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, 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 (I.R.S. Employer Identification No.)
of 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 11
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - MARCH 31, 1995
(a California Limited Partnership)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets
March 31, December 31,
1995 1994
(Unaudited) (Audited)
Assets
Cash and cash equivalents $ 2,218,000 $ 2,246,000
Cash investments 3,004,000 3,004,000
Receivables and other assets 151,000 195,000
-------------- -------------
Real estate:
Real estate 21,023,000 21,018,000
Accumulated depreciation (4,703,000) (4,518,000)
Real estate, net 16,320,000 16,500,000
Deferred financing costs, net 128,000 137,000
-------------- -------------
Total assets $ 21,821,000 $ 22,082,000
============== =============
Liabilities and Partners' Equity
Note payable $ 9,233,000 $ 8,756,000
Accrued interest 168,000 398,000
Accrued expenses and other liabilities 214,000 248,000
-------------- -------------
Total liabilities 9,615,000 9,402,000
-------------- -------------
Commitments and Contingencies
Partners' Equity (Deficit):
General partner (22,000) (13,000)
Limited partners (26,111 units outstanding at
March 31, 1995 and December 31, 1994) 12,228,000 12,693,000
-------------- -------------
Total partners' equity 12,206,000 12,680,000
-------------- -------------
Total liabilities and partners' equity $ 21,821,000 $ 22,082,000
============== =============
See notes to consolidated financial statements.
2 of 11
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - MARCH 31, 1995
(a California Limited Partnership)
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended
March 31, 1995 March 31, 1994
Revenues:
Rental $ 686,000 $ 935,000
Interest 32,000 9,000
-------------- ------------
Total revenues 718,000 944,000
-------------- ------------
Expenses:
Operating 290,000 409,000
Interest 247,000 303,000
Depreciation 185,000 217,000
General and administrative 70,000 70,000
-------------- ------------
Total expenses 792,000 999,000
-------------- ------------
Net loss $ (74,000) $ (55,000)
============== ============
Net loss per limited partnership assignee unit $ (3) $ (2)
============== ============
Cash distributions per limited partnership
assignee unit $ 15 $ 15
============== ============
See notes to consolidated financial statements.
3 of 11
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - MARCH 31, 1995
(a California Limited Partnership)
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended
March 31, 1995 March 31, 1994
Operating Activities:
Net loss $(74,000) $ (55,000)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 194,000 231,000
Interest added to note payable principal 79,000 94,000
Changes in operating assets and liabilities:
Receivables and other assets 44,000 (50,000)
Accrued expenses and other liabilities 134,000 207,000
------------- ------------
Net cash provided by operating activities 377,000 427,000
------------- ------------
Investing Activities:
Additions to real estate (5,000) (65,000)
------------- ------------
Cash (used in) investing activities (5,000) (65,000)
------------- ------------
Financing Activities:
Cash distributions to partners (400,000) (400,000)
------------- ------------
Cash (used in) financing activities (400,000) (400,000)
------------- ------------
Decrease in Cash and Cash Equivalents (28,000) (38,000)
Cash and Cash Equivalents at Beginning of Period 2,246,000 1,404,000
------------- ------------
Cash and Cash Equivalents at End of Period $2,218,000 $1,366,000
============= ============
Supplemental Disclosure of Noncash Investing and
Financing Activities:
Accrued interest added to note payable principal $ 398,000 $ 466,000
============= ============
See notes to consolidated financial statements.
4 of 11
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - MARCH 31, 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.
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.
At March 31, 1995, the Partnership had approximately $2,016,000 invested
in overnight repurchase agreements earning approximately 6% per annum.
The results of operations for the three months ended March 31, 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 $24,000 and $21,000 during the three months ended March
31, 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 three months ended March 31, 1995 and 1994, affiliates of NPI, Inc.
received $34,000 and $16,000, which are included in operating expenses.
(c) The general partner received cash distributions of $8,000 during the
three months ended March 31, 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 three months ended March 31, 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
March 31, 1995, $4,346,000 in accrued interest has been added to the principal
of this note. The Partnership will be 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.
5 of 11
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - MARCH 31, 1995
(a California Limited Partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Distributions
The Partnership distributed $15 per unit ($392,000 in total) to the
holders of limited partnership units and $8,000 to the general partner during
the three months ended March 31, 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.
6 of 11
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - MARCH 31, 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 three months ended March 31, 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 three months of 1995, Registrant distributed
to the holders of limited partnership units $15 per unit ($392,000 in total)
and $8,000 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
$28,000 decrease at March 31, 1995, as compared to December 31, 1994.
Registrant's $400,000 of cash distributions to partners and $5,000 of
additions to real estate were significantly offset by $377,000 of net cash
provided by operating activities. 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 being invested in a money market account, 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.
7 of 11
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - MARCH 31, 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
Three Months Ended March 31, 1995 vs. March 31, 1994
Operating results declined by $19,000 for the three months ended March 31,
1995, as compared to 1994, due to a decrease in revenues of $226,000, which
was substantially offset by a decrease in expenses of $207,000.
Revenues and expenses decreased due to the sale of Registrant's Lakewood
Village Mobile Home Park property in June 1994. With respect to the remaining
properties, operating results improved by $46,000 due to an increase in
revenues of $56,000, which was partially offset by an increase in expenses of
$10,000.
With respect to the remaining properties, rental revenues increased by $33,000
due to an increase in rental rates and a slight increase in occupancy at
Registrant's remaining properties.
Interest income increased due to an increase in interest rates and an increase
in 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.
With respect to the remaining properties, expenses increased by $10,000 due to
an increase in interest expense of $24,000, which was partially offset by a
$14,000 decrease in operating expenses. Operating expenses declined primarily
due to the real estate tax refund received in January 1995 for Registrant's
Wood View Apartments property. General and administrative expenses and
depreciation expense remained constant. Interest expense increased due to the
compounding of interest on the zero coupon mortgage.
8 of 11
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - MARCH 31, 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,
along with occupancy data, follows:
FOX STRATEGIC HOUSING INCOME PARTNERS,
(a California Limited Partnership)
OCCUPANCY SUMMARY
For the Quarters Ended March 31, 1995 and 1994
Average
Date of Number of Occupancy Rate (%)
Name and Location Purchase Units/Spaces 1995 1994
- ----------------- -------- ------------ ------------------
Wood View Apartments 09/87 180 96 95
Atlanta, Georgia
Barrington Place Apartments 07/89 164 97 96
Westlake, Ohio
9 of 11
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - MARCH 31, 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.
10 of 11
FOX STRATEGIC HOUSING INCOME PARTNERS - FORM 10-Q - MARCH 31, 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
--------------------------------------
ARTHUR N. QUELER
Secretary/Treasurer and Director
(Principal Financial Officer)
11 of 11
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 5,222,000 <F1>
<SECURITIES> 0
<RECEIVABLES> 151,000 <F2>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,023,000
<DEPRECIATION> (4,703,000)
<TOTAL-ASSETS> 21,821,000
<CURRENT-LIABILITIES> 0
<BONDS> 9,233,000
<COMMON> 0
0
0
<OTHER-SE> 12,206,000
<TOTAL-LIABILITY-AND-EQUITY> 21,821,000
<SALES> 0
<TOTAL-REVENUES> 686,000
<CGS> 0
<TOTAL-COSTS> 475,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 247,000
<INCOME-PRETAX> (74,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (74,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,000)
<EPS-PRIMARY> (3)
<EPS-DILUTED> (3)
<FN>
<F1> Cash includes $3,004,000 of cash investments.
<F2> Receivables include $60,000 of other assets.
</FN>
</TABLE>
