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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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.)
High Cash Partners, L.P.
c/o Colliers International
5310 Kietzke Lane, Suite
Reno, Nevada 89511
(Address of principal executive offices)
(212) 350-9900
(Registrant's telephone number, including area code)
None
(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
------ ------
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<PAGE>
HIGH CASH PARTNERS, L.P.
FORM 10-Q - SEPTEMBER 30, 2000
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - September 30, 2000 and December 31, 1999............1
STATEMENTS OF OPERATIONS - For the three and nine months ended
September 30, 2000 and 1999......................................2
STATEMENT OF PARTNERS' DEFICIT - For the nine months ended
September 30, 2000...............................................3
STATEMENTS OF CASH FLOWS - For the nine months ended
September 30, 2000 and 1999......................................4
NOTES TO FINANCIAL STATEMENTS........................................5
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..............................7
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K................................10
SIGNATURES....................................................................11
<PAGE>
PART I - FINANCIAL INFORMATION
This report contains statements that constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Those statements appear in a number of places herein and include statements
regarding the intent, belief or current expectations of the Partnership,
primarily with respect to the future operating performance of the Partnership or
related developments. Any such forward-looking statements are not guarantees of
future performance and involve risks and uncertainties, and actual results and
developments may differ from those described in the forward-looking statements
as a result of various factors, many of which are beyond the control of the
Partnership.
ITEM 1 - FINANCIAL STATEMENTS
HIGH CASH PARTNERS, L.P.
BALANCE SHEETS
September 30,
2000 December 31, 1999
(unaudited) 1999
---------------- -----------------
ASSETS
Real estate, net $ 14,802,322 $ 15,040,394
Cash and cash equivalents 687,291 957,503
Tenant receivables, net 66,358 66,632
Other assets 84,920 99,967
Prepaid insurance premiums 45,196 28,136
---------------- -----------------
$ 15,686,087 $ 16,192,632
================ =================
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgage loan payable $ 6,500,000 $ 6,500,000
Deferred interest payable 17,344,249 15,435,131
Accounts payable and accrued expenses 41,352 69,681
Due to affiliates -- 1,542
Tenants' security deposits payable 68,129 68,867
---------------- -----------------
23,953,730 22,075,221
Commitments and contingencies
Partners' deficit
Limited partners' deficit (96,472
units issued and outstanding) (8,184,964) (5,823,761)
General partners' deficit (82,679) (58,828)
---------------- -----------------
Total partners' deficit (8,267,643) (5,882,589)
---------------- -----------------
$ 15,686,087 $ 16,192,632
================ =================
See notes to financial statements
<PAGE>
HIGH CASH PARTNERS, L.P.
STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
------------------------------------ ------------------------------------
2000 1999 2000 1999
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Revenues
Rental income $ 648,353 $ 632,781 $ 1,955,768 $ 1,811,943
Interest income 7,652 10,760 22,802 79,722
Other income -- 186 -- 10,926
--------------- --------------- --------------- ---------------
656,005 643,727 1,978,570 1,902,591
--------------- --------------- --------------- ---------------
Costs and expenses
Mortgage loan interest 656,516 587,143 1,909,118 1,707,385
Operating 121,285 118,337 366,567 383,275
Depreciation and amortization 91,071 90,169 269,965 270,507
Partnership management fees 75,369 75,369 226,107 226,107
Property management fees 18,179 17,168 58,653 52,752
Administrative 36,273 22,958 83,211 76,168
--------------- --------------- --------------- ---------------
998,693 911,144 2,913,621 2,716,194
--------------- --------------- --------------- ---------------
Net loss $ (342,688) $ (267,417) $ (935,051) $ (813,603)
=============== =============== =============== ===============
Net loss attributable to
Limited partners $ (339,261) $ (264,743) $ (925,700) $ (805,467)
General partners (3,427) (2,674) (9,351) (8,136)
--------------- --------------- --------------- -----------------
$ (342,688) $ (267,417) $ (935,051) $ (813,603)
=============== =============== =============== ===============
Net loss per unit of limited
partnership interest (96,472 units
outstanding) $ (3.52) $ (2.74) $ (9.60) $ (8.35)
--------------- --------------- --------------- -----------------
</TABLE>
See notes to financial statements.
2
<PAGE>
HIGH CASH PARTNERS, L.P.
STATEMENT OF PARTNERS' DEFICIT
(unaudited)
<TABLE>
<CAPTION>
General Partners' Limited Partners' Total Partners'
Deficit Deficit Deficit
----------------- ----------------- ----------------
<S> <C> <C> <C>
Balance, January 1, 2000 $ (58,828) $ (5,823,761) $ (5,882,589)
Net loss for the nine months
ended September 30, 2000 (9,351) (925,700) (935,051)
Distributions to partners (14,500) (1,435,503) (1,450,003)
----------------- ----------------- ----------------
Balance, September 30, 2000 $ (82,679) $ (8,184,964) $ (8,267,643)
================= ================= ================
</TABLE>
3
See notes to financial statements.
<PAGE>
HIGH CASH PARTNERS, L.P.
STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
--------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities
Net loss $ (935,051) $ (813,603)
Adjustments to reconcile net loss to net
cash provided by operating
Deferred interest expense 1,909,118 1,707,385
Depreciation and amortization 269,965 270,507
Changes in operating assets and liabilities
Tenant receivables 274 (34,126)
Other assets (16,846) (13,465)
Prepaid insurance premiums (17,060) 26,444
Accounts payable and accrued expenses (28,329) (17,194)
Due to affiliates (1,542) 2,861
Tenants' security deposits payable (738) 10,000
-------------- --------------
Net cash provided by operating activities 1,179,791 1,138,809
-------------- --------------
Cash flows from financing activities
Distributions to partners (1,450,003) (4,100,000)
-------------- --------------
Net decrease in cash and cash equivalents (270,212) (2,961,191)
Cash and cash equivalents, beginning of period 957,503 4,270,688
-------------- --------------
Cash and cash equivalents, end of period $ 687,291 $ 1,309,497
============== ==============
</TABLE>
See notes to financial statements.
4
<PAGE>
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
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 discussions 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, 1999. The results of operations for the
nine months ended September 30, 2000 are not necessarily indicative of the
results to be expected for the full year.
2. CHANGE IN GENERAL PARTNER OWNERSHIP, CONFLICTS OF INTEREST AND TRANSACTIONS
WITH RELATED PARTIES
On June 13, 1997, Resources High Cash, Inc. ("RHC") and Presidio AGP Corp.
("AGP") sold their general partnership interests in the Partnership to
Pembroke HCP LLC ("Pembroke HCP") and Pembroke AGP Corp. ("Pembroke AGP"),
respectively. In the same transaction, XRC Corp., the parent company of
RHC, sold its 8,361 Units to Pembroke Capital II, LLC, an affiliate of
Pembroke HCP and Pembroke AGP. Subsequently, Pembroke Capital II LLC
acquired beneficial ownership of an aggregate of an additional 5,807 Units
in the secondary market.
Prior to the sale of the general partnership interest in the Partnership to
Pembroke HCP and Pembroke AGP, Wexford Management LLC had performed
management and administrative services for Presidio, XRC and XRC's direct
and indirect subsidiaries, as well as for the Partnership. Following the
sale, an affiliate of Pembroke HCP was engaged to perform administrative
services for the Partnership. During the quarters ended September 30, 2000
and 1999, $12,000 and $12,000, respectively, in reimbursable payroll
expenses were paid to the affiliate of Pembroke HCP for services performed
during the quarter.
The Partnership had been a party to a supervisory management agreement with
Resources Supervisory Management Corp. ("Resources Supervisory"), an
affiliate of RHC and AGP, pursuant to which Resources Supervisory performed
certain property management functions. Resources Supervisory performed such
services through June 13, 1997. Effective June 13, 1997, the Partnership
terminated this agreement and entered into a similar agreement with
Pembroke Realty Management LLC ("Pembroke Realty"), an affiliate of
Pembroke HCP and Pembroke AGP. A portion of the property management fees
payable to Resources Supervisory and Pembroke Realty was paid to an
unaffiliated local management company, which had been engaged for the
purpose of performing the local property management functions. For the
quarters ended September 30, 2000 and 1999, Pembroke Realty was entitled to
receive $18,179 and
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$17,168, respectively, of which $13,634 and $14,307, respectively, was
payable to unaffiliated management companies. No leasing activity
compensation was paid to Pembroke Realty for the quarters ended September
30, 2000 or 1999.
For managing the affairs of the Partnership, the Managing General Partner
is entitled to an annual partnership management fee equal to $301,475. For
each of the quarters ended September 30, 2000 and 1999, the Managing
General Partner was entitled to a partnership management fee of $75,369.
The general partners are allocated 1% of the net income or losses of the
Partnership, which amounted to losses of $3,427 and $2,674 in the quarters
ended September 30, 2000 and 1999, respectively. They also are entitled to
receive 1% of distributions.
3. REAL ESTATE
Real estate, which is the Partnership's sole asset, is summarized as
follows:
September 30, 2000
(unaudited) December 31, 1999
-------------------- ------------------
Land $ 6,667,189 $ 6,667,189
Building and improvements 12,940,226 12,940,226
19,607,415 19,607,415
Accumulated depreciation (4,805,093) (4,567,021)
-------------------- ------------------
$ 14,802,322 $ 15,040,394
==================== ==================
The land, building and improvements that comprise the Partnership's sole
asset are collateralized by a mortgage loan payable.
4. DUE TO AFFILIATES
The amounts due to affiliates are as follows:
September 30, 2000
(unaudited) December 31, 1999
-------------------- ------------------
Supervisory Management Fee $ -- $ 1,542
==================== ==================
5. DISTRIBUTIONS
In January 2000, the Partnership declared and paid a cash distribution of
approximately $700,000 in the aggregate, or $7.18 per Unit, to Unitholders
of record on January 1, 2000. In May 2000, the Partnership declared and
paid a cash distribution of approximately $750,000 in the aggregate, or
$7.70 per Unit, to Unitholders of record on May 30, 2000.
6
<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 leasable
area.
The Partnership uses working capital reserves and undistributed cash flow
from operations as its primary measure of liquidity. As of September 30,
2000, working capital reserves amounted to approximately $757,000, which
may be used to fund capital expenditures, insurance, real estate taxes and
loan payments. All expenditures made during the quarter ended September 30,
2000 were funded from operations.
At September 30, 2000, the total amount outstanding on the Partnership's
mortgage loan payable to Resources Accrued Mortgage Investors 2 L.P. ("RAM
2") was $23,844,249, which included deferred interest payable of
$17,344,249. The mortgage did not permit a prepayment before March 1, 1999,
and, therefore, the Partnership was not able to refinance the mortgage
before that date. The mortgage loan matures on February 28, 2001. At that
time, the total amount outstanding on the mortgage loan is expected to be
approximately $25,000,000. The Partnership does not presently have
sufficient funds to repay the mortgage loan. If the value of the property
at that time does not exceed $25,000,000, the Partnership may lose its
entire investment in the property. At present, the Partnership believes
that, unless conditions change materially, the value of the Property at
February 28, 2001 will be significantly less than $25,000,000.
The mortgage further requires the Partnership to provide RAM 2 with a
current appraisal of the Partnership's property upon RAM 2's request. If it
is determined, based upon the requested appraisal, that the sum of (i) the
principal balance of the mortgage loan plus all other then outstanding
indebtedness secured by the property and (ii) all accrued and unpaid
interest on the mortgage at 6.22% per annum, compounded monthly (that sum,
the "Measurement Amount"), exceeds 85% of the appraised value, an amount
equal to such excess would become immediately due and payable to RAM 2.
To date, RAM 2 has not requested an appraisal. There can be no assurance
that, if RAM 2 requests an appraisal, 85% of the appraised value will equal
the Measurement Amount. At September 30, 2000, the Measurement Amount was
approximately $13,381,000, which was approximately $113,000 less than 85%
of the $15,875,000 value to which the Property was written down in the
first quarter of 1997. As interest on the mortgage accrues, the Measurement
Amount will increase, and, therefore, unless the value of the Property is
appraised at a value greater than its carrying value, the Measurement
Amount will exceed 85% of the appraised value of the Property during the
fourth quarter of 2000.
Management has entered into negotiations with RAM 2 concerning a possible
extension of the maturity date of the loan, and additionally, continues to
evaluate its alternatives with respect to this loan. Such alternatives are
limited due to the fact that the principal and deferred interest on the
mortgage loan significantly exceeds the fair market value of the Property.
There can be no assurance that the Partnership will be successful in
extending the maturity date of the mortgage loan or in pursuing any of its
alternatives. If the Partnership is not successful in pursuing any of its
alternatives, the Partnership will
7
<PAGE>
likely lose its entire interest in the
Property. The Partnership's financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Until November 1997, Levitz Furniture Corporation ("Levitz") had occupied
approximately 23% of the space of the Partnership's property (i.e.,
approximately 53,000 out of approximately 233,000 square feet of net
leasable area). In November 1997, Levitz, which had filed for protection
under Chapter 11 of the Bankruptcy Code, vacated its space. Levitz ceased
paying rent to the Partnership as of April 2, 1998.
The vacancy at the Levitz space has resulted in a loss of income to the
Partnership. The vacancy at the Levitz space, as well as a vacancy in an
additional, significant space previously occupied by Good Guys, also may
have adversely affected the surrounding tenants and the Partnership's
ability to attract new tenants, particularly in light of the limited
visibility those tenants have to the main thoroughfare. See "Real Estate
Market" below. The Partnership is actively seeking a long-term,
creditworthy substitute tenant. However, there can be no assurance the
Partnership will succeed in finding a long-term, creditworthy substitute
tenant promptly or on terms comparable to those under the Levitz lease. In
addition, if a substitute tenant is obtained, the Partnership would be
required to make substantial expenditures in order to secure the substitute
tenant and in connection with a new lease.
During 1999, the Partnership entered into a short-term lease for the Levitz
space with a then existing tenant at an annual rent materially less than
under the Levitz lease. The Partnership has the right to terminate this
lease upon written notice, in the event the Partnership secures a
long-term, creditworthy tenant for the space.
The level of leasing activity cannot be predicted, particularly in light of
the Levitz and Good Guys situations, and, therefore, the amount of further
capital expenditures arising from leasing activity is uncertain. There can
be no assurance the Partnership will have sufficient liquidity both to make
such capital expenditures, and to make the payments that may be required
under the terms of the mortgage loan. If there is a default on the mortgage
loan, the Partnership would be materially and adversely affected.
In January 2000, the Partnership declared and paid a cash distribution of
approximately $700,000 in the aggregate, or $7.18 per Unit, to Unitholders
of record on January 1, 2000. In May 2000, the Partnership declared and
paid a cash distribution of approximately $750,000 in the aggregate, or
$7.70 per Unit, to Unitholders of record on May 30, 2000.
Real Estate Market
A substantial decline in the market value of the Partnership's property
reflects real estate market conditions in the vicinity of the property.
Recently built shopping centers in the vicinity have increased competition
for tenants. This competitive factor, together with the fact that much of
the unleased space in the Partnership's property (including the Levitz
space) has only limited visibility to the main thoroughfare and the fact
that the space previously occupied by Good Guys is vacant and is being
marketed for sublet by Good Guys, have hindered the lease-up of new space.
As a result, the Partnership's investment in its property is at risk.
Inflation
8
<PAGE>
Inflation has not had a material impact on the Partnership's operations or
financial condition in recent years and is not expected to have a material
impact in the foreseeable future.
Results of Operations
Three Months Ended September 30, 2000 Compared to Three Months Ended
September 30, 1999
The Partnership realized a net loss of $342,688 ($3.52 per Unit) for the
three months ended September 30, 2000 compared to a net loss of $267,417
($2.74 per Unit) for the corresponding 1999 period, an increased loss of
$75,271. The increased loss was primarily a result of an increase in
mortgage loan interest expense.
Revenues increased from 1999 to 2000 due to increases in base rentals,
primarily due to the signing of new leases.
Costs and expenses increased from 1999 to 2000 primarily due to an increase
in mortgage loan interest expense.
Mortgage loan interest expense increased due to the compounding effect from
the deferral of the interest expense on the zero coupon mortgage.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended
September 30, 1999
The Partnership realized a net loss of $935,051 ($9.60 per Unit) for the
nine months ended September 30, 2000 compared to a net loss of $813,603
($8.35 per Unit) for the corresponding 1999 period, an increased loss of
$121,448. The increased loss was primarily a result of an increase in
mortgage loan interest expense, partially offset by an increase in rental
income.
Revenues increased from 1999 to 2000 due to increases in base rentals,
primarily due to the signing of new leases. The increase in rental income
was partially offset by a decrease in interest income due to the
distributions made by the Partnership.
Costs and expenses increased from 1999 to 2000 primarily due to an increase
in mortgage loan interest expense, partially offset by decreases in
operating expenses.
Mortgage loan interest expense increased due to the compounding effect from
the deferral of the interest expense on the zero coupon mortgage.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
27 Financial Data Schedule
(b) Reports on Form 8-K: None.
10
<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: Pembroke HCP, LLC
Managing General Partner
By: Pembroke Companies, Inc.
Managing Member
Dated: November 14, 2000 By: /s/ Lawrence J. Cohen
---------------------
President and Principal
Financial and Accounting Officer
11
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