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 June 30, 1995
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 0-16877
Fox Strategic Housing Income Partners,
(a California Limited Partnership)
(Exact name of Registrant as specified in its charter)
California 94-3016373
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5665 Northside Drive N.W., Ste. 370, Atlanta, Georgia 30328
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (404) 916-9090
N/A
Former name, former address and fiscal year, if changed since last report.
Indicate by check mark whether 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_____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 12, 13, or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes _____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date __________________.
1 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
June 30, December 31,
1995 1994
(Unaudited) (Audited)
Assets
Cash and cash equivalents $ 2,828,000 $ 2,246,000
Cash investments 2,497,000 3,004,000
Other assets and receivables 81,000 195,000
Real estate:
Real estate 21,056,000 21,018,000
Accumulated depreciation (4,853,000) (4,518,000)
------------ ------------
Real estate, net 16,203,000 16,500,000
Deferred financing costs, net 118,000 137,000
------------ ------------
Total assets $ 21,727,000 $ 22,082,000
============ ============
Liabilities and Partners' Equity
Note payable $ 9,233,000 $ 8,756,000
Accrued interest 419,000 398,000
Accrued expenses and other liabilities 273,000 248,000
------------ ------------
Total liabilities 9,925,000 9,402,000
------------ ------------
Commitments and Contingencies
Partners' Equity (Deficit):
General partner (30,000) (13,000)
Limited partners (26,111 units outstanding at
June 30, 1995 and December 31, 1994) 11,832,000 12,693,000
------------ ------------
Total partners' equity 11,802,000 12,680,000
------------ ------------
Total liabilities and partners' equity $ 21,727,000 $ 22,082,000
============ ============
See notes to consolidated financial statements.
2 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
Consolidated Statements of Operations (Unaudited)
For the Six Months Ended
June 30, 1995 June 30, 1994
Revenues:
Rental $ 1,391,000 $ 1,817,000
Interest 119,000 20,000
Gain on sale of property -- 1,469,000
----------- -----------
Total revenues 1,510,000 3,306,000
----------- -----------
Expenses:
Operating 591,000 796,000
Interest 518,000 599,000
Depreciation 334,000 424,000
General and administrative 146,000 148,000
----------- -----------
Total expenses 1,589,000 1,967,000
----------- -----------
Net (loss) income $ (79,000) $ 1,339,000
=========== ===========
Net (loss) income per limited partnership
assignee unit $ (3) $ 51
=========== ===========
Cash distributions per limited partnership
assignee unit $ 30 $ 30
=========== ===========
See notes to consolidated financial statements.
3 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended
June 30, 1995 June 30, 1994
Revenues:
Rental $ 705,000 $ 882,000
Interest 87,000 11,000
Gain on sale of property -- 1,469,000
---------- ----------
Total revenues 792,000 2,362,000
---------- ----------
Expenses:
Operating 301,000 387,000
Interest 271,000 296,000
Depreciation 149,000 207,000
General and administrative 76,000 78,000
---------- ----------
Total expenses 797,000 968,000
---------- ----------
Net (loss) income $ (5,000) $1,394,000
========== ==========
Net (loss) income per limited partnership
assignee unit -- $ 53
========== ==========
Cash distributions per limited partnership
assignee unit $ 15 $ 15
========== ==========
See notes to consolidated financial statements.
4 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended
June 30, 1995 June 30, 1994
Operating Activities:
Net (loss) income $ (79,000) $ 1,339,000
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 354,000 449,000
Gain on sale of property -- (1,469,000)
Interest added to note payable principal 79,000 94,000
Changes in operating assets and liabilities:
Other assets and receivables 114,000 (95,000)
Accrued interest, accrued expenses and
other liabilities 444,000 419,000
----------- -----------
Net cash provided by operating activities 912,000 737,000
----------- -----------
Investing Activities:
Net proceeds from sale of rental property -- 7,026,000
Additions to rental properties (38,000) (82,000)
Proceeds from cash investments 3,004,000 --
Purchase of cash investments (2,497,000) --
----------- -----------
Net cash provided by investing activities 469,000 6,944,000
----------- -----------
Financing Activities:
Partial repayment of note payable principal -- (2,634,000)
Cash distributions to partners (799,000) (799,000)
----------- -----------
Cash (used in) financing activities (799,000) (3,433,000)
----------- -----------
Increase in Cash and Cash Equivalents 582,000 4,248,000
Cash and Cash Equivalents at Beginning of Period 2,246,000 1,404,000
----------- -----------
Cash and Cash Equivalents at End of Period $ 2,828,000 $ 5,652,000
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Interest paid in cash during the period -- $ 105,000
=========== ===========
Supplemental Disclosure of Non-Cash Investing and
Financing Activities
Accrued interest added to note payable principal $ 398,000 $ 466,000
=========== ===========
See notes to consolidated financial statements.
5 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The accompanying consolidated financial statements, footnotes and
discussions should be read in conjunction with the consolidated financial
statements, related footnotes and discussions contained in the
Partnership's Annual Report for the year ended December 31, 1994. Certain
accounts have been reclassified in order to conform to the current period.
The financial information contained herein is unaudited. In the opinion
of management, however, all adjustments necessary for a fair presentation
of such financial information have been included. All adjustments are of
a normal recurring nature, except as disclosed in Note 5.
At June 30, 1995, the Partnership had approximately $2,591,000 invested in
overnight repurchase agreements earning approximately 6% per annum. The
Partnership's $3,004,000 investment in a United States Treasury Bill
matured in June 1995 and was reinvested in a $2,497,000 United States
Treasury Bill earning 5.3% interest and maturing in May 1996.
The results of operations for the six and three months ended June 30, 1995
and 1994 are not necessarily indicative of the results to be expected for
the full year.
2. Transactions with Related Parties
(a) An affiliate of NPI, Inc. received reimbursements of administrative
expenses amounting to $48,000 and $52,000 during the six months ended
June 30, 1995 and 1994, respectively. These reimbursements are
primarily included in general and administrative expenses.
(b) An affiliate of NPI, Inc. is entitled to receive a management fee
equal to 5% of the annual gross receipts from certain properties it
manages. For the six months ended June 30, 1995 and 1994, affiliates
of NPI, Inc. received $69,000 and $62,000, which are included in
operating expenses.
(c) The general partner received cash distributions of $16,000 during the
six months ended June 30, 1995 and 1994.
(d) An affiliate of NPI, Inc. was paid a fee of $4,000 relating to a
successful real estate tax appeal on the Partnership's Wood View
Apartments during the six months ended June 30, 1995. This fee is
included in operating expenses.
3. Note Payable
The Partnership's properties are cross-collateralized by a zero coupon
first mortgage which secures the entire amount of the note payable.
Interest accrues on the amount borrowed at a contract rate of 10.9 percent
per annum, with the interest accrued added to principal each January and
July. As of June 30, 1995, $4,346,000 in accrued interest has been added
to the principal
6 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Note Payable (Continued)
of this note. The Partnership is required to repay a specified percentage
of the then outstanding original principal amount of the loan as follows:
20 percent in August 1995, 20 percent in August 1996, and 30 percent in
August 1997. In addition, provided that the Partnership has generated
income in an amount as defined in the note agreement, it will be required
to repay a specified percentage of the then outstanding accrued interest
added to principal as follows: 20 percent in August 1995, 20 percent in
August 1996, and 30 percent in August 1997. The remaining principal
balance plus all accrued and unpaid interest is due in August 1998.
4. Distributions
The Partnership distributed $30 per unit ($783,000 in total) to the
holders of limited partnership units and $16,000 to the general partner
during the six months ended June 30, 1995 and 1994. In order to meet the
August 1998 mortgage payment, it is anticipated that cash distributions
will be suspended starting the second half of 1995 through 1998. The
general partner will evaluate the propriety of future cash distributions
in light of property sales and required debt service payments.
5. Gain on Sale of Property
On June 20, 1994, the Partnership sold its Lakewood Village Mobile Home
Park, located in Melbourne, Florida for $7,400,000. After payment of
$2,634,000 of mortgage principal, a prepayment penalty of $480,000 and
closing costs, the Partnership received proceeds of approximately
$4,249,000. In addition, in April and May 1994, the Partnership sold a
portion of its inventory of mobile homes and received $143,000 of net
proceeds. During the period ended June 30, 1994, the Partnership
recognized a gain of approximately $1,469,000 on the sale of their
Lakewood Village Mobile Home Park property.
7 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
This item should be read in conjunction with the Consolidated Financial
Statements and other Items contained elsewhere in this Report.
Liquidity and Capital Resources
Registrant's remaining properties consist of two apartment buildings located
in Georgia and Ohio. Registrant's Lakewood Village Mobile Home Park property
was sold on June 20, 1994. The two remaining properties generated positive
cash flow for the six months ended June 30, 1995. Registrant receives rental
income from its properties and is responsible for operating expenses,
administrative expenses, capital improvements and debt service payments.
Registrant uses working capital reserves provided from any undistributed cash
flow from operations and sale proceeds as its primary source of liquidity. The
current level of cash distributions is being sustained by a combination of
both the current and prior years cash provided from operating activities and
the proceeds from the sale of Registrant's Lakewood Village Mobile Home Park
property. To preserve working capital reserves, which will be required for
necessary capital improvements to the properties and debt service
requirements, the current level of cash distributions was reduced from an
annualized rate of 6.5 percent to 6.0 percent beginning with the May 1993
distribution. During the first six months of 1995, Registrant distributed to
the holders of limited partnership units $30 per unit ($783,000 in total) and
$16,000 to the general partner. In order to meet the August 1998 mortgage
payment, it is anticipated that cash distributions will be suspended starting
the second half of 1995 through 1998. The general partner will evaluate the
propriety of future cash distributions in light of property sales and required
debt service payments.
The level of liquidity based upon cash and cash equivalents experienced a
$582,000 increase at June 30, 1995, as compared to December 31, 1994.
Registrant's $912,000 of cash provided by operating activities and $469,000 of
cash from investing activities was only partially offset by $799,000 of cash
distributions paid to partners (financing activities). Investing activities
consisted of a net $507,000 from liquidating cash investments which was only
partially offset by $38,000 of rental property additions. All other increases
(decreases) in certain assets and liabilities are the result of the timing of
receipt and payment of various operating activities.
Working capital reserves are primarily invested in United States Treasury
bills and in repurchase agreements secured by United States Treasury
obligations. The general partner believes that, if market conditions remain
relatively stable, cash flow from operations, when combined with working
capital reserves, will be sufficient to fund required capital improvements and
debt service payments until August 1998 at which time the balloon payment on
the debt comes due. Registrant will be required to arrange further financings
or refinancings, or sell a property prior to the maturity date of the note.
8 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Real Estate Market
The national real estate market has suffered from the effects of the real
estate recession including but not limited to a downward trend in market
values of existing residential properties. In addition, the bail out of the
savings and loan associations and sales of foreclosed properties by auction
reduced market values and caused a further restriction on the ability to
obtain credit. As a result, Registrant's ability to refinance or sell its
existing properties may be restricted. These factors caused a decline in
market property values and serve to reduce market rental rates and/or sales
prices. Compounding these difficulties have been relatively low interest
rates, which encourage existing and potential tenants to purchase homes. In
addition, there has been a significant decline nationally in new household
formation. Despite the above, the rental market appears to be experiencing a
gradual strengthening and management anticipates that increases in revenue
will generally exceed increases in expenses during 1995. Management believes
that the emergence of new institutional purchasers, including real estate
investment trusts and insurance companies, should create a more favorable
market value for Registrant's properties in the future.
Results of Operations
Six Months Ended June 30, 1995 vs. June 30, 1994
Operating results declined by $1,418,000 for the six months ended June 30,
1995, as compared to 1994. The decrease in operating results is due to the
$1,469,000 gain on the sale of Registrant's Lakewood Village Mobile Home Park
in June 1994.
Revenues declined by $1,796,000 for the six months ended June 30, 1995, as
compared to 1994, due to the previously mentioned sale. With respect to the
remaining properties, rental revenues increased by $80,000 due to an increase
in rental rates at Registrant's remaining properties coupled with an increase
in occupancy and decreased concessions offered to tenant's at Registrant's
Barrington Place Apartments property. Interest income increased by $99,000
due to an increase in average working capital reserves available for
investment as a result of the proceeds received from the sale of Registrant's
Lakewood Village Mobile Home Park property and the effect of higher interest
rates.
Expenses declined by $378,000 for the six months ended June 30, 1995, as
compared to 1994, due to the sale of Registrant's Lakewood Village Mobile Home
Park in June 1994. With respect to the remaining properties, expenses
increased by $18,000 due to increases in interest expense of $53,000 and
operating expenses of $1,000, which were only partially offset by a decrease
in depreciation expense of $36,000. Interest expense increased due to the
compounding of interest on the zero coupon mortgage. Depreciation expense
decreased as a result of a portion of Registrant's prior year assets becoming
fully depreciated. Operating expenses remained constant. In addition,
general and administrative expenses remained relatively constant.
9 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Three Months Ended June 30, 1995 vs. June 30, 1994
Operating results declined by $1,399,000 for the three months ended June 30,
1995 as compared to 1994. The decrease in operating results is due to the
$1,469,000 gain on sale of Registrant's Lakewood Village Mobile Home Park in
June 1994.
Revenues declined by $1,570,000 for the three months ended June 30, 1995, as
compared to 1994, due to the previously mentioned sale. With respect to the
remaining properties, rental revenues increased by $48,000 due to an increase
in rental rates and an increase in occupancy at Registrant's remaining
properties. Interest income increased by $76,000, due to an increase in
average working capital reserves available for investment as a result of the
proceeds received from the sale of Registrant's Lakewood Village Mobile Home
Park property, the effect of higher interest rates and the timing of interest
accruals.
Expenses declined by $171,000 for the three months ended June 30, 1995, as
compared to 1994, due to the sale of Registrant's Lakewood Village Mobile Home
Park in June 1994. With respect to the remaining properties, expenses
increased by $9,000, due to increases in interest expense of $39,000 and
operating expenses of $6,000, which were only partially offset by a decrease
in depreciation expense of $36,000. Interest expense increased due to the
compounding of interest and a modification in the second quarter of 1995.
Depreciation expense decreased as a result of a portion of Registrant's prior
year assets becoming fully depreciated. Operating expenses remained
relatively constant. In addition, general and administrative expenses
remained relatively constant.
10 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Properties
A description of the properties in which Registrant had an ownership interest
during the period covered by this Report, along with occupancy data, follows:
FOX STRATEGIC HOUSING INCOME PARTNERS,
(a California Limited Partnership)
OCCUPANCY SUMMARY
Average
Occupancy Rate(%)
------------------------
Six Months Three Months
Date Ended Ended
of June 30, June 30,
Name and Location Purchase Size 1995 1994 1995 1994
- ----------------- -------- ---- ---- ---- ---- ----
Wood View Apartments 09/87 180 96 96 97 96
Atlanta, Georgia
Barrington Place Apartments 07/89 164 97 95 98 96
Westlake, Ohio
Lakewood Village Mobile
Home Park (1)
Melbourne, Florida 06/87 351 -- 96 -- 96
(1) Property was sold in June 1994. Average occupancy rate is for the period
January 1, 1994 through date of sale.
11 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
No report on Form 8-K was required to be filed during the period.
12 of 13
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - JUNE 30, 1995
(a California Limited Partnership)
SIGNATURE
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.
FOX STRATEGIC HOUSING INCOME PARTNERS
(a California Limited Partnership)
By: FOX PARTNERS VIII
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
A General Partner
/s/ ARTHUR N. QUELER
Secretary/Treasurer and Director
(Principal Financial Officer)
13 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Fox
Strategic Housing Income Partners and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,325,000<F1>
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,056,000
<DEPRECIATION> (4,853,000)
<TOTAL-ASSETS> 21,727,000
<CURRENT-LIABILITIES> 0
<BONDS> 9,233,000
<COMMON> 0
0
0
<OTHER-SE> 11,802,000
<TOTAL-LIABILITY-AND-EQUITY> 21,727,000
<SALES> 0
<TOTAL-REVENUES> 1,391,000
<CGS> 0
<TOTAL-COSTS> 925,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 518,000
<INCOME-PRETAX> (79,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (79,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (79,000)
<EPS-PRIMARY> (3)
<EPS-DILUTED> (3)
<FN>
<F1> Includes cash investments of $2,497,000.
</FN>
</TABLE>
