<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 June 30, 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 - JUNE 30, 1999
INDEX
Page No.
Part I. Financial Information:
Balance Sheets--June 30, 1999 and December 31, 1998 3
Statements of Operations--Three and Six Months Ended
June 30, 1999 and l998 4
Statement of Partners' Equity--Six Months Ended
June 30, 1999 5
Statements of Cash Flows-- Six Months Ended
June 30, 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 - JUNE 30, 1999
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
ASSETS
Real estate - net $ 46,588,728 $ 47,293,445
Cash and cash equivalents 6,563,858 6,520,698
Other assets 1,230,113 1,131,282
Receivables 330,761 142,056
----------------- ------------------
$ 54,713,460 $ 55,087,481
================= ==================
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 997,899 $ 997,899
Accounts payable and accrued expenses 1,537,963 789,910
Due to affiliates 297,226 343,022
----------------- ------------------
2,833,088 2,130,831
----------------- ------------------
Commitments and contingencies
PARTNERS' EQUITY:
Limited partners' equity (371,766
units issued and outstanding) 49,286,337 50,308,799
General partners' equity 2,594,035 2,647,851
----------------- ------------------
51,880,372 52,956,650
----------------- ------------------
$ 54,713,460 $ 55,087,481
================= ==================
</TABLE>
See notes to financial statements
3
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - JUNE 30, 1999
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
-------------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Rental Revenue $ 2,051,488 $1,842,936 $3,795,463 $ 4,048,543
------------ ---------- ---------- ------------
Costs and Expenses:
Operating expenses 424,240 506,119 905,420 668,798
Depreciation and amortization 390,750 392,683 781,500 785,366
Partnership management fee 220,101 220,101 440,202 440,202
Administrative expenses 143,470 350,923 860,713 686,677
Property management fee 58,555 49,941 105,581 110,769
----------- ----------- ----------- ------------
1,237,116 1,519,767 3,093,416 2,691,812
----------- ----------- ----------- ------------
Income before interest and other income 814,372 323,169 702,047 1,356,731
Interest income 80,342 95,210 143,603 169,178
Other income 6,210 18,180 73,870 19,030
----------- ----------- ----------- ------------
Net income $ 900,924 $ 436,559 $ 919,520 $ 1,544,939
=========== =========== =========== ============
Net income attributable to:
Limited partners $ 855,878 $ 414,731 $ 873,544 $ 1,467,692
General partners 45,046 21,828 45,976 77,247
----------- ----------- ----------- ------------
Net income $ 900,924 $ 436,559 $ 919,520 $ 1,544,939
=========== =========== =========== ============
Net income per unit of limited
partnership interest (371,766 units
outstanding) $ 2.30 $ 1.12 $ 2.35 $ 3.95
=========== =========== =========== ============
</TABLE>
See notes to financial statements
4
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - JUNE 30, 1999
STATEMENT OF PARTNERS' EQUITY
<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 six months
ended June 30, 1999 45,976 873,544 919,520
Distributions as a return of capital for
the six months ended June 30, 1999
($5.10 per limited partnership unit) (99,792) (1,896,006) (1,995,798)
----------------- ----------------- ----------------
Balance, June 30, 1999 $ 2,594,035 $ 49,286,337 $ 51,880,372
================ ================ ================
</TABLE>
See notes to financial statements
5
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - JUNE 30, 1999
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
------------------------
1999 1998
----- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 919,520 $ 1,544,939
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 781,500 785,366
Straight line adjustment for stepped
lease rentals 20,566 52,206
Changes in assets and liabilities:
Accounts payable and accrued expenses 748,053 (40,461)
Receivables (188,705) (93,642)
Due to affiliates (45,796) (297,518)
Other assets (174,357) (20,668)
---------------- ----------------
Net cash provided by operating activities 2,060,781 1,930,222
--------------- ---------------
Cash Flows From Investing Activities:
Improvements to real estate (21,823) (185,254)
---------------- ----------------
Cash Flows From Financing Activities:
Distributions to partners (1,995,798) (1,995,798)
---------------- ----------------
Increase (Decrease) in Cash and Cash Equivalents 43,160 (250,830)
Cash and Cash Equivalents, Beginning of Year 6,520,698 6,540,252
--------------- ---------------
Cash and Cash Equivalents, End of Quarter $ 6,563,858 $ 6,289,422
=============== ===============
</TABLE>
See notes to financial statements
6
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - JUNE 30, 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 six months ended June 30, 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 - JUNE 30, 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 six months ended
June 30, 1999 and 1998, reimbursable expenses incurred by NorthStar Presidio
related to the Partnership amounted to approximately $51,000 and $44,700,
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 quarters ended June
30, 1999 and 1998, Resources Supervisory was entitled to receive $58,555 and
$49,941, respectively, of which $31,430 and $32,780 was paid to unaffiliated
management companies, respectively, for property management services and the
balance was retained by Resources Supervisory. For the six months ended June 30,
1999 and 1998, Resources Supervisory was entitled to receive $105,581 and
$110,769, respectively, of which $58,917 and $67,358 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 - JUNE 30, 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 June 30, 1999 and 1998, the Managing General
Partner received $50,000. For each of the six-month periods ended June 30, 1999
and 1998, the Managing General Partner received $100,000.
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 June 30, 1999 and
1998, the Managing General Partner received $220,101. For each of the six-month
periods ended June 30, 1999 and 1998, the Managing General Partner received
$440,202.
The General Partners are allocated 5% of the net income of the Partnership,
which amounted to $45,046 and $21,828 for the quarters ended June 30, 1999 and
1998, respectively. Net income allocated to the General Partners amounted to
$45,976 and $77,247 for the six months ended June 30, 1999 and 1998,
respectively. They are also entitled to receive 5% of distributions, which
amounted to $49,896 for each of the quarters ended June 30, 1999 and 1998.
Distributions allocated to the General Partners amounted to $99,792 for the six
months ended June 30, 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.("MFIV"), 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,
MFIV 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, MFIV purchased
an additional 12,396 limited partnership units from August 1998 through July
1999. The total number of units purchased by MFIV represents approximately 18.1%
of the outstanding limited partnership units of the Partnership.
9
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE
The following table is a summary of the Partnership's real estate as of:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Land $ 8,040,238 $ 8,040,238
Buildings and improvements 53,824,848 53,803,025
------------ ------------
61,865,086 61,843,263
Less: Accumulated depreciation (15,276,358) (14,549,818)
------------ ------------
$ 46,588,728 $ 47,923,445
============ ============
<CAPTION>
5. DISTRIBUTIONS PAYABLE
June 30, 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
========== ==========
Such distributions were paid in the subsequent quarters.
<CAPTION>
6. DUE TO AFFILIATES
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Partnership asset management fee $ 220,101 $ 220,101
Property management fee 27,125 72,921
Non-accountable expense reimbursement 50,000 50,000
---------- ----------
$ 297,226 $ 343,022
========== ==========
</TABLE>
Such amounts were paid in the subsequent quarters.
10
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - JUNE 30, 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.
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 ("REIT"), pursuant to
which approximately 85% of the shares of the REIT 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. 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 - JUNE 30, 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 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 would use their best efforts to effect a reorganization of the
HEP Partnerships into separate REIT's or other publicly traded entities. At a
hearing held on April 29, 1999, the Court approved the settlement in its
entirety and directed entry of judgement to that effect. As the first step in
implementing the settlement, the General Partners are currently soliciting the
consent of limited partners to the amendments to the Partnership Agreements
referred to above. 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. Accordingly, the Partnership
accrued $542,000 at March 31, 1999 related to these costs, which are expected to
be paid in the third quarter of 1999. 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 June 30, 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 - JUNE 30, 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 June 30,
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 six months ended June 30, 1999, cash and cash equivalents increased
$43,160 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
$2,060,781 for the six months ended June 30, 1999. The Partnership used $21,823
for capital expenditures related to capital and tenant improvements to the
properties and $1,995,798 for distributions to partners for the six months ended
June 30, 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 six months ended
June 30, 1999 as compared to the same period in 1998 primarily due to higher
costs and expenses and lower rental revenues. For the three months ended June
30, 1999, net income increased as compared to the same period in the prior year
due primarily to an increase in rental revenues and a decrease in costs and
expenses.
During the six months ended June 30, 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 1998. These decreases were offset by an
increase in rental revenue during the three months ended June 30, 1999 at 568
Broadway due to higher overall rental rates at the property.
13
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - JUNE 30, 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Costs and expenses increased during the six months ended June 30, 1999 as
compared to the same period in 1998 due to higher operating and administrative
expenses. However, costs and expenses decreased during the three months ended
June 30, 1999 due primarily to lower operating and administrative expenses as
compared to the same period in the prior year. Operating expenses increased
during the six months ended June 30, 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. This increase was offset by
lower real estate taxes at Melrose II during the three months ended June 30,
1999. Administrative expenses increased for the six months ended June 30, 1999
due to higher legal fees incurred during the first quarter of 1999 pursuant to
the Settlement Agreement related to the ongoing litigation and possible
reorganization of the Partnership (see Note 7). However, administrative fees for
the three months ended June 30, 1999 decreased as compared to the same period in
the prior year due to lower legal fees incurred during the second quarter as a
result of the potential settlement. Property management fees were lower during
the six months ended June 30, 1999 as compared to the same period in the prior
year and higher during the three month period ended June 30, 1999 due to the
respective decrease and increase in revenues, as previously discussed.
During the three and six month periods ended June 30, 1999, interest income
decreased due to lower invested cash balances during 1999 as compared to the
same periods in 1998. Other income increased during the six months ended June
30, 1999 as compared to the same period in 1998 due to a greater number of
investor transfers (primarily during the first quarter of 1999) on which the
Partnership earns a transfer fee. However, other income decreased during the
three months ended June 30, 1999 compared to the prior period due to fewer such
transfers during the second quarter.
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.
14
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - JUNE 30, 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 evaluating these issues and will be developing
contingency plans.
15
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88-FORM 10-Q - JUNE 30, 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 - JUNE 30, 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: August 12, 1999 By: /S/ Allan Rothschild
------------------------------------
Allan Rothschild
President
(Duly Authorized Officer)
Dated: August 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 June 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 6,563,858
<SECURITIES> 0
<RECEIVABLES> 330,761
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 54,713,460
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 51,880,372
<TOTAL-LIABILITY-AND-EQUITY> 54,713,460
<SALES> 0
<TOTAL-REVENUES> 3,795,463
<CGS> 0
<TOTAL-COSTS> 905,420
<OTHER-EXPENSES> 2,187,996
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 919,520
<INCOME-TAX> 0
<INCOME-CONTINUING> 919,520
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 919,520
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
