<PAGE>
- --------------------------------------------------------------------------------
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 March 31, 1999
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 - MARCH 31, 1999
INDEX
Page No.
Part I. Financial Information:
Balance Sheets--March 31, 1999 and December 31, 1998 3
Statements of Operations--Three Months Ended March 31, 1999
and l998 4
Statement of Partners' Equity--Three Months Ended
March 31, 1999 5
Statements of Cash Flows-- Three Months Ended
March 31, 1999 and 1998 6
Notes to Financial Statements 7 - 12
Management's Discussion and Analysis of Financial
Condition and Results of Operations 13 - 15
Part II. Other Information:
Legal Proceedings, Exhibits and Reports on Form 8-K 16
2
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
ASSETS
Real estate - net $ 46,951,353 $ 47,293,445
Cash and cash equivalents 6,547,803 6,520,698
Other assets 1,101,457 1,131,282
Receivables 167,681 142,056
----------------- ------------------
$ 54,768,294 $ 55,087,481
================= ==================
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 997,899 $ 997,899
Accounts payable and accrued expenses 1,503,409 789,910
Due to affiliates 289,640 343,022
----------------- ------------------
2,790,948 2,130,831
----------------- ------------------
Commitments and contingencies
PARTNERS' EQUITY:
Limited partners' equity (371,766
units issued and outstanding) 49,378,461 50,308,799
General partners' equity 2,598,885 2,647,851
----------------- ------------------
51,977,346 52,956,650
----------------- ------------------
$ 54,768,294 $ 55,087,481
================= ==================
</TABLE>
See notes to financial statements
3
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
----------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Rental Revenue $ 1,743,975 $2,205,607
------------- ----------
Costs and Expenses:
Operating expenses 481,180 162,679
Depreciation and amortization 390,750 392,683
Partnership asset management fee 220,101 220,101
Administrative expenses 717,243 335,754
Property management fee 47,027 60,828
------------- -------------
1,856,301 1,172,045
------------- -------------
(Loss) Income before interest and other income (112,326) 1,033,562
Interest income 63,261 73,968
Other income 67,660 850
------------- -------------
Net income $ 18,595 $ 1,108,380
============= =============
Net income attributable to:
Limited partners $ 17,665 $ 1,052,961
General partners 930 55,419
------------- -------------
Net income $ 18,595 $ 1,108,380
============= =============
Net income per unit of limited
Partnership interest (371,766 units
Outstanding) $ 0.05 $ 2.83
============= =============
<</Table>
See notes to financial statements
4
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
STATEMENT OF PARTNERS' EQUITY
</TABLE>
<TABLE>
<CAPTION>
General Partners' Limited Partners'
Equity Equity Total
---------------- --------------- --------------
<S> <C> <C> <C>
Balance, January 1, 1999 $ 2,647,851 $ 50,308,799 $ 52,956,650
Net income for the three months
ended March 31, 1999 930 17,665 18,595
Distributions as a return of capital for
the three months ended March 31, 1999
($2.55 per limited partnership unit) (49,896) (948,003) (997,899)
----------------- ----------------- ----------------
Balance, March 31, 1999 $ 2,598,885 $ 49,378,461 $ 51,977,346
================ ================ ================
</TABLE>
See notes to financial statements
5
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
----------------------------------------
1999 1998
----- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 18,595 $ 1,108,380
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 390,750 392,683
Straight line adjustment for stepped
lease rentals 10,283 26,103
Changes in assets and liabilities:
Accounts payable and accrued expenses 713,499 (100,540)
Receivables (25,625) ( 91,954)
Due to affiliates (53,382) ( 73,429)
Other assets (7,937) (16,007)
---------------- ----------------
Net cash provided by operating activities 1,046,183 1,245,236
--------------- ---------------
Cash Flows From Investing Activities:
Improvements to real estate (21,179) ( 96,082)
---------------- ----------------
Cash Flows From Financing Activities:
Distributions to partners (997,899) ( 997,899)
---------------- ----------------
Increase in Cash and Cash Equivalents 27,105 151,255
Cash and Cash Equivalents, Beginning of Year 6,520,698 6,540,252
--------------- ---------------
Cash and Cash Equivalents, End of Quarter $ 6,547,803 $ 6,691,507
=============== ===============
</TABLE>
See notes to financial statements
6
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
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, l998.
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. Results of operations for the three months ended March 31, 1999 are
not necessarily indicative of the results to be expected for the entire year.
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. 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.
7
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
NOTES TO FINANCIAL STATEMENTS
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. 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
provides the day-to-day management of Presidio and its direct and indirect
subsidiaries and affiliates, including the Partnership. For the three months
ended March 31, 1999, reimbursable expenses incurred by NorthStar Presidio
related to the Partnership amounted to approximately $25,500.
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
March 31, 1999 and 1998, Resources Supervisory was entitled to receive $47,027
and $60,828, respectively, of which $27,488 and $34,578 was paid to unaffiliated
management companies, respectively, for property management services and the
balance was retained by Resources Supervisory.
8
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
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 March 31, 1999 and 1998, the Managing General
Partner received $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 March 31, 1999 and
1998, the Managing General Partner received $220,101.
The General Partners are allocated 5% of the net income of the Partnership,
which amounted to $930 and $55,419 for the quarters ended March 31, 1999 and
1998, respectively. They are also entitled to receive 5% of distributions, which
amounted to $49,896 for each of the quarters ended March 31, 1999 and 1998.
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, Millennium Funding IV Corp., a wholly
owned indirect subsidiary of Presidio, purchased 47,270 units of the Partnership
from various limited partners.
In connection with a tender offer for units of the Partnership made on March 12,
1998 (the "Offer") by Olympia Investors, L.P. ("Olympia"), Olympia and Presidio
entered into an agreement dated March 6, 1998 (the "Agreement"). Subsequent to
the expiration of the offer, Olympia announced that it had accepted for payment
14,955 units properly tendered pursuant to the Offer. Pursuant to the Agreement,
Presidio purchased 50% of those units owned by Olympia as a result of the Offer,
or 7,478 units, for $132.26 per unit. Presidio may be deemed to beneficially own
the remaining units owned by Olympia as a consequence of the Agreement.
Subsequent to the expiration of the tender offer described above, Millennium
Funding IV Corp. purchased an additional 12,276 limited partnership units from
August 1998 through May 1999. The total number of units purchased by Millenium
Funding IV Corp. represents approximately 18.0% of the outstanding limited
partnership units of the Partnership.
9
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE
The following table is a summary of the Partnership's real estate as of:
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Land $ 8,040,238 $ 8,040,238
Buildings and improvements 53,824,204 53,803,025
---------- ----------
61,864,442 61,843,263
Less: Accumulated depreciation (14,913,089) (14,549,818)
------------ -----------
$ 46,951,353 $ 47,923,445
============= =============
</TABLE>
5. DISTRIBUTIONS PAYABLE
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<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 subsequent quarters.
6. DUE TO AFFILIATES
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Partnership asset management fee $ 220,101 $ 220,101
Property management fee 19,539 72,921
Non-accountable expense reimbursement 50,000 50,000
-------------- --------------
$ 289,640 $ 343,022
============== ==============
</TABLE>
Such amounts were paid in the subsequent quarters.
10
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES
In May 1993, limited partners in High Equity Partners L.P. - Series 86
("HEP-86"), an affiliated partnership, commenced an action (the "Action") 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 the purchasers of
limited partnership interests in HEP-86. On April 7, 1994 the plaintiffs were
granted leave to file an amended complaint on behalf of a class consisting of
all the purchasers of limited partnership interests in HEP-86, the Partnership,
and Integrated Resources High Equity Partners, Series 85 ("HEP-85"), another
affiliated partnership (collectively, the "HEP Partnerships").
In November 1995, the original plaintiffs and intervening plaintiffs filed a
consolidated class and derivative action complaint (the "Consolidated
Complaint") alleging various state law class and derivative claims, including
claims for breach of fiduciary duty; breach of contract; unfair and fraudulent
business practices under California Bus. & Prof. Code Section 17200; negligence;
dissolution, accounting, receivership and removal of general partner; fraud; and
negligent misrepresentation. The Consolidated Complaint alleges, among other
things, that the general partners of the HEP Partnerships (collectively, "HEP
General Partners") caused a waste of the HEP Partnerships' assets by collecting
management fees in lieu of pursuing a strategy to maximize the value of the
investments owned by the investors in the HEP Partnerships, that the HEP General
Partners breached their duty of loyalty and due care to the investors by
expropriating management fees from the HEP Partnerships without trying to run
the HEP Partnerships for the purposes for which they were intended; that the HEP
General Partners were acting improperly to entrench 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 of limited partnership interest in the HEP Partnerships (collectively, the
"HEP Units"); that, by refusing to seek the sale of the HEP Partnerships'
properties, the HEP General Partners diminished the value of the investors'
equity in the HEP Partnerships; that the HEP General Partners took heavily
overvalued asset management fees; and that HEP Units were sold and marketed
through the use of false and misleading statements.
In early 1996, the parties submitted a proposed settlement to the Court (the
"Proposed Settlement"), which contemplated a reorganization of the three HEP
Partnerships into a single real estate investment trust, pursuant to which
approximately 85% of the shares of the real estate investment trust would have
been allocated to investors in the three HEP Partnerships (assuming each of the
HEP Partnerships participated in the reorganization), and approximately 15% of
the shares would have been allocated to the HEP General Partners. As a
consequence, the Proposed Settlement would, among other things, have
approximately tripled the HEP General Partners' equity interests in the HEP
Partnerships. In late 1996, the California Department of Corporations informed
the Court of the conclusion that the Proposed Settlement was unfair, and, in
early 1997, the Court declined to grant final approval of the Proposed
Settlement because the Court was not persuaded that the Proposed Settlement was
fair, adequate or reasonable as to the proposed class.
11
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In July 1997, the plaintiffs filed an amended complaint, which generally asserts
the same claims as the earlier Consolidated Complaint but contains more detailed
factual assertions and eliminates some claims they had previously asserted. The
HEP General Partners challenged the amended complaint on legal grounds and filed
demurrers and a motion to strike. In October 1997, the Court granted substantial
portions of the HEP General Partners' motions. Thereafter, the HEP General
Partners served answers denying the allegations and asserting numerous defenses.
In February 1998, the Court certified three separate plaintiff classes
consisting of the current owners of record of HEP Units (but excluding all
defendants or entities related to such defendants), and appointed class counsel
and liaison counsel.
In mid-1998, the parties actively engaged in negotiations concerning a possible
settlement of the Action. In September 1998, the parties reached an agreement in
principle, and, during the following months, negotiated a more formal settlement
stipulation (the "Settlement Stipulation"), which they executed in December
1998. The Settlement Stipulation was submitted to the Court for preliminary
approval in early January 1999. In February 1999, the Court gave preliminary
approval to the Settlement Stipulation and directed that notice of the proposed
settlement be sent to the previously certified class. The proposed settlement
contemplates (I) amendments to the Partnership Agreement that would modify the
existing fee structure; (II) a tender offer whereby the General Partners would
purchase up to 6.7% of the units from limited partners; and (III) that the
General Partners will use their best efforts to effect a reorganization of the
HEP Partnerships into REIT's or other publicly traded entities. At a hearing
held on April 29, 1999, the Court approved the proposed settlement in its
entirety and directed entry of judgement to that effect. The settlement is
subject to a number of conditions. There can be no assurance that such
conditions will be fulfilled.
The General Partners believe that each of the claims asserted in the Action are
meritless and, if for any reason a final settlement pursuant to the Settlement
Stipulation is not consummated, intend to continue to vigorously defend the
Action. At a hearing held on April 29, 1999, the Court also awarded a total of
$2.5 million in attorneys' fees and reimbursement of expenses to Class and
objectors' counsel. Of that total, $875,000 is to be paid by the General
Partners and the balance by the HEP Partnerships.
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 March 31, 1999, the Partnership paid the General Partners a total of
$1,034,510 for these costs.
12
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
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 March
31, 1999, 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 three months ended March 31, 1999, cash and cash equivalents
increased $27,105 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 less property operating expenses) which amounted to
$1,046,183 for the three months ended March 31, 1999. The Partnership used
$21,179 for capital expenditures related to capital and tenant improvements to
the properties and $997,899 for distributions to partners for the three months
ended March 31, 1999.
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 its 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 months ended
March 31, 1999 as compared to the same period in 1998 primarily due to decreases
in rental revenues and higher costs and expenses. For the three months ended
March 31, 1999, other income increased, partially offset by lower interest
income as compared to the same period in the prior year.
During the three months ended March 31, 1999, rental revenue decreased as
compared to the same period in 1998 due primarily to the departure of
significant tenants at Tri-Columbus and Melrose II during the latter part of
1998.
13
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Costs and expenses increased during the three months ended March 31, 1999 as
compared to the same period in 1998. Operating expenses increased during the
three months ended March 31, 1999, primarily due to higher repair and
maintenance costs at Sunrise due to the receipt of insurance proceeds in
February 1998, offsetting previously incurred costs. In addition, administrative
expenses increased for the three months ended March 31, 1999 due to higher legal
fees related to ongoing litigation and a possible reorganization of the
Partnership. Property management fees were lower due to the decrease in
revenues, as previously discussed.
Interest income decreased due to lower cash balances during the three months
ended March 31, 1999 as compared to the same period in 1998. Other income
increased during the three months ended March 31, 1999 as compared to 1998 due
to a greater number of ownership transfers in the current year, on which the
Partnership earns a transfer fee.
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
14
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
The manager has assessed 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 installed a new
fully compliant accounting and reporting system in December 1998. Further, the
Manager anticipates that the internal computer systems will be fully Year 2000
compliant by the end of the third quarter of 1999. The Manager is also currently
reviewing other systems and programs of its unaffiliated third party service
providers, in order to insure compliance. This process is expected to be
completed during the third quarter of 1999.
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.
15
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
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
16
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - MARCH 31, 1999
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: May 12, 1999 By: /S/ Allan Rothschild
---------------------
Allan Rothschild
President
(Duly Authorized Officer)
Dated: May 12, 1999 By: /S/ Lawrence Schachter
-----------------------
Lawrence Schachter
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the financial
statements of the March 31, 1999 Form 10-Q of High Equity Partners L.P.-Series
88 and is qualified in its entirety by reference to such fiancial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 6,547,803
<SECURITIES> 0
<RECEIVABLES> 167,681
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
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0
0
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<OTHER-SE> 51,977,346
<TOTAL-LIABILITY-AND-EQUITY> 54,768,294
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<TOTAL-REVENUES> 1,743,975
<CGS> 0
<TOTAL-COSTS> 481,180
<OTHER-EXPENSES> 1,375,121
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<INCOME-PRETAX> 18,595
<INCOME-TAX> 0
<INCOME-CONTINUING> 18,595
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,595
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
