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 June 30, 2000
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5110 Langdale Way, Colorado Springs, CO 80906
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(Address of principal executive offices) (Zip Code)
(719) 527-0544
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(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 SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
-------------
ASSETS
June 30, December 31,
2000 1999
Assets held for sale (Note 6)
<S> <C> <C>
Land $2,952,978 $2,952,978
Buildings and improvements 8,611,972 8,602,064
Equipment, furnishings and fixtures 993,367 1,003,275
---------------- ----------------
12,558,317 12,558,317
Less accumulated depreciation (2,991,565) (2,991,565)
---------------- ----------------
9,566,752 9,566,752
Cash and cash equivalents 606,442 475,022
Deposits and prepaid expenses 1,957 4,670
Tenant receivable 7,680 825
---------------- ----------------
Total assets $10,182,830 $10,047,269
================ ================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $36,803 $69,732
Accrued expenses 75,562 98,141
Due to affiliates (Note 5) 5,945 40,256
Rents received in advance 9,593 974
Tenant security deposits 15,885 17,925
---------------- ----------------
Total liabilities 143,789 227,028
General Partners' equity 7,149 2,773
Limited Partners' equity 10,031,891 9,817,468
---------------- ----------------
Total liabilities and partners' equity $10,182,830 $10,047,269
================ ================
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenue:
<S> <C> <C> <C> <C>
Rental income $310,606 $312,893 $652,953 640,476
Interest income $6,399 3,776
1,709 11,361
------------- ---------------- ---------------- ----------------
317,005 314,602 664,314 644,252
Expenses:
Operating expenses 189,856 149,259 345,759 311,535
General and administrative 54,645 193,119 99,756 280,099
------------- ---------------- ---------------- ----------------
244,501 342,378 445,515 591,634
------------- ---------------- ---------------- ----------------
Net income (loss) $72,504 ($27,776) $218,799 52,618
============= ================ ================ ================
Net income (loss) allocated to:
General Partners $1,450 ($278) $4,376 1,052
Basic and diluted per unit net income allocated to Investor Limited Partner
interest:
36,411 units issued $1.95 ($0.76) $5.89 $1.42
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
-------------
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1998 $19 $9,544,826 9,544,845
Distributions (1,300) (63,719) (65,019)
Net income 4,054 336,361 340,415
------------- ---------------- ----------------
Balance at December 31, 1999 2,773 9,817,468 9,820,241
Distributions - - -
Net income 4,376 214,423 218,799
------------- ---------------- ----------------
Balance at June 30, 2000 $7,149 $10,031,891 $10,039,040
============= ================ ================
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------
Six Months Ended
June 30,
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Interest received $11,361 $3,776
Cash received from rental income 652,677 539,563
General and administrative expenses (157,946) (323,174)
Operating expenses (374,672) (346,381)
------------- -------------------
Net cash provided by (used in) operating activities 131,420 (126,216)
Cash flows from investing activities:
Capital improvements - (8,402)
------------- ----------------
Net cash provided by (used in) investing activities - (8,402)
Net increase (decrease) in cash and cash equivalents 131,420 (134,618)
Cash and cash equivalents at beginning of period 475,022 256,958
------------- ----------------
Cash and cash equivalents at end of period $606,442 $122,340
============= ================
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------
Reconciliation of net income to net cash provided by (used by) operating
activities:
Six Months Ended
June 30,
2000 1999
---- ----
<S> <C> <C>
Net income $218,7998 $52,618
Adjustments to reconcile net income
to net cash provided by operating activities:
Change in assets and liabilities net of effects of
investing and financing activities:
Decrease (increase) in deposits and prepaid expenses 2,714 (1,490)
Increase in tenants (6,855) (95,615)
receivable
Decrease in accounts payable and
accrued expenses (55,506) (50,205)
Decrease in due to/from affiliates, net (34,311) (26,226)
Increase (decrease) in rents received in advance 8,619 (1,747)
Decrease in tenant security deposits (2,040) (3,551)
------------- ----------------
Net cash provided by (used in) operating activities $131,420 ($126,216)
============= ================
</TABLE>
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 June 30, 2000, the total number of Limited
Partners was 1,939. 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 6.)
2. Significant Accounting Policies:
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its subsidiary: Canyon View Joint Venture (Canyon
View). All intercompany accounts and transactions have been eliminated
in consolidation.
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 further discussed in Note 6, 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. 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.
F. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
G. 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. As further discussed
in Note 6, assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell.
3. Joint Venture and Property Acquisition:
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.
3. Joint Venture and Property Acquisition, continued:
In accordance with the terms of the purchase agreement and the joint venture
agreement, through June 30, 2000, 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.
For the six months ended June 30, 2000 and 1999, the Canyon View Joint Venture
had a net income of $307,194 and $328,941, respectively.
4. 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.
<PAGE>
5. 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 June 30, 2000 and December 31, 1999
consisted of $5,945 and $40,256, respectively, relating to reimbursable costs
due to L'Auberge Communities, Inc.
In 2000 and 1999, general and administrative expenses included $19,235 and
$27,556, respectively, of salary reimbursements paid to the General Partners for
certain administrative and accounting personnel who performed services for the
Partnership.
During the six months ended June 30, 2000 and 1999, property management fees of
$26,342 and $25,325, 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.
6. 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 a sales agreement to sell Canyon View to
Tucson Realty Holding Co., Inc. ("TRH"), an unaffiliated third party, for
approximately $10.1 million. The sale was approved by the Limited Partners in
May 1998.
The sale of Canyon View to TRH had been delayed because of a lawsuit filed by
another party claiming that it had properly exercised a right of first refusal
to purchase Canyon View. On June 30, 1999, the dispute was resolved
through the execution of a settlement agreement by all parties. The settlement
agreement included the termination of all rights of the holder of the right of
first refusal to purchase Canyon View in exchange for a cash payment.
Following the settlement, TRH elected to withdraw from the sale agreement, with
no liability to the Partnership, because of the long delay. On March 2, 2000,
the Partnership entered into a new purchase agreement to sell Canyon View to
Tucson Canyon View LLC ("TCV"), an unaffiliated third party for approximately
$11.3 million, subject to customary adjustments. Arsenault Holdings, LLC, an
unaffiliated party ("Arsenault"), subsequently acquired TCV's rights under the
Purchase Agreement and, on June 20, 2000, deposited $1.0 million in earnest
money with the escrow agent and waived certain contingencies. Subject to
approval by Pima County, Arizona of the final development plat for condominium
conversion of the Canyon View property, the Partnership anticipates that the
sale of Canyon View to Arsenault will close during the third quarter of 2000.
As it is the intent of the General Partners to pursue the sale of Canyon View,
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, 2000 and December 31, 1999. In
accordance with SFAS No. 121, the Partnership stopped depreciating these assets
effective January 1, 1998. Had the Partnership recorded depreciation on the
assets held for sale, the depreciation expense would have been approximately
$280,000 each year for the Canyon View property. 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 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 June 30, 2000,
the Partnership had cash and cash equivalents of $606,442 compared with $475,022
at December 31, 1999. The aggregate net increase of $131,420 resulted from cash
provided 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. As further discussed in Note 6 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 June 30, 2000, the property was 84% occupied, compared to 93%
approximately one year ago. At June 30, 2000 and 1999, the
market rents for the various unit types were as follows:
Unit Type 2000 1999
--------- ---- ----
One bedroom one bath $765 $725
Two bedroom two bath 825 825
Two bedroom two bath w/den 1,010 1,010
<PAGE>
Results of Operations
For three months ended June 30, 2000, 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 appears below:
<TABLE>
Canyon Investment Consolidated
View Partnership Totals
<S> <C> <C> <C>
Total revenue $310,606 $6,399 317,005
Expenses:
General and administrative - 54,645 54,645
Operations 189,856 189,856
---------------- ---------------- ----------------
Net income $120,750 ($48,246) $72,504
================ ================ ================
For three months ended June 30, 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:
Canyon Investment Consolidated
View Partnership Totals
<S> <C> <C> <C>
Revenue $312,893 $1,709 $314,602
Expenses:
General and administrative - 193,119 193,119
Operations 149,259 149,259
--------------- ------------ --------------
Net income $163,634 ($191,410) ($27,776)
=============== ============ ==============
For six months ended June 30, 2000, 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 appears below:
Canyon Investment Consolidated
View Partnership Totals
<S> <C> <C> <C>
Revenue $652,953 $11,361 $664,314
Expenses:
General and administrative - 99,756 99,756
Operations 345,759 345,759
--------------- ------------ --------------
Net income $307,194 ($88,394) $218,799
=============== ============ ==============
For six months ended June 30, 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:
Canyon Investment Consolidated
View Partnership Totals
<S> <C> <C> <C>
Revenue $640,476 $3,776 $644,252
Expenses:
General and administrative - 280,099 280,099
Operations 311,535 311,535
--------------- ------------ --------------
Net income $328,941 ($276,323) $52,618
=============== ============ ==============
</TABLE>
Comparison of 2000 and 1999 Operating Results:
Partnership operations for 2000 generated net income of $218,799 compared with
net income of $52,618 for the corresponding period in 1999. The increase in
revenue of 20,062 or 3%, was due in part to higher average occupancy levels at
Canyon View resulting in rental revenue increase of $12,477, as well as an
increase in interest income of $7,585. The difference in operating expenses of
$34,224 or 11% was due in part to a rebate on insurance costs, as well as an
adjustment for the accrual of real estate taxes in 1999. General and
administrative expenses decreased by $180,343 or 64%, primarily due to a
$183,485 reduction of legal fees and settlement costs associated with the
Canyon View litigation in 1999.
<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: August 8, 2000
