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 September 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)
September 30, 1996
Assets
Cash and cash equivalents $ 3,970
Receivables and other assets 284
Deferred financing costs, net 74
Investment properties:
Land $ 3,119
Buildings and related personal property 18,055
21,174
Less accumulated depreciation (5,637) 15,537
$ 19,865
Liabilities and Partners' Capital (Deficit)
Liabilities
Accrued expenses and other liabilities $ 340
Accrued interest 143
Notes payable 7,878
Partners' Capital (Deficit)
General partner's $ (228)
Limited partners' (26,111 units outstanding) 11,732 11,504
$ 19,865
See Accompanying Notes to Consolidated Financial Statements
b) FOX STRATEGIC HOUSING INCOME PARTNERS
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 742 $ 696 $ 2,163 $ 2,080
Other income 91 89 242 244
Total revenues 833 785 2,405 2,324
Expenses:
Operating 443 359 1,239 979
Interest 228 253 685 771
Depreciation 152 162 453 496
General and administrative 84 76 253 222
Total expenses 907 850 2,630 2,468
Net loss $ (74) $ (65) $ (225) $ (144)
Net loss allocated to
general partner $ -- $ (65) $ (47) $ (144)
Net loss allocated to
limited partners (74) -- (178) --
$ (74) $ (65) $ (225) $ (144)
Net loss per limited
partnership assignee unit $ (2.84) $ -- $ (6.82) $ --
Cash distribution per
limited partnership
assignee unit $ -- $ -- $ -- $ 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 nine months
ended September 30, 1996 -- (47) (178) (225)
Partners' capital (deficit)
at September 30, 1996 26,111 $ (228) $ 11,732 $ 11,504
<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>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (225) $ (144)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 478 525
Interest added to note payable principal 517 582
Change in accounts:
Receivables and other assets (240) 13
Accrued interest, accrued expenses and other
liabilities 327 176
Net cash provided by operating activities 857 1,152
Cash flows from investing activities:
Property improvements and replacements (144) (35)
Proceeds from cash investments 2,630 3,004
Purchase of cash investments -- (2,497)
Net cash provided by investing activities 2,486 472
Cash flows from financing activities:
Repayment of note payable principal (782) (1,946)
Cash distributions to partners -- (799)
Net cash used in financing activities (782) (2,745)
Net increase (decrease) in cash and cash equivalents 2,561 (1,121)
Cash and cash equivalents at beginning of period 1,409 2,246
Cash and cash equivalents at end of period $ 3,970 $ 1,125
Supplemental disclosure of noncash investing and
financing activities:
Accrued interest added to note payable
principal $ 872 $ 978
<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"), a California corporation, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and nine month periods ended
September 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.
Fox Partners VIII, a California general partnership, is the general partner.
The general partners of Fox Partners VIII are FCMC 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 Financial Group, Inc. ("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. NPI
Equity is a wholly-owned subsidiary of National Property Investors, Inc.
("NPI"). In connection with these transactions, affiliates of Insignia appointed
new officers and directors of NPI Equity and FCMC.
NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES - (continued)
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were charged to expense in 1996 and 1995:
For the Nine Months Ended
September 30,
1996 1995
Property management fees (included in operating
expenses) $ 112,000 $ 104,000
Reimbursement for services of affiliates (included
in general and administrative and operating
expenses) 138,000 72,000
Partnership management fees (included in general
and administrative expenses) -- 26,000
For the period from January 19, 1996, to September 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.
For the period ended September 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 nine
months ended September 30, 1995.
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 nine
months ended September 30, 1996 and 1995:
Average
Occupancy
Property 1996 1995
Barrington Place Apartments
Westlake, Ohio 96% 98%
Wood View Apartments
Atlanta, Georgia 95% 97%
The Partnership's net loss for the nine months ended September 30, 1996, was
approximately $225,000 versus a net loss of approximately $144,000 for the same
period of 1995. The net loss for the three months ended September 30, 1996, was
approximately $74,000 compared to a net loss of approximately $65,000 for the
three months ended September 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
expense and tax expense at the properties. The increase in maintenance expense
is primarily the result of exterior painting and wood repairs to all of the
buildings at Wood View during the second and third quarters of 1996. Tax
expense increased at both properties in 1996 due to tax rate increases, which
are currently under appeal. The increase in general and administrative expenses
is due to increased expense reimbursements. As noted in "Item 1, Note B -
Transactions with Affiliated Parties," the Partnership reimburses the Managing
General Partner and its affiliates for its costs involved in the management and
administration of all partnership activities. While overall expense
reimbursements have increased during the three and nine month periods ended
September 30, 1996, the recurring expenses subsequent to the transition efforts
to the new administration are expected to more closely approximate historical
levels. The increase in expense reimbursements during the three and nine month
periods ended September 30, 1996, is directly attributable to the combined
transition efforts of the Greenville, South Carolina, and Atlanta, Georgia,
administrative offices during the year-end close, preparation of the 1995 10-K
and tax return (including the limited partner K-1's), filing of the first two
quarterly reports and transition of asset management responsibilities to the new
administration. Partially offsetting these expense increases was a decrease in
interest expense as a result of principal payments made in August 1995 and 1996.
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 market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
At September 30, 1996, the Partnership had unrestricted cash of approximately
$3,970,000 as compared to approximately $1,125,000 at September 30, 1995. Net
cash provided by operating activities decreased primarily due to the increase in
expenses as discussed above, and increases in escrow funding. The increase in
cash provided by investing activities is the result of proceeds from a maturing
investment in 1996. This increase is partially offset by an increase in property
improvements and replacements. The decrease in cash used in financing
activities is partially due to the reduction in the payment of the notes payable
in 1996 compared to 1995. Also contributing to the decrease are cash
distributions of $799,000 made during the first nine 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 September 30,
1996, approximately $4,750,000 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
totaled approximately $799,000, which represents a partial return of capital.
No cash distributions were paid during the nine months ended September 30, 1996.
Cash distributions are expected to remain suspended as a result of the pending
debt maturity which is discussed above.
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 September 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: November 5, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Fox
Strategic Housing Income Partners 1996 Third 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,970
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,174
<DEPRECIATION> 5,637
<TOTAL-ASSETS> 19,865
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 7,878
0
0
<COMMON> 0
<OTHER-SE> 11,504
<TOTAL-LIABILITY-AND-EQUITY> 19,865
<SALES> 0
<TOTAL-REVENUES> 2,405
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 685
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (225)
<EPS-PRIMARY> (6.82)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
