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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
Commission file number 0-16855
HIGH EQUITY PARTNERS L.P. - SERIES 88
(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)
(203) 862-7444
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
INDEX
Part I. Financial Information:
Balance Sheets--September 30, 1998 and December 31, 1997
Statements of Operations--Three and Nine Months Ended September 30,
1998 and l997
Statement of Partners' Equity--Nine Months Ended
September 30, 1998
Statements of Cash Flows-- Nine Months Ended
September 30, 1998 and 1997
Notes to Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information:
Legal Proceedings, Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
BALANCE SHEETS
September 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Real estate - net .......................... $47,563,680 $48,282,393
Cash and cash equivalents .................. 6,578,157 6,540,252
Other assets ............................... 1,106,097 1,280,167
Receivables ................................ 106,012 194,041
----------- -----------
$55,353,946 $56,296,853
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Distributions payable ...................... $ 997,899 $ 997,899
Accounts payable and accrued expenses ...... 914,679 761,559
Due to affiliates .......................... 294,263 584,780
----------- -----------
2,206,841 2,344,238
----------- -----------
Commitments and contingencies
PARTNERS' EQUITY:
Limited partners' equity (371,766
units issued and outstanding) ......... 50,489,731 51,254,962
General partners' equity ................... 2,657,374 2,697,653
----------- -----------
53,147,105 53,952,615
----------- -----------
$55,353,946 $56,296,853
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
STATEMENTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental Revenue ............................. $1,891,873 $2,046,917 $5,940,416 $7,633,161
---------- ---------- ---------- ----------
Costs and Expenses:
Operating expenses ................ 502,001 501,045 1,170,799 1,471,158
Depreciation and amortization ..... 392,683 455,100 1,178,049 1,295,300
Partnership asset management fee .. 220,101 220,101 660,303 660,303
Administrative expenses ........... 156,077 132,979 842,754 546,695
Property management fee ........... 51,964 55,863 162,733 181,934
---------- ---------- ---------- ----------
1,322,826 1,365,088 4,014,638 4,155,390
---------- ---------- ---------- ----------
Income before interest and other income .... 569,047 681,829 1,925,778 3,477,771
Interest income ................... 71,481 85,215 240,659 218,862
Other income ...................... 2,720 14,130 21,750 27,145
---------- ---------- ---------- ----------
Net income ................................. $ 643,248 $ 781,174 $2,188,187 $3,723,778
========== ========== ========== ==========
Net income attributable to:
Limited partners .................. $ 611,086 $ 742,115 $2,078,778 $3,537,589
General partners .................. 32,162 39,059 109,409 186,189
---------- ---------- ---------- ----------
Net income ................................. $ 643,248 $ 781,174 $2,188,187 $3,723,778
========== ========== ========== ==========
Net income per unit of limited
partnership interest (371,766 units
outstanding) ..................... $ 1.64 $ 2.00 $ 5.59 $ 9.52
========== ========== ========== ==========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
STATEMENT OF PARTNERS' EQUITY
General Limited
Partners' Partners'
Equity Equity Total
------------ ------------ ------------
<S> <C> <C> <C>
Balance, January 1, 1998 ............... $ 2,697,653 $ 51,254,962 $ 53,952,615
Net income for the nine months
ended September 30, 1998 ............... 109,409 2,078,778 2,188,187
Distributions as a return of capital for
the nine months ended September 30, 1998
($7.65 per limited partnership unit) ... (149,688) (2,844,009) (2,993,697)
------------ ------------ ------------
Balance, September 30, 1998 ............ $ 2,657,374 $ 50,489,731 $ 53,147,105
============ ============ ============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income ................................... $ 2,188,187 $ 3,723,778
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization ....... 1,178,049 1,295,300
Straight line adjustment for stepped
lease rentals .................. 78,309 36,627
Changes in assets and liabilities:
Accounts payable and accrued expenses 153,120 176,742
Receivables ......................... 88,029 (290,023)
Due to affiliates ................... (290,517) (854,569)
Other assets ........................ (32,871) (68,647)
----------- -----------
Net cash provided by operating activities .... 3,362,306 4,019,208
----------- -----------
Cash Flows From Investing Activities:
Improvements to real estate .................. (330,704) (172,696)
----------- -----------
Cash Flows From Financing Activities:
Distributions to partners .................... (2,993,697) (2,480,074)
----------- -----------
Increase in Cash and Cash Equivalents ................. 37,905 1,366,438
Cash and Cash Equivalents, Beginning of Year .......... 6,540,252 5,353,731
----------- -----------
Cash and Cash Equivalents, End of Quarter ............. $ 6,578,157 $ 6,720,169
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS
l. GENERAL
The accompanying financial statements, notes and discussions should be
read in conjunction with the financial statements, related notes and
discussions contained in the Partnership's annual report on Form l0-K for
the year ended December 3l, l997.
The financial information contained herein is unaudited; however, in the
opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of such financial
information have been included.
2. SIGNIFICANT ACCOUNTING POLICIES
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. If this review indicates that the carrying value of
a property may not be recoverable, the Partnership estimates the future
cash flows expected to result from the use of the 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 expected 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, 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
materially from the estimates.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Partnership may in the future provide additional write-downs, which
could be material, in subsequent years if real estate markets or local
economic conditions change.
Certain reclassifications were made to the prior year financial statements
in order to conform them to the current period presentation.
Results of operations for the nine months ended September 30, 1998 are not
necessarily indicative of the results to be expected for the entire year.
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Managing General Partner of the Partnership, Resources High Equity,
Inc., 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"). The General Partners and 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 (and affiliated with other entities) that are or may in the
future be engaged in businesses that may be in competition with the
Partnership. Accordingly, conflicts of interest may arise between the
Partnership and such other businesses. Subject to the right of the limited
partners under the Limited Partnership Agreement, Presidio controls the
Partnership through its indirect ownership of the General Partners.
Effective July 31, 1998, Presidio is indirectly controlled by NorthStar
Capital Investment Corp., a Maryland corporation.
Effective as of August 28, 1997, Presidio has a management agreement with
NorthStar Presidio Management Company LLC ("NorthStar Presidio"), an
affiliate of NorthStar Capital Investment Corp., pursuant to which,
NorthStar Presidio will provide the day-to-day management of Presidio and
its direct and indirect subsidiaries and affiliates. For the nine months
ended September 30, 1998, reimbursable expenses incurred by NorthStar
Presidio amounted to approximately $67,000.
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 quarters ended September 30, 1998 and 1997, Resources
Supervisory was entitled to receive $51,964 and $55,863, respectively, of
which $27,802 and $27,875 was paid to unaffiliated management companies,
respectively, for on-site management and the balance was retained by
Resources Supervisory.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
For the administration of the Partnership, the Managing General Partner is
entitled to receive reimbursement of expenses of a maximum of $200,000 per
year. For each of the quarters ended September 30, 1998 and 1997, the
Managing General Partner was entitled to receive $50,000.
For managing the affairs of the Partnership, the Managing General Partner
is entitled to receive an annual 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 quarters ended
September 30, 1998 and 1997, the Managing General Partner was entitled to
receive $220,101.
The General Partners are allocated 5% of the net income of the
Partnership, which amounted to $32,162 and $39,059 for the quarters ended
September 30, 1998 and 1997, respectively. They are also entitled to
receive 5% of distributions, which amounted to $49,896 and $50,871 for the
quarters ended September 30, 1998 and 1997, 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 investment. All
fees received by the General Partners are subject to certain limitations
as set forth in the Partnership Agreement.
From July 1996 through March 12, 1998, Millenium Funding IV Corp., a
wholly owned indirect subsidiary of Presidio, purchased 47,270 units of
the Partnership from various limited partners. Subsequent to the
expiration of the tender offer described below, Millenium Funding IV Corp.
purchased 6,399 limited partnership units from August 1998 through
November 1998. The total of these purchases represent approximately 14.4%
of the outstanding limited partnership units of the Partnership.
In connection with a tender offer for units of the Partnership made March
12, 1998 (the "Offer") by Olympia Investors, L.P., a Delaware limited
partnership controlled by Carl Ichan ("Olympia"), Olympia and Presidio
entered into an agreement, dated March 6, 1998 (the "Agreement"). On July
28, 1998, Olympia announced that it had accepted for payment 15,826 units
properly tendered pursuant to the Offer. As a consequence of the
Agreement, Presidio may be deemed to beneficially own the units owed by
Olympia.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE
The following table is a summary of the Partnership's real estate as of:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
<S> <C> <C>
Land ................................... $ 8,040,238 $ 8,040,238
Buildings and improvements ............. 53,669,603 53,338,898
------------ ------------
61,709,841 61,379,136
Less: Accumulated depreciation ......... (14,146,161) (13,096,743)
------------ ------------
$ 47,563,680 $ 48,282,393
============ ============
</TABLE>
No write-downs for impairment were recorded for the nine months ended September
30, 1998 or 1997.
5. DISTRIBUTIONS PAYABLE
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
Limited Partners ($2.55 per unit) ............ $948,003 $948,003
General Partners ............................. 49,896 49,896
-------- --------
$997,899 $997,899
======== ========
</TABLE>
Such distributions were paid in the quarters subsequent to September 30, 1998
and December 31, 1997, respectively.
6. DUE TO AFFILIATES
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
Partnership asset management fee ...................... $220,101 $220,101
Reorganization & litigation cost reimbursement (Note 7) -- 215,000
Property management fee ............................... 24,162 99,679
Non-accountable expense reimbursement ................. 50,000 50,000
-------- --------
$294,263 $584,780
======== ========
</TABLE>
Such amounts were paid in the quarters subsequent to September 30, 1998 and
December 31, 1997, respectively.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES
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 the Partnership. 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
the purchasers of limited partnership interest 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 HEP-85 and the Partnership 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
partnership; 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 n ot 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 Second Amended Complaint
asserts substantially the same claims as the Consolidated Complaint,
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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 the 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. On July 30, 1998, the Court lifted the stay.
In September 1998, the parties in the lawsuit entered into a Memorandum of
Understanding with respect to a settlement of the lawsuit. The Memorandum
of Understanding provides, among other things, for a modification of the
fees payable under the partnership agreement and a release of all claims
against the defendants. The Memorandum of Understanding is subject to a
number of conditions, including the agreement among the parties with
respect to definitive documentation, approval by the court and approval by
the limited partners of the modification referred to above. There can be
no assurance that such conditions will be fulfilled.
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 September 30, 1998, the Partnership paid the
General Partner a total of $1,039,511 for these costs.
The General Partners believe that each of the claims asserted in the
Second Amended Complaint is 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.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Working capital reserves are temporarily invested in short-term instruments and
together with operating cash flow are expected to be sufficient to fund
anticipated capital improvements to the Partnership's properties. As of
September 30, 1998, total working capital reserves amounted to approximately
$1,475,000. The Partnership intends to distribute to its partners less than all
of its future cash flow from operations in order to assure adequate working
capital reserves for capital improvements and capitalized lease procurement
costs.
During the nine months ended September 30, 1998, cash and cash equivalents
increased $37,905 as a result of cash provided by 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 $3,362,306 for the nine months
ended September 30, 1998. The Partnership used $330,704 for capital expenditures
related to capital and tenant improvements to the properties and $2,993,697 for
distributions to partners for the nine months ended September 30, 1998.
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. Vacancies at Tri-Columbus and Melrose
II are currently being marketed to a variety of potential tenants. The
Partnership is currently funding operating expenses at these locations from cash
reserves. If and when replacement tenants are secured, it is likely that capital
expenditures will be required to fund tenant improvements and leasing
commissions. Capital and tenant improvements and leasing commissions may in the
future exceed the Partnership's cash flow from operations. In that event, the
Partnership would utilize the remaining working capital reserves, 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.
RESULTS OF OPERATIONS
The Partnership experienced a decrease in net income for the three and nine
months ended September 30, 1998 as compared to the same periods in 1997
primarily due to decreases in rental revenues, partially offset by decreases in
costs and expenses. For the three months ended September 30, 1998, interest
income and other income decreased as compared to the same period in the prior
year. For the nine months ended September 30, 1998, interest income increased
while other income decreased slightly as compared to the prior period.
During the three months ended September 30, 1998, rental revenue decreased as
compared to the same period in 1997 due to the departure of a significant tenant
at Tri-Columbus in July 1998. Rental revenue decreased during the nine months
ended September 30, 1998 as compared to the same period in the prior year,
primarily due to the April 1997 receipt of $1.5 million pursuant to the
bankruptcy settlement of Handy Andy, the former sole tenant at Melrose II.
Costs and expenses decreased during the three and nine months ended September
30, 1998 as compared to the same periods in 1997. Operating expenses remained
constant during the three months ended September 30, 1998 as compared to the
same period in 1997 but decreased during the nine months ended September 30,
1998, primarily due to lower repair and maintenance costs at Sunrise due to the
receipt of insurance proceeds in February, 1998, offsetting previously incurred
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
costs. Depreciation and amortization expenses decreased during the three and
nine months ended September 30, 1998 as certain capitalized leasing commissions
became fully amortized during 1998. Administrative expenses increased for the
three and nine months ended September 30, 1998 as compared to the same periods
in 1997 due to higher legal and accounting fees related to ongoing litigation
and a possible reorganization of the Partnership. Property management fees
decreased during the three and nine months ended September 30, 1998 due to the
decrease in revenues, as previously discussed.
Interest income decreased due to lower cash balances during the three months
ended September 30, 1998 as compared to the same period in 1997. Overall
interest income, however, for the nine months ended September 30, 1998 increased
due to the higher average cash balances earlier in the year. Other income
decreased during the three and nine months ended September 30, 1998 as compared
to 1997 due to fewer ownership transfers.
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 7 to financial
statements for a description thereof.
Forward-looking Statements
When used in this quarterly report on Form 10-Q, the words "believes,"
anticipates," "expects" and similar expressions are intended to identify
forward-looking statements. Statements looking forward in time are included in
this quarterly report on Form 10-Q pursuant to the "safe harbor" provision of
the Private Securities Litigation Reform Act of 1995. Such statements are
subject to certain risks and uncertainties, which could cause actual results to
differ materially, including, but not limited to, those set forth in
"management's discussion and analysis of financial condition and results of
operations." Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
Partnership undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances occurring after the date hereof or
to reflect the occurrence of unanticipated events.
Year 2000 Compliance
The Year 2000 compliance issue concerns the inability of computerized
information systems and equipment to accurately calculate, store or use a date
after December 31, 1999, as a result of the year being stored as a two digit
number. This could result in a system failure or miscalculations causing
disruptions of operations. The Partnership and its Manager (NorthStar Presidio
Management Co., LLC) recognize the importance of ensuring that its business
operations are not disrupted as a result of Year 2000 related computer system
and software issues.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The manager is in the process of assessing its internal computer information
systems and is now taking the further steps necessary to remediate these systems
so that they will be Year 2000 compliant. In connection therewith, the manager
is currently in the process of installing a new fully compliant accounting and
reporting system. The Manager is also currently reviewing its other internal
systems and programs, along with those of its unaffiliated third party service
providers, in order to insure compliance.
Further, the Manager and these service providers are currently evaluating and
assessing those computer systems not related to information technology. These
systems, that generally operate in a building include, without limitation,
telecommunication systems, security systems (such as card-access door lock
systems), energy management systems and elevator systems. As a result of the
technology used in this type of equipment, it is possible that this equipment
may not be repairable, and accordingly may require complete replacement. Because
this assessment is ongoing, the total cost of bringing all systems and equipment
into Year 2000 compliance has not been fully quantified. Based upon available
information, the Manager does not believe that these costs will have a material
adverse effect on the Partnership's business, financial condition or results.
However, it is possible that there could be adverse consequences to the
Partnership as a result of Year 2000 issues that are outside the Partnership's
control. The Manager is in the preliminary stages of evaluating these issues and
will be developing contingency plans.
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
PART II. - OTHER INFORMATION
Item 1 - Legal Proceedings
(a) See Management's Discussion and Analysis of Financial
Condition and Results of Operations and Notes to Financial
Statements - Note 7 which is herein incorporated by
reference.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits: There were no exhibits filed.
(b) Reports on Form 8-K:
None
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88 - FORM 10-Q - SEPTEMBER 30, 1998
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
High Equity Partners L.P. - Series 88
By: Resources High Equity, Inc.
Managing General Partner
Dated: November 12, 1998 By: /S/ Allan Rothschild
---------------------
Allan Rothschild
President
(Duly Authorized Officer)
Dated: November 12, 1998 By: /S/ Lawrence Schachter
-----------------------
Lawrence Schachter
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the September 30, 1998 Form 10-Q 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 6,578,157
<SECURITIES> 0
<RECEIVABLES> 106,012
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 55,353,946
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 53,147,105
<TOTAL-LIABILITY-AND-EQUITY> 55,353,946
<SALES> 0
<TOTAL-REVENUES> 5,940,416
<CGS> 0
<TOTAL-COSTS> 1,170,799
<OTHER-EXPENSES> 2,843,839
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,188,187
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,188,187
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,188,187
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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