FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
U.S. 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, 1997
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)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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, 1997
Assets
Cash and cash equivalents $ 5,090
Receivables and deposits 220
Other assets 53
Investment properties:
Land $ 3,119
Buildings and related personal property 18,176
21,295
Less accumulated depreciation (6,101) 15,194
$20,557
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 18
Tenant security deposits 65
Accrued taxes 223
Accrued interest 378
Other liabilities 45
Mortgage notes payable 8,321
Partners' Capital (Deficit):
General partner's $ (216)
Limited partners' (26,111 units outstanding) 11,723 11,507
$20,557
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 Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 737 $ 707 $ 1,472 $ 1,421
Other income 96 83 175 151
Total revenues 833 790 1,647 1,572
Expenses:
Operating 352 447 704 796
Interest 237 229 470 457
Depreciation 157 152 311 301
General and administrative 44 83 103 169
Total expenses 790 911 1,588 1,723
Net income (loss) $ 43 $ (121) $ 59 $ (151)
Net income (loss) allocated
to general partner $ 9 $ (17) $ 12 $ (47)
Net income (loss) allocated
to limited partners 34 (104) 47 (104)
$ 43 $ (121) $ 59 $ (151)
Net income (loss) per limited
partnership unit $ 1.30 $(3.98) $ 1.80 $ (3.98)
<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' (deficit) capital
at December 31, 1996 26,111 $ (228) $11,676 $11,448
Net income for the six
months ended June 30, 1997 -- 12 47 59
Partners' (deficit) capital
at June 30, 1997 26,111 $ (216) $11,723 $11,507
<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,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 59 $ (151)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 311 301
Amortization of loan costs 20 14
Interest added to note payable principal 72 69
Change in accounts:
Receivables and deposits (14) (203)
Other assets (6) 9
Accounts payable (11) 64
Tenant security deposit liabilities (3) 2
Accrued taxes 63 54
Accrued interest payable 378 374
Other liabilities -- 54
Net cash provided by operating activities 869 587
Cash flows from investing activities:
Property improvements and replacements (94) (111)
Proceeds from cash investments -- 2,630
Net cash (used in) provided by
investing activities (94) 2,519
Cash flows from financing activities: -- --
Net increase in cash and cash equivalents 775 3,106
Cash and cash equivalents at beginning of period 4,315 1,409
Cash and cash equivalents at end of period $ 5,090 $4,515
Supplemental disclosure of non cash investing and
financing activities:
Beginning accrued interest added to note payable
principal $ 358 $ 356
<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 six month periods ended June 30,
1997, are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1997. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-KSB for the year ended December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 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 all of the
issued and outstanding shares of stock of FCMC, NPI Equity Investments II, Inc.
("NPI Equity"), the managing general partner of FRI, and National Property
Investors, Inc. ("NPI"). In connection with these transactions, affiliates of
Insignia appointed new officers and directors of NPI Equity and FCMC.
The following transactions with affiliates of Insignia, NPI, and affiliates of
NPI were incurred during the six month periods ended June 30, 1997 and 1996 (in
thousands):
Six Months Ended June 30,
1997 1996
Property management fees (included in operating
expenses) $ 76 $ 73
Reimbursement for services of affiliates (included
in general and administrative and operating
expenses) 35 96
For the period from January 19, 1996, to June 30, 1997, 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.
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 each of
the six months ended June 30, 1997 and 1996:
Average
Occupancy
Property 1997 1996
Barrington Place Apartments
Westlake, Ohio 95% 95%
Wood View Apartments
Atlanta, Georgia 93% 95%
The Partnership realized net income for the six months ended June 30, 1997 of
approximately $59,000 compared to a net loss of approximately $151,000 for the
six months ended June 30, 1996. The Partnership's net income for the three
months ended June 30, 1997 was approximately $43,000 compared to a net loss of
approximately $121,000 for the three months ended June 30, 1996. The increase
in net income is primarily attributable to decreased operating expenses.
Included in operating expense for the six months ended June 30, 1997 is
approximately $23,000 of major repairs and maintenance comprised primarily of
major landscaping. For the six months ended June 30, 1996, approximately
$135,000 of major repairs and maintenance comprised primarily of an exterior
painting project of approximately $97,000 at Woodview in the second quarter of
1996. In addition, general and administrative expenses decreased due to a
decrease in expense reimbursements paid to affiliates of the Managing General
Partners. This decrease is directly related to the costs incurred in connection
with the transition and relocation of the administration offices during 1996.
Increased other income also contributed to the increased net income, primarily
due to increased interest income. Interest income increased due to higher
average cash balances in the six months ended June 30, 1997, compared to the
corresponding period in 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 June 30, 1997, the Partnership held cash and cash equivalents of
approximately $5,090,000, compared to approximately $4,515,000 at June 30, 1996.
Net cash provided by operations increased primarily due to the decreases in
operating and general and administrative expenses as discussed above. The
decrease in net cash provided by investing activities is the result of proceeds
from a maturing cash investment 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, 1997,
approximately $5,193,000 in accrued interest has been added to the principal of
this note. The Partnership is or was 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). In August 1997, the Partnership paid
approximately $938,000 of principal.
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 various 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,
capital expenditure requirements, property sales, refinancings, and the
availability of cash reserves. In addition, distributions may be limited by the
debt repayments discussed above. No cash distributions were paid during the six
months ended June 30, 1997 or 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 June 30, 1997.
SIGNATURES
In accordance with 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
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
Vice President and Treasurer
Date: August 7, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Fox
Strategic Housing Income Partners 1997 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-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 5,090
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 21,295
<DEPRECIATION> 6,101
<TOTAL-ASSETS> 20,557
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 8,321
0
0
<COMMON> 0
<OTHER-SE> 11,507
<TOTAL-LIABILITY-AND-EQUITY> 20,557
<SALES> 0
<TOTAL-REVENUES> 1,647
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 470
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59
<EPS-PRIMARY> 1.80<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
