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 September 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 (770) 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 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 30, 1995
(a California Limited Partnership)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
September 30, December 31,
1995 1994
Assets
Cash and cash equivalents $ 1,125,000 $ 2,246,000
Cash investments 2,497,000 3,004,000
Other assets and receivables 182,000 195,000
Real Estate:
Real estate 21,053,000 21,018,000
Accumulated depreciation (5,014,000) (4,518,000)
----------- -----------
Real estate, net 16,039,000 16,500,000
Deferred financing costs, net 108,000 137,000
----------- -----------
Total assets $19,951,000 $22,082,000
=========== ===========
Liabilities and Partners' Equity
Note payable $ 7,790,000 $ 8,756,000
Accrued interest 159,000 398,000
Accrued expenses and other liabilities 265,000 248,000
----------- -----------
Total liabilities 8,214,000 9,402,000
----------- -----------
Commitments and Contingencies
Partners' equity (deficit):
General partner (30,000) (13,000)
Limited partners (26,111 units outstanding
at September 30, 1995 and December 31, 1994) 11,767,000 12,693,000
----------- -----------
Total partners' equity 11,737,000 12,680,000
----------- -----------
Total liabilities and partners' equity $19,951,000 $22,082,000
=========== ===========
See notes to consolidated financial statements.
2 of 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 30, 1995
(a California Limited Partnership)
Consolidated Statements of Operations
For the Nine Months Ended
September 30, September 30,
1995 1994
Revenues:
Rental $2,100,000 $2,491,000
Interest income 191,000 37,000
Gain on sale of property - 1,469,000
---------- ---------
Total revenues 2,291,000 3,997,000
---------- ---------
Expenses:
Operating 946,000 1,238,000
Interest 771,000 833,000
Depreciation 496,000 608,000
General and administrative 222,000 176,000
---------- ---------
Total expenses 2,435,000 2,855,000
---------- ---------
Net (loss) income $ (144,000) $1,142,000
=========== ==========
Net (loss) income per limited partnership
assignee unit $ (5.48) $ 43.32
=========== ==========
Cash distributions per limited partnership
assignee unit $ 29.99 $ 45.04
=========== ==========
See notes to consolidated financial statements.
3 of 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 30, 1995
(a California Limited Partnership)
Consolidated Statements of Operations
For the Three Months Ended
September 30, September 30,
1995 1004
Revenues:
Rental $709,000 $674,000
Interest income 72,000 17,000
-------- --------
Total revenues 781,000 691,000
-------- --------
Expenses:
Operating 355,000 442,000
Interest 253,000 234,000
Depreciation 162,000 184,000
General and administrative 76,000 28,000
-------- --------
Total expenses 846,000 888,000
-------- --------
Net loss $(65,000) $(197,000)
========= ==========
Net loss per limited partnership assignee unit $ (2.45) $ (7.47)
========= ==========
Cash distributions per limited partnership
assignee unit $ - $ 15.01
========= ==========
See notes to consolidated financial statements.
4 of 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 30, 1995
(a California Limited Partnership)
Consolidated Statements of Cash Flows
For the Nine Months Ended
September 30, September 30,
1995 1994
Operating Activities:
Net (loss) income $(144,000) $1,142,000
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization 525,000 643,000
Interest added to note payable principal 582,000 548,000
Gain on sale of property - (1,469,000)
Changes in operating assets and liabilities:
Other assets and receivables 13,000 (183,000)
Accrued interest, accrued expenses and
other liabilities 176,000 243,000
---------- ----------
Net cash provided by operating activities 1,152,000 924,000
---------- ----------
Investing Activities:
Net proceeds from sale of rental property - 7,026,000
Additions to real estate (35,000) (92,000)
Proceeds from cash investments 3,004,000 -
Purchase of cash investments (2,497,000) -
---------- ----------
Net cash provided by investing activities 472,000 6,934,000
---------- ----------
Financing Activities:
Repayment of note payable principal (1,946,000) (2,634,000)
Cash distributions to partners (799,000) (1,200,000)
---------- ----------
Cash (used in) financing activities (2,745,000) (3,834,000)
---------- ----------
(Decrease) Increase in Cash and Cash
Equivalents (1,121,000) 4,024,000
Cash and Cash Equivalents at Beginning
of Period 2,246,000 1,404,000
---------- ----------
Cash and Cash Equivalents at End of Period $1,125,000 $5,428,000
========== ==========
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 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 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 balance sheet accounts have been reclassified in
order to conform to the current period.
The financial information contained herein is unaudited. In the
opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included. All
adjustments are of a normal recurring nature, except for the gain
on disposition of property as disclosed in Note 5.
At September 30, 1995, the Partnership had approximately $1,100,000
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.
On August 17, 1995, the stockholders of National Property
Investors, Inc. ("NPI, Inc."), the sole shareholder of NPI Equity
Investments II, Inc. ("NPI Equity"), the entity which controls Fox
Capital Management Corporation, the managing general partner of the
Partnership's general partner, entered into an agreement to sell to
IFGP Corporation, an affiliate of Insignia Financial Group, Inc.
("Insignia"), all of the issued and outstanding stock of NPI, Inc.
The sale of the stock is subject to the satisfaction of certain
conditions and is scheduled to close in January 1996.
2. Transactions with Related Parties
(a) An affiliate of NPI, Inc. received reimbursements of
administrative expenses amounting to $72,000 and $76,000 during
the nine months ended September 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 nine months ended September 30,
1995 and 1994, affiliates of NPI, Inc. received $104,000 and
$100,000, which are included in operating expenses.
(c) The general partner received cash distributions of $16,000 and
$24,000 during the nine months ended September 30, 1995 and
1994, respectively.
(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 nine months ended September 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
6 of 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 30, 1995
(a California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Note Payable (Continued)
and July. As of September 30, 1995, $4,848,000 in accrued interest
has been added to the principal 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. In August 1995, the Partnership
paid $1,946,000, which represents the required 20% of original
principal and accrued interest added to principal.
4. Distributions
The Partnership distributed $29.99 and $45.04 per unit ($783,000
and $1,176,000 in total), respectively, to the holders of limited
partnership units and $16,000 and $24,000, respectively, to the
general partner during the nine months ended September 30, 1995 and
1994. In order to meet the August 1998 mortgage payment, cash
distributions were suspended during the second half of 1995 and
will remain suspended 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 premium
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 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 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. The two remaining properties generated
negative cash flow for the nine months ended September 30, 1995, due to
required notes payable principal payments as stated in Item 1, Note 3.
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. For the long term, cash from operations will remain
Registrant's 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 in order to meet the August 1998
mortgage payment, cash distributions were suspended during the second half
of 1995 and will remain suspended through 1998. During the first nine
months of 1995, Registrant distributed to the holders of limited
partnership units $29.99 per unit ($783,000 in total) and $16,000 to the
general partner. 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
$1,121,000 decrease at September 30, 1995, as compared to December 31,
1994. Registrant's $1,152,000 of cash provided by operating activities and
$472,000 of cash from investing activities was substantially offset by
$1,946,000 of repayment of note payable principal (financing activities)
and $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 $35,000 of improvements to
properties. 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.
On August 17, 1995, Insignia Financial Group, Inc. and certain of its
affiliates (collectively, "Insignia") entered into agreements pursuant to
which (i) the stockholders of NPI, Inc., the sole shareholder of NPI
Equity, agreed to sell to Insignia all of the issued and outstanding stock
of NPI, Inc., and (ii) Insignia would acquire all of the interests in NPI-
AP Management, L.P., the property manager at Registrant's properties. The
consummation of these transactions is subject to the satisfaction of
certain conditions
8 of 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 30, 1995
(a California Limited Partnership)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Liquidity and Capital Resources (Continued)
(including, third party consents and other conditions not within the
control of the parties to the agreement) and is scheduled to close in
January 1996. Upon closing, it is expected that Insignia will elect new
officers and directors of NPI Equity.
Insignia is a fully integrated real estate service company specializing in
the ownership and operation of securitized real estate assets. According
to Commercial Property News and the National Multi-Housing Council, since
1992 Insignia has been the largest property manager in the United States.
The Managing General Partner does not believe these transactions will have
a significant effect on Registrant's liquidity or results of operation.
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 served 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 the next twelve months. 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
Nine Months Ended September 30, 1995 vs. September 30, 1994
Operating results declined by $1,286,000 for the nine months ended
September 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 $1,706,000 for the nine months ended September 30,
1995, as compared to 1994, due to the previously mentioned sale. With
respect to the remaining properties, rental revenues increased by $115,000
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 $154,000 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 $420,000 for the nine months ended September 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 decreased due to an increase in interest expense of $73,000 which
was
9 of 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 30, 1995
(a California Limited Partnership)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Nine Months Ended September 30, 1995 vs. September 30, 1994 (Continued)
more than offset by decreases in operating expenses of $27,000 and
depreciation expense of $58,000. Interest expense increased due to the
compounding of interest on the zero coupon mortgage which was
slightly offset by the partial repayment of mortgage principal. Operating
expenses decreased due to lower general repairs and maintenance experienced
at both of Registrant's properties. Depreciation expense decreased as a
result of a portion of Registrant's prior year assets becoming fully
depreciated. In addition, general and administrative expenses increased by
$46,000 due to lower general and administrative expenses for the three
months ended September 30, 1994, as compared to 1995.
Three Months Ended September 30, 1995 vs. September 30, 1994
Operating results increased by $132,000 for the three months ended
September 30, 1995, as compared to 1994, due to an increase in revenues of
$90,000 and a decrease in expenses of $42,000.
Revenues increased due to increases in rental revenues of $35,000 and
interest income of $55,000 for the three months ended September 30, 1995,
as compared to 1994. Rental revenues increased 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 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 $42,000 for the three months ended September 30, 1995,
as compared to 1994 due to increases in interest expense of $19,000 and
general and administrative expenses of $48,000, which were more than offset
by decreases in operating expenses of $87,000 and depreciation expense of
$22,000. Interest expense increased due to the compounding of interest on
the zero coupon mortgage, which was slightly offset by the partial
repayment of mortgage principal. General and administrative expenses
increased due to lower general and administrative expenses for the three
months ended September 30, 1994, as compared to 1995. Operating expenses
decreased due to lower general repairs and maintenance at both of
Registrant's properties. Depreciation expense decreased as a result of a
portion of Registrant's prior year assets becoming fully depreciated.
10 of 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 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 has 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(%)
--------------------------
Nine Months Three Months
Date Ended Ended
of September 30, September 30,
Name and Location Purchase Size 1995 1994 1995 1994
- ----------------- -------- ---- ---- ---- ---- ----
Wood View Apartments 09/87 180 97 96 98 97
Atlanta, Georgia
Barrington Place Apartments 07/89 164 98 95 99 96
Westlake, Ohio
11 of 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 30, 1995
(A California Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
2. NPI, Inc. Stock Purchase Agreement dated as of August 17,
1995 incorporated by reference to Exhibit 2 to
Registrant's Current Report on Form 8-K filed with the
Securities and Exchange Commission on August 24, 1995.
(b) Report on Form 8-K
On August 24, 1995, Registrant filed a Current Report on Form
8-K with the Securities and Exchange Commission with respect
to the sale of the stock of NPI, Inc. (Item 1, Change in
Control).
12 of 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 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 14
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - SEPTEMBER 30, 1995
(a California Limited Partnership)
EXHIBIT INDEX
Exhibit Page No.
- ------- --------
2. NPI, Inc. Stock Purchase Agreement *
dated August 17, 1995
* Incorporated by reference to Exhibit 2 to Registrant's Current Report on
Form 8-K filed with the Securities and Exchange Commission on August 24,
1995.
14 of 14
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 3,622,000 <F1>
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,053,000
<DEPRECIATION> (5,014,000)
<TOTAL-ASSETS> 19,951,000
<CURRENT-LIABILITIES> 0
<BONDS> 7,790,000
<COMMON> 0
0
0
<OTHER-SE> 11,737,000
<TOTAL-LIABILITY-AND-EQUITY> 19,951,000
<SALES> 0
<TOTAL-REVENUES> 2,100,000
<CGS> 0
<TOTAL-COSTS> 1,442,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 771,000
<INCOME-PRETAX> (144,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (144,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (144,000)
<EPS-PRIMARY> (5.48)
<EPS-DILUTED> (5.48)
<FN>
<F1> Includes cash investments of $2,497,000.
</FN>
</TABLE>
