SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________________ to ________________
Commission File No. 0-16456
Development Partners II
(A Massachusetts Limited Partnership)
(Exact name of registrant as specified in its charter)
Massachusetts 04-2946004
(State or other jurisdiction of (I.R.S.
Employer incorporation or organization)
Identification No.)
5110 Langdale Way, Colorado Springs, CO 80906
(Address of principal executive offices) (Zip Code)
(719) 527-0544
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interests
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 and 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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting securities held by non-affiliates: Not
applicable, since securities are not actively traded on any exchange.
Documents incorporated by reference: Portions of the Prospectus of Registrant
dated February 13, 1987 are incorporated by reference into Part III
The Exhibit Index is located on page __
<PAGE>
PART I
ITEM 1. BUSINESS
This form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
Development Partners II (A Massachusetts Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Development Partners II, was formed on
January 9, 1987. The General Partners are Stephen B. Boyle and GP L'Auberge
Communities, L.P., a California Limited Partnership (formerly Berry and Boyle
Management).
The primary business of the Partnership is to operate and ultimately dispose of
a diversified portfolio of income-producing residential real properties through
its joint venture interest in such properties. Descriptions of such properties
are included below in Item 2. Properties as well as in Notes 5 and 6 of the
Notes to the Consolidated Financial Statements included in this report and
incorporated herein by reference thereto.
From time to time the Partnership expects to sell its properties taking into
consideration such factors as the amount of appreciation in value, if any, to be
realized, the possible risks of continued ownership and the anticipated
advantages to be gained for the partners. Proceeds from the sale, financing or
refinancing of the properties will not be reinvested by the Partnership or its
joint ventures, but will be distributed to the partners, so that the Partnership
will, in effect, be self-liquidating.
The success of the Partnership will depend upon factors which are difficult to
predict and many of which are beyond the control of the Partnership. Such
factors include, among others, general economic and real estate market
conditions, both on a national basis and in those areas where the Partnership's
investments are located, competitive factors, the availability and cost of
borrowed funds, real estate tax rates, federal and state income tax laws,
operating expenses (including maintenance and insurance), energy costs,
government regulations, and potential liability under and changes in
environmental and other laws, as well as the successful management of the
properties.
On-site management of two of its properties, Casabella and Mariposa, is
currently provided by the developer/joint venture partner. On-site management of
L'Auberge Cheyenne Creek ("Cheyenne Creek") (formerly The Pines on Cheyenne
Creek) and L'Auberge Canyon View East ("Canyon View East") is currently provided
by an affiliate of the General Partners. The terms of such property management
services between the Partnership and property managers are embodied in a written
management agreement with respect to each Property. The property manager in each
case receives management fees which are competitive with those obtainable in
arm's-length negotiations with independent parties providing comparable services
in the localities in which the properties are located. Such fees will not exceed
5% of the gross revenues from each property. It is the responsibility of the
General Partners to select or approve property managers and to supervise their
performance. Property managers are responsible for on-site operations and
maintenance, generation and collection of rental income, and payment of
operating expenses.
The difference between rental income and expenses related to operations,
including items such as local taxes and assessments, utilities, insurance
premiums, maintenance, repairs and improvements (and reserves therefor),
bookkeeping and payroll expenses, legal and accounting fees, property management
fees and other expenses incurred, constitute the properties' operating cash
flow. The Partnership's internal administrative expenses are paid out of the
Partnership's share of such cash flow from the various properties and joint
ventures and from interest income which the Partnership earns on its short-term
investments.
The Partnership's investments in real estate are also subject to certain
additional risks including, but not limited to, (i) competition from existing
and future projects held by other owners in the areas of the Partnership's
properties, (ii) possible reduction in rental income due to an inability to
maintain high occupancy levels, (iii) adverse changes in mortgage interest
rates, (iv) possible adverse changes in general economic conditions and adverse
local conditions, such as competitive overbuilding, or a decrease in employment
or adverse changes in real estate zoning laws, (v) the possible future adoption
of rent control legislation which would not permit the full amount of increased
costs to be passed on to tenants in the form of rent increases, and (vi) other
circumstances over which the Partnership may have little or no control.
The Partnership's investments are subject to competition in the rental, lease
and sale of similar types of properties in the localities in which the
Partnership's real property investments are located. Furthermore, the General
Partners of the Partnership are affiliated with other partnerships owning
similar properties in the vicinity in which the Partnership's properties are
located. In addition, other limited partnerships may be formed by affiliates of
the General Partners which will compete with the Partnership.
The Partnership considers itself to be engaged in only one industry segment,
real estate investment.
The Partnership has no employees. Accounting and other administrative functions
are performed by employees of an affiliate of the General Partners.
ITEM 2. PROPERTIES
The Partnership owns a majority joint venture interest in three joint ventures
(the "Joint Ventures"): (1) the Canyon View East Joint Venture, an Arizona joint
venture that owns and operates Canyon View East, a 96-unit multifamily rental
property in Tucson, Arizona, subject to first mortgage financing in the original
principal amount of $4,000,000; (2) the Pines on Cheyenne Creek Joint Venture, a
Colorado joint venture that owns and operates Cheyenne Creek, a 108-unit
multifamily rental property in Colorado Springs, Colorado, subject to first
mortgage financing in the original principal amount of $3,252,000; and, (3) the
Mariposa Joint Venture, an Arizona joint venture that owns and operates
Mariposa, an 84-unit multifamily rental property in Scottsdale, Arizona, subject
to first mortgage financing in the original principal amount of $2,940,000. The
Partnership also owns a minority interest in Casabella Associates, which in
turn, owns a majority interest in the Casabella Joint Venture, an Arizona joint
venture which owns and operates Casabella, a 154-unit multifamily rental
property in Scottsdale, Arizona, subject to first mortgage financing in the
original amount of $7,320,000. With regard to the proposed termination of the
Mariposa Joint Venture and Casabella Joint Venture see Note 11 of Notes to
Consolidated Financial Statements.
Canyon View East
On March 8, 1989, the Partnership acquired a majority interest in a joint
venture which owns and operates a 96-unit residential property located in
Tucson, Arizona, known as Canyon View East. The Partnership has been designated
as the managing venturer of the joint venture. In accordance with the terms of
the purchase agreement and of the joint venture agreement, through December 31,
1995, the Partnership has contributed total capital of $4,260,590 to the joint
venture which was used to repay a portion of the construction loan from a third
party lender, to pay costs related to the permanent loan refinancing, to cover
operating deficits incurred during the lease up period and to fund certain
capital improvements. The Partnership also incurred $523,022 of property
acquisition and organization costs which were subsequently treated as a capital
contribution to the joint venture.
The property was 89% occupied as of February 29, 1996, compared to 91%
approximately one year ago. At December 1995 and 1994, the market rents for the
various unit types were as follows:
Unit Type .............................. 1995 1994
- ------------------------------------------------ ---- ----
Two bedroom two bath ........................... $865 $865
Three bedroom two bath ......................... 980 980
Cheyenne Creek
On September 26, 1988, the Partnership acquired a majority interest in the Pines
on Cheyenne Creek Joint Venture that owns a 108-unit residential property in
Colorado Springs, Colorado known as Cheyenne Creek. The other joint venture
partners are the developer of the property and a limited partnership affiliated
with the General Partners (the "Affiliated Partnership"). The Partnership and
the Affiliated Partnership act as co-managing venturers of the Pines on Cheyenne
Creek Joint Venture. In accordance with the terms of the purchase agreement and
the joint venture agreement, through December 31, 1995, the Partnership has
contributed total capital of $4,693,004 to the Pines on Cheyenne Creek Joint
Venture which was used to repay a portion of the construction loan from a third
party lender, to pay costs related to the refinancing of the permanent loan, to
cover operating deficits incurred during the lease up period and to fund certain
capital improvements ($257,844 of this amount was funded in 1995). The
Partnership also incurred $470,870 of property acquisition and organization
costs which were subsequently treated as a capital contribution to the Cheyenne
Creek Joint Venture. The Affiliated Partnership has made proportionate capital
contributions for the same purposes as outlined above.
As of February 29, 1996, the property was 80% occupied, compared to 90%
approximately one year ago. At December 1995 and 1994, the market rents for the
various unit types were as follows:
Unit Type ............................ 1995 1994
- ---------------------------------------------- ---- ----
One bedroom den .............................. $785 $775
Two bedroom two bath ......................... 885 875
Mariposa
On February 3, 1989, the Partnership acquired a majority interest in the
Mariposa Joint Venture which owns and operates an 84-unit multifamily rental
property located in Phoenix, Arizona known as Mariposa. The Partnership has been
designated as the managing venturer of the Mariposa Joint Venture. In accordance
with the terms of the purchase agreement and of the joint venture agreement,
through December 31, 1995, the Partnership has contributed total capital of
$2,707,554 to the Mariposa Joint Venture which was used to repay a portion of
the construction loan from a third party lender, to pay costs related to the
refinancing of the permanent loan and to fund certain capital improvements
($14,035 of this amount was funded in 1995). The Partnership also incurred
$430,474 of property acquisition and organization costs which were subsequently
treated as a capital contribution to the Mariposa Joint Venture.
The property was 99% occupied as of February 29, 1996, compared to 96%
approximately one year ago. At December 1995 and 1994, the market rents for the
various unit types were as follows:
Unit Type ............................ 1995 1994
- ---------------------------------------------- ------ ------
One bedroom one bath ......................... $ 715 $ 705
Two bedroom two bath ......................... 855 845
Two bedroom two bath den ..................... 1,045 1,025
Casabella
On September 28, 1990, the Partnership purchased an approximate 38% interest in
Casabella Associates ("Associates"), a general partnership consisting of the
Partnership and two other affiliated partnerships. Under the terms of the
purchase, the Partnership contributed $1,800,000 to Associates.
Associates has been designated as the managing joint venture partner of the
Casabella Joint Venture and will control all decisions regarding the operation
and sale of the property. In addition to its $1,800,000 contribution to
Associates, the Partnership incurred $268,861 of acquisition expenses.
As of February 29, 1996, the property was 98% occupied, compared to 97%
approximately one year ago. At December 31, 1995 and 1994, the market rents for
the various unit types were as follows:
Unit Type ............................. 1995 1994
- ---------------------------------------------- ------ ------
One bedroom two bath w/den ................... $ 820 $ 790
Two bedroom two bath ......................... 943 915
Two bedroom two bath w/den ................... 1,170 1,118
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Partnership or any
joint venture in which it owns an interest is a party or of which any of the
properties is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The transfer of Units is subject to certain limitations contained in the
Partnership Agreement. There is no public market for the Units and it is not
anticipated that any such public market will develop.
The number of holders of Units as of December 31, 1995 was 1,934.
Distributions are made to the Partners on a quarterly basis based upon Net Cash
from Operations, as calculated under Section 10 of the Partnership Agreement.
Total cash distributions to the Limited Partners for 1995 and 1994 were paid as
follows:
Calendar ......................... Date of
Quarter Ended ....................... Payment Amount
- ------------------------------------- ----------------- ------
March 31, 1994 ...................... May 15, 1994 92,408
June 30, 1994 ....................... August 15, 1994 92,408
September 30, 1994 .................. November 15, 1994 92,408
December 31, 1994 ................... February 15, 1995 92,408
March 31, 1995 ...................... May 15, 1995 92,408
June 30, 1995 ....................... August 15, 1995 92,408
September 30, 1995 .................. November 15, 1995 60,989
December 31, 1995 ................... February 15, 1996 46,204
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
Year Ended
-------------------------------------------------------------------------
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
<S> <C> <C> <C> <C> <C>
Rental income $2,668,640 $2,616,008 $2,448,937 $2,272,456 $2,065,112
Net income (loss) ($105,066) ($83,198) ($365,788) ($576,469) ($796,794)
Net income (loss) allocated to Partners:
Limited Partners - Per Unit
Aggregate 36,963 Units ($2.81) ($2.23) ($9.80) ($15.44) ($21.34)
General Partners ($1,051) ($832) ($3,658) ($5,765) ($7,968)
Net cash provided by operations $399,317 $345,975 $411,498 $307,900 $72,717
Cash distributions to Partners:
Limited Partners:
Aggregate 36,963 Units $9.15 $13.50 $9.00 $4.25 $2.10
General Partners $6,902 $10,184 $6,789 $3,206 $1,584
Total assets $20,996,900 $21,434,192 $22,138,698 $22,886,318 $23,675,919
Long term obligations $9,991,674 $10,083,673 $10,166,105 $10,192,000 $10,192,000
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Management's expectations regarding future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
Liquidity; Capital Resources
The Partnership admitted 1,918 investors who purchased a total of 36,963 Units
aggregating $18,481,500. These offering proceeds, net of organizational and
offering costs of $2,772,225, provided $15,709,275 of net proceeds to be used
for the purchase of income-producing residential properties, including related
fees and expenses, and working capital reserves. The Partnership has expended
$14,689,033 to (i) acquire its interests in the Pines on Cheyenne Creek Joint
Venture, the Mariposa Joint Venture, the Canyon View East Joint Venture and the
Casabella Joint Ventures, (ii) to pay acquisition expenses, including
acquisition fees to the General Partners, (iii) pay costs associated with the
refinancing of the permanent loans for The Pines, Mariposa and Canyon View East
and (iv) to cover operating deficits incurred during the initial lease up
period. The remaining net proceeds of $1,020,242 were used to establish working
capital reserves sufficient to meet the future needs of the Partnership,
including contributions that may be required at the various joint ventures, as
determined by the General Partners. As of December 31, 1995, $465,342
cumulatively was contributed to the joint ventures for this purpose ($271,879 of
which was contributed in 1995).
In addition to the proceeds generated from the public offering, the Partnership
has utilized external sources of financing at the joint venture level to
purchase properties. The Partnership Agreement limits the aggregate mortgage
indebtedness which may be incurred in connection with the acquisition of
Partnership properties to 80% of the purchase price of such properties.
The working capital reserves of the Partnership consisted of cash and cash
equivalents and short-term investments. Together these amounts provide the
Partnership with the necessary liquidity to carry on its day-to-day operations
and to make necessary contributions to the various joint ventures. In 1995, the
aggregate net decrease in working capital reserves was $409,232. The decrease
resulted primarily from cash provided by operations of $399,317, contributions
from the minority interest of $58,034 and distributions of $70,472 from
Casabella, offset by $488,268 of fixed asset additions, distributions to
partners of $345,113, distributions to the minority interest of $15,490 and
principal payments on mortgage notes payable of $91,999.
In 1994, the aggregate net decrease in working capital reserves was $176,217.
The decrease resulted primarily from cash provided by operations of $345,975 and
distributions of $141,710 from Casabella, offset by $34,459 of fixed asset
additions, distributions to partners of $509,184, distributions to the minority
interest of $23,050 and principal payments on mortgage notes payable of $82,432.
In 1993, the aggregate net increase in working capital reserves was $53,602. The
increase resulted primarily from cash provided by operations of $411,498 and
distributions of $90,005 from Casabella, offset by $42,623 of fixed asset
additions, distributions to partners of $339,456, distributions to the minority
interest of $44,441 and principal payments mortgage notes payable of $25,895.
The Partnership's future ability to generate cash adequate to meet its needs is
dependent primarily on the successful operations of its real estate investments.
Such ability is also dependent upon the future availability of bank borrowings,
and upon the future refinancing and sale of the Partnership's real estate
investments and the collection of any mortgage receivables which may result from
such sales. These sources of liquidity will be used by the Partnership for
payment of expenses related to real estate operations, debt service and
professional and management fees. Net Cash From Operations and Net Proceeds, if
any, as defined in the Partnership Agreement, will then be available for
distribution to the Partners in accordance with Section 10 of the Partnership
Agreement. The General Partners believe that the current working capital
reserves together with projected cash flows for 1996 are adequate to meet the
Partnership's cash needs in the coming year. With regard to certain balloon
payments on existing first mortgage debt on the Partnership's properties, see
Note 7 of Notes to Consolidated Financial Statements.
Results of Operations
For the year ended December 31, 1995, the Partnership's operating results were
comprised of its share of the income (losses) from the Pines on Cheyenne Creek
Joint Venture, the Canyon View East Joint Venture and the Mariposa Joint
Ventures, and the Partnership's share of the income from Casabella Associates,
as well as partnership level interest income earned on its short-term
investments, reduced by administrative expenses. A summary of these operating
results appears below:
<TABLE>
Canyon Cheyenne Investment Consolidated
View East Creek Mariposa Partnership Totals
<S> <C> <C> <C> <C>
Rental income $892,157 $1,010,222 $766,261 $2,668,640
Rental operating expenses 379,117 479,676 320,225 1,179,018
------------------------------------------------------------------------
Net operating income (excluding items
shown separately below) 513,040 530,546 446,036 1,489,622
Interest expense 384,030 320,438 282,262 986,730
Depreciation and amortization 159,599 171,560 114,438 445,597
Other (income) and expenses:
Interest income (209) (618) (796) ($36,079) (37,702)
General and administrative 6,954 7,254 7,200 186,662 208,070
Equity in (income) loss from partnership (13,892) (13,892)
------------------------------------------------------------------------
6,745 6,636 6,404 136,691 156,476
------------------------------------------------------------------------
Net income (loss) before minority (37,334) 31,912 42,932 (136,691) (99,181)
interest
Minority interests' equity in
subsidiary income (5,885) (5,885)
------------------------------------------------------------------------
Net income (loss) ($37,334) $26,027 $42,932 ($136,691) ($105,066)
========================================================================
</TABLE>
For the year ended December 31, 1994, the Partnership's operating results were
comprised of its share of the income (losses) from the Pines on Cheyenne Creek
Joint Venture, the Canyon View East Joint Venture and the Mariposa Joint
Ventures, and the Partnership's share of the income from Casabella Associates,
as well as partnership level interest income earned on its short-term
investments, reduced by administrative expenses. A summary of these operating
results appears below:
<TABLE>
Canyon Cheyenne Investment Consolidated
View East Creek Mariposa Partnership Totals
<S> <C> <C> <C> <C>
Rental income $945,353 $939,857 $730,798 $2,616,008
Rental operating expenses 372,833 463,613 291,604 1,128,050
------------------------------------------------------------------------
Net operating income (excluding items
shown separately below) 572,520 476,244 439,194 1,487,958
Interest expense 387,700 323,368 284,747 995,815
Depreciation and amortization 177,343 163,502 113,153 453,998
Other (income) and expenses:
Interest income (704) (494) (746) ($36,804) (38,748)
General and administrative 7,440 7,196 7,494 149,673 171,803
Equity in (income) loss from partnership (8,517) (8,517)
------------------------------------------------------------------------
6,736 6,702 6,748 104,352 124,538
------------------------------------------------------------------------
Net income (loss) before minority 741 (17,328) 34,546 (104,352) (86,393)
interest
Minority interests' equity in
subsidiary income 3,195 3,195
------------------------------------------------------------------------
Net income (loss) $741 ($14,133) $34,546 ($104,352) ($83,198)
========================================================================
</TABLE>
For the year ended December 31, 1993, the Partnership's operating results were
comprised of its share of the losses from the Pines on Cheyenne Creek Joint
Venture, the Canyon View East Joint Venture and the Mariposa Joint Ventures, and
the Partnership's share of the loss from Casabella Associates, as well as
partnership level interest income earned on its short-term investments, reduced
by administrative expenses. A summary of these operating results appears below:
<TABLE>
Canyon Cheyenne Investment Consolidated
View East Creek Mariposa Partnership Totals
<S> <C> <C> <C> <C>
Rental income $890,468 $886,938 $671,531 $2,448,937
Rental operating expenses 363,197 329,547 294,881 987,625
------------------------------------------------------------------------
Net operating income (excluding items
shown separately below) 527,271 557,391 376,650 1,461,312
Interest expense 371,083 304,742 272,746 948,571
Depreciation and amortization 274,343 279,500 194,800 748,643
Other (income) and expenses:
Interest income (1,159) (997) (811) ($33,471) (36,438)
General and administrative 6,682 6,707 6,859 140,143 160,391
Equity in (income) loss from partnership 11,937 11,937
------------------------------------------------------------------------
5,523 5,710 6,048 118,609 135,890
------------------------------------------------------------------------
Net income (loss) before minority (123,678) (32,561) (96,944) (118,609) (371,792)
interest
Minority interests' equity in
subsidiary income 6,004 6,004
------------------------------------------------------------------------
Net income (loss) ($123,678) ($26,557) ($96,944) ($118,609) ($365,788)
========================================================================
</TABLE>
Comparison of 1995 and 1994 Operating Results
Rental income increased $52,632, or 2% from the prior year. Increases in
operating revenue for Cheyenne Creek and Mariposa were partially offset by
decreased operating revenue at Canyon View East, where occupancy declined as a
result of increased competition from newly developed properties in its immediate
market area. This lower occupancy existed through most of 1995, but has improved
to its present level of 89%. Rental operating expenses increased $50,968, or 5%
over the prior year due primarily to increased maintenance and advertising and
promotion costs. Interest income decreased $1,046 from the prior year due to a
decrease in Partnership working capital available for investment resulting from
lobby and office renovations at Cheyenne Creek that were funded from working
capital. General and administrative expenses increased $36,267 or 21%, due
primarily to increased salary expense allocations and legal costs and printing
and mailing costs associated with Richard G. Berry's withdrawal as a general
partner of the Partnership. Fixed asset purchases increased $453,809 to $488,268
from the prior year. This increase resulted from approximately $348,000 of lobby
and office renovations at Cheyenne Creek, approximately $285,000 of which was
borne by the Partnership and the remainder by the Affiliated Partnership, and
other items such as carpet, floor tile and other replacements. As a result of
the factors described above, distributions to partners decreased $164,071 from
$509,184 in 1994 to $345,113 in 1994.
Comparison of 1994 and 1993 Operating Results
Rental income increased $167,071 or 7% over the prior year, primarily as a
result of high occupancy and rent increases. In 1994, the markets where the
properties are located continued to experience economic growth with relatively
low levels of new construction. Rental operating expenses increased $140,025, or
14% from the prior year as a result of higher maintenance costs at Cheyenne
Creek, caused by a decline in occupancy that occurred in early 1994. Interest
income increased $2,310 or 6% in 1994, as a result of higher interest rates
earned on money market accounts and short-term investments. Depreciation and
amortization declined $294,645, or 39% from the prior year due to the full
depreciation of certain five year depreciable property. Distributions to
partners increased $169,728 from $339,456 in 1993 to $509,184 in 1994, due in
part to the factors described above.
1996 Projected Operating Results
Operating results for 1996 are not anticipated to vary significantly from those
of 1995. However, such forward-looking expectations involve significant risks
and uncertainties, including those described herein.
Actual results may differ materially from those anticipated.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A to this Report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Partnership has no directors or executive officers. Information as to the
individual general partners of the Partnership and directors and executive
officers of L'Auberge Communities, Inc. (formerly Berry and Boyle Inc.), the
general partner of GP L'Auberge Communities, L.P., is set forth below.
Individual General Partners
Stephen B. Boyle, age 55, is President, Executive Officer and Director of
L'Auberge Communities, Inc. and a general partner and co-founder of LP L'Auberge
Communities, a California Limited Partnership (formerly Berry and Boyle), a
limited partnership formed in 1983 to provide funds to various affiliated
general partners of real estate limited partnerships, one of which is GP
L'Auberge Communities, L.P.
In September, 1995, with the consent of Limited Partners holding a majority of
the outstanding Units, as well as the consent of the mortgage lenders for the
Partnership's three properties, Richard G. Berry resigned as a general partner
of the Partnership.
GP L'Auberge Communities, L.P.
Information as to the directors and executive officers of L'Auberge Communities,
Inc., a general partner of GP L'Auberge Communities, L.P., which is a general
partner of the Partnership, and its affiliates, is set forth below. There are no
familial relationships between or among any officer and any other officer or
director.
Name Position
Stephen B. Boyle See above
J. Michael McDonald Executive Vice President and
Chief Financial Officer
Earl O. Robertson Executive Vice President
Donna Popke Vice President and Secretary
J. Michael McDonald, age 53, is Executive Vice President and Chief Financial
Officer of L'Auberge Communities, Inc. He is a certified public accountant and a
business school graduate of California State University. He began his real
estate career with the firm of Kenneth Leventhal and Company. Mr. McDonald held
senior finance positions with publicly traded Arlen Realty and Christiana
Companies. He was a senior operations officer with Lehman Brothers real estate
affiliates. Prior to joining L'Auberge Communities, Inc. in August, 1995, he was
a consultant for the FDIC, acting as a real estate asset disposition strategist.
Earl O. Robertson, age 47, has been a senior development officer, partner and
consultant in several prominent real estate development companies for over
twenty years, including Potomac Investment Associates, developers of planned
golf course communities nationwide. Mr. Robertson was also a key member of the
management team that developed the nationally acclaimed Inn at the Market in
Seattle. He joined L'Auberge Communities, Inc. in June 1995 and holds the
position of Executive Vice President.
Donna Popke, age 36, joined L'Auberge Communities, Inc. in July, 1995 and holds
the title of Vice President and Secretary.. Prior to joining L'Auberge
Communities, Inc., Ms. Popke was employed in the field of public accounting for
six years and later with David R. Sellon & Company, a Colorado Springs land
development company.
ITEM 11. EXECUTIVE COMPENSATION
None of the General Partners or any of their officers or directors received any
compensation from the Partnership. See Item 13 below with respect to a
description of certain transactions of the General Partners and their affiliates
with the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 29, 1996, no person of record owned or was known by the General
Partners to own beneficially more than 5% of the Partnership's outstanding
Units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1995, the Partnership paid or accrued
remuneration to the General Partners or their affiliates as set forth below. In
addition to the information provided herein, certain transactions are described
in Note 9 in the Notes to Financial Statements appearing in Appendix A, which
are included in this report and are incorporated herein by reference thereto.
<TABLE>
<S> <C>
Net Cash From Operations distributed during 1995 to the General Partners $6,902
Allocation of Income or Loss to the General Partners ($1,051)
(For a description of the share of Net Cash From
Operations and the allocation of Income or Loss to which
the General Partners are entitled, reference
is made to the discussion under the caption
"Distributions and Allocations" contained on
pages 30 through 33 of the Prospectus of the
Partnership dated February 13, 1987 (the "Prospectus"),
which discussion is incorporated herein by reference.)
Property management fees paid to an affiliate of the General Partners $94,973
Reimbursements to General Partners $87,138
(For a description of the costs reimbursable to the
General Partners, reference is made to the discussion under the caption
"Compensation and Fees" contained on pages 11 through 13 of the Prospectus,
which discussion is incorporated herein by reference.)
</TABLE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1,2 See Page F-2
3 See Exhibit Index contained herein
(b) Reports on Form 8-K
The Partnership has not filed, and was not required to
file, any reports on Form 8-K during the last quarter of
1995.
(c) See Exhibit Index contained herein
(d) See Page F-2.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
By: GP L'Auberge Communities, L.P., A California Limited Partnership,
General Partner
By: L'Auberge Communities, Inc., its General Partner
By: ____/s/ J. Michael McDonald________________
J. Michael McDonald, Executive Vice President
and Chief Financial Officer
Date: March 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
___/s/ Stephen B. Boyle _ Director, President and March 25, 1996
STEPHEN B. BOYLE Principal Executive
Officer of L'Auberge
Communities, Inc.
_/s/ J. Michael McDonald _ Executive Vice President and March 25, 1996
J. MICHAEL McDONALD Principal Financial and
Accounting Officer of
L'Auberge Communities, Inc.
<PAGE>
APPENDIX A
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
---------
CONSOLIDATED FINANCIAL STATEMENTS
ITEM 8, ITEM 14(a)(1) and (2), and ITEM 14(d) OF FORM 10-K
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
For the year ended December 31, 1995
<PAGE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31, 1995 and 1994 F-4
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 F-5
Consolidated Statements of Partners' Equity (Deficit) for the years ended
December 31, 1995, 1994 and 1993 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 F-7 -- F-8
Notes to Consolidated Financial Statements F-9 -- F-18
All Schedules are omitted as they are not applicable, not required, or the
information is provided in the financial statements or the notes thereto.
<PAGE>
Report of Independent Accountants
To the Partners of
Development Partners II
(A Massachusetts Limited Partnership):
We have audited the accompanying consolidated balance sheets of
Development Partners II (A Massachusetts Limited Partnership) and subsidiaries
as of December 31, 1995 and 1994, and the related consolidated statements of
operations, partners' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the General Partners of the Partnership. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners of the Partnership, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Development Partners II (A Massachusetts Limited Partnership) and subsidiaries
as of December 31, 1995 and 1994 and the consolidated results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND, L.L.P.
Boston, Massachusetts February 21, 1996, except for the information presented in
Note 11 for which the date is March 22, 1996
<PAGE>
<TABLE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1995 and 1994
---------------
ASSETS
1995 1994
---- ----
Property, at cost (Notes 2, 3, 5, and 7):
<S> <C> <C>
Land $5,148,247 $5,148,247
Buildings and improvements 15,989,689 15,989,689
Equipment, furnishings and fixtures 2,077,104 1,588,836
--------------- ---------------
23,215,040 22,726,772
Less accumulated depreciation (4,359,624) (3,934,660)
--------------- ---------------
18,855,416 18,792,112
Cash and cash equivalents (Notes 2 and 4) 432,596 193,329
Short-term investments (Note 2) 199,599 848,098
Deposits and prepaid expenses 2,472 3,887
Accounts receivable 3,300 483
Investment in partnership (Notes 2 and 6) 1,459,833 1,516,413
Deferred costs 9,300 24,853
Deferred expenses, net of accumulated
amortization of $492,788 and $472,155 (Note 2) 34,384 55,017
--------------- ---------------
Total assets $20,996,900 $21,434,192
=============== ===============
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable (Note 7) 9,991,674 10,083,673
Accounts payable 87,245 28,022
Accrued expenses 178,844 171,286
Due to affiliates (Note 9) 11,678 11,608
Rents received in advance - 4,988
Tenant security deposits 60,630 66,036
--------------- ---------------
Total liabilities 10,330,071 10,365,613
Commitments and contingencies (Note 11)
Minority Interest (Note 5) 754,849 706,420
Partners' equity (Note 8) 9,911,980 10,362,159
--------------- ---------------
Total liabilities and partners' equity $20,996,900 $21,434,192
=============== ===============
</TABLE>
<PAGE>
<TABLE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1995, 1994 and 1993
-------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Rental income $2,668,640 $2,616,008 $2,448,937
Rental operating expenses 1,179,018 1,128,050 987,625
---------------- --------------- ---------------
Net operating income (excluding items
shown separately below) 1,489,622 1,487,958 1,461,312
Interest 986,730 995,815 948,571
Depreciation and amortization 445,597 453,998 748,643
Other (income) and expenses:
Interest income (37,702) (38,748) (36,438)
General and administrative (Note 9) 208,070 171,803 160,391
Equity in (income) loss from partnership (Note 6) (13,892) (8,517) 11,937
---------------- --------------- ---------------
156,476 124,538 135,890
---------------- --------------- ---------------
Net loss before minority interest (99,181) (86,393) (371,792)
Minority interests' equity in
subsidiary (income) loss (Note 5) (5,885) 3,195 6,004
---------------- --------------- ---------------
Net loss ($105,066) ($83,198) ($365,788)
================ =============== ===============
Net loss allocated to:
General Partners (1,051) (832) (3,658)
Per unit of Investor Limited
Partner interest:
36,963 units issued (2.81) (2.23) (9.80)
</TABLE>
<PAGE>
<TABLE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the years ended December 31, 1995, 1994 and 1993
-------------
Investor Total
General Limited Partners'
Partners Partners Equity
<S> <C> <C> <C>
Balance at December 31, 1992 (48,636) 11,708,421 11,659,785
Cash distributions (6,789) (332,667) (339,456)
Net loss (3,658) (362,130) (365,788)
---------------- --------------- ---------------
Balance at December 31, 1993 (59,083) 11,013,624 10,954,541
Cash distributions (10,184) (499,000) (509,184)
Net loss (832) (82,366) (83,198)
---------------- --------------- ---------------
Balance at December 31, 1994 (70,099) 10,432,258 10,362,159
Cash distributions (6,902) (338,211) (345,113)
Net loss (1,051) (104,015) (105,066)
---------------- --------------- ---------------
Balance at December 31, 1995 ($78,052) $9,990,032 $9,911,980
================ =============== ===============
</TABLE>
<PAGE>
<TABLE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
Increase (decrease) in cash and cash equivalents
-------------
1995 1994 1993
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Interest received $50,855 $35,870 $29,747
Cash received from rental income 2,658,246 2,604,419 2,461,745
Administrative expenses (206,486) (184,636) (155,021)
Rental operations expenses (1,116,194) (1,113,523) (979,820)
Interest paid (987,104) (996,155) (945,153)
---------------- --------------- ---------------
Net cash provided by operating activities 399,317 345,975 411,498
Cash flows from investing activities:
Purchase of fixed assets (488,268) (34,459) (42,623)
Purchases of short-term investments (197,314) (832,660) (1,020,001)
Proceeds from maturities of short-term investments 832,660 1,020,001 952,087
Distributions received from partnership 70,472 141,710 90,005
Deferred costs 15,553 (24,853) -
---------------- --------------- ---------------
Net cash provided (used) by investing activities 233,103 269,739 (20,532)
Cash flows from financing activities:
Distributions to partners (345,113) (509,184) (339,456)
Principal payments on mortgage notes payable (91,999) (82,432) (25,895)
Distributions to the minority interest (15,490) (23,050) (44,441)
Contributions from the minority interest 58,034 7,262 4,515
Deposits 1,415 (64) -
---------------- --------------- ---------------
Net cash provided (used) by financing activities (393,153) (607,468) (405,277)
---------------- --------------- ---------------
Net increase (decrease) in cash and cash equivalents 239,267 8,246 (14,311)
Cash and cash equivalents at beginning of year 193,329 185,083 199,394
---------------- --------------- ---------------
Cash and cash equivalents at end of year $432,596 $193,229 $185,083
================ =============== ===============
</TABLE>
<PAGE>
<TABLE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995, 1994 and 1993
Increase (decrease) in cash and cash equivalents
-------------
Reconciliation of net loss to net cash provided by operating activities:
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net loss ($105,066) ($83,198) ($365,788)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 445,597 453,998 748,643
Equity in (income) loss from partnership (13,892) (8,517) 11,937
Minority interests' equity in subsidiary income (loss) 5,885 (3,195) (6,004)
Change in assets and liabilities net of effects from investing and financing
activities:
Decrease (increase) in accounts and interest receivable 10,336 (2,878) (6,691)
Decrease (increase) in prepaid expenses - 470 (48)
Decrease (increase) in accounts
payable and accrued expenses 66,781 15,557 (4,650)
Increase (decrease) in due to affiliates 70 (14,673) 21,291
Increase (decrease) in rents received in advance (4,988) (480) 5,468
Increase (decrease) in tenant security deposits (5,406) (11,109) 7,340
---------------- --------------- ---------------
Net cash provided by operating activities $399,317 $345,975 $411,498
================ =============== ===============
</TABLE>
<PAGE>
DEVELOPMENT PARTNERS II
(A Massachusetts Limited Partnership)
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------
1. Organization of Partnership:
Development Partners II (A Massachusetts Limited Partnership) (the
"Partnership"), formerly Berry and Boyle Development Partners II, was formed on
January 9, 1987. GP L'Auberge Communities, L.P., a California Limited
Partnership, (formerly Berry and Boyle Management) and Stephen B. Boyle are the
General Partners. In September, 1995, with the consent of Limited Partners
holding a majority of the outstanding Units, as well as the consent of the
mortgage lenders for the Partnership's three properties, Richard G. Berry
resigned as a general partner of the Partnership. Except under certain limited
circumstances upon termination of the Partnership, the General Partners are not
required to make any additional capital contributions. The General Partners or
their affiliates will receive various fees for services and reimbursement for
various organizational and selling costs incurred on behalf of the Partnership.
On February 13, 1987 the Securities and Exchange Commission declared the
Partnership's public offering of up to 60,000 units of Limited Partnership
Interests at $500 per unit (the "Units") effective and the marketing and sale of
the Units commenced shortly thereafter. The initial closing of the offering took
place on June 30, 1987 at which time the holders of 5,231 Units were admitted to
the Partnership. The Partnership continued to admit subscribers monthly
thereafter until August 10, 1988 when it terminated the offering having admitted
1,918 investors acquiring 36,963 Units totaling $18,481,500. There were 1,934
investors at December 31, 1995.
The accompanying consolidated financial statements present the activity of the
Partnership for the years ended December 31, 1995, 1994 and 1993.
The Partnership will continue until December 31, 2010, unless earlier terminated
by the sale of all, or substantially all, of the assets of the Partnership, by
the dissolution and liquidation of the Joint Ventures or as otherwise provided
in the Partnership Agreement.
2. Significant Accounting Policies:
A. Basis of Presentation
The consolidated financial statements include the accounts of the
Partnership and its subsidiaries: The Pines on Cheyenne Creek Joint
Venture, Mariposa Joint Venture and Canyon View East Joint Venture. All
intercompany accounts and transactions have been eliminated in
consolidation. The Partnership accounts for its investment in Casabella
Associates utilizing the equity method of accounting. The Partnership's
investment account is adjusted to reflect its pro rata share of
profits, losses and distributions from Casabella Associates.
The Partnership follows the accrual basis of accounting.
B. Cash and Cash Equivalents
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents. The
carrying value of cash and cash equivalents approximates fair value. It
is the Partnership's policy to invest cash in income-producing
temporary cash investments. The Partnership mitigates any potential
risk from such concentration of credit by placing investments with high
quality financial institutions.
C. Short-term investments
At December 31, 1995, short term investments consist solely of various
forms of U. S. Government backed securities, with an aggregate par
value of $200,000, which mature in February, 1996. In 1994, the
Partnership adopted Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities". The Partnership has the intent and ability to hold its
short term investments to maturity. Accordingly, these securities have
been recorded at amortized cost, which approximates market value. There
was no cumulative effect recorded as a result of this accounting
change.
D. Significant Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
E. Depreciation
Depreciation is provided for by the use of the straight-line method
over estimated useful lives as follows:
Buildings and improvements 39-40 years
Equipment, furnishings and fixtures 5-15 years
F. Deferred Expenses
Costs of obtaining the mortgages on the properties are being amortized
over the term of the related mortgage notes payable using the
straight-line method. Buy down fees relating to permanent loan
refinancings (see Note 7) are being amortized over a three year period.
G. Income Taxes
The Partnership is not liable for Federal or state income taxes because
Partnership income or loss is allocated to the Partners for income tax
purposes. If the Partnership's tax returns are examined by the Internal
Revenue Service or state taxing authority and such an examination
results in a change in Partnership taxable income (loss), such change
will be reported to the Partners.
H. Rental Income
Leases require the payment of rent in advance, however, rental income
is recorded as earned.
I. Reclassification
Certain items in the financial statements for the years ended December
31, 1994 and 1993 have been reclassified to conform to the 1995
presentation.
J. Long-Lived Assets
The Partnership's long-lived assets include property and equipment and
deferred expenses. The Partnership will evaluate the possible
impairment of long-lived assets whenever events or circumstances
indicate that the carrying value of the assets may not be recoverable.
<PAGE>
3. Property:
Property, at cost, consisted of the following at December 31, 1995:
<TABLE>
Initial Cost Costs Capitalized
to Partnership Subsequent to Acquisition
-------------------------------------------------------------
Buildings Equipment, Buildings
Property and Furnishings and
Description Land Improvements & Fixtures Improvements
- -------------------------------------------------------------------------------------------
L'Auberge Cheyenne Creek,
a 108-unit residential
rental complex located in
<S> <C> <C> <C> <C>
Colorado Springs, Colorado $1,865,535 $6,105,495 $657,307 $47,529
Mariposa, an 84-unit
residential rental
complex located in
Scottsdale, Arizona 1,428,347 3,979,992 375,165 11,153
Canyon View East, a 96-unit
residential rental
complex located in
Tucson, Arizona 1,844,761 5,801,389 500,895 44,131
-------------------------------------------------------------
$5,138,643 $15,886,876 $1,533,367 $102,813
=============================================================
Depreciation expense for the years ended December 31, 1995 1994 and 1993 and accumulated depreciation
at December 31, 1995 and 1994 consisted of the following:
Depreciation Expense
1995 1994 1993
<S> <C> <C> <C>
Buildings and improvements $399,743 $399,602 $398,776
Equipment, furnishings and fixtures 25,221 33,764 278,270
-----------------------------------------------
$424,964 $433,366 $677,046
===============================================
3. Property Continued:
Property, at cost, consisted of the following at December 31, 1995:
Amount at Which carried
at Close of Period
--------------------------------------------------------------------------
Equipment, Buildings Equipment,
Property Furnishings and Furnishings Accumulated
Description & Fixtures Land Improvements & Fixtures Total Depreciation
- ---------------------------------------------------------------------------------------------------------------------
L'Auberge Cheyenne Creek,
a 108-unit residential
rental complex located in
<S> <C> <C> <C> <C> <C> <C>
Colorado Springs, Colorado $410,196 $1,865,535 $6,153,024 $1,067,503 $9,086,062 $1,786,477
Mariposa, an 84-unit
residential rental
complex located in
Scottsdale, Arizona 68,813 1,428,347 3,991,145 443,978 5,863,470 1,067,355
Canyon View East, a 96-unit
residential rental
complex located in
Tucson, Arizona 64,728 1,854,365 5,845,520 565,623 8,265,508 1,505,792
---------------------------------------------------------------------------------------
$543,737 $5,148,247 $15,989,689 $2,077,104 $23,215,040 $4,359,624
=======================================================================================
Depreciation expense for the years ended December 31, 1995 1994 and 1993 and accumulated depreciation
at December 31, 1995 and 1994 consisted of the following:
Accumulated Depreciation
December 31,
1995 1994
<S> <C> <C>
Buildings and improvements $2,783,081 $2,383,338
Equipment, furnishings and fixt 1,576,543 1,551,322
- ----------------------------------------------------------
$4,359,624 $3,934,660
============================
Each of the properties is encumbered by a nonrecourse mortgage note payable (see Note 7).
</TABLE>
<PAGE>
4. Cash and Cash Equivalents:
Cash and cash equivalents at December 31, 1995 and 1994 consisted of the
following:
1995 1994
-------- --------
Cash on hand ............................. $ 56,838 $ 20,514
Certificate of deposit ................... 100,000 --
Money market accounts .................... 275,758 172,815
-------- --------
$432,596 $193,329
======== ========
5. Joint Venture and Property Acquisitions:
The Partnership has invested in three properties located in Scottsdale and
Tucson, Arizona and Colorado Springs, Colorado. The success of the Partnership
will depend upon factors which are difficult to predict including general
economic and real estate market conditions, both on a national basis and in the
areas where the Partnership's investments are located.
Cheyenne Creek
On September 26, 1988, the Partnership and a limited partnership affiliated with
the General Partners (the "Affiliated Partnership") acquired L'Auberge Cheyenne
Creek ("Cheyenne Creek"), formerly The Pines on Cheyenne Creek, a 108-unit
residential property located in Colorado Springs, Colorado and simultaneously
contributed the property to the Pines on Cheyenne Creek Joint Venture comprised
of the Partnership, the Affiliated Partnership and the property developer. The
Partnership owns a majority interest in the Pines on Cheyenne Creek Joint
Venture and, therefore, the accounts and operations of the Pines on Cheyenne
Creek Joint Venture have been consolidated into those of the Partnership. The
Partnership and the Affiliated Partnership have been designated the co-managing
joint venture partners of the Pines on Cheyenne Creek Joint Venture and will
have control over all decisions affecting the joint venture and the property.
In accordance with the terms of the purchase agreement joint venture agreement,
through December 31, 1995, the Partnership has contributed $4,693,004 to the
Pines on Cheyenne Creek Joint Venture joint venture ($257,844 of which was
contributed in 1995) which was used to repay a portion of the construction loan
from a third party lender, to pay certain costs related to the refinancing of
the permanent loan, to cover operating deficits incurred during the lease up
period and to fund certain capital improvements. In addition, the Partnership
funded $470,870 of property acquisition costs which were subsequently treated as
a capital contribution to the Pines on Cheyenne Creek Joint Venture.
For the years ended December 31, 1995, 1994 and 1993, The Pines on Cheyenne
Creek Joint Venture had net income of $31,912 and net losses of $ $17,328 and
$32,561, respectively.
Net cash from operations (as defined in the joint venture agreement) is to be
distributed as available to each joint venture partner quarterly as follows:
First, to the Partnership and the Affiliated Partnership,
proportionately, an amount equal to 11.25% per annum, noncumulative
(computed daily on a simple noncompounded basis from the date of
completion funding) of their respective capital investment (as defined
in the joint venture agreement);
Second, the balance 65.25% to the Partnership, 14.75% to the Affiliated
Partnership, and 20% to the property developer.
All losses from operations and depreciation for the Pines on Cheyenne Creek
Joint Venture are allocated 81.56% to the Partnership and 18.44% to the
Affiliated Partnership, in proportion to their respective joint venture
interest.
All profits from operations to the extent of cash distributions shall first be
allocated to the Partnership, the Affiliated Partnership, and the property
developer in the same proportion as the cash distributions. Any remaining
profits are allocated 65.25% to the Partnership, 14.75% to the Affiliated
Partnership, and 20% to the property developer.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
Mariposa
On February 3, 1989, the Partnership acquired a joint venture interest in the
Mariposa Joint Venture which owns and operates an 84-unit residential property
located in Scottsdale, Arizona known as Mariposa. Since the Partnership owns a
majority interest in the Mariposa Joint Venture, the accounts and operations of
the Mariposa Joint Venture have been consolidated into those of the Partnership.
The Partnership has been designated the managing joint venture partner of the
Mariposa Joint Venture and will have control over all decisions affecting the
Mariposa Joint Venture and the property.
In accordance with the terms of the purchase agreement and the joint venture
agreement, through December 31, 1995, the Partnership has contributed $3,138,028
to the Mariposa Joint Venture ($14,035 of this amount was funded in 1995), which
was used to: (1) repay a portion of the construction loan from a third party
lender, (2) cover operating deficits incurred during the lease up period, (3)
pay for certain capital improvements, (4) fund $430,474 of property acquisition
costs and (5) pay certain costs associated with the refinancing of the permanent
loan.
For the years ended December 31, 1995, 1994 and 1993, the Mariposa Joint Venture
had net income of $42,932 and $34,546 and a net losses of $96,944, respectively.
The minority interest joint venture partner had insufficient basis to absorb its
respective share of losses, therefore, for financial statement purposes the
excess of losses over basis has been charged against the majority interest.
Future minority interest income, if any, from Mariposa will be credited against
minority interest losses previously absorbed by the majority interest. At
December 31, 1995 the minority interest losses absorbed by the majority interest
totaled $5,907.
Net cash from operations (as defined in the joint venture agreement) is to be
distributed, as available, to each joint venture partner, not less often than
quarterly, as follows:
First, to the Partnership an amount equal to 10.6% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's capital investment (as
defined in the joint venture agreement);
Second, the balance 70% to the Partnership and 30% to the other joint
venture partner.
All losses from operations and depreciation for the Mariposa Joint Venture are
allocated 99.5% to the Partnership and 0.5% to the other joint venture partner.
All profits from operations shall be allocated to each joint venture partner pro
rata in accordance with the distribution of net cash from operations for such
fiscal year.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
Canyon View East
On March 8, 1989, the Partnership acquired an interest in the Canyon View East
Joint Venture which owns and operates a 96-unit residential property located in
Tucson, Arizona known as Canyon View East. Since the Partnership owns a majority
interest in the Canyon View East Joint Venture, the accounts and operations of
the joint venture have been consolidated into those of the Partnership. The
Partnership has been designated the managing joint venture partner of the Canyon
View East Joint Venture and will have control over all decisions affecting the
Canyon View East Joint Venture and the property.
In accordance with the terms of the purchase agreement and the joint venture
agreement, the Partnership has contributed $4,783,612 to the Canyon View East
Joint Venture through December 31, 1995, which was used to: (1) repay a portion
of the construction loan from a third party lender, (2) cover operating deficits
incurred during the lease up period, (3) fund $523,022 of property acquisition
costs and (5) pay certain costs associated with the permanent loan refinancing.
For the years ended December 31, 1995, 1994 and 1993, the Canyon View East Joint
Venture had a net loss of $37,334, net income of $741 and a net loss of
$123,678, respectively.
Net cash from operations (as defined in the joint venture agreement) is to be
distributed, as available, to each joint venture partner, not less often than
quarterly, as follows:
First, to the Partnership an amount equal to 11.25% per annum,
noncumulative (computed daily on a simple noncompounded basis from the
date of completion funding) of the Partnership's capital investment (as
defined in the joint venture agreement);
Second, the balance 75% to the Partnership and 25% to the other joint
venture partners.
All losses from operations and depreciation for the Canyon View East Joint
Venture are allocated 100% to the Partnership.
All profits from operations shall be allocated to each joint venture partner in
accordance with, and to the extent of, the distribution of net cash from
operations. Any excess profits shall be allocated 100% to the Partnership.
In the case of certain capital transactions and distributions as defined in the
joint venture agreement, the allocation of related profits, losses and cash
distributions, if any, would be different than as described above and would be
effected by the relative balances in the individual partners' capital accounts.
6. Investment in Partnership:
On September 28, 1990, the Partnership contributed $1,800,000 to purchase an
approximate 38% interest in Casabella Associates, a general partnership among
the Partnership, Berry and Boyle Development Partners (A Massachusetts Limited
Partnership) ("DPI") and Berry and Boyle Development Partners III (A
Massachusetts Limited Partnership) ("DPIII"). In addition to its contribution
referred to above, the Partnership incurred $268,861 of acquisition costs,
including $186,300 in acquisition fees paid to the General Partners. The
difference between the partnership's carrying value of the investment in
Casabella Associates and the amount of underlying equity in net assets is
$186,300, representing a portion of the acquisition costs stated above that were
not recorded on the books of Casabella Associates.
On September 28, 1990, Casabella Associates purchased a majority interest in the
Casabella I Joint Venture, an Arizona joint venture that owned and operated
Casabella Phase I, a 61-unit residential property located in Scottsdale,
Arizona. On April 23, 1991, Casabella Associates, acquired a majority interest
in the Casabella Joint Venture which owns Casabella Phase II, a 93-unit
residential community, located adjacent to Casabella Phase I. On that date,
Casabella Associates and EW Casabella I Limited Partnership contributed their
interests in the Casabella I Joint Venture to the Casabella Joint Venture. In
addition, the permanent lender funded a $7,320,000 permanent loan, the proceeds
of which were used to refinance the $2,700,000 loan pertaining to Phase I and,
together with cash contributions of Casabella Associates, repay the construction
loan for Phase II. As a result of such transactions, by operation of law,
Casabella Joint Venture, which is comprised of Casabella Associates and EW
Casabella I Limited Partnership, now owns both Phases I and II of Casabella.
Casabella is now managed and operated as one single 154-unit residential
community.
On June 30, 1992, Casabella Joint Venture refinanced its original $7,320,000
permanent loan using the proceeds of a new first mortgage loan in the amount of
$7,300,000. Under the terms of the new note, monthly principal and interest
payments of $61,887, based on a fixed interest rate of 9.125%, are required over
the term of the loan.
The balance of the note will be due on July 15, 1997.
During 1995, 1994 and 1993, the Partnership received $70,472, $141,710 and
$90,005, respectively, of cash distributions from Casabella Associates.
The consolidated balance sheets of Casabella Associates and Casabella Joint
Venture at December 31, 1995 and 1994 are summarized as follows:
<TABLE>
Assets: 1995 1994
---- ----
<S> <C> <C>
Property, plant and equipment $11,297,805 $11,250,034
Accumulated depreciation (1,752,197) (1,399,386)
----------- -----------
Property, plant and equipment, net 9,545,608 9,850,648
Other assets 889,237 834,668
----------- -----------
Total assets $10,434,845 $10,685,316
========== ==========
Liabilities and partners' equity:
Mortgage note payable 6,994,549 7,093,963
Other liabilities 125,170 126,735
---------- ----------
Total liabilities 7,119,719 7,220,698
Partners' equity 3,315,126 3,464,618
--------- ---------
Total liabilities and partners' equity $10,434,845 $10,685,316
========== ==========
</TABLE>
The elements of the consolidated net income (loss) from Casabella Associates and
Casabella Joint Venture for the years ended December 31, 1995, 1994 and 1993 are
summarized as follows:
<TABLE>
Income: 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Rental income $1,520,905 1,486,525 $1,416,184
Other income 103,410 88,580 78,055
------------- ----------- ------------
1,624,315 1,575,105 1,494,239
Expenses and other deductions:
General and administrative 10,200 10,052 12,357
Operations 561,516 521,969 485,226
Depreciation and amortization 375,234 371,172 370,229
Interest 642,857 651,528 659,443
------------ ---------- -----------
1,589,807 1,554,721 1,527,255
----------- --------- ---------
Net income (loss) $ 34,508 $ 20,384 ($ 33,016)
=========== =========== ==========
</TABLE>
7. Mortgage Notes Payable:
All of the property owned by the Partnership is pledged as collateral for the
mortgage notes payable outstanding at December 31, 1995 and 1994 which consisted
of the following:
1995 1994
----------- -----------
Cheyenne Creek ..................... $ 3,189,972 $ 3,218,558
Mariposa ........................... 2,881,413 2,908,154
Canyon View East ................... 3,920,289 3,956,961
----------- -----------
$ 9,991,674 $10,083,673
=========== ===========
On September 14, 1990, the Pines on Cheyenne Creek Joint Venture refinanced its
$3,200,000 permanent loan together with deferred interest utilizing the proceeds
of a new first mortgage loan in the amount of $3,252,000. Under the terms of the
new $3,252,000 note, interest only at the rate of 9% ($24,390) is payable
monthly during the first three years of the loan term. Commencing September 15,
1993 monthly payments of $29,076 including principal and interest, at the rate
10%, will be payable. The balance of the note is payable on September 15, 1997.
On September 13 and 14, 1990 the Canyon View East and Mariposa Joint Ventures
refinanced their respective $4,000,000 and $2,940,000 original permanent loans.
Under the terms of the new $4,000,000 and $2,940,000 notes, interest only at the
rate of 9% ($30,000 and $22,050) is payable monthly during the first three years
of the loan term. Commencing September 15, 1993 monthly payments of principal
and interest, at the rate 9.75%, or $35,047 and $25,759, respectively were
payable. The balance of the notes are payable on September 15, 1997.
Accrued interest at December 31, 1995 and 1994 consisted of the following:
1995 1994
------- -------
Cheyenne Creek ........................... $13,292 $13,410
Mariposa ................................. 11,706 11,814
Canyon View East ......................... 15,926 16,074
------- -------
$40,924 $41,298
======= =======
The aggregate principal amounts of long term borrowings due during the calendar
years 1996 and 1997 are $100,886 and $9,890,788, respectively.
The principal balance of the mortgage notes payable appearing on the
consolidated balance sheet approximates the fair value of such notes.
8. Partners' Equity:
Under the terms of the Partnership Agreement profits are allocated 98% to the
Limited Partners and 2% to the General Partners; losses are allocated 99% to the
Limited Partners and 1% to the General Partners.
Cash distributions to the partners are governed by the Partnership Agreement and
are made, to the extent available, 98% to the Limited Partners and 2% to the
General Partners.
The allocation of the related profits, losses, and distributions, if any, would
be different than described above in the case of certain events as defined in
the Partnership Agreement, such as the sale of an investment property or an
interest in a joint venture partnership.
9. Related Party Transactions:
Due to affiliates at December 31, 1995 and 1994 consisted of $11,678 and
$11,608, respectively, relating to reimbursable costs due to L'Auberge
Communities, Inc., formerly Berry and Boyle Inc.
In 1995, 1994 and 1993, general and administrative expenses included $87,138,
$70,793 and $68,971, respectively, of salary reimbursements paid to the General
Partners for certain administrative and accounting personnel who performed
services for the Partnership.
The officers and principal shareholders of Evans Withycombe, Inc., the developer
and property manager of Mariposa, together hold a two and one half percent
cumulative profit or partnership voting interest in LP L'Auberge Communities
(formerly Berry and Boyle).
During the years ended December 31, 1995, 1994 and 1993, $38,308, $36,576 and
$33,577, respectively, of property management fees were paid or accrued to Evans
Withycombe, Inc.
Residential Services - L'Auberge, formerly Berry and Boyle Residential Services,
the property manager of Cheyenne Creek and Canyon View East, is an affiliate of
the General Partners of the Partnership. During the years ended December 31,
1995, 1994 and 1993, $94,973, $94,060 and $89,208, respectively, of property
management fees had been paid or accrued to Residential Services - L'Auberge.
Rental payments of $5,250 were paid by L'Auberge Communities, Inc. to Cheyenne
Creek for two employee apartments.
10. Book-Tax Reconciliation of Income
The reconciliation of net income (loss) reported in the accompanying
consolidated statements of operations with the income reported in the
Partnership's 1995 U.S. Partnership Return of Income is as follows:
Net loss per consolidated statement of operations .... $105,066
Increase in depreciation for tax purposes ............ 211,619
Rents received in advance ............................ 4,738
Other adjustments, net .................. ( 4,528)
--------
Net loss per federal tax return ...................... $316,895
========
11. Subsequent Event:
On March 22, 1996, the Partnership and certain affiliates entered into a letter
of intent with Evans Withycombe, Inc. and certain of its affiliates ("EWI"). The
transactions contemplated by the letter of intent, which are subject to the
execution of definitive agreements, the receipt of any necessary lender consents
and satisfaction of certain other conditions, as to which there can be no
assurance, are intended to more definitively separate the interests of EWI and
the Partnership, thus affording the Partnership greater flexibility in the
operation and disposition of certain of its properties. The letter of intent
provides, among other things, in consideration of a payment by the Partnership
to EWI of $65,715, for EWI (i) to relinquish its contract to manage certain
Partnership properties and its option to exercise its rights of first refusal
with regard to the sale of those properties and (ii) to assign all of its
interest in the Mariposa Joint Venture to the Partnership and its interest in
the Casabella Joint Venture to the Partnership, DPI and DPIII (while preserving
the economic interests of the venturer in these Joint Ventures), resulting in
the dissolution of the Casabella Joint Venture and the Mariposa Joint Venture.
<PAGE>
(4)(a)(1) Amended and Restated Certificate and Agreement of Limited
Partnership included as Exhibit A to Prospectus of the
Partnership dated February 13,1987 (the "Prospectus"), contained
in Amendment No. 1 to the Partnership's Registration Statement
No. 33-10345, declared effective on February 13, 1987, and
incorporated herein by reference.
(4)(a)(2) Seventeenth Amendment to Amended and Restated Certificate of
Limited Partnership dated May 31, 1990 (included as an exhibit to
the Partnership's Form 10-K for the year ended December 31, 1990
and incorporated herein by reference).
(4)(b) Subscription Agreement (included as Exhibit B to Prospectus contained
in Amendment No. 1 to the Partnership's Registration Statement
No. 33-10345 declared effective February 13, 1987, and incorporated
herein by reference).
(28) Portions of the Prospectus dated February 13,1987 (included as
an exhibit to the Partnership's Form 10-K for the year ended
December 31, 1987 and incorporated herein by reference).
(10)(a) Development Agreement and related joint venture agreement relating
to the acquisition of a joint venture interest in the Canyon View
East Joint Venture (included as an exhibit to the Partnership's
Form 10-K for the year ended December 31, 1987 and incorporated
herein by reference).
(10)(b) Purchase Agreement and certain exhibits thereto relating to the
acquisition of The Pines on Cheyenne Creek (included as an exhibit
to the Partnership's Form 10-K for the year ended December 31,
1987 and incorporated herein by reference).
(10)(c) Development Agreement and related joint venture agreement relating
to the acquisition of a joint venture interest in the Mariposa
Joint Venture (included as an exhibit to the Partnership's Form
10-K for the ended December 31, 1988, and incorporated herein by
reference).
(10)(d) Documents pertaining to the permanent loan for the Mariposa Joint
Venture (included as an exhibit to the Partnership's Form 10-K for
the year ended December 31, 1988, and incorporated herein by
reference).
(10)(e) Documents pertaining to the permanent loan for The Pines on
Cheyenne Creek Joint Venture (included as an exhibit to the
Partnership's Form 10-K for the year ended December 31, 1988, and
incorporated herein by reference).
(10)(f) Documents pertaining to the permanent loan for the Canyon View
East Joint Venture (included as an exhibit to the Partnership's
Form 10-K for the year ended December 31, 1988, and incorporated
herein by reference).
(10)(g) Development Agreement relating to the acquisition of a joint
venture interest in the Casabella I Joint Venture (included as an
exhibit to the Partnership's Form 10-K for the year ended December
31, 1989, and incorporated herein by reference).
(10)(h) Agreement of Joint Venture of Casabella Associates dated September
27, 1990 (filed as Exhibit (10)(f) to the Form 10-K of Berry and
Boyle Development Partners for the year ended December 31, 1990,
and incorporated herein by reference).
(10)(i) Amended and Restated Joint Venture Agreement of Casabella I Joint
Venture dated September 28, 1990 (filed as Exhibit (10)(g) to the
Form 10-K of Berry and Boyle Development Partners for the year
ended December 31, 1990, and incorporated herein by reference).
(10)(j) First Amendment to the Amended and Restated Joint Venture
Agreement of Casabella I Joint Venture dated October 1, 1990
(filed as Exhibit (10)(h) to the Form 10-K of Berry and Boyle
Development Partners for the year ended December 31, 1990, and
incorporated herein by reference).
(10)(k) Documents pertaining to permanent loan for Casabella I Joint
Venture (filed as Exhibit (10)(i) to the Form 10-K of Berry and
Boyle Development Partners for the year ended December 31, 1990,
and incorporated herein by reference).
(10)(l) Property Management Agreement between Canyon View East Joint
Venture and Berry and Boyle Residential Services dated August 1,
1990 (included as an exhibit to the Partnership's Form 10-K for
the year ended December 31, 1990, and incorporated herein by
reference).
(10)(m) Property Management Agreement between Pines on Cheyenne Creek
Joint Venture and Berry and Boyle Residential Services dated
August 1, 1990 (included as an exhibit to the Partnership's Form
10-K for the year ended December 31, 1990, and incorporated herein
by reference).
(10)(n) Documents pertaining to the permanent loan refinancing for The
Pines on Cheyenne Creek Joint Venture (included as an exhibit to
the Partnership's Form 10-K for the year ended December 31, 1990,
and incorporated herein by reference).
(10)(o) Documents pertaining to the permanent loan refinancing for the
Canyon View East Joint Venture (included as an exhibit to the
Partnership's Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference).
(10)(p) Documents pertaining to the permanent loan refinancing for the
Mariposa Joint Venture (included as an exhibit to the
Partnership's Form 10-K for the year ended December 31, 1990, and
incorporated herein by reference).
(10)(q) Amended and Restated Joint Venture Agreement of the Casabella
Joint Venture dated April 22, 1991, filed as Exhibit 10(f) to the
Annual Report on Form 10K for the year ended December 31, 1991 for
Berry and Boyle Development Partners III and incorporated herein
by reference.
(10)(r) Documents pertaining to the $7,320,000 permanent loan for
Casabella Joint Venture filed as Exhibit 10(g) to the Annual
Report on Form 10K for the year ended December 31, 1991 for Berry
and Boyle Development Partners III and incorporated herein by
reference.
(10)(s) Partnership Merger Agreement dated April 22, 1991 between
Casabella I Joint Venture and Casabella Joint Venture filed as
Exhibit 10(h) to the Annual Report on Form 10K for the year ended
December 31, 1991 for Berry and Boyle Development Partners III and
incorporated herein by reference.
(10)(t) Documents pertaining to the permanent loan refinancing for the
Casabella Joint Venture filed as Exhibit 10(i) to the Annual
Report on Form 10K for the year ended December 31, 1992 for Berry
and Boyle Development Partners III and incorporated herein by
reference.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 432,596
<SECURITIES> 199,599
<RECEIVABLES> 3,300
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 23,215,040
<DEPRECIATION> (4,359,624)
<TOTAL-ASSETS> 20,996,900
<CURRENT-LIABILITIES> 338,397
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,666,829
<TOTAL-LIABILITY-AND-EQUITY> 20,996,900
<SALES> 0
<TOTAL-REVENUES> 2,668,640
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,781,091
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 986,730
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (105,066)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
