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 Quarter Ended March 31, 1999
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)
(formerly Berry and Boyle Development Partners)
(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) 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 ___
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<PAGE>
<TABLE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS March 31,
1999 December 31,
(Unaudited) 1998
Assets held for sale (Note 8)
<S> <C> <C>
Land $2,952,978 $2,952,978
Buildings and improvements 8,602,064 8,602,064
Equipment, furnishings and fixtures 993,367 993,367
--------------- ---------------
12,548,409 12,548,409
Less accumulated depreciation (2,991,565) (2,991,565)
--------------- ---------------
9,556,844 9,556,844
Cash and cash equivalents 321,857 256,958
Deposits and prepaid expenses 200 200
Tenant receivable 1,199 1,085
--------------- ---------------
Total assets $9,880,100 $9,815,087
=============== ===============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Accounts payable $103,833 $28,110
Accrued expenses 89,094 157,142
Due to affiliates (Note 7) 38,633 57,042
Rents received in advance - 1,747
Tenant security deposits 23,300 26,201
--------------- ---------------
Total liabilities 254,860 270,242
General Partners' equity 1,627 19
Limited Partners' equity 9,623,613 9,544,826
--------------- ---------------
Total liabilities and partners' equity $9,880,100 $9,815,087
=============== ===============
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------
Three Months Ended
March 31,
1999 1998
---- ----
Revenue:
<S> <C> <C>
Rental income $327,583 $607,749
Interest income
2,067 4,586
---------------- ---------------
329,650 612,335
Expenses:
Operating Expenses 162,275 275,435
Interest - 198,820
Depreciation and amortization - 9,325
General and administrative 86,980 62,199
Equity in (income) loss
from partnership - (7,014)
---------------- ---------------
249,255 538,765
---------------- ---------------
Net income (loss) $80,395 $73,570
================ ===============
Net income (loss) allocated to:
General Partners $1,608 $1,471
Basic and diluted per unit net income allocated
to Investor Limited Partner interest:
36,411 units issued $2.16 $1.98
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1997 ($88,541) $9,380,110 $9,291,569
Minority interest absorbed - (912) (912)
Net income 88,560 165,628 254,188
---------------- --------------- ---------------
Balance at December 31, 1998 19 9,544,826 9,544,845
Distributions - - -
Net income 1,608 78,787 80,395
---------------- --------------- ---------------
Balance at March 31, 1999 $1,627 $9,623,613 $9,625,240
================ =============== ===============
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------
Three Months Ended
March 31,
1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Interest received $2,067 $4,586
Cash received from rental income 322,821 609,121
General and administrative expenses (121,001) (50,734)
Operating expenses (138,988) (327,989)
Interest paid - (198,820)
---------------- -----------------
Net cash (used in) provided by operating activities 64,899 36,164
Cash flows from investing activities:
Capital improvements - (35,530)
---------------- ---------------
Net cash provided by (used in) investing activities - (35,530)
Cash flows from financing activities:
Principal payments on mortgage note payable - (33,952)
---------------- ---------------
Net cash used in financing activities - (33,952)
---------------- ---------------
Net (decrease) increase in cash and cash equivalents 64,899 (33,318)
Cash and cash equivalents at beginning of year 256,958 392,010
---------------- ---------------
Cash and cash equivalents at end of year $321,857 $358,692
================ ===============
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------
Reconciliation of net income (loss) to net cash (used in) provided by operating
activities:
Three Months Ended
March 31,
1999 1998
---- ----
<S> <C> <C>
Net income (loss) $80,395 $73,570
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating
activities:
Depreciation and amortization - 9,325
Equity in (income) loss from partnership - (7,014)
Change in assets and liabilities net of effects of
investing and financing activities:
Increase in real estate tax escrow - (26,291)
Increase in deposits and prepaid expenses - (23)
Decrease (increase) in tenants receivable (114) 9,297
(Decrease) increase in accounts payable and
accrued expenses 7,675 (40,061)
Increase (decrease) in due to/from affiliates (18,409) 25,286
Decrease in rents received in advance (1,747) -
Decrease in tenant security deposits (2,901) (7,925)
---------------- ---------------
Net cash (used in) provided by operating activities $64,899 $36,164
================ ===============
</TABLE>
<PAGE>
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 L'Auberge Realty Advisors (A Massachusetts
Limited Partnership) ("Advisors"), 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 March 31, 1999, the total number of Limited
Partners was 1,971. 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 can 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 (See Note 8.)
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 (Canyon
View) and Broadmoor Pines (Broadmoor). 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 4 regarding the
termination of the Broadmoor Pines Joint Venture, and Note 5 regarding
the termination of the Casabella Joint Venture.
The Partnership follows the accrual method of accounting.
The Partnership considers itself to have been engaged in only one
industry segment, real estate.
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.
<PAGE>
2. Significant Accounting Policies continued:
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
As of December 31, 1997, the Partnership recorded its property as
Assets Held for Sale on the consolidated balance sheets. Accordingly,
the Partnership stopped depreciating these assets effective January 1,
1998.
E. Deferred Expenses
Costs of obtaining or extending various mortgages on the properties are
being amortized over the mortgage term using the straight line method,
which approximates the effective interest method.
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 utilizes the provisions of SFAS No. 121, Accounting for
the Impairment of Long -Lived Assets and for Long-Lived Assets to be
Disposed Of, to review for impairment. Recoverability of assets to be
held and used is measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset.
If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of
the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less
costs to sell.
3. Cash and Cash Equivalents:
Cash and cash equivalents at March 31, 1999 and December 31, 1998 consisted of
the following:
1999 1998
---- ----
Cash on hand $321,857 $256,958
<PAGE>
4. Joint Venture and Property Acquisitions:
The Partnership had 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 owned 100% of the underlying assets as of December 31, 1997.
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 March 31, 1999, 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.
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
affected 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 owned a majority interest in the Broadmoor
Pines Joint Venture and, therefore, the accounts and operations of the Broadmoor
Pines Joint Venture were 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.
4. Joint Venture and Property Acquisitions, continued:
The Partnership had been designated the managing joint venture partner of the
Broadmoor Pines Joint Venture and controlled the operations of the Broadmoor
Pines Joint Venture and the property.
Through March 31, 1999, the Partnership made cash payments in the form of
capital contributions totaling $6,079,200 and has funded $684,879 of property
acquisition costs which were treated as a capital contribution to the joint
venture.
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
affected by the relative balances in the individual partners' capital accounts.
JULY 3, 1996, THROUGH MARCH 31, 1999
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.
On May 28, 1998, L'Auberge Broadmoor was sold pursuant to the terms of a Sale
Agreement and Escrow Instructions (the "Agreement") dated January 26, 1998.
L'Auberge Broadmoor was sold to G&I Broadmoor LLC, a Delaware limited liability
company unaffiliated with the Partnership. The net selling price for Broadmoor
was $8,048,532 subject to certain customary adjustments net of a credit to the
purchaser of $139,000 for capital improvements. The mortgage in the approximate
amount of $3,514,880 was paid at closing utilizing a portion of proceeds from
the sale. The Partnership realized net proceeds of approximately $4,439,400 from
the sale. In 1998, the partnership recognized a gain on sale for financial
reporting purposes of $140,391.
5. Investment in Partnership:
On November 5, 1990, the Partnership contributed $400,000 to purchase an
approximate 8.5% 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. As of December 31, 1997, the difference between
the partnership's carrying value of the investment in Casabella Associates and
the amount of underlying equity in net assets was $65,345, representing a
portion of the acquisition costs stated above that were not recorded on the
books of Casabella Associates.
The co-venture partner was an affiliate of Evans Withycombe, Inc. ("EWI"), a
Phoenix based residential development, construction and management firm. EWI was
also the developer of the Casabella property.
On May 14, 1996, the Partnership and certain affiliates consummated an agreement
with Evans Withycombe Management, Inc. and certain of its affiliates ("EWI")
which separated the interests of EWI and the Partnership, thus affording the
Partnership greater flexibility in the operation and disposition of Casabella.
The Partnership, DPII, and DPIII paid $71,009 to EWI ($5,681 of which was the
Partnership's portion) and delivered certain mutual releases. EWI (i)
relinquished its contract to manage Casabella and its option to exercise its
rights to first refusal with regard to the sale of the property and (ii)
assigned all of its interest in the Casabella Joint Venture to the Partnership,
DPII and DPIII (while preserving the economic interest of the venture in these
Joint Ventures), which resulted in the dissolution of the Casabella Joint
Venture. EWI may still share in the cash flow distributions or the proceeds from
sale of the properties if certain performance levels are met.
On May 22, 1998, Casabella Associates sold its only material asset, Casabella, a
154-unit multi family rental property in Scottsdale, Arizona pursuant to the
terms of a Sale Agreement and Escrow Instructions (the "Agreement") dated
February 4, 1998, as amended.
Casabella was sold to Casabella Condominium Ventures
Limited Partnership, a limited partnership unaffiliated with the Partnership.
The net selling price was $11,418,702 subject to certain customary adjustments
net of a credit to the purchaser of $120,000 for certain capital improvements.
Casabella Associates repaid mortgage financing in the approximate amount of
$6,750,400 at closing utilizing a portion of proceeds from the sale. The net
proceeds to Casabella Associates from the sale of Casabella were approximately
$4,570,300 of which the Partnership's share was approximately $388,475. EWI did
not share in the proceeds from sale of the properties since certain performance
levels were not satisfied. Casabella Associates recognized a gain on sale of
$2,066,086, of which the Partnership's share was approximately $175,617 less the
$65,345 difference between the Partnership's carrying value of its investment in
Casabella Associates and the amount of underlying equity in net assets.
<PAGE>
5. Investment in Partnership, continued:
The consolidated balance sheets of Casabella Associates and Casabella Joint
Venture at March 31, 1999 and December 31, 1998, are summarized as follows:
<TABLE>
Assets: 1999 1998
---- ----
<S> <C> <C>
Property, plant and equipment $ - $11,580,507
Accumulated depreciation (2,228,967)
-----------
Property, plant and equipment, net 9,351,540
Other assets 87,933
Total assets $ - $9,439,473
=========
Liabilities and partners' equity:
Mortgage notes payable 6,734,895
Other liabilities 173,237
-------
Total liabilities 6,908,132
Partners' equity 2,531,341
Total liabilities and partners' equity$ - $9,439,473
=========
The elements of the consolidated net income (loss) from Casabella Associates and
Casabella Joint Venture for the three months ended March 31, 1999 and 1998 are
summarized as follows:
Income: 1999 1998
---- ----
<S> <C> <C>
Rental income $ - $404,617
Other income 7,679
-----
412,296
Expenses and other deductions:
General and administrative 1,325
Operations 167,905
Depreciation and amortization 6,428
Interest 154,121
-------
329,779
Net income (loss) $ - $82,517
======
</TABLE>
6. 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.
7. Related Party Transactions:
L'Auberge Communities, Inc. is a General Partner of L'Auberge Communities,
which owns a 99% interest in GP L'Auberge Communities,
L.P. (formerly Berry and Boyle Management). Due to affiliates at March 31,
1999 and December 31, 1998 consisted of $38,633 and $57,042, respectively,
relating to reimbursable costs due to L'Auberge Communities, Inc.
In 1999 and 1998, general and administrative expenses included $14,361 and
$19,289, respectively, of salary reimbursements paid to the General Partners for
certain administrative and accounting personnel who performed services for the
Partnership.
During the three months ended March 31, 1999 and 1998, property management fees
of $13,036 and $24,152, 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.
8. Assets Held for Sale:
During the fourth quarter of 1997, the General Partners of the Partnership
committed to a plan to dispose of Canyon View in Tucson, Arizona. In February
1998, the Partnership entered into sales agreement (the "Sales Agreement") to
sell Canyon View to Tucson Realty Holding Co., Inc. ("TRH"), an unaffiliated
third party, for approximately $10,101,497. The sale was approved by the Limited
Partners in May 1998.
Although the General Partners do not believe it to be material or with merit, a
lawsuit related to the pending sale of Canyon View was filed in March 1998.
The Partnership owns a joint venture interest in Canyon View 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 is
entitled to receive any portion of the proceeds of the sale of Canyon View.
Under the terms of the Canyon View Joint Venture Agreement, the Partnership's
co-venturers (or any of them) were granted a right of first refusal to purchase
Canyon View on the same terms and conditions as an accepted third party offer to
purchase the property. With respect to the proposed sale to 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 Sales 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 Sales Agreement and,
therefore, that the right of first refusal lapsed without exercise.
In March 1998, the co-venturer filed a lawsuit claiming that it, not TRH, has
the right to acquire Canyon View. The lawsuit seeks specific performance of its
right of first refusal to acquire Canyon View or, if the court will not grant
specific performance, monetary damages in an amount to be proven at trial. In
addition, the co-venturer filed a lis pendens on the property as a means of
blocking the sale to TRH.
The Partnership is attempting to expunge the lis pendens and is defending
against the claims of the co-venturer. The Partnership filed an answer and
counterclaim in which it denied the material allegations of the complaint and
alleged their right to a declaration that the co-venturer has no right to
acquire Canyon View, as well as monetary damages in an amount to be proven at
trial. In September 1998, the Partnership amended its counterclaim to allege
additional claims for unjustifiable lis pendens, declaratory judgment,
fraudulent and negligent misrepresentation, constructive fraud and fiduciary
breach and private cause of action for scheme and artifice to defraud.
8. Assets Held for Sale, continued:
TRH has intervened in the lawsuit and filed an answer and counterclaim in which
it denied the material allegations of the complaint and alleged their right to a
declaration that the co-venturer has no right to acquire Canyon View, as well as
monetary damages from the co-venturer in an amount to be proven at trial.
In July 1998, the co-venturer filed an amended complaint alleging claims for
breach of the covenant of good faith and fair dealing and breach of fiduciary
duty against the Partnership and General Partners. The co-venturer has stated
its intention to seek compensatory and punitive damages for such claims. The
Partnership and the General Partners believe that such claims are meritless and
will defend against them.
The tentative trial date previously set for May 18, 1999 has been rescheduled by
the court to an as yet unspecified date in the fall. Although there can be no
assurance, the parties appear to be interested in reaching a settlement.
As it is the intent of the General Partners to pursue the sale of Canyon View to
TRH, the Partnership has recorded the assets at the lower of carrying value or
net realizable value and has included these amounts as Assets Held for Sale on
the Consolidated Balance Sheets as of March 31, 1999 and December 31, 1998. In
accordance with SFAS 121, the Partnership stopped depreciating these assets
effective January 1, 1998. If closing of the sale were to occur, any proceeds
from the sale of Canyon View will be allocated to the Partners in accordance
with the terms of the Partnership Agreement and the Partnership will likely be
liquidated.
<PAGE>
ITEM 2. 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 the
General Partners' 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
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. At March 31,
1999, the Partnership had cash and cash equivalents of $321,857 compared with
$256,958 at December 31, 1998. The aggregate net decrease of $64,899 resulted
from cash used by operations.
Property Status
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. Until its sale in May 1998, the
Partnership owned and operated Broadmoor, a 108-unit multifamily rental property
in Colorado Springs, Colorado. 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 Pines Joint Venture,
see Note 4 of Notes to Consolidated Financial Statements. As further discussed
in Note 8 of the Notes to Consolidated Financial Statements, Canyon View is
under contract to be sold to a purchaser unaffiliated with the General Partners.
Canyon View
As of March 31, 1999, the property was 86% occupied, compared to 84%
approximately one year ago. At March 31, 1999 and 1998, the
market rents for the various unit types were as follows:
Unit Type .............................. 1999 1998
- ---------------------------------------------- ------ ------
One bedroom one bath ......................... $ 765 $ 765
Two bedroom two bath ......................... 825 825
Two bedroom two bath w/den ................... 1,010 1,010
<PAGE>
Results of Operations
For three months ended March 31, 1999, the Partnership's operating results were
comprised of its share of the income and expenses from the Canyon View Joint
Venture and partnership level interest income earned on short term investments,
reduced by administrative expenses (referred to collectively in the table below
under the heading "Investment Partnership"). A summary of these operating
results (unaudited) appears below:
<TABLE>
Canyon Consolidated
View Partnership Totals
<S> <C> <C> <C>
Revenue $327,583 $2,067 $329,650
Expenses:
General and administrative - 86,980 86,980
Operations 162,275 162,275
--------------- ------------ --------------
Net income $165,308 ($84,913) $80,395
=============== ============ ==============
For the three months ended March 31, 1998, the Partnership's operating results
were comprised of its share of the income and expenses from (i) the Canyon View
Joint Venture, (ii) Broadmoor Pines, and (iii) the Partnership's share of the
income from Casabella Associates, partnership level interest income earned on
short term investments, reduced by administrative expenses (referred to
collectively in the table below under the heading "Investment Partnership"). A
summary of these operating results (unaudited) appears below:
Canyon Broadmoor Consolidated
View Pines Partnership Totals
<S> <C> <C> <C> <C>
Total revenue $323,805 $285,074 $3,456 $612,335
Expenses:
General and administrative - - 62,199 62,199
Operations 164,700 110,735 275,435
Depreciation and amortization 5,224 4,101 9,325
Interest 113,585 85,235 198,820
Equity in (income) loss from partnership - - (7,014) (7,014)
-------------- --------------- ------------- ---------------
283,509 200,071 55,185 538,765
-------------- --------------- ------------- ---------------
Net income $40,296 $85,003 ($51,729) $73,570
============== =============== ============= ===============
</TABLE>
Comparison of 1999 and 1998 Operating Results:
Partnership operations for 1999 generated net income of $80,395 compared with
net income of $73,570 for the corresponding period in 1998. The operating
revenue decreased by $282,685 or 46% due to the sale of Broadmoor in May 1998.
Likewise, the operating expenses decreased $113,160 or 41%. General and
administrative expenses increased by $24,781 or 28%, primarily due to an
increase of $51,670 of legal fees associated with the Canyon View litigation,
offset by $26,889 reduction of expenses including professional fees associated
with the sale of the properties in 1998, as well as accounting fees and investor
services.
Year 2000 Issues
The Partnership's management has addressed the Year 2000 issue of its management
information systems and financial reporting systems.
The remaining real-estate asset of the Partnership is Canyon View, a 168-unit
multi-family residential property. Canyon View's management information system
is AMSI and is already Year 2000 compliant.
The Partnership's only mission critical system is its financial reporting
software which is currently maintained on the Platinum accounting software
system, which has not been updated to handle the Year 2000 date change. Because
the Partnership has entered into a Purchase Agreement to sell its remaining
property, it is anticipated to be completely liquidated by the end of 1999 and
the year 2000 issue will not materially affect the results of operations or
financial condition of the Partnership. However, if any financial information
for the Partnership needs to be maintained into the year 2000, the Partnership's
management has already purchased AMSI's financial reporting system, which is
Year 2000 compliant. The financial records would be transferred to the AMSI
accounting software prior to the end of 1999.
The accounting systems are run on a Novell network, which needs to be upgraded
for compliance with the Year 2000. The Partnership's anticipated share of the
cost of this upgrade is $450. The upgrade is scheduled to take place by the end
of May 1999.
Management anticipates that all essential functions relative to maintaining the
Partnership, if any remain at that time, will be operational and the costs
associated with Year 2000 compliance will not have a material impact on the
Partnership.
<PAGE>
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: May 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 321,857
<SECURITIES> 0
<RECEIVABLES> 1,399
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 12,548,409
<DEPRECIATION> (2,991,565)
<TOTAL-ASSETS> 9,880,100
<CURRENT-LIABILITIES> 254,860
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,625,240
<TOTAL-LIABILITY-AND-EQUITY> 9,880,100
<SALES> 0
<TOTAL-REVENUES> 329,650
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 249,255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,395
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
