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 Number: 33-3657
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
California 94-3199021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100
San Mateo, California 94402-1708
(Address of principal executive offices) (Zip Code)
(650) 343-9300
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
Total number of units outstanding as of September 30, 1997: 2,900,032
Page 1 of 21
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
Consolidated Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
September 30, December 31,
1997 1996
---------- ----------
<S> <C> <C>
Assets
Real estate held for sale, net $ --- $ 2,708
Land held for investment 517 517
Cash and cash equivalents 396 403
Marketable securities, at fair value 1,869 ---
Deposits in escrow 299 ---
Notes receivable 451 317
Investments in affiliated partnerships 1,587 2,004
Investments in unaffiliated partnerships 3,742 ---
Investment in management contracts, net 1,817 ---
Other assets 511 84
--------- ---------
Total assets $ 11,189 $ 6,033
========= =========
Liabilities and Partners' Equity
Liabilities:
Notes payable $ 6,451 $ 2,200
Accounts payable and other liabilities 463 70
--------- ---------
Total liabilities 6,914 2,270
--------- ---------
Minority interest 410 ---
Partners' equity:
General partner 410 404
Limited partners, 2,900,032 and 2,910,899 units
outstanding at September 30, 1997 and
December 31, 1996, respectively 3,455 3,359
--------- ---------
Total partners' equity 3,865 3,763
--------- ---------
Total liabilities and partners' equity $ 11,189 $ 6,033
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 2 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
Consolidated Statements of Operations
(in thousands, except units outstanding and per unit amounts)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Rental income $ --- $ 153 $ 28 $ 538
Income from management contracts 366 --- 366 ---
Income from investments in
affiliated partnerships 185 167 557 329
Equity in earnings of investments
in partnerships 142 10 218 44
Gain on debt forgiveness --- 125 --- 125
Interest and other income 136 182 144 424
------- ------- ------- -------
Total revenue 829 637 1,313 1,460
------- ------- ------- -------
Expenses:
Operating, including $5 and $44 paid
to an affiliate during the nine months
ended September 30, 1997 and 1996,
respectively 273 122 379 423
General and administrative, including
$125 and $165 paid to an affiliate during
the nine months ended September 30,
1997 and 1996, respectively 344 72 535 226
Depreciation and amortization 30 18 31 73
Interest expense 129 127 272 362
Loss on sale of real estate --- --- 89 ---
------- ------- ------- -------
Total expenses 776 339 1,306 1,084
------- ------- ------- -------
Income from operations before
minority interest 53 298 7 376
Minority interest in net loss of
consolidated entity 74 --- 74 ---
------- ------- ------- -------
Net income $ 127 $ 298 $ 81 $ 376
======= ======= ======= =======
Net income per limited
partnership unit $ .04 $ .10 $ .03 $ .13
======= ======= ======= =======
Distributions per limited partnership
unit $ --- $ --- $ 0.10 $ ---
======= ======= ======= =======
</TABLE>
- continued -
Page 3 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
<TABLE>
<CAPTION>
Consolidated Statements of Operations - continued
(in thousands, except units outstanding and per unit amounts)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
----------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average number of limited
partnership units outstanding during
the period used to compute net income
and distributions per limited
partnership unit 2,901,081 2,910,899 2,907,626 2,944,868
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity
For the nine months ended September 30, 1997 and 1996
(in thousands)
(Unaudited)
Total
General Limited Partners'
Partner Partners Equity
-------- -------- --------
Balance at December 31, 1996 $ 404 $ 3,359 $ 3,763
Distributions (4) (291) (295)
Net income 2 79 81
Unrealized holding gain on marketable
securities 8 341 349
Redemption of units --- (33) (33)
-------- -------- --------
Balance at September 30, 1997 $ 410 $ 3,455 $ 3,865
======== ======== ========
Balance at December 31, 1995 $ 420 $ 4,188 $ 4,608
Net income 9 367 376
Distribution of receivables (8) (365) (373)
Redemption of units --- (127) (127)
-------- -------- --------
Balance at September 30, 1996 $ 421 $ 4,063 $ 4,484
======== ======== ========
See accompanying notes to consolidated financial statements.
Page 5 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Nine months ended
September 30,
1997 1996
------- -------
Cash flows from operating activities:
Net income $ 81 $ 376
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 31 73
Amortization of loan fees, included in interest expense 52 9
Minority interest in net loss 74 ---
Equity in earnings of affiliated partnerships (218) (44)
Gain from debt forgiveness --- (125)
Loss on sale of real estate 89 ---
Changes in certain assets and liabilities:
Deposits in escrow (299) ---
Notes receivable (134) ---
Other assets (241) 80
Accounts payable and other liabilities 393 211
------- -------
Net cash provided by (used for) operating activities (172) 580
------- -------
Cash flows from investing activities:
Net proceeds from sale of real estate 2,619 ---
Distributions from investments in affiliated partnership 962 76
Investments in affiliated partnership (444) (352)
Investments in unaffiliated partnerships (3,625) ---
Purchase of management contracts (1,847) ---
Purchase of marketable securities (1,520) ---
Additions to real estate investments --- (26)
Increase in notes receivable and other assets (239) (293)
------- -------
Net cash used for investing activities $(4,094) $ (595)
------- -------
- continued -
Page 6 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Consolidated Statements of Cash Flows - continued
(in thousands)
(Unaudited)
Nine months ended
September 30,
1997 1996
------- -------
Net cash flows from financing activities:
Proceeds from notes payable $ 7,824 $ 2,200
Minority interest in contributions 336 ---
Principal payments on notes payable (3,573) (2,213)
Distributions to partners (295) ---
Increase in amounts due to affiliates --- 235
Redemption of limited partnership units (33) (127)
------- -------
Net cash provided by financing activities 4,259 95
------- -------
Net increase (decrease) in cash and cash equivalents (7) 80
Cash and cash equivalents at beginning of period 403 812
------- -------
Cash and cash equivalents at end of period $ 396 $ 892
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 191 $ 357
======= =======
Supplemental disclosure of loss on sale of real estate:
Sales price $ 2,675 $ ---
Less:
Closing costs (56) ---
Basis in real estate sold (2,708) ---
------- -------
Loss on sale of real estate $ 89 $ ---
======= =======
See accompanying notes to consolidated financial statements.
Page 7 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 1. THE PARTNERSHIP AND SIGNIFICANT ACCOUNTING POLICIES
In the opinion of Glenborough Corporation, the managing general partner, the
accompanying unaudited consolidated financial statements contain all adjustments
(consisting of only normal accruals) necessary to present fairly the
consolidated financial position of Glenborough Partners, a California Limited
Partnership, at September 30, 1997 and December 31, 1996, and the related
consolidated statements of operations for the three and nine months ended
September 30, 1997 and 1996, and the consolidated statements of partners' equity
and cash flows for the nine months ended September 30, 1997 and 1996.
Consolidation - The accompanying consolidated financial statements include the
accounts of Glenborough Partners, a California Limited Partnership (the
"Partnership"), and its majority-owned partnerships GPA Ltd., GPA West, GPA Bond
(through September 24, 1996), and Resort Group LLC (commencing June 1, 1997).
All significant intercompany balances and transactions have been eliminated in
the consolidation.
Allocation of net income (loss) - Pursuant to the partnership agreements of
Glenborough Partners and GPA Ltd., the general partners held a 2.30% share of
the Partnership's net income or loss and distributions during the period ended
September 30, 1997. This percentage is derived from the general partners' 1%
direct interest in GPA Ltd. and a 1.30% indirect interest through their 1.31%
general partner interest in Glenborough Partners' 99% interest in GPA Ltd. As of
September 30, 1996, the general partners and the limited partners owned 2.27%
and 97.73% interests, respectively, in the consolidated operations of the
Partnership.
During the nine months ended September 30, 1997, the Partnership has repurchased
and canceled 10,867 limited partnership units ("Units") from its investors for
$33,000, which is a substantial discount from the estimated value of the Units.
As a result of this transaction, 2,900,032 Units remain outstanding as of
September 30, 1997.
Reclassifications - Certain items in the 1996 financial statements have been
reclassified to conform to the 1997 financial statement presentation.
Note 2. REFERENCE TO 1996 AUDITED FINANCIAL STATEMENTS
These unaudited financial statements should be read in conjunction with the
Notes to Consolidated Financial Statements included in the 1996 audited
financial statements.
Page 8 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 3. RELATED PARTY TRANSACTIONS
In accordance with the Limited Partnership and Property Management Agreements,
the Partnership shall pay Glenborough Corporation ("Glenborough") compensation
for services provided to the Partnership and management of the Partnership's
assets. All fees and reimbursable expenses paid to Glenborough and included in
the Partnership's operating expenses for the nine months ended September 30,
1997 and 1996 are as follows (in thousands):
Nine months ended
September 30,
1997 1996
------- -------
Property management fees $ 1 $ 28
Property management salaries (reimbursed) 4 16
---------- ---------
Total property management fees and salaries $ 5 $ 44
========== =========
The Partnership also reimburses Glenborough for expenses incurred for services
provided to the Partnership such as accounting, investor services, data
processing, legal and administrative services, and the actual costs of goods and
materials used on behalf of the Partnership. Glenborough was reimbursed $125,000
and $165,000 for such expenses during the nine months ended September 30, 1997
and 1996, respectively.
Note 4. MARKETABLE SECURITIES
In the second and third quarters of 1997, the Partnership purchased a total of
67,500 shares of Glenborough Realty Trust Incorporated ("GLB") common stock for
$1,520,000. GLB, an affiliate of the Partnership, is a real estate investment
trust and is publicly traded on the New York Stock Exchange. As of September 30,
1997, the Partnership's investment in marketable securities had an aggregate
market value of $1,869,000 (based on an approximate market price of $27.6875 per
share). Accordingly, the Partnership recognized an unrealized holding gain of
$349,000 on these marketable securities.
Page 9 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 5. INVESTMENT IN AFFILIATED PARTNERSHIPS
GLENBOROUGH PROPERTIES L.P.:
As of September 30, 1997, the Partnership owns 579,006 limited partnership units
in Glenborough Properties L.P. ("Properties"), the operating partnership of GLB.
Since the Partnership holds only a 2.95% ownership interest in Properties at
September 30, 1997, the Partnership accounts for this investment using the cost
method. As a result, the $557,000 of distributions received by the Partnership
during the nine months ended September 30, 1997 has been recognized as income on
the accompanying September 30, 1997 consolidated statement of operations.
As of September 30, 1997, Properties, directly and through various subsidiaries
in which it and GLB own 100% of the ownership interests, controls a total of 103
real estate projects and two mortgage loans receivable.
OUTLOOK INCOME/GROWTH FUND VIII:
During the nine months ended September 30, 1997, the Partnership purchased a
total of 1,865 limited partnership units in Outlook Income/Growth Fund VIII, a
California Limited Partnership ("Outlook VIII"), from unaffiliated limited
partners for $319,000. As of September 30, 1997, the Partnership owns a total of
2,796 limited partnership units (a 8.0% interest) in Outlook VIII and accounts
for this investment using the cost method.
At September 30, 1997, Outlook VIII owned a 50% interest in a 342-unit apartment
complex in Huntington Beach, California. This property was sold to an
unaffiliated third party on October 1, 1997. As a result, Outlook VIII made a
liquidating distribution on November 14, 1997 and the Partnership received
$1,324,000 for its share in Outlook VIII.
OUTLOOK INCOME FUND 9:
During the nine months ended September 30, 1997, the Partnership purchased a
total of 1,642,746 limited partnership units in Outlook Income Fund 9, a
California Limited Partnership ("Outlook 9"), from an unaffiliated limited
partner for $125,000. As of September 30, 1997, the Partnership owns a total of
1,642,746 limited partnership units (a 4.6% interest) in Outlook 9 and accounts
for this investment using the cost method.
Page 10 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
At September 30, 1997, Outlook 9 owned a 171,743 square foot business center in
Eden Prairie, Minnesota and a 139-suite hotel in Tempe, Arizona. As of November
4, 1997, both of these properties had been sold. As a result, it is expected
that Outlook 9 will be liquidated by December 31, 1997.
GRC AIRPORT ASSOCIATES:
The Partnership owns a 25% interest in GRC Airport Associates, a California
Limited Partnership ("GRC Airport"). The sole real estate asset of GRC Airport
Associates is a 216,000 square foot offsite airport parking facility in San
Bruno, California. The Partnership accounts for its investment in GRC Airport
using the equity method.
In the nine months ended September 30, 1997, the Partnership received cash
distributions from operations totaling $105,000, plus a return of capital
distribution of $500,000 from GRC Airport.
Summary condensed balance sheet information as of September 30, 1997, and the
condensed statement of operations for the nine months ended September 30, 1997,
are as follows (in thousands):
GRC Airport
Balance Sheet as of September 30, 1997
Investment in real estate, net $ 9,153
Cash and cash equivalents 359
Other assets 317
---------
Total assets $ 9,829
=========
Note payable $ 7,450
Other liabilities 247
---------
Total liabilities 7,697
Partners' equity 2,132
---------
Total liabilities and partners' equity $ 9,829
=========
Page 11 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
GRC Airport
Statement of Operations
For the nine months ended September 30, 1997
Revenue $ 1,320
Expenses 938
--------
Net income $ 382
========
The Partnership's share of GRC Airport's net income was $96,000 for the nine
months ended September 30, 1997.
Note 6. INVESTMENTS IN UNAFFILIATED PARTNERSHIPS
RANCON PARTNERSHIPS:
On various dates during the nine months ended September 30, 1997, the
Partnership purchased limited partnership units in the following unaffiliated
real estate partnerships:
Ownership Acquisition
Partnership Units % Price
----------- ----- ------ --------
Rancon Pacific Realty, LP 40,093 1.4% $120,279
Rancon Income Fund I 715 4.9% $214,500
Rancon Realty Fund I 3 * $ 150
Rancon Realty Fund IV 2,755 3.5% $635,034
Rancon Realty Fund V 2,665 2.7% $654,879
Note *: Less than 1%
The Partnership accounts for its investments in the Rancon partnerships using
the cost method.
Page 12 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
WINDSWEPT PORTFOLIO, LLC:
On July 31, 1997, the Partnership acquired a 50% non-controlling interest in
Windswept Portfolio, LLC ("Windswept"), a limited liability company for
$1,800,000. Windswept simultaneously entered into a management agreement with
Investors Management Trust Real Estate, Inc. ("IMT") where IMT is contracted to
acquire, manage and operate for Windswept, the following five
multifamily-residential projects in Houston, Texas:
1) Ashley Square, a 117-unit apartment complex
2) Hidden Pines, a 185-unit apartment complex
3) Shenandoah Woods, a 232-unit apartment complex
4) Southern Oaks, a 198-unit apartment complex
5) Unity Pointe, a 109-unit apartment complex.
The Partnership accounts for this investment using the equity method.
Summary condensed balance sheet information as of September 30, 1997, and the
condensed statement of operations from inception (July 31, 1997) through
September 30, 1997, are as follows (in thousands):
Windswept Portfolio, LLC
Balance Sheet as of September 30, 1997
Investments in real estate $ 14,632
Cash 930
Other assets 549
--------
Total assets $ 16,111
========
Notes payable $ 11,900
Other liabilities 367
--------
Total liabilities 12,267
Partners' equity 3,844
--------
Total liabilities and partners' equity $ 16,111
========
Page 13 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
Windswept Portfolio, LLC
Statement of Operations
From July 31, 1997 (inception) through September 30, 1997
Revenue $ 812
Expenses 568
--------
Net income $ 244
========
The Partnership's share of Windswept Portfolio's net income for the period from
July 31, 1997 (inception) through September 30, 1997 was $122,000.
On October 24, 1997, the Partnership received $18,000 for its first monthly
distribution from its investment in Windswept.
CHEESEBURGER IN PARADISE:
On August 25, 1997, the Partnership contributed $200,000 for a 10%
non-controlling interest in Cheeseburger In Paradise - Waikiki, a California
limited partnership ("CIP-Waikiki") which owns and operates a Cheeseburger In
Paradise restaurant on Waikiki Beach in Honolulu, Hawaii. The Partnership
accounts for this investment using the cost method.
RESORT GROUP LLC:
In 1997, the Partnership contributed $320,000 cash for an 80% interest in Resort
Group LLC, a Colorado limited liability company ("Resort"). Resort was formed to
invest $1,595,960 for an 80% interest in Mountain Resorts LLC, a Colorado
limited liability company ("Mountain Resorts") whose primary assets are
management contracts, primarily for various condominiums and townhouses in
Colorado. As a result, the Partnership consolidates its financial statements
with Resort (after Resort consolidates with Mountain Resorts) and recognizes its
joint venture partner's interest as minority interest.
The investments in Resort and Mountain Resorts had an effective date of June 1,
1997. Of the $1,595,960 invested by Resort, $380,000 was in cash and $1,215,960
was in the form of a promissory note to the seller of the management contracts,
accruing at a rate of 8.5% per annum and maturing August 1, 2002. The note
requires monthly principal and interest payments of $24,947.
Page 14 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
Concurrent with the Partnership's investment in Resort, the Partnership loaned
$80,000 to Anthony Van Baak, the 20% partner of Resort. This promissory note
accrues interest at the "Prime Rate" plus 1.5 percentage points (10.0% as of
September 30, 1997) and requires quarterly interest payments with the entire
principal due on February 28, 1998.
Note 7. INVESTMENT IN MANAGEMENT CONTRACTS
Investment in management contracts reflects the unamortized portion of the
management contracts Mountain Resorts holds with various condominium and
townhouse owners in Colorado.
Note 8. NOTES PAYABLE
In the first quarter of 1997, the Partnership paid down $700,000 on the
Mid-Peninsula Bank ("Mid-Pen") revolving line of credit from cash distributions
received from GRC Airport and the Partnership's cash reserves. Subsequent to
this pay down, the Partnership drew $2,180,000 on the line of credit to fund the
purchase of partnership units in various affiliated and unaffiliated real estate
partnerships and a $295,000 distribution to its partners (see Note 9). To
accomplish these transactions, the Partnership obtained an increase on its line
of credit from $3,400,000 to $5,000,000.
In the second quarter of 1997, the Partnership paid down the Mid-Pen line of
credit with the proceeds from the sale of Rosemead Springs (discussed below) and
subsequently drew a total of $740,000 on the Mid-Pen line of credit to fund: (i)
the purchase of 22,500 shares of GLB common stock; (ii) the purchase of
partnership units in various affiliated and unaffiliated real estate
partnerships; and (iii) short-term operating needs of the Partnership.
In the third quarter of 1997, the Mid-Pen line of credit matured and the
Partnership negotiated for an extension of the maturity date to September 8,
1998 and an increase on the line of credit from $5,000,000 to $6,500,000. During
this period, the Partnership drew an additional $3,200,000 from this line of
credit to fund: (i) the purchase of 40,000 additional shares in GLB; (ii) the
investment in Windswept; (iii) the investment in Resort; (iv) the loan to
Anthony Van Baak; (v) the repurchase of 5,517 outstanding limited partnership
units; and (vi) other operational costs.
Page 15 of 21
<PAGE>
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Consolidated Financial Statements
September 30, 1997
(Unaudited)
Note 9. DISTRIBUTIONS
On March 26, 1997, the Partnership made a $295,000 cash distribution to help
alleviate its partners' tax burden arising from their portion of the
undistributed 1996 taxable income of the Partnership.
Note 10. PROPERTY SALE
On April 18, 1997, the Partnership sold its Rosemead Springs property, a 129,500
square foot multi-tenant office building located in El Monte, California, to an
unaffiliated entity for total cash consideration of $2,675,000. The gross sale
proceeds were used to pay down the Partnership's line of credit with
Mid-Peninsula Bank. As of September 30, 1997, the Partnership owns 1.16 acres of
land which is held for investment.
Note 11. SUBSEQUENT EVENTS
On October 31, 1997, the Partnership made a non-refundable $500,000 deposit into
escrow for the lease and option to purchase real property in Burlingame,
California for $14,000,000. The escrow is not scheduled to close until July
1998. If the property is acquired, the Partnership plans to develop the site for
office use with the possible inclusion of a restaurant and hotel. The
acquisition is subject to a number of contingencies including satisfactory
completion of title and due diligence and customary closing conditions.
Accordingly, there can be no assurance that this property will be acquired.
On November 7, 1997, the Partnership received a third quarter distribution of
$185,000 from Properties for its 579,006 limited partnership units in
Properties.
On November 12, 1997, the Partnership received $22,500 for third quarter
dividends on its investment in GLB.
On November 14, 1997, the Partnership received $1,324,000 for its share of
Outlook VIII's liquidation distribution. The carrying value of the Partnership's
limited partnership units in Outlook VIII was $319,000 resulting in a gain on
liquidation of $1,005,000.
Page 16 of 21
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
INTRODUCTION
The following discussion addresses the Partnership's financial condition at
September 30, 1997 and its results of operations for the nine months ended
September 30, 1997 and 1996. This information should be read in conjunction with
the Partnership's audited December 31, 1996 Consolidated Financial Statements,
notes thereto and other information contained elsewhere in this report.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1997, the Partnership drew a total of
$6,120,000 on the Mid-Peninsula Bank ("Mid-Pen") revolving line of credit to
fund: (i) the purchases of limited partnership units in various affiliated and
unaffiliated real estate partnerships; (ii) the purchases of 67,500 shares of
common stock of Glenborough Realty Trust Incorporated ("GLB"), an affiliate of
the Partnership which is a publicly traded (New York Stock Exchange) real estate
investment trust; (iii) a $295,000 distribution to its partners to help
alleviate its partners' tax burden arising from their portion of the 1996
undistributed taxable income of the Partnership in 1996; (iv) the investment of
a 50% interest in Windswept Portfolio, LLC, a limited liability company formed
to own and operate five multi-family residential properties in Texas; (v) the
investment of an 80% interest in Resort Group, LLC, a limited liability company
formed to indirectly own various real estate management contracts; (vi) a
short-term loan to the Partnership's partner in the Resort Group, LLC; and (vii)
its short-term operating cash requirements. To facilitate these draws, the
Partnership obtained an increase in its Mid-Pen revolving line of credit from
$3,400,000 to $6,500,000. As of September 30, 1997, $1,817,000 remains available
on this line of credit.
During the nine months ended September 30, 1997, the Partnership received a
total of $1,161,985 of distributions from its investments in GRC Airport
Associates and Glenborough Properties L.P. ("Properties"), affiliated
partnerships.
On April 18, 1997, the Partnership sold its 129,500 square foot multi-tenant
office building located in El Monte, California (referred to as the Rosemead
Springs property) to an unaffiliated third party for $2,675,000. The net
proceeds from the sale were used to pay down a portion of the Partnership's
revolving line of credit with Mid-Pen.
As of September 30, 1997, the Partnership's cash and cash equivalent balance was
$396,000. The remainder of the Partnership's assets consisted primarily of its
investments in marketable securities, management contracts and various
affiliated and unaffiliated partnerships. The primary liability of the
Partnership was $4,683,000 due on the Mid-Pen revolving line of credit. As of
September 30, 1997, the only real estate directly owned by the Partnership is a
1.16-acre parcel of land, which is held for investment.
The $393,000 increase in accounts payable and other liabilities at September 30,
1997 compared to December 31, 1996 is largely a result of normal and ordinary
trade payables and deposits received for future rental use of the condominiums
and townhouses for which Mountain Resorts has management contracts.
Page 17 of 21
<PAGE>
Management believes that the Partnership's $396,000 cash and cash equivalent
balance at September 30, 1997, plus its available line of credit, distributions
from partnership investments and dividends from investments in marketable
securities, are sufficient to meet its operating cash requirements.
RESULTS OF OPERATIONS
Rental income decreased $510,000 or 95% and $153,000 or 100% during the nine and
three months ended September 30, 1997 compared to the nine and three months
ended September 30, 1996, respectively, due to the sales of the Bond Street
property, a multi-tenant office complex in Farmington Hills, Michigan on
September 24, 1996 and the Rosemead Springs property on April 18, 1997.
Income from management contracts represents the revenue earned by Mountain
Resorts for managing various condominiums and townhouses in Colorado
Income from investments in affiliated partnerships increased $228,000 or 69%
during the nine months ended September 30, 1997 over the nine months ended
September 30, 1996 as a result of the commencement of quarterly distributions
from Properties in April 1996. In addition, Properties increased the amount of
distribution per unit while the Partnership increased its investment in
Properties on September 24, 1996, resulting in an increase in distributions from
that investment.
Equity in earnings of investments in partnerships increased during the nine and
three months ended September 30, 1997 compared to the comparable periods in 1996
due to the investment in Windswept Portfolio, LLC as of July 31, 1997.
Interest and other income decreased $280,000 or 66% and $46,000 or 25% during
the nine and three months ended September 30, 1997 compared to the nine and
three months ended September 30, 1996, respectively, primarily due to the 1996
recognition of other income of: (i) a non-refundable deposit received from a
potential buyer of Rosemead Springs after the sale fell through in 1996; (ii)
prior year property tax refunds for Rosemead Springs in the second quarter of
1996; and (iii) a fee for the dissolution of a purchase/sale agreement paid by
the owner of a property which the Partnership was negotiating to acquire.
Decreases in operating expenses and depreciation and amortization during the
nine months ended September 30, 1997 compared to the nine months ended September
30, 1996 can directly be attributable to the sale of the Bond Street and
Rosemead Springs properties. The decreases have been partially offset by
increased operating and depreciation and amortization expenses for the three
months ended September 30, 1997 over the three months ended September 30, 1996
resulting from the consolidation of Resort Group, LLC.
General and administrative expenses increased by $309,000 and $272,000 during
the nine and three months ended September 30, 1997 compared to the same periods
ended September 30, 1996 due to the consolidation of the Resort Group, LLC,
commencing with the three months ended September 30, 1997.
Page 18 of 21
<PAGE>
Interest expense decreased by $90,000 or 25% during the nine months ended
September 30, 1997 compared to the nine months ended September 30, 1996 as a
result of the debt eliminated in connection with the Bond Street property sale
in 1996. The draws on the Mid-Pen revolving line of credit in 1997 account for a
large portion of the interest expense recognized in 1997.
Page 19 of 21
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
#27 - Financial Data Schedule
(b) Reports on Form 8-K.
Registrant filed a Current Report on Form 8-K, dated October 14,
1997, reporting that Glenborough Partners, A California Limited
Partnership (the Registrant), purchased on July 16, 1997 and July
17, 1997 a total of 40,000 shares of common stock in Glenborough
Realty Trust Incorporated ("GLB") for $909,370. GLB is an affiliate
of the Partnership.
Page 20 of 21
<PAGE>
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:
GLENBOROUGH PARTNERS,
A CALIFORNIA LIMITED PARTNERSHIP
By: /s/ Robert Batinovich By: Glenborough Corporation,
Robert Batinovich a California corporation,
General Partner its Managing General Partner
By: /s/ Terri Garnick
Terri Garnick
Chief Financial Officer
Date: November 14, 1997
Page 21 of 21
<PAGE>
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
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0
0
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