UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-17651
HIGH CASH PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3347257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue Greenwich, CT 06830
(Address of principal executive offices) (Zip Code)
(203) 862-7000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by checkmark 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 [ ]
<PAGE>
HIGH CASH PARTNERS, L.P.
FORM 10-Q - MARCH 31, 1996
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - March 31, 1996 and December 31, 1995
STATEMENTS OF OPERATIONS - For the three months ended
March 31, 1996 and 1995
STATEMENT OF PARTNERS' EQUITY - For the three months
ended March 31, 1996
STATEMENTS OF CASH FLOWS - For the three months ended
March 31, 1996 and 1995
NOTES TO FINANCIAL STATEMENTS
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
HIGH CASH PARTNERS, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Real estate, net of accumulated depreciation $ 22,763,102 $ 22,869,017
of $3,129,660 and $3,016,660
Cash and cash equivalents ................... 1,469,237 1,407,276
Tenant receivables .......................... 143,596 156,608
Other assets ................................ 119,142 117,583
Prepaid real estate taxes ................... 59,393 59,393
Prepaid insurance premiums .................. 75,160 42,357
------------ ------------
$ 24,629,630 $ 24,652,234
============ ============
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Mortgage loan payable ....................... $ 6,500,000 $ 6,500,000
Deferred interest payable ................... 7,928,041 7,530,719
Distributions payable ....................... 305,007 305,007
Accounts payable and accrued expenses ....... 81,971 90,330
Due to affiliates ........................... 159,344 80,870
Tenants' security deposits payable .......... 55,257 55,659
------------ ------------
Total liabilities ........................ 15,029,620 14,562,585
------------ ------------
Commitments and contingencies
Partners' equity
Limited partners' equity (96,472 units issued
and outstanding) ......................... 9,744,191 10,228,934
General partners' deficit ................... (144,181) (139,285)
------------ ------------
Total partners' equity ................... 9,600,010 10,089,649
------------ ------------
$ 24,629,630 $ 24,652,234
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
HIGH CASH PARTNERS, L.P.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1996 1995
--------- ---------
<S> <C> <C>
Revenues
Rental income ............................... $ 596,658 $ 618,836
Interest income ............................. 10,968 13,532
Other income ................................ 751 1,800
--------- ---------
608,377 634,168
--------- ---------
Costs and expenses
Mortgage loan interest ...................... 397,323 355,278
Operating expenses .......................... 144,829 148,967
Depreciation and amortization ............... 120,735 118,904
Partnership management fees ................. 75,369 75,369
General and administrative expenses ......... 36,463 43,849
Property management fees .................... 18,290 21,790
--------- ---------
793,009 764,157
--------- ---------
Net loss ......................................... $(184,632) $(129,989)
========= =========
Net loss attributable to
Limited partners ............................ $(182,786) $(128,689)
General partners ............................ (1,846) (1,300)
--------- ---------
$(184,632) $(129,989)
========= =========
Net loss per unit of limited partnership
interest (96,472 units outstanding) $ (1.89) $ (1.33)
========= =========
</TABLE>
See notes to financial statements.
<PAGE>
HIGH CASH PARTNERS, L.P.
STATEMENT OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
General Limited Total
Partners' Partners' Partners'
Deficit Equity Equity
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1996 .............. $ (139,285) $ 10,228,934 $ 10,089,649
Net loss for the three months ended
March 31, 1996 .................... (1,846) (182,786) (184,632)
Distributions to partners for the three
months ended March 31, 1996
($3.13 per limited partner unit) .. (3,050) (301,957) (305,007)
------------ ------------ ------------
Balance, March 31, 1996 ............... $ (144,181) $ 9,744,191 $ 9,600,010
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
HIGH CASH PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the three months ended
March 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net loss ......................................... $ (184,632) $ (129,989)
Adjustments to reconcile net loss to net cash
provided by operating activities
Deferred interest expense ..................... 397,322 355,278
Depreciation and amortization ................. 120,735 118,904
Straight-line adjustment for stepped
lease rentals ............................... -- (3,020)
Changes in assets and liabilities
Tenant receivables .............................. 13,012 (6,057)
Other assets .................................... (9,294) (4,017)
Prepaid insurance premiums ...................... (32,803) (18,632)
Accounts payable and accrued expenses ........... (8,359) 11,794
Due to affiliates ............................... 78,474 (6,442)
Tenants' security deposits payable .............. (402) 699
Unearned escalation revenue ..................... -- 112,500
----------- -----------
Net cash provided by operating activities ..... 374,053 431,018
----------- -----------
Cash flows from investing activities
Additions to real estate ........................ (7,085) --
----------- -----------
Cash flows from financing activities
Distributions to partners ....................... (305,007) (303,058)
----------- -----------
Net increase in cash and cash equivalents ........ 61,961 127,960
Cash and cash equivalents, beginning of period ... 1,407,276 1,242,933
----------- -----------
Cash and cash equivalents, end of period ......... $ 1,469,237 $ 1,370,893
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
1 INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management, all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation of such
financial information have been included. The accompanying financial
statements, footnotes and discussion should be read in conjunction with
the financial statements, related footnotes and discussions contained
in the High Cash Partners, L.P. (the "Partnership") annual report on
Form 10-K for the year ended December 31, 1995. The results of
operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Leases
The Partnership accounts for its leases under the operating method.
Under this method, revenue is recognized as rentals become due, except
for stepped leases where revenue is averaged over the life of the
lease.
Depreciation
Depreciation is computed using the straight-line method over the useful
life of the property, which is estimated to be 40 years. The cost of
the property represents the initial cost of the property to the
Partnership plus acquisition and closing costs. Repairs and maintenance
are charged to operations as incurred.
Impairment of assets
In March 1995, the Financial Accounting Standards Board issued
Statement #121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of" ("SFAS #121"). The adoption of
the statement was required for fiscal years beginning after December
15, 1995. The Partnership implemented SFAS #121 beginning January 1,
1996. The implementation of SFAS #121 did not result in a write-down of
the Partnership's assets.
Under SFAS #121 the initial test to determine if an impairment exists
is to compute the recoverability of the asset based on anticipated cash
flows (net realizable value) compared to the net carrying value of the
asset. If anticipated cash flows on an undiscounted basis are
insufficient to recover the net carrying value of the asset, an
impairment loss should be recognized, and the asset written down to its
estimated fair value. The fair value of the asset is the amount by
which the asset could be bought or sold in a current transaction
between willing parties, that is, other than in a forced or liquidation
sale. The net realizable value of an asset will generally be greater
than its fair value because net realizable value does not discount cash
flows to present value and discounting is usually one of the
assumptions used in determining fair value. The write-downs for
impairment do not affect the tax basis of the assets and the
write-downs are not included in the determination of taxable income or
loss.
<PAGE>
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of assets (continued)
Because the determination of both net realizable value and fair value
is based upon projections of future economic events such as property
occupancy rates, rental rates, operating cost inflation and market
capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net
carrying value as of March 31, 1996. The cash flows used to determine
fair value and net realizable value are based on good faith estimates
and assumptions developed by management. Inevitably, unanticipated
events and circumstances may occur and some assumptions may not
materialize; therefore actual results may vary from our estimate and
the variances may be material. The Partnership may provide additional
losses in subsequent years if the real estate market or local economic
conditions change and such write-downs could be material.
A write-down for impairment was not required for the three months ended
March 31, 1996 and 1995.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Managing General Partner of the Partnership, Resources High Cash,
Inc., was until November 3, 1994, a wholly-owned subsidiary of
Integrated, at which time, pursuant to the consummation of Integrated's
Plan of Reorganization, substantially all the assets of Integrated, but
not the stock of the Managing General Partner, were sold to Presidio
Capital Corp. ("Presidio"). Presidio is also the parent of other
corporations that are, or may be in the future, engaged in businesses
that may be in competition with the Partnership. Accordingly, conflicts
of interest may arise between the Partnership and such other
businesses. Wexford Management LLC performs management and
administrative services to Presidio, XRC Corp. and its direct and
indirect subsidiaries as well as the Partnership. During the three
months ended March 31, 1996, reimbursable expenses to Wexford by the
Partnership amounted to $20,000. Wexford Management LLC performs
similar services for other entities which may be in competition with
the Partnership.
Subject to the rights of the Limited Partners under the Limited
Partnership Agreement, XRC will control the Partnership through its
ownership of the shares of the Managing General Partner and, as of
February 28, 1995, the Associate General Partner. XRC is managed by
Presidio Management Company, LLC ("Presidio Management"), a company
controlled by a director of Presidio and XRC. Presidio Management is
responsible for the day to day management of XRC and, among other
things, has authority to designate directors of the Managing General
Partner. In March 1996, Presidio Management assigned its agreement for
the day-to-day management of XRC to Wexford.
XRC has elected new directors for the Managing General Partner and
Resources Supervisory. However, certain executives remain the same and
certain of Integrated's former employees who performed services for the
Partnership are now employees of Wexford, which provides administrative
services to XRC and the Partnership.
<PAGE>
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
Affiliates of the General Partners are also engaged in businesses
related to the acquisition and operation of real estate. An affiliated
partnership, Resources Accrued Mortgage Investors 2 L.P. ("RAM 2"),
whose managing general partner is also owned by Presidio, made a zero
coupon first mortgage loan to the Partnership and conflicts of interest
could arise with respect to such loan.
The Partnership has entered into a supervisory management agreement
with Resources Supervisory Management Corp. ("Resources Supervisory"),
an affiliate of the Managing General Partner, to perform certain
functions related to the management of the property. A portion of the
property management fees payable to Resources Supervisory were paid to
an unaffiliated management company which was engaged for the purpose of
performing the management functions for certain properties. For the
quarters ended March 31, 1996 and 1995, Resources Supervisory was
entitled to receive $18,290 and $21,790, respectively, of which $15,185
and $17,106, respectively, was paid to the unaffiliated management
company. No leasing activity compensation was paid to Resources
Supervisory in the quarter ended March 31, 1996 or 1995. Current fees
of $3,105 were payable to Resources Supervisory at March 31, 1996,
which were paid in the subsequent quarter.
For managing the affairs of the Partnership, the Managing General
Partner is entitled to receive a partnership management fee in an
annual amount equal to a percentage of the gross offering proceeds as
follows: 1/8% until the third anniversary date of the offering; 1%
until the sixth anniversary and 1.25% thereafter. For the quarters
ended March 31, 1996 and 1995, the Managing General Partner was
entitled to a partnership management fee of $75,369. Current fees of
$75,369 were payable to the Managing General Partner at March 31, 1996,
which were paid in the subsequent quarter.
The general partners are allocated 1% of the net income or losses of
the Partnership which amounted to losses of $1,846 and $1,300 in the
quarters ended March 31, 1996 and 1995, respectively. They are also
entitled to receive 1% of distributions which amounted to $3,050 in the
quarters ended March 31, 1996 and 1995.
Effective April 1, 1991, Integrated purchased, in an arms-length
transaction from an unaffiliated third party, 8,361 limited partnership
units. Effective January 1, 1995 pursuant to the consummation of
Integrated's Plan of Reorganization, these units were transferred to
XRC Corp.
<PAGE>
4 DISTRIBUTIONS PAYABLE
Distributions payable are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-------- --------
<S> <C> <C>
Limited partners $301,957 $301,957
General partners 3,050 3,050
-------- --------
$305,007 $305,007
======== ========
</TABLE>
Such distributions were paid during May 1996 and February 1996,
respectively.
5 DUE TO AFFILIATES
The amounts due to affiliates are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
-------- -------
<S> <C> <C>
Partnership Management Fee $150,738 $75,369
Supervisory Management Fee 8,606 5,501
-------- -------
$159,344 $80,870
======== =======
</TABLE>
Such amounts were paid during May 1996.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership's sole property is a community shopping center located
in Reno, Nevada containing approximately 233,000 square feet of net
rentable area. The Partnership's public offering commenced on June 29,
1988 and, as of its termination on June 29, 1990, had accepted
subscriptions for 77,891 Units (not including Units held by the initial
limited partner) for aggregate proceeds of $17,282,066 (gross proceeds
of $19,472,750 less organization and offering costs aggregating
$2,190,684). The Partnership committed 100% of its net proceeds
available for investment to the Sierra Marketplace acquisition. In
addition, pursuant to a settlement agreement, on December 19, 1990 the
Partnership settled all claims with respect to its Short-Term Loans. As
a part of this transaction, the Partnership sold 18,571 unregistered
units to Integrated for aggregate net proceeds of $4,120,441 (gross
proceeds of $4,642,750 less organization and offering costs aggregating
$522,309) who in turn, sold these units to the Partnership's three bank
creditors. On February 4, 1991, Integrated purchased all of the 8,361
units owned by one of the banks. This transfer became effective on
April 1, 1991. Effective January 1, 1995, pursuant to the consummation
of Integrated's bankruptcy, these units were transferred to XRC Corp.
The Partnership uses working capital reserves set aside from the net
proceeds of its public offering and undistributed cash flow from
operations as its primary measure of liquidity. The Partnership's
working capital reserves initially consisted of 5% of the gross
proceeds from its public offering that were set aside. As of March 31,
1996, working capital reserves are $1,245,381 which may be used to fund
capital expenditures, insurance, real estate taxes, and distributions
to partners. All expenditures made during the quarter ended March 31,
1996 were funded from cash flow from operations.
For the quarter ended March 31, 1996, the Partnership declared a
distribution of cash flow from operations to Partners which was
consistent with the prior year's quarterly distributions representing a
5% annualized return on the Limited Partners' original investment. The
distribution was paid subsequent to March 31, 1996. Future
distributions will depend upon results from operations. Although there
are three tenants that each accounted for more than 10% of the total
rental revenues of Sierra Marketplace, none of their leases are due to
expire before the year 2003 and the Partnership is not aware of any
significant problems with respect to these three tenants. The
Partnership intends in the future to distribute less than all of its
cash flow from operations, when appropriate, to maintain adequate
reserves for capital improvements and capitalized lease procurement
costs. Thus, cash distributions might be reduced even if operations
continue at the current level.
To the extent that adjusted cash from operations during the operating
years exceeds 11% per annum, noncumulative, of original contributions
of the offering, such excess may be retained in a separate reserve
account to prepay a portion of the Resources Accrued Mortgage Investors
2 L.P. (the "RAM2") loan obligations. However, it is unlikely that
adjusted cash flow will exceed such a threshold in the near future.
<PAGE>
The Managing General Partner believes that cash flow from operations
combined with current working capital reserves will be sufficient to
fund future essential capital expenditures as well as future
distributions. A significant portion of capital expenditures consists
of capitalized lease procurement costs. Since the level of leasing
activity cannot be predicted with any degree of certainty, the
Partnership cannot accurately estimate capital expenditures for the
remainder of the year, but believes that its existing reserves will be
sufficient. However, the Partnership may not have sufficient liquidity
to make the payments which may be required under the terms of the RAM 2
loan in certain circumstances.
Real estate market
The real estate market continues to suffer from the effects of the
recent recession which included a substantial decline in the market
value of existing properties. Furthermore, the competition for
non-anchor tenants is strong among existing centers in the Sierra
Marketplace vicinity. This has hindered the lease up of difficult back
space in Sierra Market Place. These factors may continue to reduce
rental rates. As a result, the Partnership's potential for realizing
the full value of its investment in its property is at increased risk.
Impairment of assets
In March 1995, the Financial Accounting Standards Board issued
Statement #121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of" ("SFAS #121"). The adoption of
the statement was required for fiscal years beginning after December
15, 1995. The Partnership implemented SFAS #121 beginning January 1,
1996. The implementation of SFAS #121 did not result in a write-down of
the Partnership's assets.
Under SFAS #121 the initial test to determine if an impairment exists
is to compute the recoverability of the asset based on anticipated cash
flows (net realizable value) compared to the net carrying value of the
asset. If anticipated cash flows on an undiscounted basis are
insufficient to recover the net carrying value of the asset, an
impairment loss should be recognized, and the asset written down to its
estimated fair value. The fair value of the asset is the amount by
which the asset could be bought or sold in a current transaction
between willing parties, that is, other than in a forced or liquidation
sale. The net realizable value of an asset will generally be greater
than its fair value because net realizable value does not discount cash
flows to present value and discounting is usually one of the
assumptions used in determining fair value. The write-downs for
impairment do not affect the tax basis of the assets and the
write-downs are not included in the determination of taxable income or
loss.
<PAGE>
Because the determination of both net realizable value and fair value
is based upon projections of future economic events such as property
occupancy rates, rental rates, operating cost inflation and market
capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net
carrying value as of March 31, 1996. The cash flows used to determine
fair value and net realizable value are based on good faith estimates
and assumptions developed by management. Inevitably, unanticipated
events and circumstances may occur and some assumptions may not
materialize; therefore actual results may vary from our estimate and
the variances may be material. The Partnership may provide additional
losses in subsequent years if the real estate market or local economic
conditions change and such write-downs could be material.
A write-down for impairment was not required for the three months ended
March 31, 1996 and 1995.
Results of operations
The net loss for the quarter ended March 31, 1996 increased when
compared to the net loss for the quarter ended March 31, 1995 due to a
decrease in revenues and an increase in expenses.
Revenues decreased for the quarter ended March 31, 1996 versus March
31, 1995 due to decreases in all categories. Rental income decreased as
a result of slightly lower occupancy rates in the first quarter of 1996
compared to the first quarter of 1995. Interest income decreased
primarily as a result of decreased interest rates. Other income
decreased as there was less transfer fee income earned for the quarter
ended March 31, 1996 compared to the quarter ended March 31, 1995.
Costs and expenses increased overall for the three months ended March
31, 1996 compared to the three months ended March 31, 1995 primarily
due to the increase in mortgage interest expense only partially offset
by decreases in operating expenses, property management fees, and
general and administrative expenses. Mortgage interest expense
increased as a result of the compounding effect due to the deferral of
interest expense on the zero coupon mortgage. Operating expenses and
property management fees decreased as a result of the decrease in
operating revenue. General and administrative expenses decreased during
the quarter ended March 31, 1996 compared to the quarter ended March
31, 1995 as a result of a decrease in payroll costs.
Inflation
Inflation has not had a material impact on the Partnership's operations
or financial condition during the last three years and is not expected
to have a material impact in the future.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
<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.
HIGH CASH PARTNERS, L.P.
By: Resources High Cash, Inc.
Managing General Partner
Dated: May 15, 1996 By: /s/ Frederick Simon
-------------------
Frederick Simon
President
(Duly Authorized Officer)
Dated: May 15, 1996 By: /s/ Jay L. Maymudes
-------------------
Jay L. Maymudes
Vice President
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF THE MARCH 31, 1996 FORM 10Q OF HIGH CASH PARTNERS, L.P. AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,469,237
<SECURITIES> 0
<RECEIVABLES> 143,596
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,612,833
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,629,630
<CURRENT-LIABILITIES> 601,579
<BONDS> 14,428,041
0
0
<COMMON> 0
<OTHER-SE> 9,600,010
<TOTAL-LIABILITY-AND-EQUITY> 24,629,630
<SALES> 0
<TOTAL-REVENUES> 608,377
<CGS> 0
<TOTAL-COSTS> 274,951
<OTHER-EXPENSES> 120,735
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 397,323
<INCOME-PRETAX> (184,632)
<INCOME-TAX> 0
<INCOME-CONTINUING> (184,632)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (184,632)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
