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 for the Fiscal Year Ended December 31, 1997
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period from _______to _______
Commission file number: 0-16855
HIGH EQUITY PARTNERS L.P. - SERIES 88
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3394723
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
411 West Putnam Avenue, Greenwich CT 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 862-7444
Securities registered pursuant to Section 12(b) of the Act:
None None
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(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest, $250 Per Unit
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(Title of class)
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 [ ]
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 the 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 ]
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit A to the Prospectus of the registrant dated September 15, 1987, filed
pursuant to Rule 424(b) under the Securities Act of 1933, as amended, is
incorporated by reference in Part IV of this Form 10-K.
<PAGE>
PART I
Item 1. Business
High Equity Partners L.P. - Series 88 (the "Partnership") is a
Delaware limited partnership formed as of February 24, 1987. The Partnership is
engaged in the business of operating and holding for investment previously
acquired income-producing properties, consisting of office buildings, shopping
centers and other commercial and industrial properties such as industrial parks
and warehouses. Resources High Equity, Inc., the Partnership's managing general
partner (the "Managing General Partner"), is a Delaware corporation and a
wholly-owned subsidiary of Presidio Capital Corp., a British Virgin Islands
corporation ("Presidio"). Until November 3, 1994, the Managing General Partner
was a wholly-owned subsidiary of Integrated Resources, Inc. ("Integrated"). On
November 3, 1994, Integrated consummated its plan of reorganization under
Chapter 11 of the United States Bankruptcy Code at which time, pursuant to such
plan of reorganization, the newly-formed Presidio purchased substantially all of
Integrated's assets. Presidio AGP Corp., which is a wholly-owned subsidiary of
Presidio, became the associate general partner (the "Associate General Partner")
on February 28, 1995 replacing Third Group Partners which withdrew as of that
date. (The Managing General Partner and the Associate General Partner are
referred to collectively hereinafter as the "General Partners.") Affiliates of
the General Partners are also engaged in businesses related to the acquisition
and operation of real estate.
The Partnership offered 400,000 units (subject to increase to
800,000) of limited partnership interest (the "Units") through Integrated
Resources Marketing, Inc., a wholly-owned subsidiary of Integrated, pursuant to
the Prospectus of the Partnership dated September 15, 1987, as supplemented by
Supplements dated August 19, 1988, April 28, 1989, July 20, 1989 and September
8, 1989 (collectively, the "Prospectus"), filed pursuant to Rules 424(b) and
424(c) under the Securities Act of 1933, as amended. The Prospectus was filed as
part of the Partnership's Registration Statement on Form S-11, Commission File
No. 33-12574 (the "Registration Statement"), pursuant to which the Units were
registered. As of the termination of the offering on September 14, 1989, the
Partnership had accepted subscriptions for 371,766 Units for an aggregate of
$92,941,500 in gross proceeds, resulting in net proceeds from the offering of
$90,153,255 (gross proceeds of $92,941,500 less organization and offering costs
of $2,788,245). All underwriting and sales commissions were paid by Integrated
or its affiliates and not by the Partnership.
In August 1990, the Managing General Partner declared a
special distribution of $16.96 per Unit, representing a return of uninvested
gross proceeds. This return of capital lowered the aggregate gross proceeds to
$86,636,349, resulting in net proceeds from the offering of $83,848,104 (gross
proceeds of $86,636,349 less organization and offering costs of $2,788,245). The
3% organization and offering costs associated with the return of the original
capital were non-refundable.
As of March 15, 1998, the Partnership had invested
substantially all of its total adjusted net proceeds available for investment
after establishing a working capital reserve in the properties described below.
The Partnership's property investments which contributed more
than 15% of the Partnership's total gross revenues were as follows: in 1997,
Tri-Columbus, Sunrise, Livonia, Melrose II, and 568 Broadway represented 23%,
18%, 18%, 17% and 15% of gross revenues, respectively; in 1996, TMR Warehouses,
Sunrise, Livonia and 568 Broadway represented approximately 29%, 24%, 19%, and
16% of gross revenues, respectively; in 1995, TMR Warehouses, Sunrise and
Livonia Plaza represented approximately 27.3%, 19.6%, and 18.4%, respectively.
<PAGE>
The Partnership owned the following properties as of March 15,
1998:
(1) TMR Warehouses. On September 15, 1988, Tri-Columbus
Associates ("Tri-Columbus"), a joint venture comprised of the Partnership, High
Equity Partners L.P. - Series 86 ("HEP-86"), and IR Columbus Corp., a
wholly-owned subsidiary of Integrated ("Columbus Corp."), purchased the fee
simple interest in three warehouses (the "TMR Warehouses") located in Columbus,
Ohio. The Partnership originally purchased a 58.68% interest in Tri-Columbus on
September 15, 1988. On June 29, 1990, the Partnership closed in escrow on the
purchase of an additional 20.66% interest in Tri-Columbus. The Partnership
purchased the additional joint venture interest from Columbus Corp. at
approximately 86% of Columbus Corp.'s original cost, pursuant to a right of
first refusal contained in the joint venture agreement. Due to Integrated's
bankruptcy, the transaction was submitted to the bankruptcy court for review,
the approval of the bankruptcy court was obtained on September 6, 1990 and the
funds were released from escrow. Purchase of this additional 20.66% interest
increased the Partnership's interest in Tri-Columbus from 58.68% to 79.34%. The
remaining 20.66% is held by HEP-86.
The TMR Warehouses are distribution and light manufacturing
facilities located in Orange, Grove City and Hilliard, all suburbs of Columbus,
Ohio and comprise 1,010,500 square feet of space in the aggregate, with
individual square footage of 583,000 square feet, 190,000 square feet and
237,500 square feet, respectively. As of January 1, 1998 and 1997, the Orange
and Grove City buildings were each 100% leased to a single tenant. As of January
1, 1998, the Hilliard property was 74% leased compared to 100% as of January 1,
1997. The Volvo/GM Heavy Truck lease covering 583,000 square feet in Orange
Township extended its lease in 1997. The lease with Micro Electronics for
175,000 square feet at the Hilliard property expires in August 1998 and the
lease is not expected to be renewed.
The TMR Warehouses compete with numerous other warehouses in
the market area.
(2) Melrose Crossing Shopping Center - Phase II. On February
3, 1989, the Partnership purchased the fee simple interest in Phase II of the
Melrose Crossing Shopping Center ("Melrose-Phase II"). Melrose-Phase II, located
in Melrose Park, Illinois, previously consisted of a 24,232 square foot retail
store that had been leased to Highland Appliance, located on a parcel totaling
7.02 acres. Highland Appliance vacated in January 1992.
Melrose-Phase II lies to the north of Melrose Crossing on
which an 88,000 square foot Venture department store is located as well as
138,355 square feet of retail space which is owned by HEP-86. Melrose-Phase II
is situated in Melrose Park, Illinois, an older working-class neighborhood near
O'Hare Airport at the intersection of Mannheim Road and North Avenue, less than
10 miles from Chicago's Loop.
On December 22, 1992, the Partnership entered into a 20-year
lease with Handy Andy Home Improvement Centers, Inc. ("Handy Andy"), which
operates home improvement stores throughout the country. The lease required the
Partnership to construct a 93,728 square foot building (the "Building") and an
adjacent 23,300 square foot outdoor selling area on Melrose-Phase II.
Construction of the Building required the demolition of the existing retail
store described above.
<PAGE>
On October 12, 1995, Handy Andy filed for bankruptcy under
Chapter 11 of the United States Bankruptcy Code. On March 7, 1996, Handy Andy
closed its store at Melrose-Phase II and rejected its lease. In April 1997, the
Partnership received $1,539,748 pursuant to a proof-of-claim filed in connection
with the bankruptcy.
(3) Sunrise Marketplace. On February 15, 1989, the Partnership
purchased the fee simple interest in Sunrise Marketplace ("Sunrise"), a 176,765
square foot neighborhood shopping center in Las Vegas , Nevada. The center is
situated on 15.15 acres of land at the northeast corner of Nellis Boulevard and
Stewart Avenue. Sunrise was 99% leased as of January 1, 1998 compared to 94% at
January 1, 1997. There are no leases which represent at least 10% of the square
footage of the center scheduled to expire during 1998.
The Partnership's legal action regarding the structural
roof/truss problem was resolved in early 1998 and the Partnership received
$370,000 in connection with the settlement. Repairs were completed during 1994
at a cost of approximately $350,000
The renovation of Sunrise in late 1994 positioned the center
to compete with other properties in its primary trade market and new development
has been limited to free standing buildings at strategic locations. Rental rates
have remained stable.
(4) Super Valu Stores. On February 16, 1989, the Partnership
acquired joint venture interests in four supermarkets (the "Properties") owned
by Super Valu Stores ("Super Valu"). A fee simple interest in the Properties was
acquired pursuant to a contract of sale among the seller, the Partnership and
American Real Estate Holdings Limited Partnership ("AREH"). AREH is 99% owned by
American Real Estate Partners L.P., a public partnership originally sponsored by
Integrated. At the closing, AREH and the Partnership assigned their contract
rights with respect to each of the Properties to three joint venture entities
(the "Joint Ventures"), each of which has AREH and the Partnership as a 50%
owner.
The four supermarkets, comprising an aggregate of
approximately 257,700 square feet, are located as follows: 73,000 square feet in
Gwinnett County near Atlanta, Georgia, 60,000 square feet in Indianapolis,
Indiana, 64,700 square feet in Toledo, Ohio and 60,000 square feet in Edina,
Minnesota. The first three locations are leased to Super Valu franchisees and
the fourth to Byerly's Inc., an independent retailer.
The Properties, which were substantially completed in October
1984 (Georgia), December 1988 (Minnesota), February 1983 (Indiana) and May 1988
(Ohio), have been 100% leased since completion. There are no leases which
represent at least 10% of the square footage of the property scheduled to expire
during 1998.
(5) Livonia Plaza. On June 28, 1989, the Partnership purchased
a fee simple interest in Livonia Plaza, a shopping center that was completed in
December 1989, located in Livonia, Michigan.
<PAGE>
Livonia Plaza is a 120,652 square foot neighborhood shopping
center situated on a 12.16 acre site near the intersection of Five Mile Road and
Bainbridge Avenue in Livonia, a western suburb of Detroit. Immediate competition
for the center is a 78,000 square foot shopping center located across the street
and another nearby 75,000 square foot shopping center. Livonia Plaza was 100%
leased as of January 1, 1998 and January 1, 1997. There are no leases which
represent at least 10% of the square footage of the center scheduled to expire
in 1998.
In October 1996, the Partnership signed an agreement to expand
the Kroger store which opened during 1997. The cost of the expansion was paid by
Kroger and it has agreed to extend its lease for a new 20 year term. This
expansion is expected to enhance the rental rates on the small store space and
increase customer flow through the shopping center.
(6) 568 Broadway. On February 1, 1990, the Partnership was
admitted as a third partner in a joint venture (the "Broadway Joint Venture")
with Integrated Resources High Equity Partners, Series 85, a California limited
partnership ("HEP-85"), and HEP-86 pursuant to an amended and restated joint
venture agreement. The Partnership has a 22.15% interest in the Broadway Joint
Venture. The Broadway Joint Venture holds a fee simple interest in a commercial
office building located at 568-578 Broadway, New York, New York ("568
Broadway").
568 Broadway is located in the SoHo district of Manhattan on
the northeast corner of Broadway and Prince Street. 568 Broadway is a 12-story
plus basement and sub-basement building constructed in 1898. It is situated on a
site of approximately 23,600 square feet, has a rentable square footage of
approximately 299,000 square feet and a floor size of approximately 26,000
square feet. Formerly catering primarily to industrial light manufacturing, the
building has been converted to an office building and is currently leased to art
galleries, photography studios, retail and office tenants. The last
manufacturing tenant vacated in January 1993. The building was 100% leased as of
January 1, 1998 and January 1, 1997. There are no leases which represent at
least 10% of the square footage of the property scheduled to expire during 1998.
568 Broadway competes with other buildings in the SoHo area.
Write-downs for Impairment
See Note 4 to the financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations for a
discussion of write-downs for impairment.
Competition
The real estate business is highly competitive and, as
discussed more particularly above, the properties acquired by the Partnership
may have active competition from similar properties in the vicinity. In
addition, various limited partnerships have been formed by the General Partners
and/or their affiliates that engage in businesses that may compete with the
Partnership. The Partnership will also experience competition for potential
buyers at such time as it seeks to sell any of its properties.
<PAGE>
Employees
Services are performed for the Partnership at the properties
by on-site personnel. Salaries for such on-site personnel are paid by the
Partnership or by unaffiliated management companies that service the
Partnership's properties from monies received by them from the Partnership.
Services are also performed by the Managing General Partner and by Resources
Supervisory Management Corp. ("Resources Supervisory"), each of which is an
affiliate of the Partnership. Resources Supervisory currently provides
supervisory management and leasing services for 568 Broadway, Sunrise, Livonia
Plaza and Melrose II and subcontracts certain management and leasing functions
to unaffiliated third parties. TMR Warehouses and the properties leased by Super
Valu are currently directly managed by Resources Supervisory.
The Partnership does not have any employees. NorthStar
Presidio Management Company LLC performs accounting, secretarial, transfer and
administrative services for the Partnership. See Item 10, "Directors and
Executive Officers of the Registrant", Item11, "Executive Compensation", and
Item 13, "Certain Relationships and Related Transactions".
Forward-looking Statements
Certain statements made in this report may constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking
statements include statements regarding the intent, belief or current
expectations of the Partnership and its management and involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Partnership to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
following: general economic and business conditions, which will, among other
things, affect the demand for retail space or retail goods, availability and
creditworthiness of prospective tenants, lease rents and the terms and
availability of financing, adverse changes in the real estate markets including,
among other things, competition with other companies; risks of real estate
development and acquisition; governmental actions and initiatives; and
environment/safety requirements.
Item 2. Properties
A description of the Partnership's properties is contained in
Item 1 above (see Schedule III to the financial statements for additional
information with respect to the properties).
Item 3. Legal Proceeding
The Broadway Joint Venture is currently involved in litigation
with a number o present or former tenants who are in default on their lease
obligations. Several of these tenants have asserted claims or counterclaims
seeking monetary damages. The plaintiffs' allegations include, but are not
limited to, claims for breach of contract, failure to provide certain services,
overcharging of expenses and loss of profits and income. These suits seek total
damages of in excess of $20 million plus additional damages of an indeterminate
amount. The Broadway Joint Venture's action for rent against Solo Press was
tried in 1992 and resulted in a judgment in favor of the Broadway Joint Venture
<PAGE>
for rent owed. The Partnership believes this will result in dismissal of the
action brought by Solo Press against the Broadway Joint Venture. Since the facts
of the other actions which involve material claims or counterclaims are
substantially similar, the Partnership believes that the Broadway Joint Venture
will prevail in those actions as well.
A former retail tenant of 568 Broadway (Galix Shops Inc.) and
a related corporation which is a retail tenant of a building adjacent to 568
Broadway filed a lawsuit in the Supreme Court of The State of New York, County
of New York, against the Broadway Joint Venture which owns 568 Broadway. The
action was filed on April 13, 1994. The plaintiffs alleged that by erecting a
sidewalk shed in 1991, 568 Broadway deprived plaintiffs of light, air and
visibility to their customers. The sidewalk shed was erected, as required by
local law, in connection with the inspection and restoration of the 568 Broadway
building facade, which is also required by local law. Plaintiffs further alleged
that the erection of the sidewalk shed for a continuous period of over two years
is unreasonable and unjutified and that such conduct by defendants has deprived
plaintiffs of the use and enjoyment of their property. The suit seeks a judgment
requiring removal of the sidewalk shed, compensatory damages of $20 million and
punitive damages of $10 million. The Partnership believes that this suit is
meritless and intends to vigorously defend it.
On or about May 11, 1993 High Equity Partners L.P. - Series 86
("HEP-86"), an affiliated partnership, was advised of the existence of an action
(the "California Action') in which a complaint (the "HEP Complaint") was filed
in the Superior Court for the State of California for the County of Los Angeles
(the "Court") on behalf of a purported class consisting of all of the purchasers
of limited partnership interests in HEP-86. On April 7, 1994 the plaintiffs were
granted leave to file an amended complaint (the "Amended Complaint") on behalf
of a class consisting of all of the purchasers of limited partnership interests
in HEP-86, the Partnership and Integrated Resources High Equity Partners, Series
85 ("HEP-85"), another affiliated partnership.
On November 30, 1995, after the Court preliminarily approved a
settlement of the California Action but ultimately declined to grant final
approval and after the Court granted motions to intervene, the original and
intervening plaintiffs filed a Consolidated Class and Derivative Action
Complaint (the "Consolidated Complaint") against the Managing General Partner of
the Partnership and HEP-85 and the Investment General Partner of HEP-86; the
Administrative General Partner of HEP-86 (the "General Partners"); a subsidiary
of the indirect corporate parent of the General Partners; and the indirect
corporate parent of the General Partners. The Consolidated Complaint alleged
various state law class and derivative claims, including claims for breach of
fiduciary duties; breach of contract; unfair and fraudulent business practices
under California Bus. & Prof. Code Sec. 17200; negligence; dissolution,
accounting and receivership; fraud; and negligent misrepresentation. The
Consolidated Complaint alleged, among other things, that the General Partners
caused a waste of HEP partnership assets by collecting management fees in lieu
of pursuing a strategy to maximize the value of the investments owned by the
limited partners; that the General Partners breached their duty of loyalty and
due care to the limited partners by expropriating management fees from the
partnerships without trying to run the HEP partnerships for the purposes for
which they are intended; that the General Partners acted improperly to enrich
themselves in their position of control over the HEP partnerships and that their
actions prevent non-affiliated entities from making and completing tender offers
to purchase units in the HEP partnerships; that by refusing to seek the sale of
the HEP partnerships' properties, the General Partners diminished the value of
the limited partners' equity in the HEP partnerships; that the General Partners
took a heavily overvalued partnership asset management fee; and that limited
partnership units were sold and marketed through the use of false and misleading
statements.
<PAGE>
The Court entered an order on January 14, 1997 rejecting the
settlement and concluding that there had not been an adequate showing that the
settlement was fair and reasonable. On February 24, 1997, the Court granted the
request of one plaintiffs' law firm to withdraw as class counsel. Thereafter, in
June 1997, the plaintiffs again amended their complaint (the "Second Amended
Complaint"). The Seconded Amended Complaint asserts substantially the same
claims as the Consolidated Complaint, except that it no longer contains causes
of action for fraud, for negligent misrepresentation, or for negligence. The
defendants served answers denying the allegations and asserting numerous
affirmative defenses. In February 1998, the Court certified three plaintiff
classes consisting of current unit holders in each of the three HEP
partnerships. On March 11, 1998, the Court stayed the California Action
temporarily to permit the parties to engage in renewed settlement discussions.
The General Partners believe that each of the claims asserted
in the Second Amended Complaint are meritless and intend to continue to
vigorously defend the California Action. It is impossible at this time to
predict what the defense of the California Action will cost, the Partnership's
financial exposure as a result of the indemnification agreement discussed above,
and whether the costs of defending could adversely affect the Managing General
Partner's ability to perform its obligations to the Partnership.
The Limited Partnership Agreement provides for indemnification
of the General Partners and their affiliates in certain circumstances. The
Partnership has agreed to reimburse the General Partners for their actual costs
incurred in defending this litigation and the costs of preparing settlement
materials. Through December 31, 1997, the General Partners had billed the
Partnership a total of $1,039,511 for these costs $824,511 of which was paid in
February 1997.
On February 6,1998, Everest Investors 8, LLC ("Everest")
commenced an action in the Superior Court of the State of California for the
County of Los Angeles (Case No. BC 185554), against, among others, the HEP
partnerships, Resources Pension Shares 5 LP (an affiliated partnership), the
general partners of each of the partnerships, and DCC Securities Corp. In the
action, Everest alleged, among other things, that the partnerships and the
general partners breached the provisions of the applicable partnership
agreements by refusing to recognize transfers to Everest of limited partnership
units purportedly acquired pursuant to tender offers that had been made by
Everest (the "Everest Tender Units"). Everest sought injunctive relief (a)
directing the recognition of transfers to Everest of the Everest Tender Units
and the admission of Everest as a limited partner with respect to the Everest
Tender Units and (b) enjoining the transfer of the Everest Tender Units to any
either party. Everest seeks damages, including punitive damages, for alleged
breach of contract, defamation and intentional interference with contractual
relations. Everest's motion for a temporary restraining order was denied on
February 6, 1998. A hearing on Everest's application for a preliminary
injunction had been scheduled for February 26, however, on February 20, 1998,
Everest asked the Court to take its application off calendar. The defendants
served answers denying the allegations and asserting numerous affirmative
defenses. Merits discovery has commenced. The partnerships and the general
partners believe that Everest's claims are without merit and intend to
vigorously contest the action.
<PAGE>
On March 27, 1998, Everest commenced an action in the United
States District Court for the Central District of California against, among
others, the general partners of the HEP partnerships. In the action, Everest
alleged, among other things, various violations of the Williams Act Section
14(d) of the Securities Exchange Act of 1934 in connection with the general
partners' refusal to recognize transfers to Everest of limited partnership units
purportedly acquired pursuant to the Everest tender offers and the letters sent
by the general partners to the limited partners advising them of the general
partners' determination that the Everest tender offers violated applicable
securities laws. The general partners believe that Everest's claims are without
merit and intend to vigorously contest the action.
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 the fiscal year covered by this report through the
solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for the Registrant's Securities and
Related Security Holder Matters
Units of the Partnership are not publicly traded. There are
certain restrictions set forth in the Partnership's amended limited partnership
agreement (the "Limited Partnership Agreement") which may limit the ability of a
limited partner to transfer Units. Such restrictions could impair the ability of
a limited partner to liquidate its investment in the event of an emergency or
for any other reason.
In 1987, the Internal Revenue Service adopted certain rules
concerning publicly traded partnerships. The effect of being classified as a
publicly traded partnership would be that income produced by the Partnership
would be classified as portfolio income rather than passive income. In order to
avoid this effect, the Limited Partnership Agreement contains limitations on the
ability of a limited partner to transfer Units in circumstances in which such
transfers could result in the Partnership being classified as a publicly traded
partnership. However, due to the low volume of transfers of Units, it is not
anticipated that this will occur.
As of March 15, 1998, there were 7,266 holders of Units of the
Partnership, owning an aggregate of 371,766 Units (including 10 Units held by
the initial limited partner).
Distributions per Unit of the Partnership for 1996 and 1997
were as follows:
Distributions for the Amount of Distribution
Quarter Ended Per Unit
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March 31, 1996 $1.75
June 30, 1996 $1.75
September 30, 1996 $1.75
December 31, 1996 $1.75
March 31, 1997 $2.04
June 30, 1997 $2.55
September 30, 1997 $2.55
December 31, 1997 $2.55
The source of distributions and capital improvements in 1996 and 1997
was cash flow from operations. All distributions are in excess of accumulated
undistributed net income and, therefore, represent a return of capital to
investors on a generally accepted accounting principles basis. There are no
material restrictions set forth in the Limited Partnership Agreement upon the
Partnership's present or future ability to make distributions. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of factors which may affect the Partnership's
ability to pay distributions.
Pursuant to an agreement dated as of March 6, 1998 among Presidio
Capital Corp., American Real Estate Holding L.P. and Olympia Investors L.P. (the
"Purchaser"), on March 12, 1998, the Purchaser commenced a tender offer to
purchase up to 40% of the outstanding units of limited partnership interest at a
purchase price of $117.00 per unit.
<PAGE>
The agreement provides, among other things, for: (i) the Purchaser's
tender offers for up to 40% of the outstanding units of limited partnership
interest of the Partnership and of Integrated Resources High Equity Partners,
Series 85 and High Equity Partners L.P. - Series 86 (collectively, the
"Partnerships") and the cooperation of the general partners of the Partnerships
(collectively, the "General Partners") to facilitate such offers (including
furnishing the Purchaser with limited partner lists for use in connection with
the tender offers and taking a neutral stance with respect to the tender offers)
and the transfer of tendered units to the Purchaser without transfer fees; (ii)
an agreement by the Purchaser and its affiliates to limit their acquisition of
units to those acquired in the tender offers and to limit their acquisition of
assets or properties of the Partnerships to properties or assets the General
Partners or their affiliates have publicly announced their intention to sell or
in respect of which they have hired a broker; (iii) an agreement by the
Purchaser and its affiliates not to (A) seek the removal of the General Partners
or call any meeting of limited partners of the Partnerships; (B) make any
proposal to or seek proxies from limited partners of the Partnerships; or (C)
act, either alone or in concert with others, to seek to control the management,
policies or affairs of the Partnerships or to effect any business combination or
other extraordianry transactions with the Partnerships or the General Partners;
(iv) an agreement by the Purchaser and its affiliates to vote all units owned by
them in favor of a proposal, if any, by the General Partners resulting in
limited partners receiving securities listed on NASDAQ or a national securities
exchange; (v) the Purchaser's grant to an affiliate of the General Partners of
an option to purchase 50% of the units acquired in the offers at a price equal
to the lesser of the price paid by the Purchaser or $117.00 per unit (except
that this limitation does not apply, if the purchase price in the offer is
increased to more than $124.13 in response to a competing bid), plus 50% of the
Purchaser's costs associated with the offer; (vi) the grant to that same
affiliate of the General Partners of a similar option to purchase 50% of the
units in the other Partnerships acquired pursuant to the tender offers; and
(vii) an agreement pursuant to which either party can initiate so-called
"buy/sell" procedures by notifying the other of a specified price per unit (not
to exceed the then current net asset value of the units) and the other terms and
conditions on which the non-initiating party would then be requried to elect
(subject to certain exceptions) either to buy the units acquired in connection
with the tender offer from the initiating party or to sell the units to the
initiating party. The agreements of the Purchaser and its affiliates described
in clauses (ii), (iii), and (iv) above expire on March 6, 2001, but may expire
earlier under certain circumstances.
On March 25, 1998, the Partnership advised its limited partners of its
neutral stance on the offer.
<PAGE>
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
For the years ended December 31
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ 9,189,172 $ 7,759,188 $7,422,184 $ 7,124,114 $ 6,919,383
Net Income (Loss) 3,708,687 2,152,172 (7,260,499)2 2,439,021 797,118 1
Net Income (Loss)
Per Unit 9.48 5.50 (18.55) 6.23 2.04
Distributions
Per Unit3 9.69 7.00 7.00 7.00 7.00
Total Assets 56,296,853 56,381,690 56,305,498 66,210,947 66,493,618
</TABLE>
- ---------
(1) Net income for the year ended December 31, 1993 includes a write-down
for impairment on 568 Broadway of $398,700, or $1.02 per Unit. Also
included in net income for 1993 is a Loss on Abandonment of $839,202,
or $2.38 per Unit, in connection with razing the former structure on
the Melrose-Phase II site.
(2) Net loss for the year ended December 31, 1995 includes a write-down for
impairment on 568 Broadway, Sunrise and Melrose-Phase II in the
aggregate amount of $10,042,900 or $25.66 per Unit.
(3) All distributions are in excess of accumulated undistributed net income
and therefore represent a return of capital to investors on a generally
accepted accounting principles basis.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
The Partnership owns all of, or an interest in, certain
shopping centers, office buildings, warehouses and supermarkets. All properties
were initially acquired for cash. The Partnership's public offering of Units
commenced on September 15, 1987. As of the termination of the offering in
September 1989, the Partnership had accepted subscriptions for 371,766 Units
(including Units held by the initial limited partner) for aggregate net proceeds
of $90,153,255 (gross proceeds of $92,941,500 less organization and offering
costs of $2,788,245). In August 1990, the Managing General partner declared a
special distribution of $16.96 per Unit, representing a return of uninvested
gross proceeds. This return of capital lowered the net proceeds from the
offering to $83,848,104.
The Partnership uses working capital reserves remaining from
the net proceeds of its public offering and any undistributed cash from
operations as its primary source of liquidity. For the year ended December 31,
1997, all capital expenditures and all distributions were funded from cash flow
<PAGE>
from operations. As of December 31, 1997, total remaining working capital
reserves amounted to approximately $4,402,000. The Partnership intends to
distribute less than all of its future cash flow from operations in order to
maintain adequate working capital reserves for capital improvements and
capitalized lease procurement costs. If real estate market conditions
deteriorate in areas where the Partnership's properties are located, there is
substantial risk that future cash flow distributions may be reduced. Working
capital reserves are temporarily invested in short-term instruments and are
expected, together with operating cash flow, to be sufficient to fund
anticipated capital improvements to the Partnership's properties.
During the year ended December 31, 1997, cash and cash
equivalents increased $1,186,521 as a result of cash flows from operations in
excess of capital expenditures and distributions to partners. The Partnership's
primary source of funds is cash flow from the operation of its properties,
principally rents received from tenants, which amounted to $4,780,276 for the
year ended December 31, 1997. The Partnership used $114,807 for capital
expenditures related to capital and tenant improvements to the properties and
$3,478,948 for distributions to partners for the year ended December 31, 1997.
During 1997, the Partnership received a non-recurring payment of approximately
$1.5 million pursuant to the bankruptcy settlement of Handy Andy, the sole
tenant at Melrose II. The space formerly occupied by Handy Andy was vacant in
1997 and produced no rental revenues.
The following table sets forth for each of the last three
fiscal years, the amount of the Partnership's expenditures at each of its
properties for capital improvements and capitalized tenant procurement costs:
<TABLE>
<CAPTION>
Capital Improvements and Capitalized Tenant Procurement Costs
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
568 Broadway ............. $ 48,217 $ 132,801 $ 422,783
Sunrise .................. 7,068 308,903 606,835
Livonia Plaza ............ 111,358 7,818 251,490
Melrose-Phase II ......... 93,728 2,100 0
TMR Warehouse ............ 13,902 15,174 64,969
Super Valu ............... 0 0 0
---------- ---------- ----------
TOTALS ................... $ 274,273 $ 466,796 $1,346,077
========== ========== ==========
</TABLE>
The Partnership has budgeted expenditures for capital improvements and
capitalized tenant procurement costs in 1998 which is expected to be funded from
cash flow from operations. However, such expenditures will depend upon the level
of leasing activity and other factors which cannot be predicted with certainty.
<PAGE>
The Partnership expects to continue to utilize a portion of
its cash flow from operations and its reserves to pay for various capital and
tenant improvements to the properties and leasing commissions (the amount of
which cannot be predicted with certainty). Capital and tenant improvements and
leasing commissions may in the future exceed the Partnership's current working
capital reserves. In that event, the Partnership would utilize the remaining
working capital reserves, eliminate or reduce distributions, or sell one or more
properties. Except as discussed above, management is not aware of any other
trends, events, commitments or uncertainties that will have a significant impact
on liquidity.
Real Estate Market
The real estate market has begun to recover from the effects
of the substantial decline in the market value of existing properties. However,
market values have been slow to recover, and high vacancy rates continue to
exist in some areas. Technological changes are also occurring which may reduce
the office space needs of many users. These factors may continue to reduce
rental rates. As a result, the Partnership's potential for realizing the full
value of its investment in its properties is at continued risk.
Impairment of Assets
The Partnership evaluates the recoverability of the net
carrying value of its real estate and related assets at least annually, and more
often if circumstances dictate. The Partnership estimates the future cash flows
expected to result from the use of each property and its eventual disposition,
generally over a five-year holding period. In performing this review, management
takes into account, among other things, the existing occupancy, the expected
leasing prospects of the property and the economic situation in the region where
the property is located. If the sum of the expected future cash flows,
undiscounted, is less than the carrying amount of the property, the Partnership
recognizes an impairment loss, and reduces the carrying amount of the asset to
its estimated fair value. Fair value is the amount at which the asset could be
bought or sold in a current transaction between willing parties, that is, other
than in a forced or liquidation sale. Management estimates fair value using
discounted cash flows or market comparables, as most appropriate for each
property. Independent certified appraisers are utilized to assist management,
when warranted.
Impairment write-downs recorded by the Partnership do not
affect the tax basis of the assets and are not included in the determination of
taxable income or loss.
Because the cash flows used to evaluate the recoverability of
the assets and their fair values are based upon projections of future economic
events such as property occupancy rates, rental rates, operating cost inflation
and market capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net carrying
values at the balance sheet dates. The cash flows and market comparables used in
this process are based on good faith estimates and assumptions developed by
management. Unanticipated events and circumstances may occur and some
assumptions may not materialize; therefore, actual results may vary from the
estimates and the variances may be material. The Partnership may provide
additional write-downs, which could be material in subsequent years if real
estate markets or local economic conditions change.
<PAGE>
All of the Partnership's properties have experienced varying
degrees of operating difficulties and the Partnership recorded significant
impairment write-downs in 1995 and prior years. Improvements in the real estate
market and in the properties operations resulted in no write-downs for
impairment being needed in 1996 or 1997.
The following table represents the write-downs for impairment
recorded on the Partnership's properties.
<TABLE>
<CAPTION>
Property 1995 Prior
-------- ---- -----
<S> <C> <C>
568 Broadway ....................... $ 1,461,900 $ 4,695,800
Sunrise ............................ 5,700,000 2,800,000
Livonia Plaza ...................... 0 2,100,000
Melrose-Phase II ................... 2,881,000 0
----------- ----------
$10,042,900 $ 9,595,800
=========== ===========
</TABLE>
The details of each 1995 write-down are as follows:
568 Broadway
During 1995, significantly greater capital improvement
expenditures than were previously anticipated were required in order to render
568 Broadway more competitive in the New York market. Because the estimate of
undiscounted cash flows prepared in 1995 yielded a result lower than the asset's
net carrying value, management determined than an impairment existed. Management
estimated the property's fair value in order the determine the write-down for
impairment. Because the estimate of fair value using expected cash flows
discounted at 13% over 15 years and an assumed sale at the end of the holding
period using a 10% capitalization rate yielded a result which, in management's
opinion, was lower than the property's value in the marketplace, the property
was valued using sales of comparable buildings which indicated a fair value of
$45 per square foot. This fair value estimate resulted in a $6,600,000
write-down for impairment in 1995, of which the Partnership's share was
$1,461,900.
Sunrise
Despite the maintenance of high occupancy rates, actual income
levels at Sunrise during 1995 did not meet previously projected levels due to
lower market rental rates. In addition, expenses and capital expenditures were
both in excess of previously anticipated amounts. Because the estimate of
undiscounted cash flows prepared in 1995 yielded a result lower than the asset's
net carrying value, management determined that an impairment existed. Management
estimated the property's fair value, using expected cash flows discounted at 13%
over 15 years and an assumed sale at the end of the holding period using a 10%
capitalization rate, in order to determine the write-down for impairment. This
fair value estimate resulted in a $5,700,000 write-down for impairment in 1995.
<PAGE>
Melrose-Phase II
In October 1995, the Partnership was notified that Handy Andy
filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code.
Subsequently, Handy Andy closed its store and the lease was rejected by Handy
Andy as debtor-in-possession in March 1996. Management determined that an
impairment existed at Melrose II due to the reduction in the estimated cash
flows. Management estimated the property's fair value, using expected cash flows
discounted at 13% over 10 years and an assumed sale at the end of the holding
period using a 10% capitalization rate, in order to determine the write-down for
impairment. This fair value estimate resulted in a $2,881,000 write-down for
impairment in 1995.
Results of Operations
1997 vs. 1996
The Partnership experienced an increase in net income for the
year ended December 31, 1997 compared to 1996 primarily due to an increase in
rental revenues and interest income during 1997.
Rental revenue increased during the year ended December 31,
1997 as compared to the prior year, primarily due to the approximately $1.5
million received in April, 1997 pursuant to the bankruptcy settlement of Handy
Andy, the sole tenant at Melrose II. During 1997, increases in revenue at 568
Broadway and Livonia due to higher rental rates were offset by lower revenues at
Tri-Columbus and Sunrise resulting from tenant departures and lower cost
reimbursements from tenants, respectively.
Costs and expenses decreased slightly for the year ended December 31, 1997
compared to 1996. Administrative expenses for the year ended December 31, 1997
decreased, as legal and accounting fees related to ongoing litigation and the
HEP reorganization were higher in 1996. Operating expenses increased during the
year ended December 31, 1997 due primarily to increases in real estate taxes and
repair and maintenance expenses. Overall real estate tax expense was higher at
568 Broadway in 1997 due to the significant refunds received in 1996 which
offset the annual tax payments. Higher repair and maintenance costs at Sunrise
were due to insurance proceeds that were received in 1996, offsetting previously
incurred costs. Property management fees increased during the year ended
December 31, 1997 due to the increase in revenues, as previously discussed.
Interest income increased due to higher rates and higher
invested balances during the year ended December 31, 1997 as compared to 1996.
Other income decreased during 1997 compared to 1996 due to fewer ownership
transfers.
1996 vs. 1995
The Partnership experienced net income for the year ended
December 31, 1996 compared to a net loss in the prior year due primarily to the
significant write-downs for impairment recorded during 1995
as previously discussed.
Rental revenue increased slightly during the year ended
December 31, 1996 as compared to the prior year. Rental revenues increased at
568 Broadway and Sunrise due to higher occupancy rates in 1996 and an increase
<PAGE>
in common area maintenance and real estate tax reimbursements in the current
year pursuant to the terms of certain tenants' leases. These increases were
partially offset by a decrease in revenues at Melrose II due to the bankruptcy
filing by Handy Andy, the sole tenant at the property, in March 1996. Revenues
at the other properties generally remained constant in 1996 as compared to 1995.
Costs and expenses decreased during the year ended December
31, 1996 compared to 1995 due primarily to the significant write-downs for
impairment recorded in 1995. Operating expenses decreased slightly in 1996 as
decreases in real estate taxes and repairs and maintenance costs were partially
offset by an increase in professional fees. Real estate taxes decreased
significantly at 568 Broadway due to the receipt of refunds related to the
1992-1995 tax years of which the Partnership's share was $201,200. This decrease
was partially offset by the fact that the real estate taxes at Melrose II,
previously paid by Handy Andy, the former sole net-lease tenant there, became
the responsibility of the Partnership pursuant to the rejection of the lease by
Handy Andy as debtor-in-possession in March 1996. Overall repairs and
maintenance costs decreased at Sunrise due to the receipt of insurance proceeds
in 1996 which offset previously incurred repair and maintenance expenses. The
increase in professional fees at Melrose II was due to costs associated with the
Handy Andy bankruptcy. Depreciation and amortization and the partnership asset
management fee remained relatively constant in 1996 as compared to 1995.
Administrative expenses increased due to the Partnership's reimbursement of the
General Partners' litigation and settlement costs as previously discussed. The
increase in property management fees during 1996 was due to a decrease in
leasing commissions at certain properties, a factor in computing the property
management fee.
Interest income decreased during 1996 due to decreases in
interest rates in the current year as compared to 1995. For the year ended
December 31, 1996, other income, which consists of investor ownership transfer
fees, increased compared to 1995 due to a greater number of transfers during
1996.
Inflation is not expected to have a material impact on the
Partnership's operations or financial position.
Legal Proceedings
The Partnership is a party to certain litigation. See Note 8
to the Partnership's financial statements for a description thereof.
Year 2000 Compliance
The Partnership's accounting, administrative and property
management services are provided by affiliates of the General Partners. Those
affiliates have and will continue to make certain investments in their software
systems and applications to ensure that they are year 2000 compliant. The
Partnership's management believes that the financial impact to the Partnership
of ensuring its year 2000 compliance has not been and is not anticipated to be
material to the Partnership's financial position or results of operations.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
HIGH EQUITY PARTNERS L.P. - SERIES 88
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
I N D E X
Independent Auditors' report....................................................
Financial statements, years ended December 31, 1997, 1996 and 1995
Balance Sheets................................................
Statements of Operations......................................
Statements of Partners' Equity................................
Statements of Cash Flows......................................
Notes to Financial Statements...................................................
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of High Equity Partners L.P. - Series 88
We have audited the accompanying balance sheets of High Equity Partners L.P. -
Series 88 (a Delaware limited partnership) as of December 31, 1997 and 1996, and
the related statements of operations, partners' equity and cash flows for each
of the three years in the period ended December 31, 1997. Our audit also
included the financial statement schedule listed in the Index at Item 14(a)2.
These financial statements and the financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and the financial statement schedule
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
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of High Equity Partners L.P. - Series 88 at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/DELOITTE & TOUCHE LLP
- ------------------------
DELOITTE & TOUCHE LLP
March 27, 1998
New York, NY
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 88
BALANCE SHEETS
December 31,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Real Estate ...................................... $48,282,393 $49,566,804
Cash and cash equivalents ........................ 6,540,252 5,353,731
Other assets ..................................... 1,280,167 1,372,081
Receivables ...................................... 194,041 89,074
----------- -----------
TOTAL ASSETS ..................................... $56,296,853 $56,381,690
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Distributions payable ............................ $ 997,899 $ 684,832
Accounts payable and accrued expenses ............ 761,559 508,257
Due to affiliates ................................ 584,780 1,152,658
----------- -----------
Total liabilities ................................ 2,344,238 2,345,747
----------- -----------
Commitments and contingencies
PARTNERS' EQUITY:
Limited partners' equity (371,766 units issued and
outstanding)...................................... 51,254,962 51,334,121
General partners' equity ......................... 2,697,653 2,701,822
----------- -----------
Total partners' equity ........................... 53,952,615 54,035,943
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY ........... $56,296,853 $56,381,690
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 88
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
----------------------------------------------
1997 1996 1995
----------- ----------- ------------
<S> <C> <C> <C>
Rental Revenue ................................... $ 9,189,172 $ 7,759,188 $ 7,422,184
------------ ------------ ------------
Costs and Expenses:
Operating expenses ............. 1,901,434 1,799,966 1,819,076
Depreciation and amortization .. 1,570,724 1,551,738 1,548,105
Partnership asset management fee 880,404 880,404 880,404
Administrative expenses ........ 1,157,958 1,354,895 441,016
Property management fee ........ 305,203 246,908 186,235
Write-down for impairment ...... -- -- 10,042,900
------------ ------------ ------------
5,815,723 5,833,911 14,917,736
------------ ------------ ------------
Income (loss) before interest
and other income ............................... 3,373,449 1,925,277 (7,495,552)
Interest income ................ 298,543 175,866 198,580
Other income ................... 36,695 51,029 36,473
------------ ------------ ------------
Net Income (loss) ................................ $ 3,708,687 $ 2,152,172 $ (7,260,499)
============ ============ ============
Net income (loss) attributable to:
Limited partners ............... $ 3,523,253 $ 2,044,563 $ (6,897,474)
General partners ............... 185,434 107,609 (363,025)
------------ ------------ ------------
Net Income (loss) ................................ $ 3,708,687 $ 2,152,172 $ (7,260,499)
============ ============ ============
Net income (loss) per unit of limited
Partnership interest (371,766 units
Outstanding) ................................... $ 9.48 $ 5.50 $ (18.55)
============ ============ ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 88
STATEMENT OF PARTNERS' EQUITY
General Limited
Partners' Partners'
Equity Equity Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1995 .................... $ 3,231,170 $ 61,391,756 $ 64,622,926
Net loss .................................... (363,025) (6,897,474) (7,260,499)
Distributions as a return of capital
($7.00 per limited partnership unit) ..... (136,966) (2,602,362) (2,739,328)
------------ ------------ ------------
Balance, December 31, 1995 .................. 2,731,179 51,891,920 54,623,099
Net Income .................................. 107,609 2,044,563 2,152,172
Distributions as a return of capital
($7.00 per limited partnership unit) ........ (136,966) (2,602,362) (2,739,328)
------------ ------------ ------------
Balance, December 31, 1996 .................. 2,701,822 51,334,121 54,035,943
Net Income .................................. 185,434 3,523,253 3,708,687
Distribution as a return of capital
($9.69 per limited partnership unit) ........ (189,603) (3,602,412) (3,792,015)
------------ ------------ ------------
Balance, December 31, 1997 .................. $ 2,697,653 $ 51,254,962 $ 53,952,615
============ ============ ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 88
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
-------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ..................................... $ 3,708,687 $ 2,152,172 $ (7,260,499)
Adjustments to reconcile net income
(loss) to net cash provided by operating activities:
Write down for impairment ........... -- -- 10,042,900
Depreciation and amortization ....... 1,570,724 1,551,738 1,548,105
Straight line adjustment for stepped
lease rentals .................... 104,413 73,951 (28,149)
Changes in assets and liabilities:
Accounts payable and accrued expenses 253,303 (187,720) 135,713
Receivables ......................... (104,967) 195,656 (193,333)
Due to affiliates ................... (567,878) 851,068 (41,335)
Other assets ........................ (184,006) (151,620) (374,869)
------------ ------------ ------------
Net cash provided by operating activities ............. 4,780,276 4,485,245 3,828,533
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to real estate ........................... (114,807) (290,734) (953,047)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners .............................. (3,478,948) (2,739,328) (2,739,328)
------------ ------------ ------------
Increase in Cash and Cash Equivalents ................. 1,186,521 1,455,183 136,158
Cash and Cash Equivalents, Beginning of Year .......... 5,353,731 3,898,548 3,762,390
------------ ------------ ------------
Cash and Cash Equivalents, End of Year ................ $ 6,540,252 $ 5,353,731 $ 3,898,548
============ ============ ============
</TABLE>
See notes to financial statements.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
High Equity Partners L.P. - Series 88 (the "Partnership"), a
limited partnership, was formed on February 24, 1987 under the
Uniform Limited Partnership Laws of the State of Delaware, for
the purpose of investing in, holding and operating
income-producing real estate. The Partnership will terminate
on December 31, 2017 or sooner, in accordance with the terms
of the partnership agreement. The Partnership invested in four
shopping centers and two office/industrial properties, none of
which were encumbered by debt.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial statements
The financial statements are prepared on the accrual basis of
accounting. 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.
Reclassifications
Certain reclassifications have been made to the financial
statements for the prior years in order to conform to the
current year's presentation.
Cash and cash equivalents
For purposes of the statements of cash flows, the Partnership
considers all short-term investments, which have maturities of
three months or less from the date of issuance, to be cash
equivalents.
Leases
The Partnership accounts for its leases under the operating
method. Under this method, revenue is recognized as rentals
become due, except for stepped leases where the revenue from
the lease is averaged over the life of the lease.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation
Depreciation is computed using the straight-line method over
the useful life of the property, which is estimated to be 40
years. The cost of properties represents the initial cost of
the properties to the Partnership plus acquisition and closing
costs less write-downs, if any. Tenant improvements are
amortized over the applicable lease term.
Investments in joint ventures
For properties purchased in joint venture ownership with other
partnerships, the financial statements present the assets,
liabilities, income and expenses of the joint venture on a pro
rata basis in accordance with the Partnership's percentage of
ownership.
Impairment of Assets
The Partnership evaluates the recoverability of the net
carrying value of its real estate and related assets at least
annually, and more often if circumstances dictate.
The Partnership estimates the future cash flows expected to
result from the use of each property and its eventual
disposition, generally over a five-year holding period. In
performing this review, management takes into account, among
other things, the existing occupancy, the expected leasing
prospects of the property and the economic situation in the
region where the property is located.
If the sum of the expected future cash flows, undiscounted, is
less than the carrying amount of the property, the Partnership
recognizes an impairment loss, and reduces the carrying amount
of the asset to its estimated fair value. Fair value is the
amount at which the asset could be bought or sold in a current
transaction between willing parties, that is, other than in a
forced or liquidation sale. Management estimates fair value
using discounted cash flows or market comparables, as most
appropriate for each property. Independent certified
appraisers are utilized to assist management, when warranted.
Impairment write-downs recorded by the Partnership do not
affect the tax basis of the assets and are not included in the
determination of taxable income or loss.
Because the cash flows used to evaluate the recoverability of
the assets and their fair values are based upon projections of
future economic events such as property occupancy rates,
rental rates, operating cost inflation and market
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
capitalization rates which are inherently subjective, the
amounts ultimately realized at disposition may differ
materially from the net carrying values at the balance sheet
dates. The cash flows and market comparables used in this
process are based on good faith estimates and assumptions
developed by management. Unanticipated events and
circumstances may occur and some assumptions may not
materialize; therefore, actual results may vary from the
estimates and the variances may be material. The Partnership
may provide additional write-downs, which could be material in
subsequent years if real estate markets or local economic
conditions change.
Income taxes
No provision has been made for federal, state and local income
taxes since they are the personal responsibility of the
partners.
Net income (loss) and distributions per unit of limited
partnership interest
Net income (loss) and distributions per unit of limited
partnership interest is calculated based upon the number of
units outstanding (371,766), for each of the years ended
December 31, 1997, 1996 and 1995.
Recently issued accounting pronouncements
The Financial Accounting Standards Board ("FASB") has recently
issued several new accounting pronouncements. Statement No.
130, "Reporting Comprehensive Income" establishes standards
for reporting and display of comprehensive income and its
components. Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information: establishes standards
for the way that public business enterprises report
information about operating segments in annual financial
statements and requires that those enterprises report selected
information about operating segments in interim financial
reports issued to shareholders. It also establishes standards
for related disclosure about products and services, geographic
areas, and major customers. These two standards are effective
for the Partnership's 1998 financial statements, but the
Partnership does not believe that they will have any effect on
the Partnership's computation or presentation of net income or
other disclosures.
The implementation in 1997 of FASB Statement No. 128,
"Earnings per Share" and Statement No. 129, "Disclosure of
Information about capital Structure" effective for the
Partnership's 1997 year-end financial statements did not have
any impact on the Partnership financial statements.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
Resources High Equity, Inc., the Managing General Partner, is
a wholly owned subsidiary of Presidio Capital Corp.
("Presidio"). Presidio AGP Corp., which is a wholly-owned
subsidiary of Presidio, is the Associate General Partner
(together with the Managing General Partner, the "General
Partners"). Affiliates of the General Partners are also
engaged in businesses related to the acquisition and operation
of real estate. Presidio is also the parent of other
corporations that are or may in the future be engaged in
business that may be in competition with the Partnership.
Accordingly, conflicts of interest may arise between the
Partnership and such other businesses. Subject to the rights
of the Limited Partners under the Limited Partnership
Agreement, Presidio controls the Partnership through its
indirect ownership of all the shares of the General Partners.
On August 28,1997, an affiliate of NorthStar Capital Partners
acquired all of the Class B shares of Presidio. This
acquisition, when aggregated which other acquisitions, caused
NorthStar Capital Partners to acquire indirect control of the
General Partners.
On November 2, 1997 the Administrative Services Agreement with
Wexford Management LLC ("Wexford"), the administrator for
Presidio, expired pursuant to its terms. Pursuant to that
agreement, Wexford had authority to designate directors of the
General Partners. Presidio also entered into a management
agreement with NorthStar Presidio Management Company, LLC
("NorthStar Presidio"). Under the terms of the management
agreement, NorthStar Presidio will provide the day-to-day
management of Presidio, and its direct and indirect
subsidiaries and affiliates. Effective November 3, 1997,
Wexford and Presidio entered into an Administrative Services
Agreement dated as of November 3, 1997 (the "ASA"). The ASA
provides that Wexford will continue to provide consulting and
administrative services to Presidio and its affiliates for a
term of six months. During the year ended December 31, 1997
and 1996, reimbursable expenses paid to Wexford by the
Partnership amounted to $42,997 and $81,036, respectively.
The Partnership has a property management services agreement
with Resources Supervisory Management Corp. ("Resources
Supervisory"), an affiliate of the Managing General Partner,
to perform certain functions relating to the management of the
properties of the Partnership. A portion of the property
management fees are paid to unaffiliated management companies
which perform certain management functions for certain
properties. For the years ended December 31, 1997, 1996 and
1995, Resources Supervisory was entitled to receive $305,203,
$246,908, and $186,235, in total, of which $108,247, $120,387,
and $69,405 was paid to unaffiliated management companies,
respectively.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
For the administration of the Partnership, the Managing
General Partner is entitled to receive a Partnership
Administration Fee of a maximum of $200,000 per year.
For managing the affairs of the Partnership, the Managing
General Partner is entitled to receive a Partnership asset
management fee equal to 1.05% of the amount of original gross
proceeds paid or allocable to the acquisition of property by
the Partnership. For each of the years ended December 31,
1997, 1996 and 1995 the Managing General Partner earned
$880,404.
The general partners are allocated 5% of the net income
(losses) of the Partnership, which amounted to $185,434,
$107,609, and $(363,025) in 1997, 1996 and 1995, respectively.
The General Partners are also entitled to receive 5% of
distributions, which amounted to $189,603, $136,966 and
$136,966 in the years ended December 31, 1997, 1996 and 1995,
respectively.
During the liquidation stage of the Partnership, the Managing
General Partner or an affiliate may be entitled to receive
certain fees which are subordinated to the limited partners
receiving their original invested capital and certain
specified minimum returns on their investments. All fees
received by the General Partners are subject to certain
limitations as set forth in the Partnership Agreement.
During July 1996 through March 1998, Millennium Funding IV
Corp., a wholly owned indirect subsidiary of Presidio,
contracted to purchase 47,270 units of the Partnership from
various limited partners, which represents approximately 12.7%
of the outstanding limited partnership units of the
Partnership. During 1997, distributions in the amount of
$15,536 were received by Millennium Funding IV Corp. related
to these units.
Pursuant to an agreement dated as of March 6, 1998 among
Presidio, American Real Estate Holding L.P. and Olympia
Investors L.P. (the "Purchaser"), on March 12, 1998, the
Purchaser commenced a tender offer to purchase up to 40% of
the outstanding units of limited partnership interest at a
purchase price of $117.00 per unit.
4. REAL ESTATE
Management recorded write-downs for impairment totaling
$10,042,900 in 1995. No write-downs were required for the
years ended December 31, 1996 or 1997. The details of
write-downs recorded in 1995 are as follows:
During 1995, significantly greater capital improvement
expenditures than were previously anticipated were required in
order to render 568 Broadway more competitive in the New York
market. Because the estimate of undiscounted cash flows
prepared in 1995 yielded a result lower than the asset's net
carrying value, management determined that an impairment
existed. Management estimated the property's fair value in
order the determine the write-down for impairment. Because the
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE (CONTINUED)
estimate of fair value using expected cash flows discounted at
13% over 15 years and an assumed sale at the end of the
holding period using a 10% capitalization rate yielded a
result which, in management's opinion, was lower than the
property's value in the marketplace, the property was valued
using sales of comparable buildings which indicated a fair
value of $45 per square foot. This fair value estimate
resulted in a $6,600,000 write-down for impairment in 1995 of
which the Partnership's share was $1,461,900.
Despite the maintenance of high occupancy rates, actual income
levels at Sunrise during 1995 did not meet previously
projected levels due to lower market rental rates. In
addition, expenses and capital expenditures were both in
excess of previously anticipated amounts. Because the estimate
of undiscounted cash flows prepared in 1995 yielded a result
lower than the asset's net carrying value, management
determined that an impairment existed. Management estimated
the property's fair value, using expected cash flows
discounted at 13% over 15 years and an assumed sale at the end
of the holding period using a 10% capitalization rate, in
order to determine the write-down for impairment. This fair
value estimate resulted in a $5,700,000 write-down for
impairment in 1995.
In October 1995, the Partnership was notified that Handy Andy
filed for bankruptcy under Chapter 11 of the United States
Bankruptcy Code. Subsequently, Handy Andy closed its stores
and the lease was rejected by Handy Andy as
debtor-in-possession in March 1996. Management determined that
an impairment existed at Melrose II due to the reduction in
the estimated future cash flows. Management estimated the
property's fair value, using expected cash flows discounted at
13% over 10 years and an assumed sale at the end of the
holding period using a 10% capitalization rate, in order to
determine the write-down for impairment. This fair value
estimate resulted in a $2,881,000 write-down for impairment in
1995.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE (CONTINUED)
The following table is a summary of the Partnership's real
estate as of:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Land ................................... $ 8,040,238 $ 8,040,238
Buildings and Improvements ............. 53,338,898 53,224,091
------------ ------------
61,379,136 61,264,329
Less: Accumulated depreciation ......... (13,096,743) (11,697,525)
------------ ------------
$ 48,282,393 $ 49,566,804
============ ============
</TABLE>
The following is summary of the Partnership's share of
anticipated future receipts under noncancellable leases:
<TABLE>
<CAPTION>
Year Ending December 31,
1998 1999 2000 2001 2002 Thereafter Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 5,653,000 $ 4,774,000 $ 4,369,000 $ 4,086,000 $4,006,000 $10,312,000 $33,200,000
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
5. DISTRIBUTIONS PAYABLE
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
-------- --------
<S> <C> <C>
Limited partners ($2.55 and $1.75 per unit) ...... $948,003 $650,591
General partners ................................. 49,896 34,241
-------- --------
$997,899 $684,832
======== ========
</TABLE>
Such distributions were paid in subsequent quarters.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
6. DUE TO AFFILIATES
<TABLE>
<CAPTION>
December 31,
----------------------
1997 1996
-------- ----------
<S> <C> <C>
Partnership asset management fee ........................ $220,101 $ 220,101
Reorganization and litigation cost reimbursement (Note 7) 215,000 824,511
Property management fee ................................. 99,679 58,046
Partnership administration fee .......................... 50,000 50,000
-------- ----------
$584,780 $1,152,658
======== ==========
</TABLE>
Such amounts were paid in subsequent quarters.
7. COMMITMENTS AND CONTINGENCIES
a) 568 Broadway Joint Venture is currently involved in litigation
with a number of present or former tenants who are in default
on their lease obligations. Several of these tenants have
asserted claims or counter claims seeking monetary damages.
The plaintiffs' allegations include but are not limited to
claims for breach of contract, failure to provide certain
services, overcharging of expenses and loss of profits and
income. These suits seek total damages of in excess of $20
million plus additional damages of an indeterminate amount.
The Broadway Joint Venture's action for rent against Solo
Press was tried in 1992 and resulted in a judgement in favor
of the Broadway Joint Venture for rent owed. The Partnership
believes this will result in dismissal of the action brought
by Solo Press against the Broadway Joint Venture. Since the
facts of the other actions which involve material claims or
counterclaims are substantially similar, the Partnership
believes that the Broadway Joint Venture will prevail in those
actions as well.
b) A former retail tenant of 568 Broadway (Galix Shops, Inc.) and
a related corporation which is a retail tenant of a building
adjacent to 568 Broadway filed a lawsuit in the Supreme Court
of The State of New York, County of New York, against the
Broadway Joint Venture which owns 568 Broadway. The action was
filed on April 13, 1994. The Plaintiffs allege that by
erecting a sidewalk shed in 1991, 568 Broadway deprived
plaintiffs of light, air and visibility to their customers.
The sidewalk shed was erected, as required by local law, in
connection with the inspection and restoration of the 568
Broadway building facade, which is also required by local law.
Plaintiffs further allege that the erection of the sidewalk
shed for a continuous period of over two years is unreasonable
and unjustified and that such conduct by defendants has
deprived plaintiffs of the use and enjoyment of their
property. The suit seeks a judgement requiring removal of the
sidewalk shed, compensatory damages of $20 million and
punitive damages of $10 million. The Partnership believes that
this suit is merit less and intends to vigorously defend it.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
c) On or about May 11, 1993 High Equity Partners L.P. - Series 86
("HEP-86"), an affiliated partnership, was advised of the
existence of an action (the "California Action') in which a
complaint (the "HEP Complaint") was filed in the Superior
Court for the State of California for the County of Los
Angeles (the "Court") on behalf of a purported class
consisting of all of the purchasers of limited partnership
interests in HEP-86. On April 7, 1994 the plaintiffs were
granted leave to file an amended complaint (the "Amended
Complaint") on behalf of a class consisting of all of the
purchasers of limited partnership interests in HEP-86, the
Partnership and Integrated Resources High Equity Partners,
Series 85 ("HEP-85"), another affiliated partnership.
On November 30, 1995, after the Court preliminarily approved a
settlement of the California Action but ultimately declined to
grant final approval and after the Court granted motions to
intervene, the original and intervening plaintiffs filed a
Consolidated Class and Derivative Action Complaint (the
"Consolidated Complaint") against the Managing General Partner
of the Partnership and HEP-85 and the Investment General
Partner of HEP-86; the Administrative General Partner of
HEP-86 (the "General Partners"); a subsidiary of the indirect
corporate parent of the General Partners; and the indirect
corporate parent of the General Partners. The Consolidated
Complaint alleged various state law class and derivative
claims, including claims for breach of fiduciary duties;
breach of contract; unfair and fraudulent business practices
under California Bus. & Prof. Code Sec. 17200; negligence;
dissolution, accounting and receivership; fraud; and negligent
misrepresentation. The Consolidated Complaint alleged, among
other things, that the General Partners caused a waste of the
HEP partnership assets by collecting management fees in lieu
of pursuing a strategy to maximize the value of the
investments owned by the limited partners; that the General
Partners breached their duty of loyalty and due care to the
limited partners by expropriating management fees from the
partnerships without trying to run the HEP partnerships for
the purposes for which they are intended; that the General
Partners acted improperly to enrich themselves in their
position of control over the HEP partnerships and that their
actions prevented non-affiliated entities from making and
completing tender offers to purchase units in the HEP
partnerships; that by refusing to seek the sale of the HEP
partnerships' properties, the General Partners diminished the
value of the limited partners' equity in the HEP partnerships;
that the General Partners took a heavily overvalued
partnership asset management fee; and that limited partnership
units were sold and marketed through the use of false and
misleading statements.
The Court entered an order on January 14, 1997 rejecting the
settlement and concluding that there had not been an adequate
showing that the settlement was fair and reasonable. On
February 24, 1997, the Court granted the request of one
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
plaintiffs' law firm to withdraw as class counsel. Thereafter,
in June 1997, the plaintiffs again amended their complaint
(the "Second Amended Complaint"). The Seconded Amended
Complaint asserts substantially the same claims as the
Consolidated Complaint, except that it no longer contains
causes of action for fraud, for negligent misrepresentation,
or for negligence. The defendants served answers denying the
allegations and asserting numerous affirmative defenses. In
February 1998, the Court certified three plaintiff classes
consisting of current unit holders in each of the three HEP
partnerships. On March 11, 1998, the Court stayed the
California Action temporarily to permit the parties to engage
in renewed settlement discussions.
The General Partners believe that each of the claims asserted
in the Second Amended Complaint are meritless and intend to
continue to vigorously defend the California Action. It is
impossible at this time to predict what the defense of the
California Action will cost, the Partnership's financial
exposure as a result of the indemnification agreement
discussed above, and whether the costs of defending could
adversely affect the Managing General Partner's ability to
perform its obligations to the Partnership.
The Limited Partnership Agreement provides for indemnification
of the General Partners and their affiliates in certain
circumstances. The Partnership has agreed to reimburse the
General Partners for their actual costs incurred in defending
this litigation and the costs of preparing settlement
materials. Through December 31, 1997, the General Partners had
billed the Partnership a total of $1,039,511 for these costs
$824,511 of which was paid in February 1997.
d) On February 6, 1998, Everest Investors 8, LLC ("Everest")
commenced an action in the Superior Court of the State of
California for the County of Los Angeles (Case No. BC 185554),
against, among others, the HEP partnerships, Resources Pension
Shares 5 LP (an affiliated partnership), the general partners
of each of the partnerships and DCC Securities Corp. In the
action, Everest alleged, among other things, that the
partnerships and the general partners breached the provisions
of the applicable partnership agreements by refusing to
recognize transfers to Everest of limited partnership units
purportedly acquired pursuant to tender offers that had been
made by Everest (the "Everest Tender Units"). Everest sought
injunctive relief (a) directing the recognition of transfers
to Everest of the Everest Tender Units and the admission of
Everest as a limited partner with respect to the Everest
Tender Units and (b) enjoining the transfer of the Everest
Tender Units to any either party. Everest seeks damages,
including punitive damages, for alleged breach of contract,
defamation and intentional interference with contractual
relations. Everest's motion for a temporary restraining order
was denied on February 6, 1998. A hearing on Everest's
application for a preliminary injunction had been scheduled
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
for February 26, however, on February 20, 1998, Everest asked
the Court to take its application off calendar. The defendants
served answers denying the allegations and asserting numerous
affirmative defenses. Merits discovery has commenced. The
partnerships and the general partners believe that Everest's
claims are without merit and intend to vigorously contest the
action.
On March 27, 1998, Everest commenced an action in the United
States District Court for the Central District of California
against, among others, the general partners of the HEP
partnerships. In the action, Everest alleged, among other
things, various violations of the Williams Act Section 14(d)
of the Securities Exchange Act of 1934 in connection with the
general partners' refusal to recognize transfers to Everest of
limited partnership units purportedly acquired pursuant to the
Everest tender offers and the letters sent by the general
partners to the limited partners advising them of the general
partners' determination that the Everest tender offers
violated applicable securities laws. The general partners
believe that Everest's claims are without merit and intend to
vigorously contest the action.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
8. RECONCILIATION OF NET INCOME (LOSS) AND NET ASSETS PER
FINANCIAL STATEMENTS TO TAX REPORTING
The Partnership files its tax returns on an accrual basis and
has computed depreciation for tax purposes using the
accelerated cost recovery and modified accelerated cost
recovery systems, which are not in accordance with generally
accepted accounting principles. The following is a
reconciliation of the net income (loss) per the financial
statements to net taxable income.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss) per financial statements $ 3,708,687 $ 2,152,172 $ (7,260,499)
Write-down for impairment ................ -- -- 10,042,900
Tax depreciation in excess of financial
Statement depreciation ................ (606,297) (610,441) (558,392)
------------ ------------ ------------
Net taxable income ....................... $ 3,102,390 $ 1,541,731 $ 2,224,009
============ ============ ============
</TABLE>
The differences between the Partnership's assets and
liabilities for tax purposes and financial reporting purposes are as follows:
<TABLE>
<CAPTION>
December 31
1997
------------
<S> <C>
Net assets per financial statements ............................... $ 53,952,615
Write-down for impairment ......................................... 19,638,700
Tax depreciation in excess of financial statement depreciation .... (3,942,248)
Fair market value step-up in connection with purchase of
joint venture interest not recognized for tax purposes............. 304,942
Organization costs not charged to partners' equity for tax purposes 2,788,171
Building and accumulated depreciation, tax basis, not charged to
loss on abandonment for tax purposes............................... 2,294,009
------------
Net assets per tax reporting ...................................... $ 75,036,189
============
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no officers or directors. The Managing
General Partner manages and controls substantially all of the Partnership's
affairs and has general responsibility and ultimate authority in all matters
affecting its business. The Managing General Partner is also the investment
general partner of HEP-86 and is the managing general partner of HEP-85, both
limited partnerships with investment objectives similar to those of the
Partnership. The Associate General Partner is also a general partner in other
partnerships affiliated with Presidio and whose investment such, objectives are
similar to those of the Partnership. The Associate General Partner, in its
capacity as does not devote any material amount of its business time and
attention to the Partnership's affairs.
Based on a review of Forms 3 and 4 and amendments thereto
furnished to the Partnership pursuant to Rule 16a-3(e) during its most recent
fiscal year and Form 5 and amendments thereto furnished to the Partnership with
respect to its most recent fiscal year, and written representations pursuant to
Item 405(b)(2)(i) of Regulation S-K, none of the General Partners, directors or
officers of the Managing General Partner or beneficial owners of more than 10%
of the Units failed to file on a timely basis reports required by Section 16(a)
of the Securities Exchange Act of 1934 (the "Exchange Act") during the most
recent fiscal or prior fiscal years. No written representations were received
from the partners of the Associate General Partner.
As of March 5, 1998, the names and ages of, as well as the
positions held by, the officers and directors of the Managing General Partner
are as follows
<TABLE>
<CAPTION>
Officer and/or
Name Age Position Director Since
---- --- -------- --------------
<S> <C> <C> <C>
W. Edward Scheetz 33 Director November 1997
David Hamamoto 38 Director November 1997
Richard Sabella 42 President, Director November 1997
David King 35 Executive VP, Director November 1997
Assistant Treasurer
Larry Schachter 41 Senior VP, CFO January 1998
Kevin Reardon 39 VP, Secretary, Treasurer,
Director November 1997
Allan B. Rothschild 36 Executive VP December 1997
Marc Gordon 33 VP November 1997
Charles Humber 24 VP November 1997
Adam Anhang 24 VP November 1997
Gregory Peck 23 Assistant Secretary November 1997
</TABLE>
<PAGE>
W. Edward Scheetz co-founded NorthStar with David Hamamoto in July 1997 having
previously been a partner at Apollo Real Estate Advisors L.P. since 1993. From
1989 to 1993, Mr. Scheetz was a principal with Trammell Crow Ventures.
David Hamamoto co-founded NorthStar with W. Edward Scheetz in July 1997, having
previously been a partner and co-head of the Real Estate Principal Investment
Area at Goldman, Sachs & Co., where he initiated the effort to build a real
estate principal investment business in 1988 under the auspices of the Whitehall
Funds.
Richard Sabella joined NorthStar in November 1997, having previously been the
head of real estate and a partner at the law firm of Cahill, Gordon & Reindel
since 1989. Mr. Sabella has also been associated with the law firms of Milgrim,
Thomajian, Jacobs & Lee, P.C. and Cravath, Swaine & Moore.
David King joined NorthStar in November 1997, having previously been a Senior
Vice President of Finance at Olympia & York Companies (USA). Prior to joining
Olympia & York in 1990 Mr. King worked for Bankers Trust in its real estate
finance group.
Larry Schachter joined NorthStar in January 1998, having previously held the
position as Controller at CB Commercial/Hampshire, LLC from 1996 to 1997. Prior
to joining CB, Mr. Schachter held the position of Controller at Goodrich
Associates in 1996, and at Greenthal/Harian Realty Services Co. from 1992 to
1995. Mr. Schachter who holds a CPA, graduated from Miami University (Ohio).
Kevin Reardon joined NorthStar in October 1997, having previously held the
position of Controller at Lazard Freres Real Estate Investors from 1996 to 1997.
Prior to joining Lazard Freres, Mr. Reardon was the Director of Finance in
charge of European expansion at the law firm of Dewey Ballantine from 1993 to
1996. Prior to 1993, Mr. Reardon held a financial position at Hearst-ABC-Viacom
Entertainment Services. Mr. Reardon, who holds a CPA, graduated from Fordham
University with a B.S. in accounting.
Allan B. Rothschild joined NorthStar in December 1997, having previously been
the Senior Vice President and General Counsel of Newkirk Limited Partnership
where he managed a large portfolio of net-leased real estate assets. Prior to
joining Newkirk, Mr. Rothschild was associated with the law firm of Proskauer,
Rose LLP in its real estate group.
Marc Gordon joined NorthStar in October 1997, having previously been a Vice
President in the Real Estate Investment Banking Group at Merrill Lynch where he
executed corporate finance and strategic transactions for public and private
real estate ownership companies, including REITs, real estate service companies,
and real estate intensive operating companies. Prior to joining Merrill Lynch in
1993, Mr. Gordon was in the Real Estate and Banking Group at the law firm of
Irell & Manella. Mr. Gordon graduated from Dartmouth College with a A.B. in
economics and also holds a J.D. from the UCLA School of Law.
Charles Humber joined NorthStar in September 1997, having previously worked for
Merrill Lynch's Real Estate Investment Banking group from 1996 to 1997. Mr.
Humber graduated from Brown University with a B.A. in international relations
and organizational behavior and management.
Adam Anhang joined NorthStar in August 1997, having previously worked for the
Atena Group's Russia and Former Soviet Union development team from 1996 to 1997.
Mr. Anhang graduated from the Wharton School of the University of Pennsylvania
with a B.S. in economics with concentration in finance and real estate.
<PAGE>
Gregory Peck joined NorthStar in July 1997, having previously worked for the
Morgan Stanley Realty Real Estate Funds (MSREF) and Morgan Stanley's Real Estate
Investment Banking group from 1996 to 1997. Prior to joining Morgan Stanley, Mr.
Peck worked for Lazard Freres & Co., LLC in the Real Estate Investment Banking
Group from 1994 to 1996. Mr. Peck graduated from Columbia College with an A.B.
in mathematics and A.B. in economics.
All of the directors will hold office, subject to the bylaws
of the Administrative General Partner or the Investment General Partner (as the
case may be), until the next annual meeting of the stockholders of the
Administrative General Partner or the Investment General Partner (as the case
may be) and until their successors are elected and qualified.
There are no family relationships between any executive
officer and any other executive officer or any director of the Administrative
General Partner or the Investment General Partner.
Affiliates of the General Partners are also engaged in
businesses related to the acquisition and operation of real estate.
Many of the officers, directors and partners of the Investment
General Partner, the Administrative General Partner and the Associate General
Partner listed above are also officers and/or directors of the general partners
of other public partnerships controlled by Presidio and various subsidiaries of
Presidio.
Item 11. Executive Compensation
The Partnership is not required to and did not pay
remuneration to the officers and directors of the Managing General Partner or
the partners of the Associate General Partner. Certain officers and directors of
the Managing General Partner receive compensation from the Managing General
Partner and/or its affiliates (but not from the Partnership) for services
performed for various affiliated entities, which may include services performed
for the Partnership; however, the Managing General Partner believes that any
compensation attributable to services performed for the Partnership is
immaterial. See also "Item 13. Certain Relationships and Related Transactions."
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 15, 1998, an affiliate of the General Partners
owned approximately 12.7% of the Units. No directors, officers or partners of
the Manging General Partner presently own any Units.
To the knowledge of the Registrant, the following sets forth
certain information regarding ownership of the Class A shares of Presidio as of
March 11, 1998 (except as otherwise noted) by (i) each person or entity who owns
of record or beneficially five percent or more of the Class A shares, (ii) each
director and executive officer of Presidio, and (iii) all directors and
executive officers of Presidio as a group. To the knowledge of Presidio, each of
such shareholders has sole voting and investment power as to the shares shown
unless otherwise noted.
All outstanding shares of Presidio are owned by Presidio
Capital Investment Company, LLC ("PCIC"), a Delaware limited liability company.
The interest in PCIC (and beneficial ownership in Presidio) are held as follows:
<TABLE>
<CAPTION>
Percentage Ownership in PCIC
and Percentage Beneficial Ownership
Name of Beneficial Owner in Presidio
------------------------ -----------------------------------
<S> <C>
Five Percent Holders:
Presidio Holding Company, LLC(1) 71.93%
AG Presidio Investors, LLC(2) 14.12%
DK Presidio Investors, LLC(3) 8.45%
Stonehill Partners, LP(4) 5.50%
</TABLE>
The holdings of the directors and executive officers of Presidio are as follows:
<TABLE>
<CAPTION>
<S> <C>
Directors and Officers:
Adam Anhang(5) 0%
Marc Gordon(5) 0%
David Hamamoto(5) 71.93%
Charles Humber(5) 0%
David King(5) 0%
Gregory Peck(5) 0%
Kevin Reardon(5) 0%
Allan Rothschild(5) 0%
Richard J. Sabella(5) 0%
Lawrence Schachter(5) 0%
W. Edward Scheetz(5) 71.93%
Directors and Officers as a group: 71.93%
</TABLE>
(1) Presidio Holding Company, LLC is a New York limited liability
company whose address is 527 Madison Avenue, 16th Floor, New
York, New York 10022. PHC has two members, Polaris Operating
LLC ("Polaris") which holds a 1% interest, and Northstar
Operating, LLC ("Northstar") which holds a 99% interest.
Polaris is a Delaware limited liability company whose address
is 527 Madison Avenue, 16th Floor, New York, New York 10022.
Polaris has two members, Sextann Operating Corp. ("Sextann"),
which holds a 1% interest, and Northstar, which holds a 99%
interest. Sextann is a Delaware corporation whose address is
527 Madison Avenue, 16th Floor, New York, New York 10022 and
whose sole shareholder is Northstar. Northstar is a Delaware
limited liability company whose address is527 Madison Avenue,
16th Floor, New York, New York 10022. Northstar has two
members, Northstar Capital Partners ("NCP"), which holds a 99%
interest, and Northstar Capital Holdings I, LLC ("NCHI"),
which holds a 1% interest. Both NCP and NCHI are Delaware
<PAGE>
limited liability companies, whose business address is 527
Madison Avenue, 16th Floor, New York, New York 10022. NCP has
two members, NCHI, which holds a 74.75% interest, and
Northstar Capital Holdings II LLC ("NCHII"), which holds a
25.25% interest. The business address for NCHII, a Delaware
limited liability company is 527 Madison Avenue, 16th Floor,
New York, New York 10022. NCHII has three members, NCHI, which
holds a 99% interest, Edward Scheetz, who holds a 0.5%
interest and David Hamamoto, who holds a 0.5% interest. Mr.
Scheetz, a U.S. citizen whose business address is 527 Madison
Avenue, 16th Floor, New York, New York 10022, is a founding
member of NCP. Mr. Hamamoto, a U.S. citizen whose business
address is 527 Madison Avenue, 16th Floor, New York, New York
10022, is a founding member of NCP. NCHI has two members, Mr.
Scheetz and Mr. Hamamoto, each of whom holds a 50% interest.
Pursuant to that certain Amended and Restated Pledge and
Security Agreement (the "Pledge Agreement") dated March 5,
1998 made by PHC in favor of Credit Suisse First Boston
Mortgage Capital LLC ("CSFB"), PHC pledged all of its
membership interest in PCIC to CSFB as security for loans
issued under the Loan Agreement dated as of February 20, 1998
by and among PHC and CSFB and the First Amendment thereon
dated March 5, 1998 (together, the "Loan Agreement"). The
Pledge Agreement and Loan Agreement contain standard default
and event of default provisions which may at a subsequent date
result in a change of control of PCIC and, therefore, the
Registrant.
(2) Each of Angelo, Gordon & Company, LP, as sole manager of AG
Presidio Investors, LLC, and John M. Angelo and Michael L.
Gordon, as general partners of the general partner of Angelo,
Gordon & Company, LP may be deemed to beneficially own for
purposes of rule 13 d-3 of the Exchange Act, the securities
beneficially owned by AG Presidio Investors, LLC. Each of John
M. Angelo and Michael L. Gordon disclaim such beneficial
ownership. The business address for such persons is c/o
Angelo, Gordon & Company, LP, 345 Park Avenue, 26th Floor, New
York, New York 10167.
(3) M.H. Davidson & Company, Inc., as sole manager of DK Presidio
Investors, LLC may be deemed to beneficially own for purposes
of Rule 13d-3 of the Exchange Act, the securities beneficially
owned by DK Presidio Investors, LLC. The business address for
such person is c/o M.H. Davidson & Company, 885 Third Avenue,
New York, New York 10022.
(4) Includes shares of PCIC beneficially owned by Stonehill
Offshore Partners Limited and Stonehill Institutional
Partners, LP. John A. Motulsky is a managing general partner
of Stonehill Partners, LP, a managing member of the investment
advisor to Stonehill Offshore Partners Limited and is a
general partner of Stonehill Institutional Partners, LP. John
A. Motulsky disclaims beneficial ownership of the shares held
by these entities. The business address for such person is c/o
Stonehill Investment Corporation, 110 East 59th Street, New
York, New York 10022.
(5) The business address for such person is 527 Madison Avenue,
16th Floor, New York, New York 10022.
<PAGE>
Item 13. Certain Relationships and Related Transactions
The General Partners and certain affiliated entities have, during the year
ended December 31, 1997, earned or received compensation or payments
for services or reimbursements from the Partnership or subsidiaries of
Presidio as follows:
<TABLE>
<CAPTION>
Compensation
Capacity in from the
Name of Recipient Which Served Partnership
----------------- ------------ -----------
<S> <C> <C>
Resources High Equity, Inc. Managing General $ 1,409,548 (1)
Partner
Presidio AGP Corp. Associate General $ 3,792 (2)
Partner
Resources Supervisory Affiliated Property $ 196,956 (3)
Management Corp. Manager
Resources Capital Corp. Affiliate $ 71,667 (4)
</TABLE>
<PAGE>
(1) Of this amount $185,811 represents the Managing General Partner's share
of distributions of cash from operations, $200,000 represents the
Partnership Administration Fee based on the total number of Units
outstanding, $143,333 represents reimbursement of costs in connection
with the California Action, and $880,404 represents the Partnership
Asset Management Fee for managing the affairs of the Partnership.
Furthermore, under the Partnership's Limited Partnership Agreement 4.9%
of the net income and net loss of the Partnership is allocated to the
Managing General Partner. Pursuant thereto, for the year ended December
31, 1997, $152,796 of the Partnership's taxable income was allocated to
the Managing General Partner.
(2) This amount represents the Associate General Partner's share of the
distributions of cash from operations. For the year ended December 31,
1997, $3,118 of the Partnership's taxable income was allocated to the
Associate General Partner pursuant to the Partnership's Limited
Partnership Agreement. The Associate General Partner is entitled to
receive 0.1% of the Partnership's net income or net loss.
3) This amount was earned pursuant to a management agreement with
Resources Supervisory, a wholly-owned subsidiary of Presidio, for
performance of certain functions relating to the management of the
Partnership's properties and the placement of certain tenants at those
properties. The total fee paid to Resources Supervisory was $305,203 of
which $108,247 was paid to unaffiliated management companies. All
property management fees payable at December 31, 1997 have subsequently
been paid.
(4) This amount represents reimbursements of actual costs incurred in
defending the California Action and the cost of preparing settlement
materials.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
(a)(1) Financial Statements:
See Index to Financial Statements in Item 8.
(a)(2) Financial Statement Schedule:
III. Real Estate and Accumulated Depreciation
(a)(3) Exhibits:
3, 4. (a) Amended and Restated Partnership Agreement ("Partnership
Agreement") of the Partnership, incorporated by reference to
Exhibit A to the Prospectus of the Partnership dated September
15, 1987 included in the Partnership's Registration Statement
on Form S-11 (Reg. No. 3312574).
(b) First Amendment dated as of March 1, 1988 to the
Partnership's Partnership Agreement, incorporated by reference
to Exhibit 3, 4 of the Partnership's Annual Report on Form
10-K for the year ended December 31, 1987.
10. (a) Management Agreement between the Partnership and Resources
Property Management Corp., incorporated by reference to
Exhibit 10B to the Partnership's Registration Statement on
Form S-11 (Reg. No. 33-12574).
(b) Acquisition and Disposition Services Agreement among the
Partnership, Realty Resources Inc. and Resources High Equity,
Inc., incorporated by reference to Exhibit 10(b) of the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1987.
(c) Agreement among Resources High Equity, Inc., Integrated
Resources, Inc. and Third Group Partners, incorporated by
reference to Exhibit 10(c) of the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1987.
(d) Amended and Restated Joint Venture Agreement dated
February 1, 1990 among the Partnership, Integrated, High
Equity Partners, Series 85, a California Limited Partnership,
and High Equity Partners L.P., Series 86, with respect to 568
Broadway, incorporated by reference to Exhibit 10(a) to the
Partnership's Current Report on Form 8-K dated February 1,
1990.
(e) First Amendment to Amended and Restated Joint Venture
Agreement of 568 Broadway Joint Venture, dated as of February
1, 1990, among the Partnership, HEP 85 and HEP 86 incorporated
by reference to Exhibit 10(h) to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1990.
<PAGE>
(f) Form of Termination of Supervisory Management Agreement
(separate agreement entered into with respect to each
individual property) and Form of Supervisory Management,
Agreement between the Partnership and Resources Supervisory
(separate agreement entered into with respect to each
individual property), incorporated by reference to Exhibit
10(h) of the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1991.
(g) Lease Agreement between the Partnership and Handy Andy
Home Improvement Centers, Inc. dated as of December 22, 1992,
incorporated by reference to Exhibit 10(g) of the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1992.
(b) Reports on Form 8-K:
The Partnership filed the following report on Form 8-K during
the last quarter of the fiscal year:
None.
<PAGE>
Financial Statement Schedule Filed Pursuant to
Item 14(a)(2)
HIGH EQUITY PARTNERS L.P. - SERIES 88
ADDITIONAL INFORMATION
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
INDEX
Additional financial information furnished pursuant to the
requirements of Form 10-K:
Schedules - December 31, 1997, 1996 and 1995 and years then
ended, as required:
Schedule III - Real estate and accumulated depreciation
- Notes to Schedule III - Real estate and
accumulated depreciation
All other schedules have been omitted because they are
inapplicable, not required, or the information is included in the financial
statements or notes thereto.
<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.
HIGH EQUITY PARTNERS L.P. - SERIES 88
By: RESOURCES HIGH EQUITY, INC.,
Managing General Partner
Dated: March 27, 1998 By: /s/ Richard Sabella
--------------------
Richard Sabella
President and Director
(Principal Executive Officer)
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 their capacities on the dates indicated.
Dated: March 27, 1998 By: /s/ Richard Sabella
--------------------
Richard Sabella
President and Director
(Principal Executive Officer)
Dated: March 27, 1998 By: /s/ Lawrence Schachter
-----------------------
Lawrence Schachter
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Dated: March 27, 1998 By: /s/ Kevin Reardon
------------------
Kevin Reardon
Director, Vice President,
Treasurer and Secretary
Dated: March 27, 1998 By: /s/ David King
---------------
David King
Director and
Executive Vice President
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 88
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Costs Capitalized
Initial Cost Subsequent to Acquisition
-------------------------- -------------------------
Buildings
And Carrying
Description Encumbrances Land Improvement Improvements Costs
----------- ------------ ---- ----------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
RETAIL:
Melrose II Shopping Center Melrose Park IL $--- $ 1,375,000 $ 4,000,640 $ 6,876 $ ---
Sunrise Marketplace Las Vegas NV --- 3,024,968 13,469,031 1,643,747 1,342,536
SuperValu Stores Various -- --- 1,787,620 6,881,999 --- 708,358
Livonia Plaza Livonia MI --- 1,518,638 9,328,777 1,058,847 880,080
---- ----------- ----------- ---------- -----------
--- 7,706,226 33,680,447 2,709,470 2,930,974
OFFICE:
568 Broadway Office Building New York NY --- 1,429,284 6,091,266 2,799,478 813,953
INDUSTRIAL:
TMR Warehouses Various OH --- 1,355,621 19,694,413 89,428 1,717,279
---- ----------- ----------- ---------- -----------
$--- $10,491,131 $59,466,126 $5,598,376 $5,462,206
==== =========== =========== ========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Reductions
Recorded
Subsequent to Gross Amount at which Carried
Acquisition at Close of Period
------------ --------------------------------------------
Buildings
And Accumulated Date
Description Write-downs Land Improvements Total Depreciation Acquired
----------- ----------- ---- ------------ ----- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
RETAIL:
Melrose II Shopping Center $ (2,881,000) $ 638,742 $ 1,862,774 $ 2,501,516 $ 364,991 1989
Sunrise Marketplace (8,500,000) 1,811,849 9,168,433 10,980,282 2,791,343 1989
SuperValu Stores --- 1,935,936 7,442,041 9,377,977 1,651,275 1989
Livonia Plaza (2,100,000) 1,536,441 9,149,901 10,686,342 2,023,468 1989
------------- ---------- ----------- ----------- -----------
(13,481,000) 5,922,968 27,623,149 33,546,117 6,831,077
OFFICE:
568 Broadway Office Building (6,157,700) 651,057 4,325,224 4,976,281 1,528,507 1986
INDUSTRIAL:
TMR Warehouses --- 1,466,213 21,390,525 22,856,738 4,737,159 1988
------------- ---------- ----------- ----------- -----------
$ (19,638,700) $8,040,238 $53,338,898 $61,379,136 $13,096,743
============= ========== =========== =========== ===========
</TABLE>
Note: The aggregate cost for Federal income tax purposes is $81,017,836 at
December 31, 1997.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
(A) RECONCILIATION OF REAL ESTATE OWNED:
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------
1997 1996 1995
------------- ------------- ------------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR ....... $ 61,264,329 $ 60,973,595 $ 70,063,448
ADDITIONS DURING THE YEAR
Improvements to Real Estate 114,807 290,734 953,047
OTHER CHANGES
Write-down for impairment . -- -- (10,042,900)
------------ ------------ ------------
BALANCE AT END OF YEAR (1) ......... $ 61,379,136 $ 61,264,329 $ 60,973,595
============ ============ ============
</TABLE>
(1) INCLUDES THE INITIAL COST OF THE PROPERTIES PLUS ACQUISITION AND
CLOSING COSTS.
(B) RECONCILIATION OF ACCUMULATED DEPRECIATION:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR .... $11,697,525 $10,307,676 $ 8,879,768
ADDITIONS DURING THE YEAR
Depreciation Expense (1) 1,399,218 1,389,849 1,427,908
----------- ----------- -----------
BALANCE AT END OF YEAR .......... $13,096,743 $11,697,525 $10,307,676
=========== =========== ===========
</TABLE>
(1) DEPRECIATION IS PROVIDED ON BUILDINGS USING THE STRAIGHT-LINE METHOD
OVER THE USEFUL LIFE OF THE PROPERTY, WHICH IS ESTIMATED TO BE 40
YEARS.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the December 31, 1997 Form 10-K of High Equity Partners
L.P.-Series 88 and is qualified in its entirety by reference to such financial
statemens.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 6,540,252
<SECURITIES> 0
<RECEIVABLES> 194,041
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 56,296,853
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 53,952,615
<TOTAL-LIABILITY-AND-EQUITY> 56,296,853
<SALES> 0
<TOTAL-REVENUES> 9,189,172
<CGS> 0
<TOTAL-COSTS> 1,901,434
<OTHER-EXPENSES> 3,914,289
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,708,687
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,708,687
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,708,687
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
