UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[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: 0-15837
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of Registrant as specified in its charter)
California 33-0202964
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 South El Camino Real, Suite 1100
San Mateo, California 94402
(Address of principal executive offices) (Zip Code)
(415) 343-9300
(Registrant's telephone number)
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
Total number of units outstanding as of June 30, 1997: 35,727,572
Page 1 of 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets
(in thousands, except units outstanding)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Assets
Investments in real estate:
Rental property, net of accumulated depreciation
of $4,199 and $6,183 at June 30, 1997 and
December 31, 1996, respectively $ 12,201 $ 12,397
Rental property held for sale, net --- 3,917
Rental property held pending foreclosure --- 3,375
-------------- --------------
Net real estate investments 12,201 19,689
Cash and cash equivalents 2,368 1,121
Note receivable 2,000 2,000
Accounts receivable, net 83 119
Deferred financing costs and other fees,
net of accumulated amortization of $936
and $1,219 at June 30, 1997 and
December 31, 1996, respectively 383 435
Other assets 140 125
-------------- --------------
Total assets $ 17,175 $ 23,489
============== ==============
</TABLE>
- continued -
Page 2 of 16
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Balance Sheets - continued
(in thousands, except units outstanding)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Liabilities and Partners' Equity (Deficit)
Liabilities:
Notes payable - secured $ 9,150 $ 16,325
Participating notes:
Notes issued and outstanding 4,591 4,591
Accrued interest, thereon 5,400 5,125
Less: Notes held in trust (3,288) (3,288)
Accrued interest, thereon (3,843) (3,650)
-------------- --------------
Net due to noteholders 2,860 2,778
Accounts payable and accrued expenses 198 448
Interest payable 755 769
Other liabilities 73 65
-------------- --------------
Total liabilities 13,036 20,385
-------------- --------------
Partners' equity (deficit):
General Partner (386) (396)
Limited Partners, 35,727,572 equity units
outstanding at June 30, 1997 and
December 31, 1996 4,525 3,500
-------------- --------------
Total partners' equity 4,139 3,104
-------------- --------------
Total liabilities and partners' equity $ 17,175 $ 23,489
============== ==============
</TABLE>
See accompanying notes to financial statements.
Page 3 of 16
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations
(in thousands, except per unit amounts and units outstanding)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------ ----------------------------
1997 1996 1997 1996
------------ ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue:
Rental income $ 1,425 $ 1,849 $ 3,448 $ 3,838
Interest and other income 122 112 245 221
Gain on foreclosure 174 --- 174 ---
Gain on sale of property 556 --- 556 ---
----------- ----------- ------------- -------------
Total revenue 2,277 1,961 4,423 4,059
----------- ----------- ------------- -------------
Expenses:
Operating, including $789 and $935
paid to affiliates during the six months
ended June 30, 1997 and 1996, respectively 870 1,231 2,019 2,363
Interest 372 424 824 848
Depreciation and amortization 153 318 337 621
General and administrative, including
$143 and $140 paid to affiliates in the
six months ended June 30, 1997 and
1996, respectively 106 117 208 220
----------- ----------- ------------- -------------
Total expenses 1,501 2,090 3,388 4,052
----------- ----------- ------------- -------------
Income (loss) before extraordinary item 776 (129) 1,035 7
Extraordinary item:
Gain (loss) from Participating Notes
purchased --- (59) --- 511
----------- ----------- ------------- -------------
Net income (loss) $ 776 $ (188) $ 1,035 $ 518
=========== =========== ============= =============
</TABLE>
- continued -
Page 4 of 16
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Operations - continued
(in thousands, except per unit amounts and units outstanding)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------------------- --------------------------
1997 1996 1997 1996
-------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Net income (loss) per equity unit:
Before extraordinary item $ 0.02 $ (0.01) $ 0.03 $ ---
Extraordinary item --- --- --- 0.01
-------------- ------------ -------------- -------------
Total $ 0.02 $ (0.01) $ 0.03 $ 0.01
============== ============ ============== =============
Weighted average number of equity units
outstanding during the period used to
compute net income (loss)per equity unit 35,727,572 35,733,822 35,727,572 35,737,572
============== ============ ============== =============
</TABLE>
See accompanying notes to financial statements.
Page 5 of 16
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Partners' Equity (Deficit)
For the six months ended June 30, 1997 and 1996
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at December 31, 1996 $ (396) $ 3,500 $ 3,104
Net income 10 1,025 1,035
------------- ------------ -------------
Balance at June 30, 1997 $ (386) $ 4,525 $ 4,139
============= ============ =============
Balance at December 31, 1995 $ (397) $ 3,390 $ 2,993
Net income 5 513 518
------------- ------------ -------------
Balance at June 30, 1996 $ (392) $ 3,903 $ 3,511
============= ============ =============
</TABLE>
See accompanying notes to financial statements.
Page 6 of 16
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,035 $ 518
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 337 621
Amortization of loan fees, included in interest expense 58 8
Gain on Participating Notes purchased --- (511)
Gain on foreclosure (174) ---
Gain on sale of property (556) ---
Changes in certain assets and liabilities:
Accounts receivable 36 (9)
Deferred financing costs and other fees (160) (20)
Other assets (23) (14)
Accounts payable and accrued expenses (226) 36
Interest payable 146 119
Other liabilities 8 1
---------- ----------
Net cash provided by operating activities 481 687
---------- ----------
Cash flows from investing activities:
Additions to real estate (119) (176)
---------- ----------
Cash flows from financing activities:
Net proceeds from note payable refinancing 42 ---
Notes payable principal payments (58) (52)
Borrowings on secured notes payable --- 1,100
Buy-back of Participating Notes-discounted --- (1,314)
Net proceeds from sale of property 901 ---
---------- ----------
Net cash provided by (used for) financing activities 885 (266)
---------- ----------
Net increase in cash and cash equivalents 1,247 245
Cash and cash equivalents at beginning of period 1,121 591
----------- ---------
Cash and cash equivalents at end of period $ 2,368 $ 836
=========== =========
</TABLE>
- continued -
Page 7 of 16
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Statements of Cash Flows - continued
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1997 1996
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid for interest $ 579 $ 1,075
=========== ===========
Supplemental disclosure of non-cash transactions:
Reduction of accrued interest payable resulting
from purchase of Participating Notes at discount $ --- $ 850
=========== ===========
Supplemental disclosure of non-cash refinancing:
New financing $ 4,300 $ ---
Original financing paid-off in escrow (4,258) ---
----------- -----------
Net loan proceeds $ 42 $ ---
=========== ===========
Supplemental disclosure of property foreclosure:
Write-off assets:
Basis in investment in real estate $ (3,376) $ ---
Unamortized deferred costs (12) ---
Other assets (8) ---
Write-off liabilities:
Note payable balance 3,468 ---
Accrued interest expense 78 ---
Other accrued expenses 24 ---
----------- -----------
Net gain on foreclosure $ 174 $ ---
=========== ===========
Supplemental disclosure of property sale:
Sales price $ 4,900 $ ---
Note payable paid-off in escrow (3,691) ---
Costs of sale (308) ---
----------- -----------
Proceeds from the sale $ 901 $ ---
=========== ===========
Sales price, net of costs of sale $ 4,592 $ ---
Less: Basis in investment in real estate (3,917) ---
Less: Unamortized deferred financing costs and other fees (119) ---
----------- -----------
Gain on sale of property $ 556 $ ---
=========== ===========
</TABLE>
See accompanying notes to financial statements.
Page 8 of 16
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
June 30, 1997
(Unaudited)
Note 1. THE PARTNERSHIP
In the opinion of Glenborough Corporation, the managing general partner, the
accompanying unaudited financial statements contain all adjustments (consisting
of only normal accruals) necessary to present fairly the financial position of
Outlook Income Fund 9, a California Limited Partnership, (the "Partnership") as
of June 30, 1997 and December 31, 1996, and the related statements of operations
for the three and six months ended June 30, 1997 and 1996, and changes in
partners' equity (deficit) and cash flows for the six months ended June 30, 1997
and 1996.
Management intends to present a plan of Partnership liquidation for an investor
vote in 1997. The carrying value of the investments in real estate at June 30,
1997 does not purport to represent the ultimate sales price the Partnership will
realize from the disposition of these assets nor are the amounts reflected in
the accompanying financial statements intended to represent the ultimate amount
to be distributed to partners if the plan is adopted.
Basis of Accounting - The accompanying financial statements have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles under the presumption that the Partnership will continue
as a going concern. As discussed above, management intends to present a plan of
Partnership liquidation for an investor vote in 1997. However, the liquidation
proceeds and the timing thereof are not currently estimable, nor is approval of
such plan assured. Accordingly, the accompanying financial statements do not
provide for any adjustments relating to the aforementioned plan of liquidation
if it is adopted.
Reclassifications - Certain 1996 balances have been reclassified to conform with
the current year presentation.
Note 2. REFERENCE TO 1996 AUDITED FINANCIAL STATEMENTS
----------------------------------------------
These unaudited financial statements should be read in conjunction with the
Notes to Financial Statements included in the 1996 audited financial statements.
Note 3. TRANSACTIONS WITH AFFILIATES
In accordance with the Limited Partnership Agreement, Glenborough Corporation
and Glenborough Hotel Group (collectively "Glenborough") are compensated for
management services. Included in operating expenses for the six months ended
June 30, 1997 and 1996, are the following amounts paid to Glenborough:
Page 9 of 16
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
June 30, 1997
(Unaudited)
1997 1996
------------- -------------
Property management fees $ 71,000 $ 70,000
Property salaries (reimbursed) 77,000 68,000
Hotel management fees 110,000 128,000
Hotel salaries (reimbursed) 531,000 669,000
------------- -------------
$ 789,000 $ 935,000
============= =============
The Partnership also reimburses Glenborough for expenses incurred for services
provided to the Partnership such as accounting, investor services, data
processing, duplicating and office supplies, legal and administrative services
and the actual costs of goods and materials used for or by the Partnership.
Glenborough was reimbursed $143,000 and $140,000 by the Partnership for such
expenses during the six months ended June 30, 1997 and 1996, respectively. Such
amounts are included in general and administrative expenses in the accompanying
statements of operations.
As of June 30, 1997, GPA Ltd., a partnership with the same general partner as
the Partnership, purchased 1,642,746 limited partnership units (a 4% interest)
from an unaffiliated limited partner for $124,000.
In accordance with the Partnership Agreement, the general partner or its
affiliates are entitled to a property disposition fee equal to 3% of the gross
sales price of the property. Glenborough Corporation was paid $147,000 in 1997
associated with the sale of the Lake Mead Estates Apartments. This fee is
included in the net gain on sale of property.
Note 4. INVESTMENTS IN REAL ESTATE
As of June 30, 1997, the Partnership owned the following properties: Bryant Lake
Business Center: Phases I, II and III (a 171,743 square foot commercial center
in Eden Prairie, Minnesota), and Country Suites by Carlson Tempe (a 139 suite
hotel in Tempe, Arizona).
The Partnership discontinued debt service payments effective January 1997 on the
Country Suites by Carlson Memphis property due to the continued insufficient
funds generated from operations to cover debt service. On April 4, 1997, the
lender foreclosed upon the property. At the time of the foreclosure, the
outstanding loan balance secured by the property (including accrued interest)
was $3,546,000 and the net assets approximated $3,372,000. The Partnership
recognized a gain on foreclosure of $174,000 which is included in the 1997
statement of operations.
Page 10 of 16
<PAGE>
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
Notes to Financial Statements
June 30, 1997
(Unaudited)
On June 18, 1997, the Partnership sold Lake Mead Estates Apartments to an
unaffiliated third party for $4,900,000. The proceeds from the sale were used to
payoff the loan secured by the property of approximately $3,700,000 and
settlement and other closing costs, including a $147,000 transaction fee to the
general partner. The remaining net proceeds of $863,000 were added to the
Partnership's reserves. The sale was an all cash sale and the Partnership has no
continuing obligation or involvement with the property. The Partnership
recognized a $556,000 gain on the sale of the property.
Note 4. NOTES PAYABLE
On April 24, 1997, the Partnership refinanced two loans with a total outstanding
balance of $4,258,000 into a $4,300,000 loan with an unaffiliated third party.
The loan is secured by the Country Suites by Carlson-Tempe hotel property, bears
interest at a rate of prime plus one (9.5% at June 30, 1997) and requires
monthly interest only payments until March 31, 1999, at which time all principal
and interest will be due and payable.
Page 11 of 16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
INTRODUCTION
The following discussion addresses the Partnership's financial condition at June
30, 1997 and its results of operations for the six months ended June 30, 1997
and 1996. This information should be read in conjunction with the Partnership's
audited December 31, 1996 Financial Statements, notes thereto and other
information contained elsewhere in this report.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Partnership had cash and cash equivalents of $2,368,000.
The remainder of the Partnership's assets consist primarily of its investments
in real estate which total $12,201,000 at June 30, 1997.
As of June 30, 1997, the Partnership owned the following properties: Bryant Lake
Business Center: Phases I, II and III (a 171,743 square foot commercial center
in Eden Prairie, Minnesota), and Country Suites by Carlson Tempe (a 139 suite
hotel in Tempe, Arizona).
The Partnership discontinued debt service payments effective January 1997 on the
Country Suites by Carlson Memphis property due to the continued insufficient
funds generated from operations to cover debt service. On April 4, 1997, the
lender foreclosed upon the property. At the time of the foreclosure, the
outstanding loan balance secured by the property (including accrued interest)
was $3,546,000 and the net assets approximated $3,372,000. The Partnership
recognized a gain on foreclosure of $174,000 which is included in the 1997
statement of operations.
On June 18, 1997, the Partnership sold Lake Mead Estates Apartments to an
unaffiliated third party for $4,900,000. The proceeds from the sale were used to
payoff the loan secured by the property of approximately $3,700,000 and
settlement and other closing costs, including a $147,000 transaction fee to the
general partner. The remaining net proceeds of $863,000 were added to the
Partnership's reserves. The sale was an all cash sale and the Partnership has no
continuing obligation or involvement with the property. The Partnership
recognized a $556,000 gain on the sale of the property.
On April 24, 1997, the Partnership refinanced two loans with a total outstanding
balance of $4,258,000 into a $4,300,000 loan with an unaffiliated third party.
The loan is secured by the Country Suites by Carlson-Tempe hotel property, bears
interest at a rate of prime plus one (9.5% at June 30, 1997) and requires
monthly interest only payments until March 31, 1999, at which time all principal
and interest will be due and payable.
Other assets increased $15,000, or 12%, from December 31, 1996 to June 30, 1997
primarily due to additional impound payments made in accordance with the loan
obtained on April 24, 1997.
Accounts payable and accrued expenses decreased $250,000, or 56%, from December
31, 1996 to June 30, 1997 primarily due to the seasonality of the hotel business
and the aforementioned foreclosure of the Memphis hotel property.
Page 12 of 16
<PAGE>
Management intends to present a plan of liquidation for an investor vote in
1997. The carrying value of the investments in real estate at June 30, 1997 does
not purport to represent the ultimate sales price the Partnership will realize
from the disposition of these assets nor are the amounts reflected in the
accompanying financial statements intended to represent the ultimate amount to
be distributed to partners if the plan is adopted.
Management believes that the Partnership's available cash together with cash
generated from operations and net proceeds upon the eventual sales of the
properties will be sufficient to finance the cash requirements of the
Partnership.
RESULTS OF OPERATIONS
Rental income decreased $390,000, or 10%, for the six months ended June 30, 1997
compared to the same period in 1996. The decrease is primarily the result of the
April 1997 foreclosure on the Country Suites by Carlson Memphis property and the
June 1997 sale of the Lake Mead Estates Apartments which accounted for decreases
of $546,000 and $34,000, respectively. These decreases are partially offset by
an increase in revenues at the Tempe hotel property of $202,000 resulting from
an increase in the average daily room rate. The following is a comparison of
occupancy (and average daily room rates for the hotel) of the properties owned
by the Partnership as of June 30, 1997 and 1996:
Occupancy Level Percentage
1997 1996
Bryant Lake Phases I and II 91% 100%
Bryant Lake Phase III 94% 100%
Country Suites - Tempe 91% 90%
Average Daily Room Rate $76.49 $67.68
Interest and other income increased $24,000 or 11% when comparing the six months
ended June 30, 1997 to the same six months in 1996 primarily due to $35,000
received in 1997 in connection with a settlement from a former tenant of the
Bryant Lake Phase I property. Additionally, interest income increased $7,000 in
1997 compared to 1996 as a result of higher invested cash balances in 1997;
these increases were partially offset by a decrease in other hotel revenue as a
result of the April 4, 1997 foreclosure on the Country Suites by Carlson -
Memphis property.
As discussed in Note 4 to the Notes to Financial Statements, the foreclosure of
Country Suites by Carlson Memphis property resulted in a gain of $174,000 and is
included on the Partnership's 1997 statement of operations.
As discussed in Note 4 to the Notes to Financial Statements, the sale of Lake
Mead Estates Apartments resulted in a gain of $556,000 and is included on the
Partnership's 1997 statement of operations.
Operating expenses decreased $344,000, or 15%, for the six months ended June 30,
1997 compared to the same period in 1996 primarily as a result of the April 1997
foreclosure on the Country Suites by Carlson - Memphis property which accounted
for a decrease of $347,000.
Page 13 of 16
<PAGE>
The decrease in depreciation and amortization of $284,000, or 46%, from June 30,
1996 to June 30, 1997 is a direct result of ceasing depreciation, effective
January 1, 1997, on the Partnership's properties that were classified as held
for sale and held pending foreclosure.
General and administrative expenses decreased $12,000, or 5%, for the six-month
period ended June 30, 1997 compared to the same period in 1996 primarily due to
a one-time payment of professional fees in 1996 rendered in connection with
appraisals of the Partnership's properties.
Page 14 of 16
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
#27 - Financial Data Schedule
(b) Reports on Form 8-K.
None.
Page 15 of 16
<PAGE>
SIGNATURES
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.
OUTLOOK INCOME FUND 9,
A CALIFORNIA LIMITED PARTNERSHIP
By: Glenborough Corporation,
a California corporation
Its Managing General Partner
Date: August 14, 1997 By: /s/ Terri Garnick
-----------------------
Terri Garnick
Chief Financial Officer
Page 16 of 16
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000801449
<NAME> Outlook Income Fund 9
<MULTIPLIER> 1,000
<CURRENCY> u.s. dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-01-1997
<EXCHANGE-RATE> 1.000
<CASH> 2,368
<SECURITIES> 0
<RECEIVABLES> 2089
<ALLOWANCES> (6)
<INVENTORY> 0
<CURRENT-ASSETS> 2,591
<PP&E> 16,401
<DEPRECIATION> (4,200)
<TOTAL-ASSETS> 17,175
<CURRENT-LIABILITIES> 271
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,139
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</TABLE>
