SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-16860
EAGLE INSURED L.P.
(Exact names of registrant as specified in its charter)
Delaware 13-3442945
- -------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
625 Madison Avenue, New York, New York 10022
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
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
--- ---
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EAGLE INSURED L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
ASSETS
March 31, December 31,
1996 1995
----------- ------------
Investments in mortgage loans $27,733,535 $27,764,817
Loan receivable from affiliate 3,060,000 3,060,000
Deferred loan origination fees, net 954,866 962,387
Cash and cash equivalents 1,110,155 1,145,895
Interest receivable 261,205 206,763
Equity loan to developer 21,147 6,162
Other assets 0 3,253
----------- -----------
Total assets $33,140,908 $33,149,277
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to affiliates $ 55,654 $ 76,429
Accrued expenses 51,650 57,222
Distribution payable 39,214 0
----------- -----------
Total liabilities 146,518 133,651
----------- -----------
Contingencies
Partners' capital (deficit):
BUC$holders (2,641,100 BUC$
issued and outstanding) 33,330,936 33,351,747
General partners (336,546) (336,121)
----------- -----------
Total partners' capital 32,994,390 33,015,626
----------- -----------
Total liabilities and partners' capital $33,140,908 $33,149,277
=========== ===========
See accompanying notes to financial statements
-2-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
---------------------------
1996 1995
---------- ----------
Revenues:
Interest income:
Mortgage loans $614,254 $619,427
Loan receivable from affiliate 72,207 75,182
Temporary investments 11,085 12,330
Equity gain 14,985 21,669
-------- --------
Total revenues 712,531 728,608
-------- --------
Expenses:
General and administrative 46,960 51,774
Amortization of deferred loan origination fees 7,521 7,521
-------- --------
Total expenses 54,481 59,295
-------- --------
Net income $658,050 $669,313
======== ========
Allocation of Net Income:
BUC$holders $606,459 $617,497
======== ========
General partners:
Special distribution $ 39,214 $ 39,214
Other 12,377 12,602
-------- --------
$ 51,591 $ 51,816
======== ========
Net income per BUC $ .23 $ .23
======== ========
See accompanying notes to financial statements
-3-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Total BUC$holders General Partners
----------- ----------- ----------------
<S> <C> <C> <C>
Partners' capital (deficit) -- January 1, 1996 $33,015,626 $33,351,747 $(336,121)
Net income 658,050 606,459 51,591
Distributions (679,286) (627,270) (52,016)
----------- ----------- ----------
Partners' capital (deficit) -- March 31, 1996 $32,994,390 $33,330,936 $(336,546)
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating
activities:
Interest received $ 643,104 $ 682,951
General and administrative expenses paid (70,054) (41,528)
---------- ----------
Net cash provided by operating activities 573,050 641,423
---------- ----------
Cash flows from investing activities:
Principal payments received on mortgage loans 31,282 31,339
---------- ----------
Cash flows from financing activities:
Distributions paid to partners (640,072) (640,071)
---------- ----------
Net (decrease) increase in cash and cash equivalents (35,740) 32,691
Cash and cash equivalents at beginning of the period 1,145,895 975,682
---------- ----------
Cash and cash equivalents at end of the period $1,110,155 $1,008,373
========== ==========
Reconciliation of net income to net cash provided by
operating activities:
Net income $ 658,050 $ 669,313
---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity gain (14,985) (21,669)
Amortization of deferred loan origination fees 7,521 7,521
Changes in:
Interest receivable (54,442) (21,092)
Other assets 3,253 1,663
Due to affiliates (20,775) 17,270
Accrued expenses (5,572) (11,583)
---------- ----------
Total adjustments (85,000) (27,890)
---------- ----------
Net cash provided by operating activities $ 573,050 $ 641,423
========== ==========
Supplemental schedule of financing activities
Distributions to partners $ 679,286 $ 679,285
Increase in distributions payable (39,214) (39,214)
---------- ----------
Distributions paid to partners $ 640,072 $ 640,071
========== ==========
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 1 - General
These financial statements have been prepared without audit. In the
opinion of management, the financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of Eagle Insured L.P. (the "Partnership") as of March 31,
1996 and the results of operations and cash flows for the three months ended
March 31, 1996 and 1995. However, the operating results for the interim periods
may not be indicative of the results expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1995.
NOTE 2 - Related Parties
The General Partners and their affiliates perform services for the
Partnership which include, but are not limited to: accounting and financial
management; registrar, transfer and assignment functions; asset management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement"). The costs and expenses were:
Three Months Ended
March 31,
-------------------------
1996 1995
-------- --------
Prudential-Bache Properties, Inc.
("PBP") and affiliates $15,392 $20,433
Related Federal Insured L.P.
(the "Related General Partner")
and affiliates 15,000 1,026
------- --------
$30,392 $21,459
======= ========
The present owner of the Cross Creek property ("Walsh/Cross Creek L.P.")
acquired title to the property upon the default of the original developer.
Significant interests in Walsh/Cross Creek L.P. are held by affiliates of the
Related General Partner. The Partnership made a loan to Walsh/Cross Creek L.P.
(the "Cross Creek Loan") to pay for costs incurred to complete construction and
to fund operating deficits. The Cross Creek Loan bears interest at the prime
rate plus 1.0% and is due on January 1, 2030 or on the occurrence of other
events as more fully described in the loan agreement. The amount loaned to
Walsh/Cross Creek L.P. is classified as a loan receivable from affiliate and is
anticipated to be repaid from cash flows from the property. Stephen M. Ross
holds a majority interest in the Related General Partner and has guaranteed to
the Partnership, subject to certain conditions contained in the Guarantee
Agreement and Amendment to the Guarantee as follows: (i) the performance of all
obligations for the payment of interest on the Cross Creek Loan when due in
accordance with documentation evidencing the Cross Creek Loan; (ii) the payment
of principal on the Cross Creek Loan on or before December 31, 2000; (iii) the
repayment on or before December 31, 2000 of the $1,783,900 equity loan
(currently recorded at zero) previously made to the original developer of Cross
Creek; and (iv) the payment when due of interest and principal at an interest
rate of 8.95% of the $17,494,100 first mortgage loan previously made to the
original developer.
-6-
<PAGE>
EAGLE INSURED L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 2 - Related Parties (continued)
In accordance with the Guarantee Agreement and Amendment to the
Guarantee and except as otherwise required by HUD, available cash flow or
capital proceeds from the Cross Creek property will be applied first to all
expenses of operating and maintaining the property, debt service and/or
satisfaction of the mortgage loan, equity loan and Cross Creek Loan, then to
reimburse Stephen M. Ross for operating deficit payments which he has made
(amounting to $75,000 for the three months ended March 31, 1996 and $3,002,732,
cumulatively), then to additional interest, default rate and guaranteed rate
payments as set forth in the Subordinated Note and the Additional Interest
Guarantee.
The Partnership maintained an account with the Prudential Institutional
Liquidity Portfolio Fund, an affiliate of PBP, for investment of its available
cash in short-term instruments in 1995 in accordance with the guidelines
established by the Partnership Agreement.
Prudential Securities Incorporated ("PSI") owns 6,655 BUC$ at March 31,
1996.
NOTE 3 - Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes
et al. v. Prudential Securities Group, Inc. et al. (CV-93-654), was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership, against the Partnership, PBP, PSI and a number
of other defendants. Plaintiffs alleged violations of the Racketeer Influenced
and Corrupt Organizations Act ("RICO") statutes, breach of fiduciary duty, fraud
and deceit, negligence, and demanded an accounting. Plaintiffs sought
unspecified compensatory, punitive and treble damages, and rescission, including
costs and attorneys' fees, but the only relief sought against the Partnership
was an accounting. The defendants filed a motion to dismiss on December 22,
1993.
By order of the Judicial Panel on Multidistrict Litigation dated April
14, 1994, the Kinnes case, together with a number of other actions not involving
the Partnership, were transferred to a single judge of the United States
District Court for the Southern District of New York and consolidated for
pretrial proceedings under the caption In re Prudential Securities Incorporated
Limited Partnerships Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs
in the transferred cases filed a complaint that consolidated the previously
filed complaints and named as defendants, among others, PSI, certain of its
present and former employees and the General Partners. The Partnership was not
named a defendant in the consolidated complaint, but the name of the Partnership
was listed as being among the limited partnerships at issue in the case.
On August 9, 1995 PBP, PSI and other Prudential defendants entered into
a Stipulation and Agreement of Partial Compromise and Settlement with legal
counsel representing plaintiffs in the consolidated actions. The court
preliminarily approved the settlement agreement by order dated August 29, 1995
and, following a hearing held November 17, 1995, found that the agreement was
fair, reasonable, adequate and in the best interests of the plaintiff class. The
court gave final approval to the settlement, certified a class of purchasers of
specific limited partnerships, including the Partnership, released all settled
claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing and
prosecuting any settled claim against the released parties. The full amount due
under the settlement agreement has been paid by PSI. The consolidated action
remains pending against the Related General Partner and certain of its
affiliates.
NOTE 4 - Subsequent Events
In May 1996, distributions of approximately $627,000 and $13,000 were
paid to the BUC$holders and General Partners, respectively, for the quarter
ended March 31, 1996.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Partnership originally invested in four mortgage loans which finance
multifamily residential rental property ("Mortgages") one of which was prepaid
in 1994.
All base interest and initially at least 90% in the aggregate of the
principal of the loans made by the Partnership are coinsured by the FHA (80% of
the 90%) and an affiliate of the Related General Partner (20% of the 90%), with
the remaining 10% of the Partnership's original portfolio comprised of uninsured
non-interest bearing equity loans made directly to the same developers as are
the Mortgages.
The Partnership is entitled to receive additional interest on each
Mortgage from the annual net cash flow of the development and from a percentage
of the residual value upon sale or refinancing. The receipt of additional
interest is dependent upon the economic performance of the underlying
properties. The Partnership did not receive additional interest payments during
the three months ended March 31, 1996.
Stephen M. Ross has guaranteed repayment of the principal and interest
on a loan to the Cross Creek developer. See Note 3 to the financial statements
for further information. Mr. Ross remains in compliance with his obligations
under the Guarantee Agreement and Amendment to the Guarantee. However,
significant portions of his assets are in the form of partnership interests and
corporate stock which are pledged or are otherwise illiquid. Furthermore, a
significant portion of the cash flow which Mr. Ross would otherwise be expected
to receive from his business operations is presently pledged to meet other
obligations. Mr. Ross also has contingent liabilities that, if simultaneously
called upon, could result in Mr. Ross having insufficient liquid assets to meet
all of his current liabilities. There can be no assurance that Mr. Ross will
have the liquidity necessary to continue to comply with his obligations under
the Guarantee Agreement. In addition, Mr. Ross has capitalized the Related
General Partner with a demand promissory note and, if called upon to pay all or
a portion of this note, there is no assurance that he will have the liquidity
necessary to meet such demand.
A distribution of approximately $627,000 was paid to BUC$holders in May
1996 from adjusted cash flow from operations. Debt service payments from
mortgage loans are anticipated to provide sufficient liquidity to meet the
operating expenditures of the Partnership and to pay distributions in the
future.
Management is not aware of any trends or events, commitments or
uncertainties, which have not otherwise been disclosed, that will or are likely
to impact liquidity in a material way. All base interest and the principal of
the Partnership's investments in mortgage loans are insured or co-insured by the
FHA and a private mortgage lender (which is an affiliate of the Related General
Partner). The Partnership's investment in unsecured non-interest bearing equity
loans (which represent approximately 10% of the Partnership's portfolio) are
secured by a Partnership interest in properties which are diversified by
location so that if one state is experiencing downturns in the economy, the
remaining properties may be experiencing upswings.
Results of Operations
The Partnership's net income for the three months ended March 31, 1996
remained relatively constant with a decrease of approximately $11,000 or 2% as
compared to the corresponding period in 1995.
During the three months ended March 31, 1996 and 1995, the Partnership
recorded equity gains of approximately $15,000 and $22,000, respectively,
relating to net equity income from the Woodgate Manor property.
-8-
<PAGE>
Additional Information
The following table lists the respective occupancy rates at the
properties securing Mortgages as of April 7, 1996:
Property Location Occupancy %
-------- -------- -----------
Cross Creek Apartments Charlotte, NC 97%
Weatherly Walk Apartments Fayetteville, GA 94%
Woodgate Manor Gainesville, FL 96%
-9-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings -- Incorporated by reference to Note 4 to the
financial statements filed herewith in Item 1 of Part I of the
Partnership's Quarterly Report.
Item 2. Changes in Securities -- None
Item 3. Defaults Upon Senior Securities -- None
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:
3(a) and 4(a) Agreement of Limited Partnership, as amended
(incorporated by reference to Exhibits 3(a) and 4(a)
to the Partnership's Prospectus, dated December 11,
1987, filed pursuant to Rule 424(b) under the
Securities Act of 1933, File No. 33-17059).
3(b) and 4(b) Certificate of Limited Partnership, as amended
(incorporated by reference to Exhibits 3(a) and 4(a)
to the Registration Statement on Form S-11, (File
No. 33-17059) dated November 17, 1987 and to
Amendment No. 2 to such Registration Statement dated
December 2, 1987).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K -- None
-10-
<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.
EAGLE INSURED L.P.
By: RFI Associates, Inc.
A Delaware corporation,
general partner of the General Partner
Date: May 14, 1996 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Vice President
Date: May 14, 1996 By: /s/ Lawrence J. Lipton
----------------------
Lawrence J. Lipton
Treasurer
(Principal Financial and Accounting Officer)
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
Date: May 14, 1996 By: /s/ Eugene D. Burak
-------------------
Eugene D. Burak
Vice President
By: Related Federal Insured L.P.
A Delaware limited partnership, General Partner
-11-
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the
financial statements for Eagle Insured L.P. and is qualified in its entirety by
reference to such financial statements
</LEGEND>
<NAME> Eagle Insured L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,110,155
<SECURITIES> 0
<RECEIVABLES> 31,075,887
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 954,866
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 33,140,908
<CURRENT-LIABILITIES> 146,518
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 32,994,390
<TOTAL-LIABILITY-AND-EQUITY> 33,140,908
<SALES> 0
<TOTAL-REVENUES> 712,531
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 54,481
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 658,050
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 658,050
<EPS-PRIMARY> .23
<EPS-DILUTED> 0
</TABLE>
