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 September 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
September 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 689,148 475,022
Deposits and prepaid expenses 4,298 4,670
Tenant receivable 18,732 825
---------------- ----------------
Total assets $10,278,929 $10,047,269
================ ================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $25,924 $69,732
Accrued expenses 76,340 98,141
Due to affiliates (Note 5) 3,850 40,256
Rents received in advance - 974
Tenant security deposits 17,749 17,925
---------------- ----------------
Total liabilities 123,863 227,028
General Partners' equity 9,469 2,773
Limited Partners' equity 10,145,596 9,817,468
---------------- ----------------
Total liabilities and partners' equity $10,278,929 $10,047,269
================ ================
.
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Revenue:
<S> <C> <C> <C> <C>
Rental income $292,493 $331,872 $945,446 972,348
Interest income $8,110 143 3,919
19,472
------------- ---------------- ---------------- ----------------
300,603 332,015 964,918 976,267
Expenses:
Operating expenses 147,561 184,739 493,320 496,275
General and administrative 37,018 (35,838) 136,774 244,261
------------- ---------------- ---------------- ----------------
184,579 148,901 630,094 740,536
------------- ---------------- ---------------- ----------------
Net income (loss) $116,024 $183,114 $334,824 235,731
============= ================ ================ ================
Net income (loss) allocated to:
General Partners $2,320 ($278) $6,696 1,052
Basic and diluted per unit net income allocated to Investor Limited Partner
interest:
36,411 units issued $3.12 ($0.76) $9.01 $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 6,696 328,128 334,824
------------- ---------------- ----------------
Balance at September 30, 2000 $9,469 $10,145,596 $10,155,065
============= ================ ================
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------
Nine Months Ended
September 30,
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Interest received 19,472 $3,919
Cash received from rental income 926,390 969,251
General and administrative expenses (198,059) (292,517)
Operating expenses (533,676) (546,220)
------------- -------------------
Net cash provided by operating activities 214,126 134,433
Cash flows from investing activities:
Capital improvements - (9,908)
------------- ----------------
Net cash used in investing activities - (9,908)
Net increase in cash and cash equivalents 214,126 60,806
Cash and cash equivalents at beginning of period 475,022 256,958
------------- ----------------
Cash and cash equivalents at end of period $689,148 $317,764
============= ================
<PAGE>
DEVELOPMENT PARTNERS
(A Massachusetts Limited Partnership)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------
Reconciliation of net income to net cash provided by operating activities:
Nine Months Ended
September 30,
2000 1999
---- ----
<S> <C> <C>
Net income $334,824 $235,731
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 373 (2,980)
Increase in tenants receivable (17,907) 5,551
Decrease in accounts payable and
accrued expenses (65,609) (60,853)
Decrease in due to/from affiliates, net (36,406) (34,368)
Decrease in rents received in advance (974) (1,747)
Decrease in tenant security deposits (176) (6,901)
------------- ----------------
Net cash provided by operating activities $214,126 $134,433
============= ================
</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 September 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 September 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 nine months ended September 30, 2000 and 1999, the Canyon View Joint
Venture had a net income of $452,126 and $476,073, 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 September 30,
2000 and December 31, 1999 consisted of $3,850 and $40,256, respectively,
relating to reimbursable costs due to L'Auberge Communities, Inc.
In 2000 and 1999, general and administrative expenses included $26,181 and
$40,752, respectively, of salary reimbursements paid to the General Partners for
certain administrative and accounting personnel who performed services for the
Partnership.
During the nine months ended September 30, 2000 and 1999, property management
fees of $37,701 and $38,474, 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. On
November 13, 2000, Arsenault deposited an additional $0.5 million in earnest
money. 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
fourth 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 September 30,
2000, the Partnership had cash and cash equivalents of $689,148 compared with
$475,022 at December 31, 1999. The aggregate net increase of $214,126 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 September 30, 2000, the property was 91% occupied, compared to 94%
approximately one year ago. At September 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 September 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 $292,493 $8,110 300,603
Expenses:
General and administrative - 37,018 37,018
Operations 147,561 147,561
----------------- ---------------- ----------------
147,561 37,018 184,579
----------------- ---------------- ----------------
Net income $144,932 ($28,907) 116,024
================= ================ ================
For three months ended September 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 Consolidated
View Partnership Totals
<S> <C> <C> <C>
Revenue $331,872 $ 143 $332,015
Expenses:
General and administrative - (35,838) (35,838)
Operations 184,739 184,739
--------------- ------------ --------------
Net income $147,133 $35,981 $183,114
=============== ============ ==============
For nine months ended September 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 $945,446 $19,472 $964,918
Expenses:
General and administrative - 136,774 136,774
Operations 493,320 493,320
--------------- ------------ --------------
Net income $452,126 ($117,302) $334,824
=============== ============ ==============
For nine months ended September 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 Consolidated
View Partnership Totals
<S> <C> <C> <C>
Revenue $972,348 $3,919 $976,267
Expenses:
General and administrative - 244,261 244,261
Operations 496,275 496,275
--------------- --------------- ----------------
Net income $476,073 ($240,342) $235,731
=============== =============== ================
</TABLE>
Comparison of 2000 and 1999 Operating Results:
Partnership operations for 2000 generated net income of $334,823 compared with
net income of $235,731 for the corresponding period in 1999. The decrease in
revenue of 11,349 or 1%, was due in part to lower average occupancy levels at
Canyon View resulting in rental revenue decrease of $26,902, off set by an
increase in interest income of $15,553. General and administrative expenses
decreased by $107,487 or 44%, primarily due to the 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: November 14, 2000
