FORM 10K/A
Amendment No. 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended Commission File Number
December 31, 1999 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 (IRS Employer
incorporation or organization) Identification Number)
5 Cambridge Center, 9th Floor, Cambridge, MA 02142
-------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 234-3000
---------------
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether 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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
There is no public market for the Limited Partnership Units. Accordingly,
information with respect to the aggregate market value of Limited Partnership
Units held by non-affiliates of Registrant has not been supplied.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Documents incorporated by reference
-----------------------------------
None
<PAGE>
The Annual Report on Form 10-K for the Year ended December 31, 1999 of High
Equity Partners, L.P. - Series 88 is hereby amended by deleting (i) Item 1. -
Competition; (ii) Item 1 - Employees, (iii) Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations - Real Estate Market,
and (iv) Item 7 - Management's Discussion and Analysis of Financial Condition
and Results of Operations - Impairment of Assets in their entirety and inserting
the following in lieu thereof.
(i) Item 1 - Competition
Competition
The real estate business is highly competitive and, as discussed more
particularly in "Item 2. Properties" and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Real Estate Market",
the properties acquired by the Partnership may have active competition from
similar properties in the vicinity. In addition, various limited partnerships
have been formed by the Managing General Partner and/or its affiliates and
agents that engage in businesses that may be competitive with the Partnership.
The Partnership will also experience competition for potential buyers at such
time as it seeks to sell any of its properties.
(ii) Item 1 - Employees
Employees
On-site personnel perform services for the Partnership at the properties.
Salaries for such on-site personnel are paid by unaffiliated management
companies that service the Partnership's properties. Services are also performed
by the Managing General Partner and by Resources Supervisory Management Corp.
("Resources Supervisory"), an affiliate of the Managing General Partner.
Resources Supervisory currently provides supervisory management and leasing
services for all of the Partnership's properties and subcontracts certain
management and leasing functions to unaffiliated third parties.
The Partnership does not have any employees. Presidio previously retained
Wexford Management LLC ("Wexford") to provide consulting and administrative
services to Presidio and its affiliates, including the Managing General Partner
and the Partnership. The agreement with Wexford expired on May 3, 1998 at which
time Presidio entered into a management agreement with NorthStar Presidio
Management Company, LLC ("NorthStar Presidio"). Under the terms of the
management agreement, NorthStar Presidio provided the day-to-day management of
Presidio and its direct and indirect subsidiaries and affiliates.
Presidio determined that it would be more cost effective to retain AP-PCC
III, L.P. (the "Agent") to provide asset management and investor services for
the Partnership. Accordingly, on October 21, 1999 Presidio entered into a
Services Agreement with the Agent pursuant to which the
2
<PAGE>
Agent was retained to provide asset management and investor relation services to
Partnership and other entities affiliated with Partnership.
As a result of this agreement, the Agent has the duty to direct the day to
day affairs of Partnership, including, without limitation, reviewing and
analyzing potential sale, financing or restructuring proposals regarding the
Partnership's assets, preparation of all reports, maintaining records and
maintaining bank accounts of Partnership. The Agent is not permitted, however,
without the consent of Presidio, or as otherwise required under the terms of the
Limited Partnership Agreement to, among other things, cause Partnership to sell
or acquire an asset or file for bankruptcy protection.
In order to facilitate the Agent's provision of the asset management
services and the investor relation services, effective October 25, 1999, the
officers and directors of the General Partner resigned and nominees of the Agent
were elected as the officers and directors of the General Partner. See Item 10,
"Directors and Executive Officers of the Partnership", The Agent is an affiliate
of Winthrop Financial Associates, a Boston based company that provides asset
management services, investor relation services and property management services
to over 150 limited partnerships which own commercial property and other assets.
The General Partner does not believe this transaction will have a material
effect on the operations of Partnership.
(iii) Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations - Real Estate Market
REAL ESTATE MARKET
In the markets in which the Partnership's properties are located, the
market values of existing properties continue to recover from the effects of the
substantial decline in the real estate market in the early 1990's. However, in
select markets, values have been slow to recover, and high vacancy rates
continue to exist in some areas. The geographic diversity of the Partnership's
properties decreases the risk of a significant partnership devaluation resulting
from an isolated market slump in a particular region. The overall economic
outlook for the specific markets in which the Partnership's properties are
located continues to be stable to improving.
The outlook is particularly positive for 568 Broadway as office and retail
space in the Midtown South sub-market in which 568 Broadway is located is
becoming increasingly popular. Little new office space inventory has been
introduced to offset demand in the area, resulting in a favorable operating
environment for the property. Rents are thus anticipated to continue to increase
at the property for the foreseeable future.
The expectations are positive, but more tempered, for improving market
conditions in several other regions in which the Partnership owns or has an
interest in properties. Indications are that the Columbus, Ohio, Norcross,
Georgia, Indianapolis, Indiana and Edina, Minnesota markets will continue to
show moderate increases in real estate values for properties comparable to those
in which the Partnership has an interest. The Partnership's properties in these
locations seem to be well
3
<PAGE>
positioned to benefit from the growth in these markets. However, the realization
of any market appreciation will be subject to the terms of the existing leases
which are not due to expire for several years at the Partnership's properties in
these locations.
The Partnership also owns a property in Livonia, Michigan, a suburb of
Detroit. After suffering significant losses in the early 1980's, the regional
economy has diversified and is in the midst of a continuing steady recovery. The
property is located on an established commercial and retail corridor near both
downtown Detroit and the Detroit Metropolitan Airport. Accordingly, indications
are that the property is well positioned to benefit from the anticipated growth
in the area.
The Las Vegas sub market in which Sunrise Marketplace is located is
likewise improving with strong population growth and household development. A
recent review of the property's position suggests however that Sunrise
Marketplace is not located within one of the region's primary growth paths, and
its competition continues to be traditional neighborhood shopping centers with
grocery or discount store anchors. It is therefore not anticipated that Sunrise
Marketplace will fully benefit from the expected general appreciation in the
real estate market in the area.
The Partnership's property in Melrose Park, Illinois continues to
experience extremely poor operating conditions. While the broader Chicago market
is experiencing economic and population growth which is creating a positive
environment for real estate appreciation, the trade area in which the property
is located is experiencing a decline in population. This decline coupled with
the related flight from the area by big box retailers has left many retail
properties, including the Partnership's property, suffering from high vacancy
and low rental rates. Vehicular access to the Partnership's property is also
difficult, further contributing to the negative outlook for the property in the
foreseeable future.
The Partnership owns an interest in a former Wigest Supermarket that is
located in Toledo, Ohio. Toledo is experiencing moderate but sustained growth in
the general economy. Accordingly, real estate values have been stable to
improving in the recent past and demographic trends suggest the likelihood of
continued moderate appreciation. Nonetheless, the tenant at the property, Wigest
Corporation, has recently become in default of its leasehold obligations and has
indicated that it will be unable to either cure the default or meet its future
responsibilities under the lease. The Partnership through its joint venture
position in the property has terminated Wigest's lease and is pursuing all
available remedies thereunder. As a result of these developments, the
Partnership is pursuing a new tenant for the property and early marketing
efforts indicate that the rental rates that will likely be achieved at the
property are below the scheduled rental rates under the Wigest lease. Should the
terms of any new lease be less favorable than those previously in place under
the Wigest lease, the properties near term value would be adversely affected.
Technological changes are also occurring which may reduce the space needs
of many tenants and potential tenants and may alter the demand for amenities and
power supplies at the Partnership's properties. As a result of these changes and
the continued risk for overall market volatility, the Partnership's potential
for realizing the full value of its investment in the properties is at continued
risk.
4
<PAGE>
(iv) Item 7- Management's Discussion and Analysis of Financial Condition and
Results of Operations -Impairment of Assets
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 there is an indication that the carrying amount of a
property may not be recoverable, the Partnership prepares an estimate of the
future undiscounted 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 undiscounted cash flow 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 adjustments to reduce the carrying value of the real estate
assets 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.
Management is not aware of any other current trends, events, or commitments
that will have a significant impact on the long-term value of the properties.
However, because the cash flows used to evaluate the recoverability of the
assets and their fair values are based upon projections of future economic
events such as property occupancy rates, rental rates, operating cost inflation
and market capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net carrying
values at the balance sheet dates. The cash flows and market comparables used in
this process are based on good faith estimates and assumptions developed by
management. Unanticipated events and circumstances may occur and some
assumptions may not materialize. Actual results may vary from the estimates and
the variances may be material.
All of the Partnership's properties have experienced varying degrees of
operating difficulties and the Partnership recorded significant impairment
adjustments in prior years. Improvements in the real estate market and in
property operations resulted in no adjustments for impairment being needed from
1997 through December 31, 1999.
5
<PAGE>
The following table represents the write-downs for impairments recorded
against the Partnership's assets held at December 31, 1999 :
Property
-----------
568 Broadway $ 6,157,700
Sunrise 8,500,000
Livonia Plaza 2,100,000
Melrose-Phase II 2,881,000
-----------
$19,638,700
===========
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf of the undersigned, thereunto duly authorized.
HIGH EQUITY PARTNERS, L.P.-SERIES-88
By: RESOURCES HIGH EQUITY, INC.
Managing General Partner
Dated: September 14, 2000 By: /s/ MICHAEL L. ASHNER
-----------------------------------------
Michael L. Ashner
President and Director
(Principal Executive Officer)
6
