FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended in Rel. No. 312905, eff. 4/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(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, 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 0-16877
FOX STRATEGIC HOUSING INCOME PARTNERS
(Exact name of small business issuer as specified in its charter)
California 94-3016373
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Indicate by check mark 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 .
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) FOX STRATEGIC HOUSING INCOME PARTNERS
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
Assets
Cash and cash equivalents $ 4,515
Receivables and other assets 238
Deferred financing costs, net 85
Investment properties:
Land $ 3,119
Buildings and related personal property 18,022
21,141
Less accumulated depreciation (5,485) 15,656
$ 20,494
Liabilities and Partners' Capital (Deficit)
Liabilities
Accrued expenses and other liabilities $ 330
Accrued interest 373
Notes payable 8,213
Partners' Capital (Deficit)
General partner's $ (228)
Limited partners' (26,111 units outstanding) 11,806 11,578
$ 20,494
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
b) FOX STRATEGIC HOUSING INCOME PARTNERS
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 707 $ 698 $ 1,421 $ 1,384
Other income 83 106 151 155
Total revenues 790 804 1,572 1,539
Expenses:
Operating 447 323 796 620
Interest 229 261 457 518
Depreciation 152 149 301 334
General and administrative 83 76 169 146
Total expenses 911 809 1,723 1,618
Net loss $ (121) $ (5) $ (151) $ (79)
Net loss allocated to
general partner $ (17) $ (5) $ (47) $ (79)
Net loss allocated to
limited partners (104) -- (104) --
$ (121) $ (5) $ (151) $ (79)
Net loss per limited
partnership assignee unit $ (3.98) $ -- $ (3.98) $ --
Cash distribution per
limited partnership
assignee unit $ -- $ 15 $ -- $ 30
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) FOX STRATEGIC HOUSING INCOME PARTNERS
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner's Partners' Total
<S> <C> <C> <C> <C>
Original capital contributions 26,111 $ -- $ 26,111 $ 26,111
Partners' capital (deficit)
at December 31, 1995 26,111 $ (181) $ 11,910 $ 11,729
Net loss for the six
months ended June 30, 1996 -- (47) (104) (151)
Partners' capital (deficit)
at June 30, 1996 26,111 $ (228) $ 11,806 $ 11,578
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) FOX STRATEGIC HOUSING INCOME PARTNERS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (151) $ (79)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 315 354
Interest added to note payable principal 69 79
Change in accounts:
Receivables and other assets (194) 114
Accrued interest, accrued expenses and other
liabilities 548 444
Net cash provided by operating activities 587 912
Cash flows from investing activities:
Property improvements and replacements (111) (38)
Proceeds from cash investments 2,630 3,004
Purchase of cash investments -- (2,497)
Net cash provided by investing activities 2,519 469
Cash flows from financing activities:
Cash distributions to partners -- (799)
Net cash used in financing activities -- (799)
Net increase in cash and cash equivalents 3,106 582
Cash and cash equivalents at beginning of period 1,409 2,246
Cash and cash equivalents at end of period $ 4,515 $ 2,828
Supplemental disclosure of noncash investing and
financing activities:
Accrued interest added to note payable
principal $ 425 $ 398
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) FOX STRATEGIC HOUSING INCOME PARTNERS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Fox Strategic Housing Income
Partners (the "Partnership") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of Fox Capital Management Corporation ("FCMC" or the "Managing General
Partner"), all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended June 30, 1996, are not necessarily indicative
of the results that may be expected for the fiscal year ending December 31,
1996. For further information, refer to the financial statements and footnotes
thereto included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
Note B - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. The Partnership Agreement provides for payments to
affiliates for services and as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership.
The following transactions with affiliates of Insignia Financial Group, Inc.
("Insignia"), National Property Investors, Inc. ("NPI"), and affiliates of NPI
were charged to expense in 1996 and 1995:
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1996 1995
<S> <C> <C>
Property management fees (included in operating
expenses) $ 73,000 $ 69,000
Reimbursement for services of affiliates (included
in general and administrative expenses) 96,000 50,000
Partnership management fees (included in general
and administrative expenses) -- 26,000
</TABLE>
For the period from January 19, 1996, to June 30, 1996, the Partnership insured
its properties under a master policy through an agency and insurer unaffiliated
with the Managing General Partner. An affiliate of the Managing General Partner
acquired, in the acquisition of a business, certain financial obligations from
an insurance agency which was later acquired by the agent who placed the current
year's master policy. The current agent assumed the financial obligations to
the affiliate of the Managing General Partner who received payments on these
obligations from the agent. The amount of the Partnership's insurance premiums
accruing to the benefit of the affiliate of the Managing General Partner by
virtue of the agent's obligations is not significant.
Note B - Transactions with Affiliated Parties - continued
For the period ended June 30, 1995, an affiliate of NPI was paid a fee of $4,000
relating to a successful real estate tax appeal on the Partnership's Wood View
Apartments. This fee is included in operating expenses.
The general partner received cash distributions of $16,000 during the six months
ended June 30, 1995.
Fox Partners VIII, a California general partnership, is the general partner.
The general partners of Fox Partners VIII are FCMC, a California corporation,
and Fox Realty Investors ("FRI"), a California general partnership.
Pursuant to a series of transactions which closed during the first half of 1996,
affiliates of Insignia acquired (i) control of NPI Equity Investments II, Inc.
("NPI Equity"), the managing general partner of FRI, and (ii) all of the issued
and outstanding shares of stock of FCMC. In connection with these transactions,
affiliates of Insignia appointed new officers and directors of NPI Equity and
FCMC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two apartment complexes. The
following table sets forth the average occupancy of the properties for the six
months ended June 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Barrington Place Apartments
Westlake, Ohio 95% 97%
Wood View Apartments
Atlanta, Georgia 95% 96%
The Partnership's net loss for the six months ended June 30, 1996, was
approximately $151,000 versus approximately $79,000 net loss for the same period
of 1995. The net loss for the three months ended June 30, 1996, was
approximately $121,000 compared to a net loss of approximately $5,000 for the
three months ended June 30, 1995. The increase in net loss is primarily
attributable to increases in operating expenses and general and administrative
expenses. Operating expenses increased mostly due to increased maintenance
expenses at both of the Partnership's properties. During the second quarter of
1996, Wood View began a property improvement project which includes repainting
the entire property and making any necessary repairs to the buildings. All
repairs are expected to be completed by the end of the third quarter. The
increase in general and administrative expenses is related to increased expense
reimbursements related to the transition of the partnership administration
offices in 1996. Partially offsetting these expense increases was a decrease in
interest expense as a result of a principal payment made in August 1995.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. As part of
this plan, the Managing General Partner attempts to protect the Partnership from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At June 30, 1996, the Partnership had unrestricted cash of approximately
$4,515,000 as compared to approximately $2,828,000 at June 30, 1995. Net cash
provided by operating activities decreased primarily as a result of the timing
of property tax payments and increases in escrow funding. The increase in cash
provided by investing activities is the result of proceeds from maturing cash
investments in 1996. This increase is only partially offset by an increase in
property improvements and replacements. The decrease in cash used in financing
activities is the result of the Partnership making distributions in the first
six months of 1995 compared to no distributions being made in 1996.
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, 1996,
approximately $4,303,000 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
approximately $1,947,000 (which included $970,000 of accrued interest added to
principal). In August 1996, the Partnership paid $782,000, which is 20 percent
of the then outstanding original principal balance (no additional payment of
accrued interest was required).
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Partnership. Such assets are currently
thought to be sufficient for any near-term needs of the Partnership. The
mortgage indebtedness and accrued interest mature August 1, 1998, at which time
the properties will either be refinanced or sold. Future cash distributions
will depend on the levels of net cash generated from operations, property
sales, and the availability of cash reserves. In addition, distributions may be
limited by the debt repayments discussed above. Cash distributions paid in 1995
totalled approximately $799,000. No cash distributions were paid during the six
months ended June 30, 1996. Cash distributions are anticipated to remain
suspended as a result of the pending debt maturity, which is discussed above. At
this time it appears that the original investment objective of capital growth
will not be attained and that investors will not receive a return of all of
their invested capital.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to
this report.
b) Reports on Form 8-K: None filed during the quarter ended June 30,
1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FOX STRATEGIC HOUSING INCOME PARTNERS
By: FOX PARTNERS VIII
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
Its Managing General Partner
By: /s/William H. Jarrard, Jr.
William H. Jarrard, Jr.
President and Director
By: /s/Ronald Uretta
Ronald Uretta
Principal Financial Officer
and Principal Accounting Officer
Date: August 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Fox
Strategic Housing Income Parnters 1996 Second Quarter 10-QSB and is qualified in
its entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000800080
<NAME> FOX STRATEGIC HOUSING INCOME PARTNERS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,515
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,141
<DEPRECIATION> 5,485
<TOTAL-ASSETS> 20,494
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,213
0
0
<COMMON> 0
<OTHER-SE> 11,578
<TOTAL-LIABILITY-AND-EQUITY> 20,494
<SALES> 0
<TOTAL-REVENUES> 1,572
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,723
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 457
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (151)
<EPS-PRIMARY> (3.98)<F2>
<EPS-DILUTED> 0
<FN>
<F1>The Registrant has an unclassified balance sheet.
<F2>Multipler is 1.
</FN>
</TABLE>
