, those set forth in
"management's discussion and analysis of financial condition and results of
operations." Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
Partnership undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances occurring after the date hereof or
to reflect the occurrence of unanticipated events.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
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:
None
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 86 - FORM 10-Q - JUNE 30, 1998
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: August 12, 1998 By: /S/ Richard Sabella
--------------------
Richard Sabella
President
(Duly Authorized Officer)
Dated: August 12, 1998 By: /S/ Lawrence Schachter
-----------------------
Lawrence Schachter
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the June 30, 1998 Form 10-Q of High Equity Partners L.P.-Series
86 and is qualified in its entirety by reference to such financial statemens.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 9,825,153
<SECURITIES> 0
<RECEIVABLES> 310,975
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 61,557,038
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0
0
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</TABLE>
