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SCHEDULE 14A INFORMATION
Consent Solicitation Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Consent Solicitation
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[X] Definitive Consent Solicitation
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240,14a-12
DEVELOPMENT PARTNERS
(A MASSACHUSETTS LIMITED PARTNERSHIP)
(Name of Registrant As Specified in Charter)
(Name of Person(s) Filing Consent Solicitation Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Units of Limited Partnership Interest ("Units")
(2) Aggregate number of securities to which transaction applies:
36,411 Units
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was
determined): $10,321,052 equal to the estimated aggregate amount
of cash to be distributed to the partners upon liquidation of
the Registrant.
(4) Proposed maximum aggregate value of transaction: $10,321,052
(5) Total fee paid: $2,064
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:_________________________________________
(2) Form, Schedule or Registration Statement No.:___________________
(3) Filing Party:___________________________________________________
(4) Date Filed:_____________________________________________________
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DEVELOPMENT PARTNERS
(A MASSACHUSETTS LIMITED PARTNERSHIP)
5110 Langdale Way
Colorado Springs, Colorado 80906
(719) 527-0544
March 16, 1998
Dear Limited Partner:
We are pleased to let you know that, during the last quarter of 1997,
Development Partners (A Massachusetts Limited Partnership) (the "Partnership")
implemented and completed a competitive bidding process for the disposition of
its real property investments. The competitive bidding process included the
participation of a number of well-screened and fully-qualified institutional
real property purchasers and resulted in the Partnership receiving and accepting
offers to purchase all of its properties.
The Partnership is now in a position, subject to the approval of a majority in
interest of the limited partners, to sell its properties and dissolve the
Partnership. Accordingly, pursuant to the enclosed Consent Solicitation, the
Partnership is seeking the consent of the limited partners to dissolve the
Partnership and liquidate all of its real property investments (the
"Dissolution"). The Dissolution and the principal terms of the offers are
discussed in more detail in the Consent Solicitation under "Description of
Dissolution."
FOR THE REASONS SET FORTH IN THE ENCLOSED CONSENT SOLICITATION, THE GENERAL
PARTNERS RECOMMEND THAT THE LIMITED PARTNERS CONSENT TO THE DISSOLUTION.
Accompanying the Consent Solicitation is the Partnership's Form 10-K for the
year ended December 31, 1996 and its most recent Form 10-Q for the quarter ended
September 30, 1997.
We urge you to read the enclosed document carefully and to return your signed
consent as soon as possible to GP L'Auberge Communities, L.P., c/o Gemisys, 7103
South Revere Parkway, Englewood, Colorado 80112. You may also return your
Consent to GP L'Auberge Communities, L.P., c/o Gemisys, via facsimile at (303)
705-6171. For your convenience a postage-paid return envelope has been included.
If you have any questions about the enclosed material, please call our Investor
Services line at (800) 262-7778.
Very truly yours,
L'AUBERGE REALTY ADVISORS (A MASSACHUSETTS GP L'AUBERGE COMMUNITIES, L.P.,
LIMITED PARTNERSHIP), General Partner General Partner
By: L'Auberge Communities,
Inc., its general partner
By: Stephen B. Boyle, General Partner
By: Stephen B. Boyle, President
YOUR VOTE IS IMPORTANT
PLEASE SIGN AND DATE THE ENCLOSED CONSENT AND RETURN IT
IMMEDIATELY SO THAT YOUR VOTE CAN BE COUNTED.
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DEVELOPMENT PARTNERS
(A MASSACHUSETTS LIMITED PARTNERSHIP)
5110 Langdale Way
Colorado Springs, Colorado 80906
CONSENT SOLICITATION
March 16, 1998
INTRODUCTION
This solicitation of written consents (the "Consent Solicitation") is
furnished by GP L'Auberge Communities, L.P., a California limited partnership,
and L'Auberge Realty Advisors (A Massachusetts Limited Partnership), the general
partners (the "General Partners") of Development Partners (A Massachusetts
Limited Partnership) (the "Partnership"), in connection with the Partnership's
solicitation of consents from the Partnership's limited partners (the "Limited
Partners") to dissolve the Partnership and liquidate all of its real property
investments (hereinafter referred to as "properties") (collectively, the
"Dissolution") by means of a liquidation strategy as described herein. If the
Dissolution is consented to by a majority in interest of the Limited Partners as
described herein, the Partnership's properties will be sold and liquidated as
soon as is practicable, consistent with obtaining reasonable value therefor, and
the net proceeds will be distributed to the Limited Partners. As discussed
below, the Partnership has received and accepted offers from purchasers
unaffiliated with either General Partner to purchase all of its properties,
although there can be no assurance that any or all such offers will result in
consummated sales of the properties. The General Partners recommend that the
Limited Partners consent to the Dissolution.
This Consent Solicitation contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Actual results could differ materially from
those projected in the forward-looking statements as a result of a number of
factors, including those identified herein.
This Consent Solicitation, and the enclosed consent form (the
"Consent"), are first being mailed to the Limited Partners on or about March 20,
1998.
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DESCRIPTION OF DISSOLUTION
BACKGROUND AND REASONS FOR DISSOLUTION
The Partnership was organized in 1985 for the purpose of acquiring,
operating and ultimately selling or disposing of multifamily residential rental
properties. The Partnership's original investment objectives contemplated that
the properties would be held for approximately five to seven years, with
decisions about the timing of eventual property sales or other dispositions to
be left to the General Partners' discretion based on the anticipated economic
benefits of continued ownership and other factors. The national recession that
extended through the early 1990s had the effect of depressing real estate
values. Subsequently, the markets where the Partnership's properties are located
experienced an oversupply of new apartment developments. These conditions led
the General Partners to conclude that it was advisable for the Partnership to
hold its properties longer than initially anticipated.
Instead of selling the Partnership's properties during the downturn in
their markets, the Partnership continued to hold and operate its properties. As
improvement in the Partnership's markets became apparent, the General Partners
began to prepare the properties for sale and to devise and implement a
disposition strategy. The proposed Dissolution and sales transactions are the
final step in the disposition process. After considering various alternatives
for marketing the Partnership's properties, the General Partners determined
that, given the quality of the properties, the most advantageous offers were
likely to be obtained by approaching a reasonable number of well-qualified
institutional real estate purchasers in a competitive bidding process.
Accordingly, with the assistance of a licensed real estate broker unaffiliated
with either General Partner (the "Unaffiliated Broker"), approximately 15
institutional real estate purchasers representing a broad cross-section of the
institutional real estate capital market were approached. As a result of the
competitive bidding process, the Partnership received multiple offers to
purchase each of its properties. In order to maximize the sales prices, the
Partnership permitted each offeror the opportunity to increase its offer. From
the resubmitted offers, the General Partners selected the highest and best offer
for each property and a purchase and sale agreement (the "Purchase Agreement")
has been executed with respect to each property, subject to the consent of the
Limited Partners to the Dissolution. Certain of the principal terms of the
Purchase Agreements are discussed in this Consent Solicitation under
"Description of Dissolution -- Liquidation Strategy; Pending Sales."
Sales of the properties at this time will enable the Partnership to take
advantage of the improved local economies where its properties are located. The
General Partners have reviewed comparable sales in the properties' respective
markets and have determined that the accepted offer for each property is fair
and reasonable. Moreover, the General Partners believe that the terms of each
proposed sale described herein are advantageous to the Partnership because of
the price, the purchase of the properties for all cash without a financing
contingency and the strength and reliability of the purchaser.
For the foregoing reasons, the General Partners believe that it is in
the best interests of the Partnership and the Limited Partners to dissolve the
Partnership and seek to sell and liquidate the
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Partnership properties and wind up the Partnership at this time rather than to
continue to hold and operate the properties for later sale.
EFFECTS OF THE DISSOLUTION
Under the Massachusetts Revised Uniform Limited Partnership Act, a
limited partnership may be dissolved at the time or upon the happening of events
specified in its partnership agreement. The Amended and Restated Certificate and
Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement") provides that the Partnership shall be dissolved upon the vote or
written consent of a majority in interest of the Limited Partners. Under the
terms of the Partnership Agreement and applicable law, upon dissolution of the
Partnership the General Partners are to take full account of the Partnership's
assets and liabilities, liquidate the Partnership's remaining assets and apply
and distribute the liquidation proceeds in the order specified in the
Partnership Agreement. See "Liquidation and Winding Up" below. During the
winding up process, the Partnership's legal existence would continue solely for
purposes relating to the liquidation and winding up and the Limited Partners
would continue to have the voting and economic rights provided in the
Partnership Agreement.
Neither the Partnership Agreement nor Massachusetts law provides for a
specified period of time for completing the liquidation and winding up of the
Partnership. If the Dissolution is consented to by a majority in interest of the
Limited Partners, the General Partners would be authorized and directed to
settle and close the Partnership's business and dispose of and convey the
Partnership's property as soon as practicable, pursuant to the offers described
herein or otherwise, consistent with obtaining reasonable value for the
properties. In the event that one or more of the properties are not sold
pursuant to the Purchase Agreements described herein (see "Liquidation Strategy;
Pending Sales" below), the General Partners would continue to have broad
discretion to manage the business and affairs of the Partnership and the winding
up process and to determine the timing, terms and conditions of property sales
and other dispositions. Upon the dissolution and completion of the winding up
process, the Partnership will file a certificate of cancellation with the
Massachusetts Office of the Secretary of State and will be terminated. There are
no federal or state regulatory requirements that must be complied with or
approvals that must be obtained in connection with the Dissolution.
LIQUIDATION STRATEGY; PENDING SALES
The following table sets forth certain information regarding the
Partnership's properties and the Purchase Agreements.
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<TABLE>
Projected Purchase Agreements
Mortgage --------------------------------
Property Name and Number of Indebtedness Purchase Closing
Location Units at 3/30/98 Price Purchaser Date(1)
----------------- --------- ------------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
Canyon View West, 168 $4,963,525 $10,101,497 Tucson 4/24/98(3)
Tucson, AZ(2) Realty
Holding
Co. Inc.
L'Auberge Broadmoor, 108 $3,489,660 $8,300,000 DRA 4/30/98
Colorado Springs, Advisors,
CO(4) Inc.
Casabella, 154 $6,734,895 $11,700,000 JPR (6)
Scottsdale, AZ(5) Capital
LLC
</TABLE>
(1) Subject to the consent of the Limited Partners to the Dissolution
proposed herein.
(2) The Partnership owns a joint venture interest in Canyon View
West Joint Venture which holds fee simple title to this property. The
Partnership's co-venturers are unaffiliated with the Partnership and the
General Partners. No co-venturer will be entitled to receive any portion
of the proceeds of the sale of Canyon View West. Under the terms of the
Canyon View West Joint Venture Agreement, the Partnership's co-venturers
(or any of them) were granted a right of first refusal to purchase
Canyon View West on the same terms and conditions as an accepted third
party offer to purchase the property. With respect to the proposed sale
to Tucson Realty Holding Co. Inc. ("TRH"), the co-venturers had until
the close of business on March 13, 1998 to exercise the right of first
refusal on the terms contained in the Canyon View West Purchase
Agreement. On March 13, 1998, one of the co-venturers purported to
exercise the right of first refusal. The Partnership believes, and has
asserted, that the purported exercise was not in conformity with the
material terms and conditions of the Canyon View West Purchase Agreement
and, therefore, that the right of first refusal lapsed without exercise.
Accordingly, the Partnership is proceeding to close the sale of Canyon
View West to TRH pursuant to the Canyon View West Purchase Agreement.
There can be no assurance, however, that the co-venturer will not claim
that the Partnership is prohibited from selling the property to TRH and
attempt to enjoin the sale. The assertion of such a claim could
materially delay the Partnership's sale of Canyon View West. Canyon
View West will be sold together with an adjacent property which is owned
by a joint venture in which a public limited partnership of which the
General Partners or their affiliates are the general partners is the
managing venturer. Accordingly, the sale of Canyon View West is also
conditioned upon the consent of the limited partners of the affiliated
partnership to the dissolution of such partnership. The $16,750,000
total purchase price for the two adjacent properties was allocated
between the two joint ventures based on relative gross rent potential of
the two properties.
(3) The Closing Date may occur earlier than the date indicated if the
consent of the Limited Partners to the Dissolution is received prior
thereto.
(4) The Partnership holds fee simple title to this property. The
Partnership's former joint venture partner in the joint venture which
previously held title to the property retained an economic interest in
the property's cash flow and sales proceeds under certain circumstances.
The former joint venture partner will not be entitled to receive any
portion of the proceeds of the sale of L'Auberge Broadmoor.
(5) The Partnership owns an approximate 8% interest in Casabella Associates,
a general partnership which holds fee simple title to the property. The
Partnership's partners in Casabella Associates are two public limited
partnerships of which the General Partners or their affiliates are the
general partners. Accordingly, the sale of Casabella is also conditioned
upon the consent of the limited partners of the affiliated partnerships
to the dissolution of such partnerships. Casabella Associates' former
joint venture partner in
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the joint venture which previously held title to the property retained
an economic interest in the property's cash flow and sales proceeds
under certain circumstances. The former joint venture partner will not
be entitled to receive any portion of the proceeds of the sale of
Casabella.
(6) Approximately 90 days after the Limited Partner consents described in
note (5) above are received, but not later than June 15, 1998.
Each Purchase Agreement provides that the purchaser has the right to
conduct its "due diligence" review of the property. This review includes, but is
not limited to, a physical inspection and examination of title and environmental
matters. During the due diligence period, each purchaser has the customary right
to withdraw its offer for any reason. Because each of the property sales is
subject to the respective purchaser's due diligence review of the property,
there can be no assurance that any or all proposed sales described above will
actually occur. Alternatively, as is customary in similar real estate
transactions, if, during the due diligence period, the purchaser identifies
conditions which are unacceptable to it, the purchaser may seek a purchase price
adjustment, which the General Partners would consider and negotiate as they deem
appropriate. Each Purchase Agreement provides that in the event that the
purchaser defaults by failing to close following the end of the due diligence
period, the Partnership will be entitled to retain the purchaser's deposit as
liquidated damages.
Assuming, for purposes of illustration, that the Partnership's
properties were sold for an aggregate price of $30,101,497 (the total of the
purchase prices set forth above), the General Partners believe that, after (i)
repayment of mortgage indebtedness in the aggregate amount of approximately
$15,188,080, (ii) deducting estimated fees and expenses of the sales, which
currently are anticipated to total approximately $410,500, including a real
estate brokerage commission payable to the Unaffiliated Broker in an amount
equal to 1.25% of the sales price of each property, (iii) payment of real estate
taxes, (iv) giving effect to the interests of the Partnership's partners or
co-venturers in certain properties, and (v) including the Partnership's
estimated cash balance of $270,000, approximately $10,321,052 (the "Dissolution
Proceeds") would be available to the Partnership.
The Dissolution Proceeds, less a $300,000 wind-up reserve which the
General Partners intend to establish to cover various expenses of winding up and
liquidating the Partnership, would be distributed to the Limited Partners as
promptly as possible following the sales of the properties. Assuming Dissolution
Proceeds of $10,321,052, for each $500 invested in the Partnership, the Limited
Partners would receive out of the Dissolution Proceeds approximately $275 (the
"Distribution Per Unit"). When added to the $100.75 per Unit that has been
distributed from operations and the $1.55 per Unit distributed from uninvested
funds, Limited Partners will have received aggregate distributions of
approximately $377.21 per $500 Unit over the term of the investment.(1) In
addition, upon final winding up of the Partnership, any unexpended funds in the
wind-up reserve will be distributed to the Limited Partners.
- ------------
(1) Exhibit A attached to this Consent Solicitation sets forth certain
information regarding Partnership distributions on a quarterly basis for the
past three years and in the aggregate since inception.
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The foregoing estimates are presented for the Limited Partners'
reference only and should not be relied upon in determining whether to consent
to the Dissolution. The estimates assume that sales of the properties are
consummated pursuant to the terms of the Purchase Agreements. There can be no
assurance that such sales will occur. If one or more of the proposed sales does
not occur, the General Partners would seek substitute purchasers, although there
can be no assurance as to when such purchasers would be located or the terms on
which such purchasers would agree to purchase the properties. The Limited
Partners would have no right to approve the terms of any substituted sale. The
estimates do not give effect to the operating expenses or net income or net loss
of the Partnership for any period prior to the time the properties are sold,
which could affect the amount of Dissolution Proceeds available for
distribution. Additionally, the estimates do not give effect to customary
closing adjustments, credits and prorations, the amounts of which are not known
at this time. For these reasons, the actual proceeds to be received by the
Limited Partners may vary materially from the Distribution Per Unit, and
therefore possibly be substantially less.
The timing of the Limited Partners' receipt of any Dissolution Proceeds
will depend on when a sale or other disposition of the Partnership's properties
can be completed. If the properties are sold pursuant to the terms of the
Purchase Agreements, the General Partners expect that the sales will be
consummated during the second quarter of 1998. The General Partners will
endeavor to distribute funds as expeditiously as possible after any sale.
LIQUIDATION AND WINDING UP
Pursuant to the Partnership Agreement, if the Dissolution is consented
to by a majority in interest of the Limited Partners, the General Partners are
to take full account of the Partnership's assets and liabilities, liquidate the
Partnership's assets and discharge or make adequate provision for the
liabilities of the Partnership in the following order:
(a) First, to creditors, in the order of priority provided by law;
(b) Second, to the setting up of any reserve for contingencies which the
General Partners may consider necessary; and
(c) After all such liabilities have been either discharged or adequately
provided for, to the partners, in accordance with Section 10 of the Partnership
Agreement.
It is not anticipated that the General Partners will receive any of the
proceeds from the Dissolution. The General Partners are not aware of any
liabilities or obligations of the Partnership, contingent or otherwise, except
as set forth on the Partnership's balance sheet included as part of its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (a copy
of which accompanies this Consent Solicitation and is incorporated herein by
reference) and liabilities and obligations incurred since September 30, 1997 in
the ordinary course of the Partnership's business.
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CERTAIN CONSIDERATIONS
The General Partners cannot predict when any of the Partnership's
properties will actually be sold or disposed of, or when the eventual
liquidation will occur, nor can the General Partners estimate with certainty the
amount of Dissolution Proceeds that will be available to distribute to the
Limited Partners upon the sale or other disposition of the Partnership's
properties and completion of the liquidation. Moreover, there can be no
assurance that the properties will be sold or disposed of at prices equal to the
purchase prices contained in the Purchase Agreements described herein or that
the value of the properties will not increase after they are sold or disposed of
by the Partnership.
In considering whether to approve the Dissolution, the Limited Partners
should bear in mind that the General Partners have broad discretion to manage
the business and affairs of the Partnership. If the Dissolution is not approved,
the General Partners intend to continue to manage the Partnership and its
properties substantially as they are currently being managed and to continue to
entertain and consider indications of interest from third parties to acquire all
or a portion of the Partnership's properties. There can be no assurance that the
Dissolution will result in greater returns to the Limited Partners than a
continuation of the Partnership and eventual sale or disposition of its
properties at a later time.
Because of the General Partners' long-standing experience with the
Partnership properties, the property management affiliate of the General
Partners may be considered, among other independent property management
companies, to manage the Partnership's properties following their sale. In this
regard, DRA Advisors, Inc., the purchaser of L'Auberge Broadmoor, has indicated
its intention to retain such property management affiliate following the sale
pursuant to an agreement terminable by the purchaser on 30 days prior notice. If
the Limited Partners consent to the Dissolution, they also will be deemed to
have consented to any transaction that may be undertaken to accomplish the
liquidation and winding up of the Partnership and will not be entitled to
approve or disapprove of any such transaction, including transactions which may
involve the General Partners' management affiliate continuing as property
manager.
Neither Massachusetts law nor the Partnership Agreement provides the
Limited Partners with any dissenter's rights, or the right to seek an
independent appraisal of the value of the Partnership or its assets. Thus, the
Limited Partners will be bound to accept the consideration upon the sale of the
Partnership's properties if the Dissolution is consented to by the Limited
Partners.
RECOMMENDATION OF THE GENERAL PARTNERS
THE GENERAL PARTNERS BELIEVE THAT THE DISSOLUTION IS IN THE BEST
INTERESTS OF THE LIMITED PARTNERS AND RECOMMEND THAT THE LIMITED PARTNERS VOTE
"FOR" AND CONSENT TO THE DISSOLUTION.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
If a majority of the Limited Partners consent to the Dissolution, the
General Partners intend to sell the Partnership's properties and, after payment
of certain Partnership expenses and liabilities (see "Description of Dissolution
- -- Liquidation and Winding Up"), distribute the proceeds to the Partners in
liquidation of the Partnership. Such a sale and distribution will result in
certain federal income tax consequences to a Limited Partner as described below.
Section references below are to the Internal Revenue Code of 1986, as amended
(the "Code").
IN GENERAL
As a partnership for federal income tax purposes, the Partnership is not
subject to federal income tax as a separate taxable entity. Instead, each
Partner is required to report on its own federal income tax return such
Partner's distributive share of the Partnership's items of income, gain, loss,
deduction and credit, including any gain or loss recognized by the Partnership
on the sale of Partnership properties. Accordingly, a Limited Partner may be
subject to tax on such Limited Partner's distributive share of Partnership
income irrespective of whether such Limited Partner receives any cash
distribution from the Partnership. A Limited Partner's adjusted basis in its
Units is increased by such Limited Partner's distributive share of income and
gain of the Partnership for each taxable year, is reduced by its distributive
share of loss for such taxable year and is reduced by the amount of any actual
or deemed distributions made to such Limited Partner during such year. A
reduction in a Limited Partner's allocable share of Partnership liabilities that
were included in such Limited Partner's adjusted basis in its Units (e.g., as a
result of the repayment of a nonrecourse mortgage secured by a Partnership
property) is treated as a deemed distribution of cash for this purpose.
GAIN OR LOSS ON SALE OF PARTNERSHIP PROPERTY
The Partnership will separately recognize gain or loss for federal
income tax purposes with respect to the sale of each Partnership asset. The
Partnership will recognize a gain for tax purposes with respect to the sale of
an asset if the amount realized for such asset (i.e., the cash proceeds and
other consideration, if any, received reduced by the expenses of sale) exceeds
the Partnership's adjusted basis for such asset. The Partnership will recognize
a loss with respect to the sale of an asset if the Partnership's adjusted basis
for such asset exceeds the amount realized by the Partnership for such asset.
Overall, the Partnership expects to realize a gain of approximately $1,048,093,
of which approximately $959,555 or $26.35 per Unit, will be allocated to the
Limited Partners, in connection with the sale of its properties pursuant to the
Purchase Agreements.
Under Section 702(a)(3) of the Code, the Partnership is required to
separately state, and each Partner is required to account separately for, such
Partner's distributive share of any Section 1245 gain (depreciation recapture),
Section 1231 gain or loss and net taxable income or loss from Partnership
operations for any taxable year in which Partnership property is sold. Section
1231 gain or loss is gain or loss (apart from depreciation recapture, if any)
resulting from the sale or exchange of "Section 1231 property," which is defined
generally as depreciable property used in the trade or business and held for
more than one year and real property used in the trade or
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business and held for more than one year which is not inventory or other
property held for sale to customers in the ordinary course of the trade or
business.
Except for gain attributable to depreciation recapture under Section
1245 of the Code, any gain or loss on the sale of Partnership assets is expected
to be Section 1231 gain or loss. To the extent that for any taxable year Section
1231 loss exceeds Section 1231 gain, such net Section 1231 loss will be treated
as an ordinary loss, subject to any applicable passive activity loss limitations
under Code Section 465. Passive activity losses generally can only offset
passive activity income; however, upon completion of the liquidation of the
Partnership, a Limited Partner's share of passive activity losses of the
Partnership, including suspended passive activity losses, may be utilized in the
taxable year in which such liquidation occurs to offset non-passive income from
other sources.
To the extent that for any taxable year Section 1231 gain exceeds
Section 1231 loss, such net Section 1231 gain will be treated as long-term
capital gain. However, Section 1231 gain will be treated as ordinary income to
the extent of prior Section 1231 losses from any source that were treated as
ordinary in any of the previous five years.
A Limited Partner will also realize gain or loss on the final
liquidation of the Partnership pursuant to the Dissolution to the extent that
the amount of any actual or deemed distribution to such Limited Partner differs
from such Limited Partner's adjusted basis for its Units. Any such loss (or
gain) will be long-term or short-term capital loss (or gain), depending on the
holding period of its Units. It is anticipated that a Limited Partner who
acquired its Units in the public offering will realize a capital loss of
approximately $74.63 per Unit in connection with the liquidation of the
Partnership.
CAPITAL GAINS AND LOSSES
Individuals, trusts and estates are generally subject to tax on net
long-term capital gain with respect to property held for more than 18 months at
a maximum rate of 20% (28% in the case of property held for more than one year
but not more than 18 months), except that long-term capital gain from the sale
of real property that would otherwise qualify for the 20% maximum rate will
instead be subject to a 25% maximum rate to the extent of prior depreciation
deductions allowed with respect to such real property. Capital losses generally
may be utilized in any taxable year only to the extent of capital gains plus, in
the case of a non-corporate taxpayer, up to $3,000 of ordinary income ($1,500 in
the case of a married individual filing a separate return). Unused capital
losses may be carried forward and utilized in subsequent years subject to the
same limitations.
THE FOREGOING IS A SUMMARY ONLY, AND SPECIAL CONSIDERATIONS MAY BE
APPLICABLE TO PARTICULAR TYPES OF LIMITED PARTNERS. EACH LIMITED PARTNER IS
ADVISED TO CONSULT ITS OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES
OF THE DISSOLUTION, UNDER THE FEDERAL INCOME TAX LAWS, AS WELL APPLICABLE STATE,
LOCAL, FOREIGN OR OTHER TAX LAWS NOT DISCUSSED HEREIN.
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CONSENT REQUIREMENTS AND WRITTEN CONSENTS
RECORD DATE
The General Partners have fixed 5:00 P.M. Central Time on March 12, 1998
as the record date (the "Record Date") for determining the Limited Partners
entitled to notice of and to act on the Dissolution. As of the close of business
on the Record Date, the General Partners anticipate that there will be
approximately 1,990 Limited Partners of record.
COMPLETION OF CONSENTS; DEADLINE FOR CONSENTING
A form of written consent (the "Consent") accompanies this Consent
Solicitation. EACH LIMITED PARTNER IS URGED TO COMPLETE, SIGN, DATE AND RETURN
THE CONSENT BY NOT LATER THAN APRIL 15, 1998 (THE "CONSENT DEADLINE"). This date
may be extended from time to time by the General Partners in its discretion
until not later than June 1, 1998, subject to applicable requirements to update
this Consent Solicitation.
A postage-paid, pre-addressed envelope has been provided for the
Limited Partners' convenience in returning Consents. Completed Consents should
be returned as soon as possible to GP L'Auberge Communities, L.P., c/o Gemisys,
7103 South Revere Parkway, Englewood, Colorado 80112. Limited Partners may also
return their Consents to GP L'Auberge Communities, L.P., c/o Gemisys, via
facsimile at (303) 705-6171; Attention: Development Partners. Consents may be
marked either "FOR," "AGAINST," or "ABSTAIN" with respect to the Dissolution. If
a Limited Partner fails to return a Consent, or returns a Consent marked
"ABSTAIN," it will have the same effect as a disapproval of the Dissolution. If
a Consent is returned signed, but not marked "AGAINST" or "ABSTAIN," the Limited
Partner will be deemed to have consented to the Dissolution. THE GENERAL
PARTNERS RECOMMEND THAT THE LIMITED PARTNERS VOTE "FOR" AND CONSENT TO THE
DISSOLUTION.
APPROVAL OF DISSOLUTION
The Dissolution will be approved if consented to by the Consent Deadline
by a majority in interest of the Limited Partners as determined based upon the
total number of Units outstanding. Each Unit is entitled to one vote.
Accordingly, the Dissolution requires the approval of Limited Partners holding
of record not less than 18,206 of the total 36,411 Units outstanding.
REVOCATION OF CONSENTS
A Consent may be revoked by a Limited Partner by delivery to the General
Partners of a subsequent writing revoking the Consent. The writing must bear a
later date than the previously executed Consent and must be signed by the
Limited Partner. To be effective, any such revocation must be received by
Gemisys Corporation or the General Partners, as described above,
-10-
<PAGE> 13
on or before the Consent Deadline or such earlier date as of which the
Dissolution shall have been consented to by the requisite number of Limited
Partners.
EXPENSES OF SOLICITATION
The Partnership will bear all expenses of the solicitation of Consents,
whether or not the Dissolution is approved. After this Consent Solicitation is
mailed to the Limited Partners, Consents may be solicited by means of the mails,
facsimile transmissions, telephone or telegraph by the General Partners and
their respective regular employees and affiliates, none of whom will receive any
special or additional compensation for their services. The Partnership has
retained Gemisys Corporation, an independent firm, to aid in the solicitation of
Consents. The cost to the Partnership of doing so is currently estimated to be
$3,000. The Partnership will also be required to reimburse Gemisys Corporation
for its mailing services, postage, printing and similar pass-through costs.
The General Partners will request brokers, nominees and other
fiduciaries and custodians who hold Units in their names to furnish this
Consent Solicitation and any accompanying materials to the beneficial owners of
such Units.
IF YOU ARE A LIMITED PARTNER ON THE RECORD DATE, YOU ARE RESPECTFULLY
REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING CONSENT IN THE
ENCLOSED ENVELOPE AT YOUR EARLIEST CONVENIENCE, BUT IN ANY EVENT PRIOR TO THE
CONSENT DEADLINE.
INTEREST OF THE GENERAL PARTNERS IN THE DISSOLUTION
Neither the General Partners nor any affiliate of a General Partner will
be entitled to receive any distribution, real estate brokerage or other fee or
compensation upon disposition of the Partnership's properties.
POTENTIAL CONFLICT OF INTEREST
The General Partners believe that neither they nor any of their
affiliates have any conflict of interest with the Limited Partners regarding the
recommendation to approve the Dissolution. In fact, if the Dissolution is not
approved, the General Partners would continue to receive 2% of all distributions
of net cash from operations and the General Partners' property management
affiliate would be entitled to continue to earn property management fees for its
services in managing the Partnerships' properties.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
According to information available from the Partnership's transfer agent
and public records, as of the date of the Record Date, no person or entity owned
beneficially 5% or more of the outstanding Units. The Partnership has not issued
any options, warrants or other rights to
-11-
<PAGE> 14
purchase securities of the Partnership, nor has either General Partner loaned
money to the Partnership.
As of the Record Date, neither of the General Partners nor any director
or officer of L'Auberge owned beneficially any Units.
MANAGEMENT
The Partnership is a limited partnership and, as such, has no executive
officers or directors. The General Partners of the Partnership are GP L'Auberge
Communities, L.P., a California limited partnership, of which L'Auberge
Communities Inc. (formerly known as Berry and Boyle Inc.) ("L'Auberge") is the
general partner, and L'Auberge Realty Advisors (A Massachusetts Limited
Partnership).
GP L'AUBERGE COMMUNITIES, L.P.
GP L'Auberge Communities, L.P. was formed in 1983 for the purpose of
acting as a general partner in partnerships formed to invest directly or
indirectly in real property. L'Auberge is the sole general partner of GP
L'Auberge Communities, L.P. The following sets forth certain biographical
information with respect to the executive officers and directors of L'Auberge.
There are no familial relationships between or among any officer or director and
any other officer or director.
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Stephen B. Boyle President, Executive Officer and Director
Earl C. Robertson Executive Vice President and Chief Financial Officer
Donna Popke Vice President and Secretary
</TABLE>
Stephen B. Boyle, age 57, is President, Executive Officer and Director
of L'Auberge and a general partner and co-founder of LP L'Auberge Communities, a
California limited partnership (formerly Berry and Boyle), a limited partnership
formed in 1983 to provide funds to various affiliated general partners of real
estate limited partnerships, one of which is GP L'Auberge Communities, L.P.
Earl C. Robertson, age 50, has been Executive Vice President of
L'Auberge since April 1995 and its Chief Financial Officer since May 1996. Mr.
Robertson joined L'Auberge in April 1995 as Executive Vice President. Prior to
joining L'Auberge, Mr. Robertson had over 20 years experience as a senior
development officer, partner and consultant in several prominent real estate
development companies, including Potomac Investment Associates, a developer of
planned golf course communities nationwide, where he was employed from 1989 to
June 1993. He also served as a consultant to Potomac Sports Properties from July
1993 to April 1995. Mr. Robertson was also a key member of the management team
that developed the nationally acclaimed Inn at the Market in Seattle.
-12-
<PAGE> 15
Donna Popke, age 37, has been Vice President of L'Auberge since November
1995. Ms. Popke joined L'Auberge in June 1994 as Accounting Manager. Prior to
joining L'Auberge, Ms. Popke was Accounting Manager for David R. Sellon &
Company, a Colorado Springs land development company, from August 1989 to June
1994 and for Intermec of the Rockies from September 1985 to July 1989.
L'AUBERGE REALTY ADVISORS (A MASSACHUSETTS LIMITED PARTNERSHIP)
L'Auberge Realty Advisors (A Massachusetts Limited Partnership) was
formed in 1985 for the purpose of acting as a general partner of the
Partnership. Its sole general partner is Stephen B. Boyle.
TERMINATION AND CHANGE IN CONTROL ARRANGEMENTS
The General Partners know of no termination or change-in-control
arrangement affecting the Partnership, except as contemplated by the Partnership
Agreement. The Partnership Agreement provides generally that the bankruptcy or
dissolution of a General Partner will cause a dissolution of the Partnership
unless there is a remaining general partner that elects to continue the business
of the Partnership. In the event there is no remaining general partner, the
Partnership may nonetheless be continued by vote of a majority in interest of
the Limited Partners. The Partnership Agreement also permits the General
Partners to withdraw from the Partnership subject to certain conditions. In such
event, the withdrawing General Partner is obligated to resell its interest in
the Partnership to the Partnership.
ADDITIONAL INFORMATION
This Consent Solicitation is accompanied by copies of the Partnership's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997, as filed
with the Securities and Exchange Commission. The information in these reports is
incorporated herein by reference. The exhibits to such reports are not included
with this Consent Solicitation, but are available without charge to any person
entitled to receive this Consent Solicitation, upon written request, from the
General Partners, 5110 Langdale Way, Colorado Springs, Colorado 80906,
Attention: Development
-13-
<PAGE> 16
Partners. A requested exhibit will be furnished by first-class mail, or other
equally prompt means, within one business day of such request.
L'AUBERGE REALTY ADVISORS (A MASSACHUSETTS GP L'AUBERGE COMMUNITIES, L.P.,
LIMITED PARTNERSHIP), General Partner General Partner
By: L'Auberge Communities,
Inc., its general partner
By: Stephen B. Boyle, General Partner
By: Stephen B. Boyle, President
-14-
<PAGE> 17
EXHIBIT A
DISTRIBUTIONS TO LIMITED PARTNERS
Following is a summary of distributions to the Limited Partners for the
periods shown:
<TABLE>
<CAPTION>
Per $500 Unit Aggregate Amount
-------------------------------- ---------------------------
Return of Return of
Unexpended Unexpended
Quarter Ended From Operations(1) Funds From Operations Funds
------------- ------------------ ----------- --------------- -----------
<S> <C> <C> <C> <C>
March 31, 1995 $3.75 $136,541
June 30, 1995 $3.75 $136,541
September 30, 1995 $2.50 $91,028
December 31, 1995 $1.75 $63,719
March 31, 1996 $1.75 $63,719
June 30, 1996 $1.75 $63,719
September 30, 1996 $1.75 $63,719
December 31, 1996 $1.75 $63,719
March 31, 1997 $1.75 $63,719
June 30, 1997 $1.75 $63,719
September 30, 1997
December 31, 1997 $1.75 $63,719
Since Inception
in 1986 $100.75 $1.55 $3,713,922 $56,437
</TABLE>
- ----------
(1) The amounts set forth above representing per Unit distributions From
Operations may vary slightly among Limited Partners depending on a
Limited Partner's date of admission to the Partnership. Operating
distributions for the first four quarters following the initial
admission of Limited Partners were prorated based on a Limited Partner's
date of admission to the Partnership. The amount set forth for the
calculation of total per Unit distributions From Operations since
inception is based on average distributions for those first four
quarters.
<PAGE> 18
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 [FEE REQUIRED]
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 [NO FEE REQUIRED]
For the transition period from __________________ to ________________
Commission File No. 0-15511
Development Partners
(A Massachusetts Limited Partnership)
(Exact name of registrant as specified in its charter)
Massachusetts 04-2895800
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5110 Langdale Way, Colorado Springs, CO 80906
(Address of principal executive offices) (Zip Code)
(719) 527-0544
(Registrant's telephone number, including area code)
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 Interests
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 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 ___
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 ]
Aggregate market value of voting securities held by non-affiliates: Not
applicable, since securities are not actively traded on any exchange.
Documents incorporated by reference: None
The Exhibit Index is located on page ____
<PAGE> 19
PART I
ITEM 1. BUSINESS
This form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
Development Partners (A Massachusetts Limited Partnership) (the "Partnership"),
formerly Berry and Boyle Development Partners, was formed on October 23, 1985.
The General Partners are L'Auberge Realty Advisors (A Massachusetts Limited
Partnership), formerly Berry and Boyle Realty Advisors, and GP L'Auberge
Communities, L.P., a California Limited Partnership (formerly Berry and Boyle
Management).
The primary business of the Partnership is to invest in, operate and ultimately
dispose of a diversified portfolio of income-producing residential real
properties through its joint venture partner interest in such properties.
Descriptions of such properties are included below in Item 2. as well as in Note
5 of the Notes to the Consolidated Financial Statements.
From time to time, the Partnership expects to sell its properties taking into
consideration such factors as the price to be realized, the possible risks of
continued ownership and the anticipated advantages to be gained for the
partners. Proceeds from the sale, financing or refinancing of the properties
will not be reinvested by the Partnership or its joint ventures, but will
ultimately be distributed to the partners so that the Partnership will, in
effect, be self-liquidating. Under the terms of the various joint venture
agreements, the Partnership has control over the decision to sell a property.
The success of the Partnership will depend upon factors which are difficult to
predict and many of which are beyond the control of the Partnership. Such
factors include, among others, general economic and real estate market
conditions, both on a national basis and in those areas where the Partnership's
investments are located, competitive factors, the availability and cost of
borrowed funds, real estate tax rates, federal and state income tax laws,
operating expenses (including maintenance and insurance), energy costs,
government regulations, and potential liability under and changes in
environmental and other laws, as well as the successful management of the
properties.
On July 3, 1996, the Partnership and certain affiliates consummated an agreement
with Highland Properties, Inc. ("Highland"), a Colorado based residential
development, construction and management firm and developer of the property
known as L'Auberge Broadmoor, which separated the interests of Highland and the
Partnership, thus affording the Partnership greater flexibility in the operation
and disposition of the property. In consideration of a payment by the
Partnership, to Highland totaling $8,683, and delivery of certain mutual
releases, Highland (i) relinquished its option to exercise its rights of first
refusal with regard to the sale of the property and (ii) assigned all of its
interest in the L'Auberge Broadmoor Joint Venture to the Partnership (while
preserving the economic interests of the venturer in these Joint Ventures),
which resulted in the dissolution of the L'Auberge Broadmoor Joint Venture.
Highland may still share in cash flow distributions or proceeds from sales if
certain performance levels are met.
On-site management of two of the Partnership's properties, L'Auberge Broadmoor
("Broadmoor"), formerly Broadmoor Pines, and L'Auberge Canyon View ("Canyon
View), as well as Casabella is currently provided by an affiliate of the General
Partners. The terms of such property management services between the Partnership
and property managers are embodied in a written management agreement with
respect to each property. The property manager in each case receives management
fees which are competitive with those obtainable in arm's-length negotiations
with independent parties providing comparable services in the localities in
which the properties are located. These fees do not exceed 4% of the gross
revenues from each property.
It is the responsibility of the General Partners to select or approve property
managers and to supervise their performance. Property managers are responsible
for on-site operations and maintenance, generation and collection of rental
income and payment of operating expenses.
The difference between rental income and expenses related to operations,
including items such as local taxes and assessments, utilities, insurance
premiums, maintenance, repairs and improvements, bookkeeping and payroll
expenses, legal and accounting fees, property management fees and other expenses
incurred, constitute the properties' operating cash flow. The Partnership's
administrative expenses are paid out of the Partnership's share of such cash
flow from the various joint ventures and from interest income which the
Partnership earns on its short-term investments.
The Partnership's investments in real estate are also subject to certain
additional risks including, but not limited to, (i) competition from existing
and future projects held by other owners in the areas of the Partnership's
properties, (ii) possible reduction in rental income due to an inability to
maintain high occupancy levels, (iii) adverse changes in mortgage interest
rates, (iv) possible adverse changes in general economic conditions and adverse
local conditions, such as competitive over-bidding, or a decrease in employment
or adverse changes in real estate zoning laws, (v) the possible future adoption
of rent control legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent increases, and (vi) other
circumstances over which the Partnership may have little or no control.
The Partnership's investments are subject to competition in the rental, lease
and sale of similar types of properties in the localities in which the
Partnership's real property investments are located, and the Partnership
competes with other real property owners and developers in the rental, leasing
and sale of such properties. Furthermore, the General Partners of the
Partnership are affiliated with other partnerships owning similar properties in
the vicinity in which the Partnership's properties are located. In addition,
other limited partnerships may be formed by affiliates of the General Partners
which will compete with the Partnership.
The Partnership considers itself to be engaged in only one industry segment,
real estate investment.
ITEM 2. PROPERTIES
The Partnership owns a majority joint venture interest in the Canyon View Joint
Venture, an Arizona joint venture that owns and operates Canyon View, a 168-unit
multifamily rental property in Tucson, Arizona, subject to first mortgage
financing in the original principal amount of $5,300,000. The Partnership owns
and operates Broadmoor, a 108-unit multifamily rental property in Colorado
Springs, Colorado, subject to first mortgage financing in the original principal
amount of $3,650,000. The ownership of Broadmoor was formerly structured as a
Joint Venture of which the Partnership owned a majority interest. With regard to
the termination of the Broadmoor Joint Venture, see Note 5 of the Notes to
Consolidated Financial Statements. The Partnership also owns a minority interest
in Casabella Associates, which owns and operates Casabella, a 154-unit
multifamily rental property in Scottsdale, Arizona, subject to first mortgage
financing in the original amount of $7,320,000. With regard to the termination
of the Casabella Joint Venture, see Note 6 of the Notes to Consolidated
Financial Statements.
Canyon View
On September 29, 1987, the Partnership acquired a majority interest in the
Canyon View Joint Venture which owns and operates a 168-unit multifamily rental
property located in Tucson, Arizona, known as Canyon View. The Partnership has
been designated as the managing joint venture partner and will control all
decisions regarding the operation and sale of the property. In accordance with
the terms of the purchase agreement and the joint venture agreement, through
December 31, 1996, the Partnership has contributed total capital of $6,889,588
to the Canyon View Joint Venture which was used to repay a portion of the
construction loan from a third party lender, to pay certain costs related to the
refinancing of the permanent loan, to cover operating deficits and to fund
certain capital improvements. In addition to the contributions above, the
Partnership also incurred $745,902 of property acquisition and organization
costs which were subsequently treated as a capital contribution to the joint
venture.
<PAGE> 20
As of February 25, 1997, the property was 96% occupied, compared to 92%
approximately one year ago. At December 31, 1996 and 1995, the market rents for
the various unit types were as follows:
<TABLE>
<CAPTION>
Unit Type 1996 1995
- -------------------------- ---- ----
<S> <C> <C>
One bedroom one bath ..... $725 $725
Two bedroom two bath ..... 810 810
Two bedroom two bath w/den 980 980
</TABLE>
Broadmoor
On October 12, 1988, the Partnership acquired Broadmoor, a 108-unit multifamily
rental property located in Colorado Springs, Colorado, and simultaneously
contributed the property to a joint venture comprised of the Partnership and the
developer of the property. The Partnership has been designated as the managing
joint venture partner and will control all decisions regarding the operation and
sale of the property. In accordance with the terms of the purchase agreement and
the joint venture agreement, through December 31, 1996, the Partnership has
contributed total capital of $6,051,022 to the Broadmoor Pines Joint Venture
which was used to repay a portion of the construction loan from a third party
lender, to pay certain costs related to the refinancing of the permanent loan,
to cover operating deficits incurred during the lease up period and to fund
certain capital improvements. In addition to the contributions above, the
Partnership also incurred $684,879 of property acquisition and organization
costs which were subsequently treated as a capital contribution to the joint
venture.
As of February 25, 1997, the property was 92% occupied, compared to 86%
approximately one year ago. At December 31, 1996 and 1995, the market rents for
the various unit types were as follows:
<TABLE>
<CAPTION>
Unit Type 1996 1995
- -------------------------- ------ ------
<S> <C> <C>
One bedroom two bath w/den $ 875 $ 864
Two bedroom two bath ..... 975 975
Two bedroom two bath w/den 1,175 1,175
</TABLE>
Casabella
On November 5, 1990, the Partnership purchased an approximate 8% interest in
Casabella Associates ("Associates"), a general partnership consisting of the
Partnership and two other partnerships affiliated with the General Partners.
Under the terms of the purchase, the Partnership contributed $400,000 to
Associates. Associates was formed to acquire a majority interest in the
Casabella Joint Venture which owns and operates a 154-unit multifamily rental
property located in Scottsdale, Arizona, known as Casabella.
Associates has been designated as the managing joint venture partner and will
control all decisions regarding the operation and sale of the property. In
addition to its $400,000 contribution to Associates, the Partnership has
incurred $83,668 of acquisition expenses.
As of February 25, 1997, the property was 99% occupied, compared to 98%
approximately one year ago. At December 31, 1996 and 1995, the market rents for
the various unit types were as follows:
<TABLE>
<CAPTION>
Unit Type 1996 1995
- -------------------------- ------ ------
<S> <C> <C>
One bedroom two bath w/den $ 820 $ 820
Two bedroom two bath ..... 950 943
Two bedroom two bath w/den 1,185 1,170
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the Partnership or any
joint venture in which it owns an interest is a party, or of which any of the
properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE> 21
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is not
anticipated that any such public market will develop.
The number of holders of Units as of December 31, 1996 was 2,030.
Distributions are made to the Partners on a quarterly basis based upon Net Cash
from Operations, as calculated under Section 10 of the Partnership Agreement.
Total cash distributions to the Limited Partners for 1996 and 1995 were paid as
follows:
<TABLE>
<CAPTION>
Date of
Quarter Ended ... Payment Amount
- ------------------ ----------------- --------
<S> <C> <C>
March 31, 1995 ... May 15, 1995 $136,541
June 30, 1995 .... August 15, 1995 $136,541
September 30, 1995 November 15, 1995 $ 91,028
December 31, 1995 February 15, 1996 $ 63,719
March 31, 1996 ... May 15, 1996 $ 63,719
June 30, 1996 .... August 15, 1996 $ 63,719
September 30, 1996 November 15, 1996 $ 63,719
December 31, 1996 February 28, 1997 $ 63,719
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Partnership and consolidated
subsidiaries has been derived from consolidated financial statements audited by
Coopers & Lybrand, LLP, whose reports for the periods ended December 31, 1996,
1995 and 1994 are included elsewhere in the Form 10K and should be read in
conjunction with the full consolidated financial statements of the Partnership
including the Notes thereto.
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------------------------
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
Rental income $2,427,779 $2,444,585 $2,598,360 $2,441,256 $2,199,937
Net income (loss) $(217,956) $54,619 $227,996 $25,664 ($369,802)
Net income (loss) allocated to Partners:
Limited Partners - Per Unit
Aggregate 36,411 Units $(5.93) $1.47 $6.14 $0.69 ($10.05)
General Partners $(2,180) $1,092 $4,560 $513 ($3,698)
Cash distributions to Partners:
Limited Partners - Per Unit
Aggregate 36,411 Units $7.00 $13.75 $19.25 $9.50 $5.25
General Partners $5,202 $10,217 $14,304 $7,059 $3,901
Total assets $18,518,721 $19,144,374 $19,675,617 $20,241,217 $20,640,755
Long term obligations $8,615,326 $8,732,151 $8,838,924 $8,935,644 $9,006,141
</TABLE>
Long term obligations become due in 1997. The Partnership intends to refinance
this debt prior to the due date.
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Management's expectations regarding future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity; Capital Resources
At the close of the offering on February 26, 1987, the Partnership had admitted
2,033 Limited Partners who contributed capital of $18,205,500 to the
Partnership. These offering proceeds, net of organizational and offering costs
of $2,730,825, provided $15,474,675 of net proceeds to be used for the purchase
of income-producing residential properties, including related fees and expenses,
and working capital reserves. The Partnership has expended $14,277,559 to (i)
acquire its joint venture interests in the Canyon View Joint Venture, Broadmoor
Pines Joint Venture and Casabella Associates, (ii) pay acquisition expenses,
including acquisition fees to one of the General Partners, and (iii) pay certain
costs associated with the refinancing of the Canyon View and Broadmoor permanent
loans. The Partnership distributed $56,437 to the Limited Partners as a return
of capital resulting from excess reserves. The remaining net proceeds of
$1,140,679 were used to establish initial working capital reserves. These
reserves are used periodically to enable the Partnership to meet its various
financial obligations including contributions to the various joint ventures that
may be required. Through December 31, 1996, $577,499 cumulatively was
contributed to the joint ventures for this purpose.
In addition to the proceeds generated from the public offering, the Partnership
utilized external sources of financing at the joint venture level to purchase
properties. The Partnership Agreement limits the aggregate mortgage indebtedness
which may be incurred in connection with the acquisition of Partnership
properties to 80% of the purchase price of such properties.
The Partnership's future ability to generate cash adequate to meet its needs is
dependent primarily on the successful operations of its real estate investments.
Such ability may also be dependent upon the future availability of bank
borrowings, and upon the future refinancing and sale of the Partnership's real
estate investments and the collection of any mortgage receivable which may
result from such sales. These sources of liquidity will be used by the
Partnership for payment of expenses related to real estate operations, debt
service and professional and management fees and expenses. Net Cash From
Operations and Net Proceeds, if any, as defined in the Partnership Agreement,
will then be available for distribution to the Partners in accordance with
Section 10 of the Partnership Agreement. The General Partners believe that the
current working capital reserves together with projected cash flows for 1997 are
adequate to meet the Partnership's operating cash needs in the coming year. With
regard to certain balloon payments on existing first mortgage debt on the
Partnership's properties, the General Partners do not anticipate having
sufficient cash flow to retire this debt. As these mortgage notes payable are
due in fiscal 1997, the Partnership will seek to renegotiate these mortgage
notes with its existing lenders or seek new sources of financing for these
properties on a long term basis. The General Partners believe that existing cash
flows from the properties will be sufficient to support a level of borrowing
that is at least equal to amounts outstanding as of December 31, 1996. If the
general economic climate for real estate in these respective locations were to
deteriorate resulting in an increase in interest rates for mortgage financing or
a reduction in the availability of real estate mortgage financing or a decline
in the market values of real estate it may affect the Partnership's ability to
complete these refinancings.
The working capital reserves of the Partnership consisted of cash and cash
equivalents and short-term investments. Together these amounts provide the
Partnership with the necessary liquidity to carry on its day-to-day operations
and to make necessary contributions to the various properties. In 1996, the
aggregate net decrease in working capital reserves was $431,972. This decrease
resulted primarily from cash provided by operations of $200,326 and $40,017 of
distributions from Casabella, offset by $287,833 of fixed asset additions,
distributions to partners of $260,079 and $116,825 of principal payments on
mortgage notes payable
In 1995, the aggregate net decrease in working capital reserves was $189,776.
This decrease resulted primarily from cash provided by operations of $508,779
and $15,640 of distributions from Casabella, offset by $98,858 of fixed asset
additions, distributions to partners of $510,868 and $106,773 of principal
payments on mortgage notes payable.
For the year ended December 31, 1996, the Partnership's operating results were
comprised of its share of the income and expenses from the Canyon View and
Broadmoor Pines joint ventures, the Partnership's share of the income from
Casabella Associates, as well as partnership level interest income earned on
short term investments, reduced by administrative expenses. A summary of these
operating results appears below:
<TABLE>
<CAPTION>
Canyon Broadmoor Investment Consolidated
View Pines Partnership Totals
<S> <C> <C> <C> <C>
Total revenue $1,212,061 $1,218,002 $29,545 $2,459,608
Expenses:
General and administrative 10 0 245,117 245,127
Operations 684,240 477,662 1,161,902
-
Depreciation and amortization 251,459 189,993 441,452
-
Interest 466,778 347,028 813,806
-
Equity in (income) loss from partnership - - 15,277 15,277
------------- --------------- --------------- -------------
1,402,487 1,014,683 260,394 2,677,564
------------- --------------- --------------- -------------
Net income (loss) ($190,426) $203,319 ($230,849) ($217,956)
============= =============== =============== =============
</TABLE>
For the year ended December 31, 1995, the Partnership's operating results were
comprised of the income and expenses from the Canyon View and Broadmoor Pines
joint ventures, the Partnership's share of the income from Casabella Associates,
as well as partnership level interest income earned on short term investments,
reduced by administrative expenses. A summary of these operating results appears
below
<TABLE>
<CAPTION>
Canyon Broadmoor Partnership Consolidated
View Pines Level Totals
<S> <C> <C> <C> <C>
Total revenue $1,303,606 $1,141,950 $51,697 $2,497,253
Expenses:
General and administrative 7,208 7,021 163,439 177,668
Operations 597,918 422,394 - 1,020,312
Depreciation and amortization 239,665 183,868 - 423,533
Interest 473,776 350,428 - 824,204
Equity in (income) loss from partnership - - (3,083) (3,083)
-------------- --------------
--------------- -------------
1,318,567 963,711 160,356 2,442,634
-------------- -------------- --------------- -------------
Net income (loss) ($14,961) $178,239 ($108,659) $54,619
============== ============== =============== =============
</TABLE>
For the year ended December 31, 1994, the Partnership's operating results were
comprised of the income and expenses from the Canyon View and Broadmoor Pines
joint ventures, the Partnership's share of the income from Casabella Associates,
as well as partnership level interest income earned on short term investments,
reduced by administrative expenses. A summary of these operating results appears
below:
<TABLE>
<CAPTION>
Canyon Broadmoor Partnership Consolidated
View Pines Level Totals
<S> <C> <C> <C> <C>
Total revenue $1,432,466 $1,167,557 $41,302 $2,641,325
Expenses:
General and administrative 7,679 7,534 140,286 $155,499
Operations 578,062 425,718 - $1,003,780
Depreciation and amortization 234,919 187,035 - $421,954
Interest 480,210 353,776 - $833,986
Equity in (income) loss from - - (1,890) ($1,890)
partnership
------------ ----------- ----------- --------------
1,300,870 974,063 138,396 2,413,329
------------ ----------- ----------- --------------
Net income (loss) $131,596 $193,494 ($97,094) $227,996
============ =========== =========== ==============
</TABLE>
Comparison of 1996 and 1995 Operating Results:
The total revenue decreased by 2% (37,645),of which $20,839 was due to lower
interest income. Rental operating expenses increased $141,590 (14%) due
primarily to increases in advertising and promotion, salaries and maintenance
and repair costs. Transition costs associated with the outsourcing of much of
the Partnership's administration work to an administration agent and the
relocation of the remaining administration, financial and investor services
functions to a more cost efficient location in Colorado Springs, Colorado has
temporarily increased the Partnerships costs. Consequently, the general and
administrative expenses of the Partnership increased 38% or $67,459 in 1996 as
compared with 1995. Included is a one-time cost of the Evans Withycombe
termination ($5,681) and the cost of the Highland termination ($8,683) and its
related legal cost were incurred in May, June and July of 1996. (Refer to Note 5
and Note 6 of the Notes to Consolidated Financial Statements).
Comparison of 1995 and 1994 Operating Results:
The total revenue decreased $144,072, or 5% from the prior year, primarily as a
result of lower occupancy at Canyon View and Broadmoor. Broadmoor's occupancy
declined during the first quarter of 1995 and improved steadily during the
remainder of the year. Canyon View occupancy declined as a result of increased
competition from newly developed properties in its immediate market area. This
lower occupancy existed through most of 1995, but improved to 92% occupancy.
Interest income increased $9,703 or 23% in 1995, as a result of higher interest
rates earned on money market accounts and short-term investments. General and
administrative expenses increased $22,169 or 14%, due primarily to increased
salary expense allocations and printing and mailing costs. Fixed asset purchases
increased $91,206 from $7,652 in 1994 to $98,858 in 1995 and included such items
as carpet, floor tile and other replacements. As a result of the factors
described above, distributions to partners decreased $204,347 from $715,215 in
1994 to $510,868 in 1995.
Projected 1997 Operating Results:
Although there can be no assurance that the Partnership will dispose of any or
all of its properties during 1997, consistent with the Partnership's disposition
strategy the Partnership will continue to seek to do so. In the event that the
Partnership were to dispose of any property during 1997, operating results of
the Partnership would vary significantly from those achieved in prior periods.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE> 23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as to the
General Partners is set forth below:
L'Auberge Realty Advisors
Stephen B. Boyle, age 56, is President, Executive Officer and Director of
L'Auberge Communities, Inc. (formerly Berry and Boyle Inc.) and a general
partner and co-founder of LP L'Auberge Communities, a California Limited
Partnership (formerly Berry and Boyle), a limited partnership formed in 1983 to
provide funds to various affiliated general partners of real estate limited
partnerships, one of which is GP L'Auberge Communities, L.P.
In September 1995, with the consent of Limited Partners holding a majority of
the outstanding Units, as well as the consent of the mortgage lenders for the
Partnership's three properties, Richard G. Berry resigned as a general partner
of the Partnership.
GP L'Auberge Communities, L.P.
Information as to the directors and executive officers of L'Auberge Communities,
Inc., a general partner of GP L'Auberge Communities, L.P., which is a general
partner of the Partnership, and its affiliates, is set forth below. There are no
familial relationships between or among any officer and any other officer or
director.
Name Position
Stephen B. Boyle See above
Earl C. Robertson Executive Vice President and
Chief Financial Officer
Donna Popke Vice President and Secretary
Earl C. Robertson, age 48, has been a senior development officer, partner and
consultant in several prominent real estate development companies for over
twenty years, including Potomac Investment Associates, developers of planned
golf course communities nationwide. Mr. Robertson was also a key member of the
management team that developed the nationally acclaimed Inn at the Market in
Seattle. He joined L'Auberge Communities, Inc. in June 1995.
Donna Popke, age 37, joined L'Auberge Communities, Inc. in July, 1995 and holds
the title of Vice President and Secretary. Prior to joining L'Auberge
Communities, Inc., Ms. Popke was employed with Olive & Associates in Denver,
Colorado in the field of public accounting for six years and later from 1989 to
1995 with David R. Sellon & Company, a Colorado Springs land development
company.
ITEM 11. EXECUTIVE COMPENSATION
None of the General Partners or any of their officers or directors received any
compensation from the Partnership. See Item 13 below with respect to a
description of certain transactions of the General Partners and their affiliates
with the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 21, 1997, no person of record owned or was known by the General
Partners to own beneficially more than 5% of the Partnership's outstanding
Units. Neither of the General Partners nor any of their directors and officers
owns Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1996, the Partnership paid or accrued
remuneration to the General Partners or their affiliates as set forth below. In
addition to the information provided herein, certain transactions are described
in Notes 8 and 9 in the Notes to Consolidated Financial Statements appearing in
Appendix A, which are included in this report and are incorporated herein by
reference thereto.
Net Cash From Operations distributed during 1996
to the General Partners $5,202
Allocation of Income (Loss) to the General Partners $(2,180)
Property management fees paid to an affiliate of the
General Partners $103,969
Reimbursements to General Partners $65,879
<PAGE> 24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1,2 See Page F-2
3 See Exhibit Index contained herein.
(b) Reports on Form 8-K
The Partnership has not filed, and was not required to file, any
reports on Form 8-K during the last quarter of 1996.
(c) See Exhibit Index contained herein.
(d) See Page F-2.
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P., a California Limited Partnership,
General Partner
By: L'Auberge Communities, Inc., its General Partner
By: ____/s/ Earl C. Robertson________________
Earl C. Robertson, Executive Vice President and
Chief Financial Officer
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
___/s/ Stephen B. Boyle _____ Director, President and March 26, 1997
--------------------
STEPHEN B. BOYLE Principal Executive
Officer of L'Auberge
Communities, Inc.
___/s/ Earl C. Robertson _ Executive Vice President and March 26, 1997
---------------------
EARL C. ROBERTSON Principal Financial Officer of
L'Auberge Communities, Inc.
<PAGE> 26
APPENDIX A
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
---------
CONSOLIDATED FINANCIAL STATEMENTS
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the Year Ended December 31, 1996
<PAGE> 27
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
-------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1996 and 1995 F-4
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Partners' Equity (Deficit) for the
years ended December 31, 1996, 1995 and 1994 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 F-7 -- F-8
Notes to Consolidated Financial Statements F-9 -- F-17
All Schedules are omitted as they are not applicable, not required, or the
information is provided in the financial statements or the notes thereto.
<PAGE> 28
Report of Independent Accountants
To the Partners of
Development Partners
(A Massachusetts Limited Partnership):
We have audited the accompanying consolidated balance sheets of
Development Partners (A Massachusetts Limited Partnership) and subsidiaries of
December 31, 1996 and 1995, and the related consolidated 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 are the
responsibility of the General Partners of the Partnership. Our responsibility is
to express an opinion on these financial statements 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 the
General Partners of the Partnership, 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 consolidated financial position of
Development Partners (A Massachusetts Limited Partnership) and subsidiaries as
of December 31, 1996 and 1995 and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND LLP
Denver, Colorado
February 28, 1997
<PAGE> 29
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
---------------
ASSETS
<TABLE>
<CAPTION>
Property, at cost 1996 1995
---- ----
<S> <C> <C>
Land $5,114,512 $5,110,277
Buildings and improvements 15,561,584 15,561,584
Equipment, furnishings and fixtures 1,687,793 1,404,195
-------------- -------------
22,363,889 22,076,056
Less accumulated depreciation (4,741,203) (4,322,133)
-------------- -------------
17,622,686 17,753,923
Cash and cash equivalents 537,735 532,019
Short-term investments - 437,688
Real estate tax escrows 27,976 29,457
Deposits and prepaid expenses 639 4,168
Due from affiliates (Note 9) 20,631 392
Investment in partnership 293,210 348,504
Deferred expenses, net of accumulated
amortization of $298,472 and $276,093 15,844 38,223
-------------- -------------
Total assets $18,518,721 $19,144,374
============== =============
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $8,615,326 $8,732,151
Accounts payable 57,602 88,062
Accrued expenses 164,447 171,283
Due to affiliates (Note 9) 10,680 9,210
Rents received in advance 6,158 0
Tenant security deposits 66,305 67,430
-------------- -------------
Total liabilities 8,920,518 9,068,136
Partners' equity 9,598,203 10,076,238
-------------- -------------
Total liabilities and partners' $18,518,721 $19,144,374
equity
============== =============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 30
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
-------------
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Revenue:
<S> <C> <C> <C>
Rental income $2,427,779 $2,444,585 $2,598,360
Interest Income
31,829 52,668 42,965
-------------- -------------- -------------
2,459,608 2,497,253 2,641,325
Expenses:
Operating Expenses 1,161,902 1,020,312 1,003,780
Interest 813,806 824,204 833,986
Depreciation and amortization 441,452 423,533 421,954
General and administrative 245,127 177,668 155,499
Equity in (income) loss from 15,277 (3,083) (1,890)
partnership
-------------- -------------- -------------
2,677,564 2,442,634 2,413,329
-------------- -------------- -------------
Net income (loss) ($217,956) $54,619 $227,996
============== ============== =============
Net income (loss) allocated to:
General Partners ($2,180) $1,092 $4,560
Per unit net income (loss) allocated to Investor
Limited
Partner interest:
36,411 units issued ($5.93) $1.47 $6.14
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 31
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
for the years ended December 31, 1996, 1995 and 1994
-------------
<TABLE>
<CAPTION>
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1993 ($57,273) $11,076,979 $11,019,706
Cash distributions (14,304) (700,911) (715,215)
Net income 4,560 223,436 227,996
-------------- -------------- -------------
Balance at December 31, 1994 (67,017) 10,599,504 10,532,487
Cash distributions (10,217) (500,651) (510,868)
Net income 1,092 53,527 54,619
-------------- -------------- -------------
Balance at December 31, 1995 (76,142) 10,152,380 10,076,238
Cash distributions (5,202) (254,877) (260,079)
Net income (loss) (2,180) (215,776) (217,956)
-------------- -------------- -------------
Balance at December 30, 1996 ($83,524) $9,681,727 $9,598,203
============== ============== =============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 32
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
-------------
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Interest received $39,411 $56,334 $43,454
Cash received from operating revenue 2,432,812 2,428,669 2,595,917
General and administrative expenses (236,943) (178,114) (147,020)
Operating expense (1,220,694) (973,492) (970,827)
Interest paid (814,260) (824,618) (834,362)
--------------------------------------------
Net cash provided by operating 200,326 508,779 687,162
activities
Cash flows from investing activities:
Purchase of fixed assets (287,833) (98,858) (7,652)
Proceeds from maturities of short-term 430,110 542,101 68,482
investments
Deposits 0 5,970 (6,065)
Distributions from partnership 40,017 15,640 31,450
--------------------------------------------
Net cash provided by investing 182,294 464,853 86,215
activities
Cash flows from financing activities:
Distributions to partners (260,079) (510,868) (715,215)
Principal payments on mortgage note payable (116,825) (106,773) (96,720)
-------------- -------------- -------------
Net cash used by financing activities (376,904) (617,641) (811,935)
-------------- -------------- -------------
Net increase (decrease) in cash and cash 5,716 355,991 (38,558)
equivalents
Cash and cash equivalents at beginning of year 532,019 176,028 214,586
-------------- -------------- -------------
Cash and cash equivalents at end of year $537,735 $532,019 $176,028
============== ============== =============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 33
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
-------------
Reconciliation of net income (loss) to net cash provided by operating
activities:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net income (loss) ($217,956) $54,619 $227,996
Adjustments to reconcile net income (loss) to net
cash
provided by operating activities:
Depreciation and amortization 441,452 423,533 421,954
Equity in (income) loss from partnership 15,277 (3,083) (1,890)
Change in assets and liabilities net of effects of investing and financing
activities:
Decrease (increase) in real estate tax escrow 1,481 (1,342) (168)
Decrease in interest receivable 7,575 3,666 4,669
Decrease in prepaid expenses 3,529 - 821
Increase in accounts payable and accrued (37,296) 49,412 29,199
expenses
(Decrease) increase in due to (from) affiliates (18,769) (1,718) 22,464
(Decrease) increase in rents received in 6,158 (6,483) (3,440)
advance
Decrease in tenant security deposits (1,125) (9,433) (14,443)
-------------- -------------- -------------
Net cash provided by operating $200,326 $509,171 $687,162
activities
============== ============== =============
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 34
1. Organization of Partnership:
Development Partners (A Massachusetts Limited Partnership), (the "Partnership"),
formerly Berry and Boyle Development Partners, was formed on October 23, 1985.
GP L'Auberge Communities, L.P., a California Limited Partnership, (formerly
Berry and Boyle Management) and Berry and Boyle Realty Advisors ("Advisors") (A
Massachusetts Limited Partnership), are the General Partners. A total of 2,033
individual Limited Partners owning 36,411 Units have contributed $18,205,500 of
capital to the Partnership. At December 31, 1996, the total number of Limited
Partners was 2,030. Except under certain limited circumstances upon termination
of the Partnership, the General Partners are not required to make any additional
capital contributions. The General Partners or their affiliates will receive
various fees for services and reimbursement for various organizational and
selling costs incurred on behalf of the Partnership.
The Partnership will continue until December 31, 2010, unless earlier terminated
by the sale of all or substantially all of the assets of the Partnership, or as
otherwise provided in the Partnership Agreement.
2. Significant Accounting Policies:
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its subsidiaries: Canyon View Joint Venture and
Broadmoor Pines Joint Venture. All intercompany accounts and
transactions have been eliminated in consolidation. The Partnership
accounts for its investment in Casabella Associates utilizing the
equity method of accounting. The Partnership's investment account is
adjusted to reflect its pro rata share of profits, losses and
distributions from Casabella Associates. Refer to Note 5 regarding the
termination of the Broadmoor Pines Joint Venture, and Note 6 regarding
the termination of the Casabella Joint Venture.
The Partnership follows the accrual method of accounting.
B. Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. It
is the Partnership's policy to invest cash in income-producing
temporary cash investments. The Partnership mitigates any potential
risk from such concentration of credit by placing investments with high
quality financial institutions.
C. Short-term Investments
At December 31, 1995, short term investments consisted solely of
various forms of U. S. Government backed securities, with an aggregate
par value of $440,000, which matured in February, 1996. As of December
31, 1996, there were no short term investments. Investments are
recorded at amortized costs which approximates market value.
D. Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires 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 amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
E. Depreciation
Depreciation is provided for by the use of the straight-line method
over estimated useful lives as follows:
Buildings and improvements 40 years
Equipment, furnishings and fixtures 5-15 years
F. Deferred Expenses
Costs of obtaining various mortgages on the properties are being
amortized over the mortgage term using the straight line method, which
approximates the effective interest method.
G. Income Taxes
No provision is made for income taxes since the Partners are required
to include on their tax returns their pro rata share of the
Partnership's taxable income or loss. If the Partnership's tax returns
are examined by the Internal Revenue Service or a state taxing
authority, and such an examination results in a change in partnership
taxable income or loss, such change will be reported to the Partners.
H. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
I. Long-Lived Assets
The Partnership's long-lived assets include property and equipment. On
a quarterly basis, the Partnership evaluates the recoverability of the
rental property using undiscounted cash flow from operation.
J. Reclassification
Certain items in the financial statements for the years ended December
31, 1995, and December 31, 1994, have been reclassified to conform to
the 1996 presentation.
<PAGE> 35
3. Property, at Cost:
Property, at cost, consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
Costs Capitalized
Initial Cost Subsequent to
to Partnership Acquisition
--------------------------------------- ----------------------------------
Buildings Equipment, Buildings Equipment,
Property and Furnishings and Furnishings
Description Land Improv. & Fixtures Land Improv. & Fixtures
- ------------------------ ---------- ----------- ---------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Canyon View at Ventana,
a 168-unit residential
rental complex located
in Tucson, AZ $2,932,796 $8,591,969 $719,461 $20,181 $10,095 $189,722
Broadmoor, a 108-unit
residential rental
complex located in
Colorado Springs, CO 2,148,811 6,891,420 559,282 12,724 68,100 219,328
---------- ----------- ---------- ------- ------- --------
$5,081,607 $15,483,389 $1,278,743 $32,905 $78,195 $409,050
========== =========== ========== ======= ======= ========
Gross Amount at
Which Carried
at Close of Period
-----------------------------------------------------
Buildings Equipment,
Property and Furnishings
Description Land Improv. & Fixtures Total
- ------------------------ ---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Canyon View at Ventana,
a 168-unit residential
rental complex located
in Tucson, AZ $2,952,977 $8,602,064 $ 909,183 $12,464,224
Broadmoor, a 108-unit
residential rental
complex located in
Colorado Springs, CO 2,161,535 6,959,520 778,610 9,899,665
---------- ---------- ---------- -----------
$5,114,512 $15,561,584 $1,687,793 $22,363,889
========== ========== ========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1995 and 1994 and
accumulated depreciation at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
Depreciation Accumulated
Expense Depreciation
------------------------------- -----------------------
1996 1995 1994 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Buildings and improvements $379,938 $389,282 $389,039 $3,401,069 $3,021,131
Equip., furnishings and fixtures 39,132 9,606 8,270 1,340,134 1,301,002
-------- -------- -------- ---------- ----------
$419,070 $398,888 $397,309 $4,741,203 $4,322,133
======== ======== ======== ========== ==========
</TABLE>
Each of the properties is encumbered by a nonrecourse mortgage note payable (see
Note 7).
<PAGE> 36
4. Cash and Cash Equivalents:
Cash and cash equivalents at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cash on hand .......... $326,649 $130,805
Certificate of deposits 211,086 100,000
Money market accounts . ___ 301,214
-------- --------
$537,735 $532,019
======== ========
</TABLE>
5. Joint Venture and Property Acquisitions:
The Partnership has invested in three properties located in Scottsdale and
Tucson, Arizona and Colorado Springs, Colorado. The success of the Partnership
will depend upon factors which are difficult to predict including general
economic and real estate market conditions, both on a national basis and in the
areas where the Partnership's investments are located. The Broadmoor Joint
Venture was effectively terminated on December 31, 1996. The Partnership has
eliminated the minority interest related to this joint venture, as such, the
Partnership owns 100% of the underlying assets as of December 31, 1996.
Canyon View
On September 29, 1987, the Partnership acquired a majority interest in the
Canyon View Joint Venture which owns and operates a 168-unit multifamily
residential property located in Tucson, Arizona. The Partnership has been
designated as the managing joint venture partner and will control all decisions
regarding the operation and sale of the property.
In accordance with the terms of the purchase agreement and the joint venture
agreement, through December 31, 1996, the Partnership has contributed total
capital of $6,889,588 to the Canyon View Joint Venture, which was used to repay
a portion of the construction loan from a third party lender, to pay certain
costs related to the refinancing of the permanent loan, to cover operating
deficits incurred during the lease up period and to fund certain capital
improvements. In addition, the Partnership funded $745,902 of property
acquisition costs which were subsequently treated as a capital contribution to
the joint venture.
For the years ended December 31, 1996, 1995 and 1994, the Canyon View Joint
Venture had a net loss of $190,426 and $14,961 and net income of $131,596,
respectively.
Net cash from operations (as defined in the joint venture agreement) will be
distributed as available to each joint venture partner not less often than
quarterly, as follows:
First, to the Partnership until it has received an annual
non-cumulative 11.25% priority return on its capital contribution for
such year.
Second, the balance 75% to the Partnership and 25% to the other joint
venture partner.
Income from operations will be allocated to the Partnership and the other joint
venture partner generally in accordance with the distribution of net cash from
operations.
Losses from operations will generally be allocated 100% to the Partnership.
In the case of certain capital transactions and distributions, as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
Broadmoor
On October 12, 1988, the Partnership acquired L'Auberge Broadmoor ("Broadmoor")
(formerly Broadmoor Pines), a 108-unit residential property located in Colorado
Springs, Colorado and simultaneously contributed the property to a joint venture
comprised of the Partnership and the property developer (the "Broadmoor Pines
Joint Venture"). The Partnership owns a majority interest in the Broadmoor Pines
Joint Venture and, therefore, the accounts and operations of the Broadmoor Pines
Joint Venture have been consolidated into those of the Partnership.
The co-venture partner was Highland Properties, Inc. ("Highland"), a Colorado
based residential development, construction and management firm. Highland
developed the property known as L'Auberge Broadmoor.
Through December 31, 1996, the Partnership has made cash payments in the form of
capital contributions totaling $6,051,022 and has funded $684,879 of property
acquisition costs which were treated as a capital contribution to the joint
venture.
For the years ended December 31, 1996 1995 and 1994, the Broadmoor Pines Joint
Venture had net income of $203,319, $178,239 and $193,494, respectively.
The Partnership has been designated the managing joint venture partner of the
Broadmoor Pines Joint Venture and will have control over all decisions affecting
the Broadmoor Pines Joint Venture and the property.
JANUARY 1, 1996, THROUGH JULY 2, 1996
Net cash from operations (as defined in the joint venture agreement) was to be
distributed as available to each joint venture partner quarterly, as follows:
First, to the Partnership an amount equal to 11.25% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of its respective capital investment, as
defined in the joint venture agreement;
Second, the balance 80% to the Partnership, and 20% to the property
developer.
Losses from operations and depreciation for the Broadmoor Pines Joint Venture
were allocated 100% to the Partnership.
All profits from operations to the extent of cash distributions shall first be
allocated to the Partnership and the property developer in the same proportion
as the cash distributions. Any remaining profits are allocated 80% to the
Partnership and 20% to the property developer.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
<PAGE> 37
JULY 3, 1996, THROUGH DECEMBER 31, 1996
On July 3, 1996, the Partnership and certain affiliates consummated an agreement
with Highland Properties, Inc. ("Highland") which separated the interests of
Highland and the Partnership, thus affording the Partnership greater flexibility
in the operation and disposition of the property. In consideration of a payment
by the Partnership, to Highland totaling $8,683, and delivery of certain mutual
releases, Highland (i) relinquished its option to exercise its rights of first
refusal with regard to the sale of the property and (ii) assigned all of its
interest in the L'Auberge Broadmoor Joint Venture to the Partnership (while
preserving the economic interests of the venturer in these Joint Ventures),
which resulted in the dissolution of the L'Auberge Broadmoor Joint Venture.
Highland may still share in cash flow distributions or proceeds from the sale of
the property if certain performance levels are met.
6. Investment in Partnership:
On November 5, 1990, the Partnership contributed $400,000 to purchase an
approximate 8% interest in Casabella Associates, a general partnership among the
Partnership, Development Partners II (A Massachusetts Limited Partnership)
("DPII") and Development Partners III (A Massachusetts Limited Partnership)
("DPIII"). In addition to its contribution referred to above, the Partnership
incurred $83,668 of acquisition costs, including $41,400 in acquisition fees
paid to the General Partners. The difference between the partnership's carrying
value of the investment in Casabella Associates and the amount of underlying
equity in net assets is $65,345, representing a portion of the acquisition costs
stated above that were not recorded on the books of Casabella Associates.
On September 28, 1990, Casabella Associates purchased a majority interest in the
Casabella I Joint Venture, an Arizona joint venture that owned and operated
Casabella Phase I, a 61-unit residential property located in Scottsdale,
Arizona. On April 23, 1991, Casabella Associates, acquired a majority interest
in the Casabella Joint Venture which owned Casabella Phase II, a 93-unit
residential community, located adjacent to Casabella Phase I. On that date,
Casabella Associates and EW Casabella I Limited Partnership contributed their
interests in the Casabella I Joint Venture to the Casabella Joint Venture. In
addition, the permanent lender funded a $7,320,000 permanent loan, the proceeds
of which were used to refinance the $2,700,000 loan pertaining to Phase I and,
together with cash contributions of Casabella Associates, to repay the
construction loan for Phase II. As a result of such transactions, by operation
of law, Casabella Joint Venture, which is comprised of Casabella Associates and
EW Casabella I Limited Partnership, now owns both Phases I and II of Casabella.
Casabella is now managed and operated as one single 154-unit residential
community.
On June 30, 1992, Casabella Joint Venture refinanced its original $7,320,000
permanent loan using the proceeds of a new first mortgage loan in the amount of
$7,300,000. Under terms of the new note, monthly principal and interest payments
of $61,887, based on a fixed interest rate of 9.125%, are required over the term
of the loan. The balance of the note will be due on July 15, 1997. As this
mortgage note payable is due in fiscal 1997, the Partnership of Casabella will
seek to renegotiate this mortgage note with its existing lender or seek new
sources of financing for this property on a long term basis. The General
Partners of Casabella believe that existing cash flows from the property will be
sufficient to support a level of borrowing that is at least equal to the amount
outstanding as of December 31, 1996. If the general economic climate for real
estate in this location were to deteriorate resulting in an increase in interest
rates for mortgage financing or a reduction in the availability of real estate
mortgage financing or a decline in the market values of real estate it may
affect the Partnership's ability to complete this refinancing.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI is
also the developer of the Casabella property.
During 1996, 1995 and 1994, the Partnership received $40,017, $15,640 and
$31,450, respectively, of cash distributions from Casabella Associates.
The consolidated balance sheets of Casabella Associates and Casabella Joint
Venture at December 31, 1996 and 1995, are summarized as follows:
<TABLE>
<CAPTION>
Assets: 1996 1995
---- ----
<S> <C> <C>
Property, plant and equipment $11,453,820 $11,297,805
Accumulated depreciation (1,996,504) (1,752,197)
----------- -----------
Property, plant and equipment, net 9,457,316 9,545,608
Other assets 294,840 889,237
----------- -----------
Total assets $9,752,156 $10,434,845
========= ==========
Liabilities and partners' equity:
Mortgage note payable 6,885,673 6,994,549
Other liabilities 202,487 125,170
---------- ----------
Total liabilities 7,088,160 7,119,719
Partners' equity 2,663,996 3,315,126
--------- ---------
Total liabilities and partners' equity $9,752,156 $10,434,845
========= ==========
</TABLE>
The elements of the consolidated net income (loss) from Casabella Associates and
Casabella Joint Venture for the years ended December 31, 1996, 1995 and 1994 are
summarized as follows:
<TABLE>
<CAPTION>
Income: 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Rental income $1,341,037 1,520,905 $1,486,525
Other income 50,811 103,410 88,580
------------ ----------- ------------
1,391,848 1,624,315 1,575,105
Expenses and other deductions:
General and administrative 6,223 10,200 10,052
Operations 665,878 561,516 521,969
Depreciation and amortization 266,730 375,234 371,172
Interest 633,360 642,857 651,528
------------ ---------- -----------
1,572,191 1,589,807 1,554,721
----------- --------- ---------
Net income (loss) ($ 180,343) $ 34,508 ($ 20,384)
============= =========== ==========
</TABLE>
7. Mortgage Notes Payable:
All of the property owned by the Partnership is pledged as collateral for the
mortgage notes payable outstanding at December 31, 1996 and 1995, which
consisted of the following:
<PAGE> 38
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Canyon View $5,074,647 $5,154,887
Broadmoor . 3,540,679 3,577,264
---------- ----------
$8,615,326 $8,732,151
</TABLE>
Canyon View is subject to a nonrecourse first mortgage in the original principal
amount of $5,380,000. Under the terms of the note, monthly principal and
interest payments of $45,610, based on a fixed interest rate of 9.125%, are
required over the term of the loan. The balance of the note will be due on July
15, 1997.
Broadmoor is subject to a nonrecourse first mortgage in the principal amount of
$3,650,000. Interest only at the rate of 8% was payable monthly for the first
three years of the loan term. Commencing on September 15, 1993 monthly payments
of $31,980 including principal and interest, at the rate of 9.75%, were payable.
The balance of the note is payable on September 15, 1997.
Interest included in accrued expenses on the Balance Sheets of the Consolidated
Financial Statements at December 31, 1996 and 1995 consisted of $33,678 and
$34,132, respectively.
As these mortgage notes payable are due in fiscal 1997, the Partnership will
seek to renegotiate these mortgage notes with its existing lenders or seek new
sources of financing for these properties on a long term basis. The General
Partners believe that existing cash flows from the properties will be sufficient
to support a level of borrowing that is at least equal to amounts outstanding as
of December 31, 1996. If the general economic climate for real estate in these
respective locations were to deteriorate resulting in an increase in interest
rates for mortgage financing or a reduction in the availability of real estate
mortgage financing or a decline in the market values of real estate it may
affect the Partnership's ability to complete these refinancings.
The principal balance of the mortgage notes payable appearing on the
consolidated balance sheets at December 31, 1996 and 1995 approximates the fair
value of such notes.
8. Partners' Equity:
Under the terms of the Partnership Agreement profits are generally allocated 98%
to the Limited Partners and 2% to the General Partners; losses are allocated 99%
to the Limited Partners and 1% to the General Partners.
Cash distributions to the partners are governed by the Partnership Agreement and
are made, to the extent available, 98% to the Limited Partners and 2% to the
General Partners.
The allocation of the related profits, losses, and distributions, if any, would
be different than described above in the case of certain events defined in the
Partnership Agreement, such as the sale of an investment property or an interest
in a joint venture partnership.
9. Related Party Transactions:
Due to affiliates at December 31, 1996 and 1995 consisted of $10,680 and $9,210,
respectively, relating to reimbursable costs due to L'Auberge Communities, Inc.
Due from affiliates of $20,631, of which $6,802 consisted of expense
reimbursements due from Canyon View West, an affiliate of the general partners.
In addition, $13,828 of expense reimbursement is due from Lincoln Residential
Services, property manager of an affiliate of the general partners.
In 1996, 1995 and 1994, general and administrative expenses included $65,879,
$75,552 and $63,300, respectively, of salary reimbursements paid to the General
Partners for certain administrative and accounting personnel who performed
services for the Partnership.
During the years ended December 31, 1996, 1995 and 1994, property management
fees of $103,969, $121,209 and $129,737, respectively, had been paid to
Residential Services-L'Auberge, formerly Berry and Boyle Residential Services,
an affiliate of the General Partners of the Partnership. These fees are 4% of
rental revenue in 1996 and 5% of the rental revenue in 1995 and 1994.
Rental payments of $18,275 were paid by L'Auberge Communities, Inc. to Broadmoor
for two employee apartments.
<PAGE> 39
EXHIBIT INDEX
Exhibit No. Amended and Restated Certificate and Agreement of Limited
(4)(a)(1) Partnership (filed as an exhibit to the Partnership's
Registration Statement No. 33-02101, filed December 12, 1985 (the
"Registration Statement") and incorporated herein by reference).
(4)(a)(3) Fifteenth Amendment to the Amended and Restated Certificate and
Agreement of Limited Partnership dated October 29, 1990.(filed as
Exhibit 4(a)(3) to the Partnership's Annual Report on Form 10-K
for the year ended December 31, 1990 and incorporated herein by
reference).
(4)(b) Form of Subscription Agreement (filed as an exhibit to the
Registration Statement and incorporated herein by reference).
(10)(a) Development Agreement among the Partnership, Epoch Properties,
Inc. and the Canyon View Joint Venture and exhibits thereto (filed
as an exhibit to the Registration Statement and incorporated
herein by reference).
(10)(b) Documents pertaining to the $4,00,000 permanent loan for the
Canyon View Joint Venture (filed as an exhibit to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1989 and incorporated herein by reference).
(10)(c) Documents pertaining to the $3,650,000 permanent loan for the
Broadmoor Pines Joint Venture (filed as an exhibit to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1990 and incorporated herein by reference).
(10)(d) Agreement of Joint Venture of Casabella Associates dated September
27, 1990 (filed as Exhibit 10(f) to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference).
(10)(e) Property Management Agreement between Broadmoor Pines Joint
Venture and Berry and Boyle Residential Services dated August 1,
1990 (filed as Exhibit 10(k) to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1990 and incorporated
herein by reference).
(10)(f) Documents pertaining to the $7,300,000 permanent loan for
Casabella Joint Venture filed as an exhibit to the Annual Report
on Form 10K for the year ended December 31, 1991 for Berry and
Boyle Development Partners III and incorporated herein by
reference.
(10)(g) First Amendment to Joint Venture Agreement of L'Auberge Broadmoor
Joint Venture and Related Assignment of Joint Venture Interest.
(10)(h) Agreement regarding Casabella Joint Venture
(10)(i) Property Management Agreement (Canyon View) dated May 15, 1996,
between L'Auberge Communities Inc. and Canyon View Joint Venture.
(10)(j) Property Management Agreement (Casabella) dated November 1, 1996,
between L'Auberge Communities Inc. and Casabella Associates.
(27) Financial Data Schedule
<PAGE> 40
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
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 No. 0-15511
Development Partners
(A Massachusetts Limited Partnership)
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2895800
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer incorporation
or organization) Identification No.)
5110 Langdale Way, Colorado Springs, CO 80906
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(719) 576-5122
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 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> 41
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<PAGE> 42
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30
1997 December 31,
(Unaudited) 1996
ASSETS
Property, at cost
<S> <C> <C>
Land $5,114,512 $5,114,512
Buildings and improvements 15,561,584 15,561,584
Equipment, furnishings and fixtures 1,784,826 1,687,793
--------------- -----------------
22,460,922 22,363,889
Less accumulated depreciation (5,067,352) (4,741,203)
--------------- -----------------
17,393,570 17,622,686
Cash and cash equivalents 455,530 537,735
Real estate tax escrows 54,437 27,976
Deposits and prepaid expenses 2,206 639
Accounts receivable 18,133 20,631
Investment in partnership 284,618 293,210
Deferred expenses, net of accumulated
amortization of $312,681 and $298,472 1,635 15,844
--------------- -----------------
Total assets $18,210,129 $18,518,721
=============== =================
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $8,520,306 $8,615,326
Accounts payable 95,007 57,602
Accrued expenses 175,306 164,447
Due to affiliates (Note 8) 831 10,680
Rents received in advance - 6,158
Tenant security deposits 80,161 66,305
--------------- -----------------
Total liabilities 8,871,611 8,920,518
General Partner's equity (84,209) (83,524)
Limited Partner's equity 9,422,727 9,681,727
--------------- -----------------
Total liabilities and partners' equity $18,210,129 $18,518,721
=============== =================
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 43
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
-------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1997 1996 1997 1996
---- ---- ---- ----
Revenue:
<S> <C> <C> <C> <C>
Rental income $615,445 $580,485 $1,874,669 $1,861,690
Interest Income
5,185 6,345 16,939 24,295
-------------- -------------- --------------- -----------------
620,630 586,830 1,891,608 1,885,985
Expenses:
Operating Expenses 316,799 295,799 879,350 868,053
Interest 205,360 203,234 608,294 611,719
Depreciation and amortization 118,503 107,321 340,357 319,087
General and administrative 42,611 61,455 123,543 180,903
Equity in (income) loss
from partnership 5,658 7,495 8,591 2,413
-------------- -------------- --------------- -----------------
688,931 675,304 1,960,135 1,982,175
-------------- -------------- --------------- -----------------
Net income (loss) ($68,301) ($88,474) ($68,527) ($96,190)
============== ============== =============== =================
Net income (loss) allocated to:
General Partners ($683) ($885) ($685) ($962)
Per unit net income (loss) allocated to Investor Limited Partner interest:
36,411 units issued ($1.86) ($2.41) ($1.86) ($2.62)
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 44
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
(Unaudited)
-------------
<TABLE>
<CAPTION>
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1995 (76,142) 10,152,380 10,076,238
Cash distributions (5,202) (254,877) (260,079)
Net income (2,180) (215,776) (217,956)
-------------- --------------- -----------------
Balance at December 31, 1996 (83,524) 9,681,727 9,598,203
Cash distributions - (191,158) (191,158)
Net income (loss) (685) (67,842) (68,527)
-------------- --------------- -----------------
Balance at September 30, 1997 ($84,209) $9,422,727 $9,338,518
============== =============== =================
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 45
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
-------------
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1997 1996
---- ----
Cash flows from operating activities:
<S> <C> <C>
Interest received 16,939 $29,619
Cash received from operating revenue 1,882,367 1,855,887
General and administrative expenses (142,181) (190,841)
Operating expense (847,825) (897,577)
Interest paid (608,294) (611,719)
----------------------------------
Net cash provided by operating activities 301,006 185,369
Cash flows from investing activities:
Purchase of fixed assets (97,033) (177,291)
Proceeds from maturities of short-term investments - 74,332
Deposits - (2,112)
Distributions from partnership - 26,842
----------------------------------
Net cash provided by investing activities (97,033) (78,229)
Cash flows from financing activities:
Distributions to partners (191,158) (191,158)
Principal payments on mortgage note payable (95,020) (86,594)
--------------- -----------------
Net cash used by financing activities (286,178) (277,752)
--------------- -----------------
Net decrease in cash and cash equivalents (82,205) (170,612)
Cash and cash equivalents at beginning of year 537,735 532,019
--------------- -----------------
Cash and cash equivalents at end of year $455,530 $361,407
=============== =================
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 46
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
-------------
Reconciliation of net income (loss) to net cash provided by operating
activities:
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1997 1996
---- ----
<S> <C> <C>
Net income (loss) ($68,527) ($96,190)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 340,357 319,087
Equity in (income) loss from partnership 8,591 2,413
Change in assets and liabilities net of effects of investing and financing
activities:
Increase in real estate tax escrow (26,461) (24,764)
Decrease in prepaid expenses (1,567) 5,324
Decrease in accounts payable and accrued expenses 48,266 (2,917)
Decrease in due to (from) affiliates (7,351) (11,781)
Decrease in rents received in advance (6,158) -
Increase (decrease) in tenant security deposits 13,856 (5,803)
--------------- -----------------
Net cash provided by operating activities $301,006 $185,369
=============== =================
</TABLE>
The accompanying notes are an integral
part of the consolidated financial statements.
<PAGE> 47
1. Organization of Partnership:
Development Partners (A Massachusetts Limited Partnership), (the "Partnership"),
formerly Berry and Boyle Development Partners, was formed on October 23, 1985.
GP L'Auberge Communities, L.P., a California Limited Partnership, (formerly
Berry and Boyle Management) and Berry and Boyle Realty Advisors ("Advisors") (A
Massachusetts Limited Partnership), are the General Partners. A total of 2,033
individual Limited Partners owning 36,411 Units have contributed $18,205,500 of
capital to the Partnership. At September 30, 1997, the total number of Limited
Partners was 2,003. Except under certain limited circumstances upon termination
of the Partnership, the General Partners are not required to make any additional
capital contributions. The General Partners or their affiliates will receive
various fees for services and reimbursement for various organizational and
selling costs incurred on behalf of the Partnership.
The accompanying consolidated financial statements present the activity of the
Partnership for the nine months ended September 30, 1997 and 1996.
The Partnership will continue until December 31, 2010, unless earlier terminated
by the sale of all or substantially all of the assets of the Partnership, or by
the dissolution and liquidation of the joint ventures.
2. Significant Accounting Policies:
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its subsidiaries: Canyon View Joint Venture and
Broadmoor Pines Joint Venture. All intercompany accounts and
transactions have been eliminated in consolidation. The Partnership
accounts for its investment in Casabella Associates utilizing the
equity method of accounting. The Partnership's investment account is
adjusted to reflect its pro rata share of profits, losses and
distributions from Casabella Associates.
The Partnership follows the accrual method of accounting.
B. Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. It
is the Partnership's policy to invest cash in income-producing
temporary cash investments. The Partnership mitigates any potential
risk from such concentration of credit by placing investments with high
quality financial institutions.
C. Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires 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 amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
D. Depreciation
Depreciation is provided for by the use of the straight-line method
over estimated useful lives as follows:
Buildings and improvements 40 years
Equipment, furnishings and fixtures 5-15 years
E. Deferred Expenses
Costs of obtaining various mortgages on the properties are being
amortized over the term of the related mortgage notes payable using the
straight-line method. Buy down fees relating to permanent loan
refinancings (see Note 7) are being amortized over a three year period.
Any unamortized costs remaining at the date of a refinancing are
expensed in the year of refinancing.
F. Income Taxes
No provision is made for income taxes since the Partners are required
to include on their tax returns their pro rata share of the
Partnership's taxable income or loss. If the Partnership's tax returns
are examined by the Internal Revenue Service or a state taxing
authority, and such an examination results in a change in partnership
taxable income or loss, such change will be reported to the Partners.
G. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
H. Long-Lived Assets
The Partnership's long-lived assets include property and equipment and
deferred expenses. The Partnership evaluates rental properties for
impairment when conditions exist which may indicate that it is probable
that the sum of expected future cash flows (undiscounted) from rental
properties is less than its carrying value. Upon determination that a
permanent impairment has occurred, rental properties are reduced to
fair value. For the year ended December 31, 1996, and the quarter ended
September 30, 1997, permanent impairment conditions did not exist at
any of the Partnership's properties.
3. Cash and Cash Equivalents:
Cash and cash equivalents at September 30, 1997, and December 31, 1996,
consisted of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Cash on hand ............................. $211,503 $326,649
Certificate of deposit ................... 211,086
Money Market Accounts .................... 244,027
------- --------
$455,530 $537,735
======== ========
</TABLE>
4. Joint Venture and Property Acquisitions:
The Partnership has invested in three properties located in Scottsdale and
Tucson, Arizona and Colorado Springs, Colorado. The success of the Partnership
will depend upon factors which are difficult to predict including general
economic and real estate market conditions, both on a national basis and in the
areas where the Partnership's investments are located.
Canyon View
On September 29, 1987, the Partnership acquired a majority interest in the
Canyon View Joint Venture which owns and operates a 168-unit multifamily
residential property located in Tucson, Arizona. The Partnership has been
designated as the managing joint venture partner and will control all decisions
regarding the operation and sale of the property.
In accordance with the terms of the purchase agreement and the joint venture
agreement, through September 30, 1997, the Partnership has contributed total
capital of $6,889,588 to the Canyon View Joint Venture, which was used to repay
a portion of the construction loan from a third party lender, to pay certain
costs related to the refinancing of the permanent loan, to cover operating
deficits incurred during the lease up period and to fund certain capital
improvements. In addition, the Partnership funded $745,902 of property
acquisition costs which were subsequently treated as a capital contribution to
the joint venture.
For the nine months ended September 30, 1997 and 1996, the Canyon View Joint
Venture had a net loss of $56,408 and $94,647, respectively.
Net cash from operations (as defined in the joint venture agreement) will be
distributed as available to each joint venture partner not less often than
quarterly, as follows:
First, to the Partnership until it has received an annual
non-cumulative 11.25% priority return on its capital contribution for
such year.
Second, the balance 75% to the Partnership and 25% to the other joint
venture partner.
Income from operations will be allocated to the Partnership and the other joint
venture partner generally in accordance with the distribution of net cash from
operations.
Losses from operations will generally be allocated 100% to the Partnership.
In the case of certain capital transactions and distributions, as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
Broadmoor
On October 12, 1988, the Partnership acquired L'Auberge Broadmoor ("Broadmoor")
(formerly Broadmoor Pines), a 108-unit residential property located in Colorado
Springs, Colorado, and simultaneously contributed the property to a joint
venture comprised of the Partnership and the property developer (the "Broadmoor
Pines Joint Venture"). The Partnership control and owns a majority interest in
the Broadmoor Pines Joint Venture and, therefore, the accounts and operations of
the Broadmoor Pines Joint Venture have been consolidated into those of the
Partnership.
The co-venture partner was Highland Properties, Inc. ("Highland"), a Colorado
based residential development, construction and management firm. Highland
developed the property known as L'Auberge Broadmoor.
The Partnership has been designated the managing joint venture partner of the
Broadmoor Pines Joint Venture and will have control over all decisions affecting
the Broadmoor Pines Joint Venture and the property.
JANUARY 1, 1996, THROUGH JULY 2, 1996
Net cash from operations (as defined in the joint venture agreement) was to be
distributed as available to each joint venture partner quarterly, as follows:
First, to the Partnership an amount equal to 11.25% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of its respective capital investment, as
defined in the joint venture agreement;
Second, the balance 80% to the Partnership, and 20% to the property
developer.
Losses from operations and depreciation for the Broadmoor Pines Joint Venture
were allocated 100% to the Partnership.
All profits from operations to the extent of cash distributions shall first be
allocated to the Partnership and the property developer in the same proportion
as the cash distributions. Any remaining profits are allocated 80% to the
Partnership and 20% to the property developer.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
JULY 3, 1996, THROUGH SEPTEMBER 30, 1997
On July 3, 1996, the Partnership and certain affiliates consummated an agreement
with Highland Properties, Inc. ("Highland"), which separated the interests of
Highland and the Partnership, thus affording the Partnership greater flexibility
in the operation and disposition of the property. In consideration of a payment
by the Partnership to Highland totaling $8,683 and delivery of certain mutual
releases, Highland (i) relinquished its option to exercise its rights of first
refusal with regard to the sale of the property and (ii) assigned all of its
interest in the L'Auberge Broadmoor Joint Venture to the Partnership (while
preserving the economic interests of the venturer in these Joint Ventures),
which resulted in the dissolution of the L'Auberge Broadmoor Joint Venture.
Highland may still share in cash flow distributions or proceeds from the sale of
the property if certain performance levels are met.
Through September 30, 1997, the Partnership has made cash payments totaling
$6,079,200 and has funded $684,879 of property acquisition costs.
For the nine months ended September 30, 1997 and 1996, L'Auberge Broadmoor had a
net income of $107,889 and $158,762, respectively.
6.. Mortgage Notes Payable:
All of the property owned by the Partnership is pledged as collateral for the
mortgage notes payable outstanding at September 30, 1997, and December 31, 1996,
which consisted of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Canyon View ........................ $5,009,494 $5,074,647
Broadmoor .......................... 3,510,812 3,540,679
---------- ----------
$8,520,306 $8,615,326
</TABLE>
Canyon View is subject to a nonrecourse first mortgage in the original principal
amount of $5,380,000. Under the terms of the note, monthly principal and
interest payments of $45,610, based on a fixed interest rate of 9.125%, are
required over the term of the loan. The maturity of the note has been extended
from July 15, 1997, to July 15, 1998, with the same interest rate.
Broadmoor is subject to a nonrecourse first mortgage in the principal amount of
$3,650,000. Interest only at the rate of 8% was payable monthly for the first
three years of the loan term. Commencing on September 15, 1993, monthly payments
of $31,980 including principal and interest, at the rate of 9.75%, were payable.
The maturity of the note is September 15, 1998.
Interest accrued at September 30, 1997 and 1996, consisted of $33,678 and
$33,678, respectively, relating to the Canyon View and L'Auberge Broadmoor.
The principal balance of the mortgage notes payable appearing on the
consolidated balance sheet approximates the fair value of such notes.
7. Partners' Equity:
Under the terms of the Partnership Agreement profits are generally allocated 98%
to the Limited Partners and 2% to the General Partners; losses are allocated 99%
to the Limited Partners and 1% to the General Partners.
Cash distributions to the partners are governed by the Partnership Agreement and
are made, to the extent available, 98% to the Limited Partners and 2% to the
General Partners.
The allocation of the related profits, losses, and distributions, if any, would
be different than described above in the case of certain events defined in the
Partnership Agreement, such as the sale of an investment property or an interest
in a joint venture partnership.
8. Related Party Transactions:
Due to affiliates at September 30, 1997 and December 31, 1996, consisted of $831
and $10,680, respectively, relating to reimbursable costs due to L'Auberge
Communities, Inc.
As of September 30, 1997 and 1996, general and administrative expenses included
$40,509 and $52,463, respectively, of salary reimbursements paid to the General
Partners for certain administrative and accounting personnel who performed
services for the Partnership.
For the nine months ended September 30, 1997 and 1996, $72,317and $81,988 of
property management fees had been paid or accrued to Residential
Services-L'Auberge, formerly Berry and Boyle Residential Services, an affiliate
of the General Partners of the Partnership.
<PAGE> 48
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity; Capital Resources
At the close of the offering on February 26, 1987, the Partnership had admitted
2,033 Limited Partners who contributed capital of $18,205,500 to the
Partnership. These offering proceeds, net of organizational and offering costs
of $2,730,825, provided $15,474,675 of net proceeds to be used for the purchase
of income-producing residential properties, including related fees and expenses,
and working capital reserves. The Partnership has expended $14,384,167 to (i)
acquire its joint venture interests in the Canyon View Joint Venture, Broadmoor
Pines Joint Venture and Casabella Associates, (ii) pay acquisition expenses,
including acquisition fees to one of the General Partners, and (iii) pay certain
costs associated with the refinancing of the Canyon View and Broadmoor Pines
permanent loans. The Partnership distributed $56,437 to the Limited Partners as
a return of capital resulting from excess reserves. The remaining net proceeds
of $1,034,071 have been used to establish initial working capital reserves
sufficient to meet the future needs of the Partnership, including contributions
to the various properties that may be required. As of September 30, 1997,
$605,677 cumulatively was contributed to the properties for this purpose.
The working capital reserves of the Partnership consist of cash and cash
equivalents and short-term investments. Together these amounts provide the
Partnership with the necessary liquidity to carry on its day-to-day operations
and to make necessary contributions to the various joint ventures. Thus far in
1997, the aggregate net decrease in working capital reserves has been $82,205.
This decrease resulted primarily from cash provided by operations of $301,006,
offset by distributions to partners of $191,158, purchases of fixed assets
totaling $97,033, and principal payments on mortgage notes payable of $95,020.
Canyon View
As of September 30, 1997, the property was 89% occupied, compared to 74%
approximately one year ago. At September 30, 1997 and 1996, the market rents for
the various unit types were as follows:
<TABLE>
<CAPTION>
Unit Type 1997 1996
- ---------------------------------------------- ------ ------
<S> <C> <C>
One bedroom one bath ......................... $ 725 $ 725
Two bedroom two bath ......................... 795 810
Two bedroom two bath w/den ................... 1,010 980
</TABLE>
Broadmoor Pines
As of September 30, 1997, the property was 88% occupied, compared to 93%
approximately one year ago. At September 30, 1997 and 1996, the market rents for
the various unit types were as follows:
<TABLE>
<CAPTION>
Unit Type 1997 1996
- ---------------------------------------------- ------ ------
<S> <C> <C>
One bedroom two bath w/den ................... $ 930 $ 885
Two bedroom two bath ......................... 1,045 995
Two bedroom two bath w/den ................... 1,255 1,195
</TABLE>
Casabella
As of September 30, 1997, the property was 86% occupied, compared to 73%
approximately one year ago. At September 30, 1997 and 1996, the average monthly
rents collected for the various unit types were as follows:
<TABLE>
<CAPTION>
Unit Type 1997 1996
- ---------------------------------------------- ------ ------
<S> <C> <C>
One bedroom two bath w/den ................... $ 820 $ 820
Two bedroom two bath ......................... 940 940
Two bedroom two bath w/den ................... 1,160 1,160
</TABLE>
Results of Operations
The Partnership's operating results for the three months ended September 30,
1997, consisted of interest income, administrative expenses and the
Partnership's share of the income from Casabella Associates and the income
allocated from Canyon View and Broadmoor Pines, as follows:
<TABLE>
<CAPTION>
Canyon Broadmoor Investment Consolidated
View Pines Partnership Totals
<S> <C> <C> <C> <C>
Total revenue $312,316 $304,788 $3,526 $620,630
Expenses:
General and administrative 42,611 42,611
Operations 179,195 137,604 316,799
Depreciation and amortization 63,544 54,959 118,503
Interest 117,117 88,243 205,360
Equity in (income) loss from partnership 5,658 5,658
--------------- ---------------- ------------- -----------
359,856 280,806 48,269 688,931
--------------- ---------------- ------------- -----------
Net income ($47,540) $23,982 ($44,743) ($68,301)
=============== ================ ============= ===========
</TABLE>
The Partnership's operating results for the three months ended September 30,
1996 consisted of interest income, administrative expenses, the Partnership's
share of the loss from Casabella Associates and the income allocated from Canyon
View and Broadmoor Pines, as follows:
<TABLE>
<CAPTION>
Canyon Broadmoor Investment Consolidated
View Pines Partnership Totals
<S> <C> <C> <C> <C>
Total revenue $272,190 $308,295 $6,345 $586,830
Expenses:
General and administrative 61,455 61,455
Operations 172,488 123,311 295,799
Depreciation and amortization 60,911 46,410 107,321
Interest 116,548 86,686 203,234
Equity in (income) loss from partnership 7,495 7,495
-------------- ---------------- --------------- ------------
349,947 256,407 68,950 675,304
-------------- ---------------- --------------- -------------
Net income ($77,757) $51,888 ($62,605) ($88,474)
============== ================ =============== =============
</TABLE>
The Partnership's operating results for the nine months ended September 30,
1997, consisted of interest income, administrative expenses, the Partnership's
share of the income from Casabella Associates and the income allocated from
Canyon View and Broadmoor Pines, as follows:
<TABLE>
<CAPTION>
Canyon Broadmoor Investment Consolidated
View Pines Partnership Totals
<S> <C> <C> <C> <C>
Total revenue $992,103 $887,379 $12,126 $1,891,608
Expenses:
General and administrative 123,543 123,543
Operations 511,402 367,948 879,350
Depreciation and amortization 189,270 151,087 340,357
Interest 347,839 260,455 608,294
Equity in (income) loss from 8,591 8,591
partnership
--------------- ---------------- ------------- ------------
1,048,511 779,490 132,134 1,960,135
--------------- ---------------- ------------- ------------
Net income ($56,408) $107,889 ($120,008) ($68,527)
=============== ================ ============= ============
</TABLE>
The Partnership's operating results for the nine months ended September 30,
1996, consisted of interest income, administrative expenses, the Partnership's
share of the income from Casabella Associates and the income allocated from
Canyon View and Broadmoor Pines, as follows:
<TABLE>
<CAPTION>
Canyon Broadmoor Investment Consolidated
View Pines Partnership Totals
<S> <C> <C> <C> <C>
Total revenue $944,416 $918,568 $23,001 $1,885,985
Expenses:
General and administrative 10 - 180,893 180,903
Operations 507,309 360,744 868,053
Depreciation and amortization 180,743 138,344 319,087
Interest 351,001 260,718 611,719
Equity in (income) loss from partnership - - 2,413 2,413
-------------- ---------------- -------------- ---------------
1,039,063 759,806 183,306 1,982,175
-------------- ---------------- -------------- ---------------
Net income ($94,647) $158,762 ($160,305) ($96,190)
============== ================ ============== ===============
</TABLE>
Comparison of Operating Results for the Nine Months Ended September 30, 1997 and
1996:
Total revenue remained stable with an increased of $5,623. General and
administrative expenses decreased by $57,360 or 32% due to lower legal costs, as
well as the re-stabilization of costs associated with the Partnership
administrative, financial and investor services functions following the office
relocation to Colorado Springs.
Operating expenses increased by less than 1% or $11,297.
Thus far in 1997, the Partnership has made the following cash distributions to
its Partners:
Limited Partners $ 191,158
General Partners -
$191,158
<PAGE> 49
PART II - OTHER INFORMATION
----------------
ITEM 1. Legal Proceedings
Response: None
ITEM 2. Changes in Securities
Response: None
ITEM 3. Defaults Upon Senior Securities
Response: None
ITEM 4. Submission of Matters to a Vote of Security Holders
Response: None
ITEM 5. Other Information
Response: None
ITEM 6. Exhibits and Reports on Form 8-K
Response: None
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.
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P., a California Limited Partnership,
General Partner
By: L'Auberge Communities, Inc., its General Partner
By: ____/s/ Stephen B. Boyle________________
President
Date November 12, 1997
<PAGE> 50
DEVELOPMENT PARTNERS
(A MASSACHUSETTS LIMITED PARTNERSHIP)
THIS CONSENT is solicited by and on behalf of the Partnership. The
General Partners recommend a vote "FOR" the Proposal. A vote "FOR" the Proposal
also will constitute your consent to all actions necessary to consummate all
transactions with respect to the Proposal contemplated by the Consent
Solicitation.
THIS CONSENT WILL BE RECORDED IN ACCORDANCE WITH THE INSTRUCTIONS BELOW.
IF NO INSTRUCTIONS ARE INDICATED, BY YOUR SIGNATURE BELOW YOU WILL BE DEEMED TO
HAVE CONSENTED TO THE PROPOSAL AS RECOMMENDED BY THE GENERAL PARTNERS.
PLEASE MARK THE APPROPRIATE BOX:
With the General Partners' recommendation to dissolve the Partnership
and settle and close the Partnership's business and dispose of and convey the
Partnership's property as soon as practicable, consistent with obtaining
reasonable value for the properties, I vote:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
The undersigned acknowledges receipt of the Consent Solicitation dated
March 20, 1998 pertaining to the Proposal.
Dated:_________________________ ______________________________
Signature
_______________________________
Signature (if held jointly)
_______________________________
Title
Please sign exactly as name appears hereon. When Units are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS CONSENT PROMPTLY USING THE ENCLOSED
PRE-PAID ENVELOPE TO: GP L'Auberge Communities, L.P., c/o Gemisys, 7103 South
Revere Parkway, Englewood, Colorado 80112. If you have any questions, please
call THE L'AUBERGE INVESTOR SERVICES LINE at (800) 262-7778.
