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FORM 10K
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
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(Exact name of Registrant as specified in its charter)
Delaware 13-3394723
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
5 Cambridge Center, 9th Floor, Cambridge, MA 02142
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 234-3000
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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
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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
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None
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PART I
Item 1. Business
High Equity Partners L.P. - Series 88 (the "Partnership") is a
Delaware limited partnership formed as of February 24, 1987. The Partnership is
engaged in the business of operating and holding for investment previously
acquired income-producing properties, consisting of office buildings, shopping
centers and other commercial and industrial properties such as industrial parks
and warehouses. See "Item 2. Properties" for a description of the Partnership's
properties.
Resources High Equity, Inc., a Delaware corporation and a
wholly owned subsidiary of Presidio Capital Corp., a British Virgin Islands
corporation ("Presidio"), is the Partnership's managing general partner (the
"Managing General Partner"). Effective July 31, 1998, Presidio is indirectly
controlled by NorthStar Capital Investment Corp., a Maryland corporation. Until
November 3, 1994, Resources High Equity, Inc. was a wholly owned subsidiary of
Integrated Resources, Inc. ("Integrated"). On November 3, 1994 Integrated
consummated its plan of reorganization under Chapter 11 of the United States
Bankruptcy Code at which time, pursuant to such plan of reorganization, the
newly-formed Presidio purchased substantially all of Integrated's assets.
Presidio AGP Corp., which is a wholly-owned subsidiary of Presidio, became the
associate general partner (the "Associate General Partner") on February 28, 1995
replacing Z Square G Partners II which withdrew as of that date. The Managing
General Partner and the Associate General Partner are referred to collectively
hereinafter as the "General Partners." Affiliates of the General Partners are
also engaged in businesses related to the acquisition and operation of real
estate. See "Management/Employees" below.
In 1989, the Partnership offered 400,000 units (subject to
increase to 800,000) of limited partnership interest (the "Units") pursuant to a
prospectus filed with the Securities and Exchange Commission. Upon final
admission of limited partners, the Partnership had accepted subscriptions for
371,766 Units for an aggregate of $92,941,500 in gross proceeds, resulting in
net proceeds from the offering of $90,153,255 (gross proceeds of $92,941,500
less organization and offering costs of $2,788,245). All underwriting and sales
commissions were paid by Integrated or its affiliates and not by the
Partnership.
In August 1990, the Managing General Partner declared a
special distribution of $16.96 per Unit, representing a return of uninvested
gross proceeds. This return of capital lowered the aggregate gross proceeds to
$86,636,349, resulting in net proceeds from the offering of $83,848,104 (gross
proceeds of $86,636,349 less organization and offering costs of $2,788,245). The
3% organization and offering costs associated with the return of the original
capital were non-refundable.
The Partnership has invested substantially all of its total
adjusted net proceeds available for investment, after establishing a working
capital reserve, in real estate. The Partnership's property investments which
contributed more than 15% of the Partnership's total gross revenues were as
follows: in 1999, Tri-Columbus, Sunrise, Livonia and 568 Broadway represented
22%, 25%, 19% and 23% of gross revenues, respectively; in 1998, Tri-Columbus,
Sunrise, Livonia, and 568 Broadway represented 26%, 23%, 19% and 18% of gross
revenues, respectively; in 1997, Tri-Columbus,
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Sunrise, Livonia, Melrose II, and 568 Broadway represented 23%, 18%, 18%, 17%
and 15% of gross revenues, respectively.
Settlement of Class Action Lawsuit
In April 1999, the California Superior Court approved the
terms of the settlement of a class action and derivative litigation involving
the Partnership. Under the terms of the settlement, the General Partners agreed
to take the actions described below subject to first obtaining the consent of
limited partners to amendments to the Agreement of Limited Partnership of the
Partnership summarized below. The settlement became effective in August 1999
following approval of the amendments. As amended, the Partnership Agreement (a)
provides for a Partnership Asset Management Fee equal to 1.25% of the gross
asset value of the Partnership and a fixed 1999 Partnership Asset Management Fee
of $719,411 or $160,993 less than the amount that would have been paid for 1999
under the prior formula and (b) fixes the amount that the General Partners will
be liable to pay to limited partners upon liquidation of the Partnership as
repayment of fees previously received (the "Fee Give-Back Amount"). As of
December 31, 1999, the Fee Give-Back Amount was $3.57 per Unit which amount will
be reduced by approximately $.40 per Unit for each full calendar year after 1999
in which a liquidation does not occur. As amended, the Partnership Agreement
provides that, upon a reorganization of the Partnership into a real estate
investment trust or other public entity, the General Partners will have no
further liability to pay the Fee Give-Back Amount. In accordance with the terms
of the settlement, Presidio Capital Corp., an affiliate of the General Partners,
guaranteed payment of the Fee Give-Back Amount.
As required by the settlement, an affiliate of the General
Partners, Millennium Funding IV LLC, made a tender offer to limited partners to
acquire up to 25,034 Units (representing approximately 6.7% of the outstanding
Units) at a price of $113.15 Unit. The offer closed in January 2000 and all
25,034 Units were acquired in the offer.
The final requirement of the settlement obligated the General
Partners to use their best efforts to reorganize the Partnership into a real
estate investment trust or other entity whose shares were listed on a national
securities exchange or on the NASDAQ National Market System. A Registration
Statement was filed with the Securities and Exchange Commission on February 11,
2000 with respect to the restructuring of the Partnership into a publicly-traded
real estate investment trust. The Registration Statement has not yet become
effective and the consent of a majority of limited partners will be needed to
effect the restructuring.
The Limited Partnership Agreement provides for indemnification of the
General Partners and their affiliates in certain circumstances. The Partnership
has agreed to reimburse the General Partners for their actual costs incurred in
defending this litigation and the costs of preparing settlement materials.
Through December 31, 1999, the Partnership paid the General Partners a total of
$1,079,676 for these costs.
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Competition
The real estate business is highly competitive and, as
discussed more particularly in "Item 2, Properties", 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.
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"), each of which is an affiliate of the
Partnership. 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.
On October 21, 1999, Presidio entered into a Services
Agreement with AP-PCC III, L.P. (the "Agent") pursuant to which the 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.
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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.
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Item 2. Properties
The Partnership owned the following properties as of March 15,
2000:
(1) TMR Warehouses. On September 15, 1988, Tri-Columbus
Associates ("Tri-Columbus"), a joint venture comprised of the Partnership, High
Equity Partners L.P. - Series 86 ("HEP-86"), and IR Columbus Corp., at the time
a wholly-owned subsidiary of Integrated ("Columbus Corp."), purchased the fee
simple interest in three warehouses (the "TMR Warehouses") located in Columbus,
Ohio. The Partnership originally purchased a 58.68% interest in Tri-Columbus on
September 15, 1988. On June 29, 1990, the Partnership closed in escrow on the
purchase of an additional 20.66% interest in Tri-Columbus. The Partnership
purchased the additional joint venture interest from Columbus Corp. at
approximately 86% of Columbus Corp.'s original cost, pursuant to a right of
first refusal contained in the joint venture agreement. Due to Integrated's
bankruptcy, the transaction was submitted to the bankruptcy court for review,
the approval of the bankruptcy court was obtained on September 6, 1990 and the
funds were released from escrow. Purchase of this additional 20.66% interest
increased the Partnership's interest in Tri-Columbus from 58.68% to 79.34%. The
remaining 20.66% is held by HEP-86.
The TMR Warehouses are distribution and light manufacturing
facilities located in Orange, Grove City and Hilliard, all suburbs of Columbus,
Ohio and comprise 1,010,500 square feet of space in the aggregate, with
individual square footage of 583,000 square feet, 190,000 square feet and
237,500 square feet, respectively. As of January 1, 2000 and 1999, the Orange
and Grove City buildings were each 100% leased to a single tenant. In 1999
Simmons Company renewed for five years its lease at the Grove City facility with
an expansion option during the initial two years of the renewal term.
As of January 1, 2000 and January 1, 1999, the Hilliard
property was vacant. On February 9, 2000, the Partnership signed a lease on
175,000 square feet for a three-year term. As a result, the Hilliard property is
currently approximately 74% occupied.
The TMR Warehouses compete with numerous other warehouses in
the market area.
(2) Melrose Crossing Shopping Center - Phase II. On February
3, 1989, the Partnership purchased the fee simple interest in Phase II of the
Melrose Crossing Shopping Center ("Melrose-Phase II"). Melrose-Phase II, located
in Melrose Park, Illinois, previously consisted of a 24,232 square foot retail
store that had been leased to Highland Appliance, located on a parcel totaling
7.02 acres. Highland Appliance vacated in January 1992. The property was 100%
vacant at January 1, 1999 and January 1, 2000.
Melrose-Phase II lies to the north of Melrose Crossing on
which an 88,000 square foot Venture department store is located as well as
138,355 square feet of retail space which is owned by HEP-86. Melrose-Phase II
is situated in Melrose Park, Illinois, an older working-class neighborhood near
O'Hare Airport at the intersection of Mannheim Road and North Avenue, less than
10 miles from Chicago's Loop.
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(3) Sunrise Marketplace. On February 15, 1989, the Partnership
purchased the fee simple interest in Sunrise Marketplace ("Sunrise"), a 176,765
square foot neighborhood shopping center in Las Vegas, Nevada. The center is
situated on 15.15 acres of land at the northeast corner of Nellis Boulevard and
Stewart Avenue. Sunrise was 94% leased as of January 1, 2000 compared to 92% at
January 1, 1999. There are no leases which represent at least 10% of the square
footage of the center scheduled to expire during 2000. House of Fabrics signed a
two-year renewal for 12,000 square feet effective June 1, 1999. Capital
expenditures during 1999 included repainting the center and parking lot repairs.
The renovation of Sunrise in late 1994 positioned the center
to compete with other properties in its primary trade market and new development
has been limited to free standing buildings at strategic locations. Rental rates
have remained stable.
(4) Super Valu Stores. On February 16, 1989, the Partnership
acquired joint venture interests in four supermarkets (the "Properties") owned
by Super Valu Stores ("Super Valu"). A fee simple interest in the Properties was
acquired pursuant to a contract of sale among the seller, the Partnership and
American Real Estate Holdings Limited Partnership ("AREH"). AREH is 99% owned by
American Real Estate Partners L.P., a public partnership originally sponsored by
Integrated. At the closing, AREH and the Partnership assigned their contract
rights with respect to each of the Properties to three joint venture entities
(the "Joint Ventures"), each of which has AREH and the Partnership as a 50%
owner.
The four supermarkets, comprising an aggregate of
approximately 257,700 square feet, are located as follows: 73,000 square feet in
Gwinnett County near Atlanta, Georgia, 60,000 square feet in Indianapolis,
Indiana, 64,700 square feet in Toledo, Ohio and 60,000 square feet in Edina,
Minnesota. The first three locations are leased to Super Valu franchisees and
the fourth to Byerly's Inc., an independent retailer.
The Properties, which were substantially completed in October
1984 (Georgia), December 1988 (Minnesota), February 1983 (Indiana) and May 1988
(Ohio), have been 100% leased since completion. In 1998, the Indiana lease was
renewed for five years through August 31, 2003 and the Minnesota lease was
renewed for five years through June 30, 2003. There are no leases which
represent at least 10% of the square footage of the property scheduled to
expire during 2000.
(5) Livonia Plaza. On June 28, 1989, the Partnership purchased
a fee simple interest in Livonia Plaza, a shopping center that was completed in
December 1989, located in Livonia, Michigan.
Livonia Plaza is a 133,198 square foot neighborhood shopping
center situated on a 13.9 acre site near the intersection of Five Mile Road and
Bainbridge Avenue in Livonia, a western suburb of Detroit. In October 1996, the
Partnership signed an agreement to expand the Kroger store to
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55,700 square feet and purchased 1.77 acre of land adjacent to the center to
facilitate the Kroger expansion. The expansion was completed in 1997 and Kroger
incurred the costs of the building and parking lot construction. The Kroger
lease was extended until 2017. Immediate competition for the center is a 78,000
square foot shopping center located across the street and another nearby 75,000
square foot shopping center.
Livonia Plaza was 89% leased as of January 1, 2000 and 95%
leased on January 1, 1999. There are no leases which represent at least 10% of
the square footage of the center scheduled to expire in 2000. Phase III of the
parking lot repair work was completed in 1998 and there are no major capital
expenditures budgeted for 2000 outside of costs anticipated in leasing the
vacant space.
(6) 568 Broadway. On February 1, 1990, the Partnership was
admitted as a third partner in a joint venture (the "Broadway Joint Venture")
with Integrated Resources High Equity Partners, Series 85, a California limited
partnership ("HEP-85"), and HEP-86 pursuant to an amended and restated joint
venture agreement. The Partnership has a 22.15% interest in the Broadway Joint
Venture. The Broadway Joint Venture holds a fee simple interest in a commercial
office building located at 568-578 Broadway, New York, New York ("568
Broadway").
568 Broadway is located in the SoHo district of Manhattan on
the northeast corner of Broadway and Prince Street. 568 Broadway is a 12-story
plus basement and sub-basement building constructed in 1898. It is situated on a
site of approximately 23,600 square feet, has a rentable square footage of
approximately 299,000 square feet and a floor size of approximately 26,000
square feet. Formerly catering primarily to industrial light manufacturing, the
building has been converted to an office building and is currently leased to art
galleries, photography studios, retail and office tenants. The last
manufacturing tenant vacated in January 1993. The building was 100% leased as of
January 1, 2000 and January 1, 1999. There are no leases which represent at
least 10% of the square footage of the property scheduled to expire during 2000.
568 Broadway competes with other buildings in the SoHo area.
Item 3. Legal Proceeding
The Broadway Joint Venture is currently involved in litigation
with a number of present or former tenants who are in default on their lease
obligations. Several of these tenants have asserted claims or counterclaims
seeking monetary damages. The plaintiffs' allegations include, but are not
limited to, claims for breach of contract, failure to provide certain services,
overcharging of expenses and loss of profits and income. These suits seek total
damages of in excess of $20 million plus additional damages of an indeterminable
amount. The Broadway Joint Venture's action for rent
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against Solo Press was tried in 1992 and resulted in a judgment in favor of the
Broadway Joint Venture for rent owed. The Partnership believes this will result
in dismissal of the action brought by Solo Press against the Broadway Joint
Venture. Since the facts of the other actions which involve material claims or
counterclaims are substantially similar, the Partnership believes that the
Broadway Joint Venture will prevail in those actions as well.
A former retail tenant of 568 Broadway (Galix Shops Inc.) and
a related corporation which is a retail tenant of a building adjacent to 568
Broadway filed a lawsuit in the Supreme Court of The State of New York, County
of New York, against the Broadway Joint Venture which owns 568 Broadway. The
action was filed on April 13, 1994. The plaintiffs alleged that by erecting a
sidewalk shed in 1991, 568 Broadway deprived plaintiffs of light, air and
visibility to their customers. The sidewalk shed was erected, as required by
local law, in connection with the inspection and restoration of the 568 Broadway
building facade, which is also required by local law. Plaintiffs further alleged
that the erection of the sidewalk shed for a continuous period of over two years
is unreasonable and unjustified and that such conduct by defendants has deprived
plaintiffs of the use and enjoyment of their property. The suit seeks a judgment
requiring removal of the sidewalk shed, compensatory damages of $20 million and
punitive damages of $10 million. The Partnership believes that this suit is
meritless and intends to vigorously defend it.
See "Item 1. Business-Settlement of Class Action Lawsuit" for
information relating to the settlement of the class action lawsuit in which the
Partnership was a defendant.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during
the fourth quarter of the fiscal year covered by this report through the
solicitation of proxies or otherwise.
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PART II
Item 5. Market for the Registrant's Securities and
Related Security Holder Matters
Units of the Partnership are not publicly traded. There are
certain restrictions set forth in the Partnership's amended limited partnership
agreement (the "Limited Partnership Agreement") which may limit the ability of a
limited partner to transfer Units. Such restrictions could impair the ability of
a limited partner to liquidate its investment in the event of an emergency or
for any other reason.
In 1987, the Internal Revenue Service adopted certain rules
concerning publicly traded partnerships. The effect of being classified as a
publicly traded partnership would be that income produced by the Partnership
would be classified as portfolio income rather than passive income. In order to
avoid this effect, the Limited Partnership Agreement contains limitations on the
ability of a limited partner to transfer Units in circumstances in which such
transfers could result in the Partnership being classified as a publicly traded
partnership. However, due to the low volume of transfers of Units, it is not
anticipated that this will occur.
As of March 15, 2000, there were 6,509 holders of Units of the
Partnership, owning an aggregate of 371,766 Units (including 10 Units held by
the initial limited partner).
Distributions per Unit of the Partnership for 1998 and 1999
were as follows:
Distributions for the Amount of Distribution
Quarter Ended Per Unit
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March 31, 1998 $2.55
June 30, 1998 $2.55
September 30, 1998 $2.55
December 31, 1998 $2.55
March 31, 1999 $2.55
June 30, 1999 $2.55
September 30, 1999 *
December 31, 1999 *
* Distributions have been suspended while the requirements of the settlement
are completed.
The source of distributions and capital improvements in 1998
and 1999 was cash flow from operations. There are no material restrictions set
forth in the Limited Partnership Agreement upon the Partnership's present or
future ability to make distributions. See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations" for a discussion of
factors which may affect the Partnership's ability to pay distributions.
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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 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"). 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 the units owned by Olympia as a result of the Offer,
or 7,478 units, for $132.26 per unit.
Subsequent to the expiration of the tender offer described
above, Millennium Funding IV Corp. purchased 12,396 limited partnership units
from August 1998 through February 1999. The total of these purchases and the
units purchased from Olympia (as described above) represents approximately 18.1%
of the outstanding limited partnership units of the Partnership.
Pursuant to the settlement agreement, Millennium Funding IV
LLC, a wholly owned subsidiary of Presidio, completed a tender offer in January
2000, purchasing approximately 6.75% or 25,092 units for $113.15 or $2,832,597.
Over the past few years many companies have begun making
"mini-tenders" (offers to purchase an aggregate of less than 5% of the total
outstanding units) for limited partnership interests in the Partnership.
Pursuant to the rules of the Securities and Exchange Commission, when a tender
offer is commenced for Units the Partnership is required to provide limited
partners with a statement setting forth whether it believes limited partners
should tender or whether it is remaining neutral with respect to the offer.
Unfortunately, the rules of the Securities and Exchange Commission do not
require that the bidders in certain tender offers provide the Partnership with a
copy of their offer. As a result, the General Partners often do not become aware
of such offers until shortly before they are scheduled to expire or even after
they have expired. Accordingly, the General Partners do not have sufficient time
to advise you of its position on the tender. In this regard, please be advised
that pursuant to the discretionary right granted to the General Partners of your
partnership in the Limited Partnership Agreement to reject any transfers of
units, the General Partners will not permit the transfer of any Unit in
connection with a tender offer unless: (i) the Partnership is provided with a
copy of the bidder's offering materials, including amendments thereto,
simultaneously with their distribution to the limited partners; (ii) the offer
provides for withdrawal rights at any time prior to the expiration date of the
offer and, if payment is not made by the bidder within 60 days of the date of
the offer, after such 60 day period; and (iii) the offer must be open for at
least 20 business days and, if a material change is made to the offer, for at
least 10 business days following such change.
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Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
For the Years Ended December 31,
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 7,625,731 $ 7,882,248 $ 9,189,172 3 $ 7,759,188 $ 7,422,184
Net Income (Loss) 1,895,156 2,995,631 3,708,687 3 2,152,172 (7,260,499) 1
Net Income (Loss)
Per Unit 4.84 7.65 9.48 5.50 (18.55)
Distributions
Per Unit(2) 5.10 10.20 9.69 7.00 7.00
Total Assets 54,187,702 55,087,481 56,296,853 56,381,690 56,305,498
</TABLE>
(1) Net loss for the year ended December 31, 1995 includes a write-down for
impairment on 568 Broadway, Sunrise and Melrose-Phase II in the aggregate
amount of $10,042,900 or $25.66 per Unit.
(2) All distributions are in excess of accumulated undistributed net income and
therefore represent a return of capital to investors on a generally
accepted accounting principles basis.
(3) Revenues and Net Income for the year ended December 31, 1997 include
approximately $1,500,000, or $3.83 per Unit, received pursuant to the
bankruptcy settlement of a tenant.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The matters discussed in this Form 10-K contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-K and the other filings with the
Securities and Exchange Commission made by the Partnership from time to time.
The discussion of the Partnership's liquidity, capital resources and results of
operations, including forward-looking statements pertaining to such matters,
does not take into account the effects of any changes to the Partnership's
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
Liquidity and Capital Resources
The Partnership owns all of, or an interest in, certain
shopping centers, office buildings, warehouses and supermarkets. All properties
were initially acquired for cash. The Partnership's public offering of Units
commenced on September 15, 1987. As of the termination of the offering in
September 1989, the Partnership had accepted subscriptions for 371,766 Units
(including Units held by the initial limited partner) for aggregate net proceeds
of $90,153,255 (gross proceeds of $92,941,500 less organization and offering
costs of $2,788,245). In August 1990, the Managing General Partner declared a
special distribution of $16.96 per Unit, representing a return of uninvested
gross proceeds. This return of capital lowered the net proceeds from the
offering to $83,848,104. The Partnership generates rental revenue from the
commercial properties and is responsible for each property's operating expenses
as well as its administrative cost.
The Partnership uses working capital reserves remaining from
the net proceeds of its public offering and any undistributed cash from
operations as its primary source of liquidity. For the year ended December 31,
1999, all capital expenditures and all distributions were funded from cash flow
from operations. As of December 31, 1999, total remaining working capital
reserves amounted to approximately $5,101,837. The Partnership intends to
distribute less than all of its future cash flow from operations in order to
maintain adequate working capital reserves for capital improvements and
capitalized lease procurement costs. If real estate market conditions
deteriorate in areas where the Partnership's properties are located, there is
substantial risk that future cash flow distributions may be reduced. Working
capital reserves are temporarily invested in short-term instruments and are
expected, together with operating cash flow, to be sufficient to fund
anticipated capital improvements to the Partnership's properties.
The Partnership had $6,433,530 of cash and cash equivalents at
December 31, 1999, as compared to $6,520,698 at December 31, 1998. During the
year ended December 31, 1999 cash and cash equivalents decreased $87,168 as a
result of capital expenditures and distributions to partners in excess of cash
flows from operations. The Partnership's primary source of funds is cash flow
from the operation of its properties, principally rents received from tenants,
which amounted to $2,959,813
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for the year ended December 31, 1999. The Partnership used $53,284 for capital
expenditures related to capital and tenant improvements to the properties and
$2,993,697 for distributions to partners for the year ended December 31, 1999.
The following table sets forth for each of the last three
fiscal years, the Partnership's expenditures at each of its properties for
capital improvements and capitalized tenant procurement costs:
Capital Improvements and Capitalized Tenant Procurement Costs
1999 1998 1997
---- ---- ----
568 Broadway $ 87,985 $166,742 $ 48,217
Sunrise 74,738 140,388 7,068
Livonia Plaza 12,868 149,894 111,358
Melrose-Phase II -- 90,633 93,728
TMR Warehouse 112,560 23,207 13,902
Super Valu -- -- --
-------- -------- --------
TOTALS $288,151 $570,864 $274,273
======== ======== ========
The Partnership has budgeted expenditures for capital
improvements and capitalized tenant procurement costs of $247,000 in 2000 in the
normal course of business which are expected to be funded from cash flow from
operations. However, such expenditures will depend upon the level of leasing
activity and other factors which cannot be predicted with certainty.
The Partnership expects to continue to utilize a portion of
its cash flow from operations and its reserves to pay for various future capital
and tenant improvements to the properties and leasing commissions (the amount of
which cannot be predicted with certainty). Capital and tenant improvements and
leasing commissions may in the future exceed the Partnership's cash flow from
operations which would otherwise be available for distributions. Current working
capital is thought to be sufficient for any near term needs of the Partnership.
In that event, the Partnership would utilize the remaining working capital
reserves, eliminate or reduce distributions, or sell one or more properties.
Except as discussed above, management is not aware of any other trends, events,
commitments or uncertainties that will have a significant impact on liquidity.
Real Estate Market
The real estate market has begun to recover (for selected
markets and property types) from the effects of the substantial decline in the
market value of existing properties. However, market values have been slow to
recover, and high vacancy rates continue to exist in some areas. Technological
changes are also occurring which may reduce the office space needs of many
users. As a result, the Partnership's potential for realizing the full value of
its investment in its properties is at continued risk.
15
<PAGE>
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 flows 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.
Because the cash flows used to evaluate the recoverability of
the assets and their fair values are based upon projections of future economic
events such as property occupancy rates, rental rates, operating cost inflation
and market capitalization rates which are inherently subjective, the amounts
ultimately realized at disposition may differ materially from the net carrying
values at the balance sheet dates. The cash flows and market comparables used in
this process are based on good faith estimates and assumptions developed by
management. Unanticipated events and circumstances may occur and some
assumptions may not materialize; therefore, actual results may vary from the
estimates and the variances may be material. The Partnership may provide
additional adjustments to reduce the carrying value of the real estate assets,
which could be material in subsequent years if real estate markets or local
economic conditions change.
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 the properties operations resulted in no adjustments for impairment being
needed in 1997, 1998 or 1999.
16
<PAGE>
The following table represents the write-downs for impairments
recorded against the Partnership's assets held at 12/31/99:
Property
- --------
568 Broadway $ 6,157,700
Sunrise 8,500,000
Livonia Plaza 2,100,000
Melrose-Phase II 2,881,000
-----------
$19,638,700
===========
Results of Operations
1999 vs. 1998
The Partnership experienced a decrease in net income of 36.7% for the
year ended December 31, 1999 compared to 1998. Net income decreased to
$1,895,156 for the year ended December 31, 1999 from net income of $2,995,631
for the year ended December 31, 1998 primarily due to a decrease in rental
revenues and increases in operating and administrative expenses during 1999.
Rental revenue decreased by 3.3% during the year ended December 31,
1999 to $7,625,731 from $7,882,248 as compared to the prior year, primarily due
to the departure of a significant tenant at Tri-Columbus in July 1998.
Costs and expenses increased by 16.9% for the year ended December 31,
1999 to $6,094,120 compared to $5,215,289 in 1998 due to the higher operating
expenses and administrative expenses, which more than offset reductions in
depreciation and amortization, partnership asset management fees and property
management fees. Operating expenses increased $885,719 or 62.3% during the year
ended December 31, 1999 compared to 1998 due primarily to 1998 reflecting the
receipt of insurance proceeds that lowered repairs and maintenance costs at
Sunrise by $344,000. Operating expenses for 1999 also reflected increases in
security expenses of $53,285 and a provision for doubtful accounts at Livonia
and Sunrise totaling $166,000. Administrative expenses for the year ended
December 31, 1999 increased by 28.2% or $269,840 compared to 1998 due to higher
professional fees related to the settlement of the litigation and reorganization
of the Partnership. Depreciation and amortization decreased $76,701 or 4.5% due
to higher depreciation recorded in 1998 on certain capitalized tenant
improvements. Partnership asset management fees decreased 18.3% in 1999 to
$719,411 due to an amendment to the partnership agreement provided for in the
terms of the settlement.
Interest income decreased by 8.7% to $270,439 in 1999 due to lower cash
balances during the current year compared to 1998. Other income increased
$60,516 during the year ended December 31, 1999 to $93,106 compared to $32,590
in 1998 due to an increase in fees from investor servicing primarily related to
an increase in investor transfers, while interest income decreased $25,643 for
the comparable periods.
17
<PAGE>
1998 vs. 1997
The Partnership experienced an decrease in net income of 19.2% for the
year ended December 31, 1998 to $2,995,631 compared to 1997 net income of
$3,708,687 primarily due to a decrease in rental revenues during 1998, partially
offset by a decrease in costs and expenses.
Rental revenue decreased by 14.2% during the year ended December 31,
1998 to $7,882,248 from $9,189,172 for the same period in 1997 primarily due the
departure of a significant tenant at Tri-Columbus in July 1998 and to the
approximately $1.5 million received in April, 1997 pursuant to the bankruptcy
settlement of Handy Andy, the former sole tenant at Melrose II.
Costs and expenses decreased by 10.3% for the year ended December 31,
1998 to $5,215,289 compared to $5,815,723 in 1997 due to lower operating
expenses, administrative expenses and property management fees, partially offset
by higher depreciation and amortization. Operating expenses decreased $480,518
or 25.3% during the year ended December 31, 1998 due primarily to lower repair
and maintenance costs at Sunrise due to the receipt of $344,000 of insurance
proceeds in 1998 (offsetting previously incurred costs) and a decrease in
insurance expenses at all of the properties due to the payment of lower premiums
while coverage remained the same. Administrative expenses for the year ended
December 31, 1998 decreased by 17.3% or $199,947 compared to 1997 due to lower
legal and accounting fees related to the ongoing litigation and possible
reorganization of the Partnership. Property management fees decreased by $35,129
during the year ended December 31, 1998 due to the decrease in revenues, as
previously discussed. Depreciation and amortization expense increased $115,160
in the current year due to higher depreciation recorded in 1998 on certain
capitalized tenant improvements
Interest income and other income (transfer fees received from limited
partner ownership transfers) remained relatively consistent during the year
ended December 31, 1998 as compared to 1997.
Legal Proceedings
The Partnership is a party to certain litigation. See "Item 3.
Litigation" and "Item 8. Financial Statements-Note 7" for a description thereof.
18
<PAGE>
Item 8. Financial Statements and Supplementary Data
HIGH EQUITY PARTNERS L.P. - SERIES 88
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
I N D E X
Independent Auditors' Report.................................................20
Financial statements, years ended December 31, 1999, 1998 and 1997
Balance Sheets......................................................21
Statements of Operations............................................22
Statements of Partners' Equity......................................23
Statements of Cash Flows............................................24
Notes to Financial Statements.......................................25
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of High Equity Partners L.P. - Series 88
We have audited the accompanying balance sheets of High Equity Partners L.P. -
Series 88 (a Delaware limited partnership) as of December 31, 1999 and 1998, and
the related statements of operations, partners' equity and cash flows for each
of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed in the Index at Item 14(a)2.
These financial statements and the financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and the financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of High Equity Partners L.P. - Series 88 at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with generally accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
DELOITTE & TOUCHE LLP
March 17, 2000
Boston, MA
20
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------------
1999 1998
---- ----
<S> <C> <C>
ASSETS
Real estate, net $45,961,310 $47,321,395
Cash and cash equivalents 6,433,530 6,520,698
Other assets 1,454,764 1,103,332
Receivables, net of allowances of $242,500 and $76,500, respectively 338,098 142,056
----------- -----------
TOTAL ASSETS $54,187,702 $55,087,481
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ -- $ 997,899
Accounts payable and accrued expenses 883,464 789,910
Due to affiliates 448,230 343,022
----------- -----------
Total liabilities 1,331,694 2,130,831
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' EQUITY:
Limited partners' equity (371,766 units issued and outstanding) 50,213,189 50,308,799
General partners' equity 2,642,819 2,647,851
----------- -----------
Total partners' equity 52,856,008 52,956,650
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $54,187,702 $55,087,481
=========== ===========
</TABLE>
See notes to financial statements
21
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended December 31,
--------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Rental Revenue $7,625,731 $7,882,248 $9,189,172
---------- ---------- ----------
Costs and Expenses:
Operating expenses 2,306,635 1,420,916 1,901,434
Depreciation and amortization 1,609,183 1,685,884 1,570,724
Partnership asset management fee 719,411 880,404 880,404
Administrative expenses 1,227,851 958,011 1,157,958
Property management fee 231,040 270,074 305,203
---------- ---------- ----------
6,094,120 5,215,289 5,815,723
---------- ---------- ----------
Income before interest and other income 1,531,611 2,666,959 3,373,449
Interest income 270,439 296,082 298,543
Other income 93,106 32,590 36,695
---------- ---------- ----------
Net income $1,895,156 $2,995,631 $3,708,687
========== ========== ==========
Net income attributable to:
Limited partners 1,800,398 $2,845,849 $3,523,253
General partners 94,758 149,782 185,434
---------- ---------- ----------
Net income $1,895,156 $2,995,631 $3,708,687
========== ========== ==========
Net income per unit of limited
Partnership interest (371,766 units outstanding) $ 4.84 $ 7.65 $ 9.48
========== ========== ==========
</TABLE>
See notes to financial statements
22
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
General Limited
Partners' Partners'
Equity Equity Total
------ ------ -----
<S> <C> <C> <C>
Balance, December 31, 1996 $ 2,701,822 $51,334,121 $54,035,943
Net income 185,434 3,523,253 3,708,687
Distributions as a return of capital
($9.69 per limited partnership unit) (189,603) (3,602,412) (3,792,015)
----------- ----------- -----------
Balance, December 31, 1997 2,697,653 51,254,962 53,952,615
Net income 149,782 2,845,849 2,995,631
Distributions as a return of capital
($10.20 per limited partnership unit) (199,584) (3,792,012) (3,991,596)
----------- ----------- -----------
Balance, December 31, 1998 $ 2,647,851 $50,308,799 $52,956,650
Net Income 94,758 1,800,398 1,895,156
Distributions as a return of capital
($5.10 per limited partnership unit) (99,790) (1,896,008) (1,995,798)
----------- ----------- -----------
Balance, December 31, 1999 $ 2,642,819 $50,213,189 $52,856,008
=========== =========== ===========
</TABLE>
See notes to financial statements
23
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
-------------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,895,156 $ 2,995,631 $ 3,708,687
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,609,183 1,685,884 1,570,724
Straight line adjustment for stepped
lease rentals (254,000) 41,131 104,413
Changes in assets and liabilities:
Accounts payable and accrued expenses 93,553 28,351 253,303
Receivables (196,042) 51,985 (104,967)
Due to affiliates 105,208 (241,758) (567,878)
Other assets (293,245) (125,055) (184,006)
----------- ----------- -----------
Net cash provided by operating activities 2,959,813 4,436,169 4,780,276
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to real estate (53,284) (464,127) (114,807)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners (2,993,697) (3,991,596) (3,478,948)
----------- ----------- -----------
(Decrease) Increase in Cash and Cash Equivalents (87,168) (19,554) 1,186,521
Cash and Cash Equivalents, Beginning of Year 6,520,698 6,540,252 5,353,731
----------- ----------- -----------
Cash and Cash Equivalents, End of Year $ 6,433,530 $ 6,520,698 $ 6,540,252
=========== =========== ===========
</TABLE>
See notes to financial statements
24
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
High Equity Partners L.P. - Series 88 (the "Partnership"), a limited
partnership, was formed on February 24, 1987 under the Uniform Limited
Partnership Laws of the State of Delaware, for the purpose of investing
in, holding and operating income-producing real estate. The Partnership
will terminate on December 31, 2017 or sooner, in accordance with the
terms of the partnership agreement. The Partnership invested in four
shopping centers and two office/industrial properties, none of which
were encumbered by debt. See "Note 9."
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial statements
The financial statements are prepared on the accrual basis of
accounting. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Reclassifications
Certain reclassifications have been made to the financial statements
for the prior years in order to conform to the current year's
presentation.
Cash and cash equivalents
For purposes of the balance sheets and statements of cash flows, the
Partnership considers all short-term investments, which have maturities
of three months or less from the date of issuance, to be cash
equivalents.
25
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition
Base rents are recognized on a straight line basis over the terms of
the related leases. Percentage rents charged to retail tenants based on
sales volume are recognized when earned. Recoveries from tenants for
taxes, insurance and other operating expenses are recognized as revenue
in the period the applicable costs are incurred.
Investments in Joint Ventures
Certain properties were purchased in joint venture ownership with
affiliated partnerships that have the same, or affiliated, general
partners as the Partnership. The Partnership owns an undivided interest
and is severally liable for indebtedness it incurs in connection with
its ownership interest in those properties. Therefore, the
Partnership's financial statements present the assets, liabilities,
revenues and expenses of the joint ventures on a pro rata basis in
accordance with the Partnership's percentage of ownership.
Real Estate
Real estate is carried at cost, net of adjustments for impairment.
Repairs and maintenance are charged to expense as incurred.
Replacements and betterments are capitalized. 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 undiscounted future cash flows 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.
26
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Real Estate
Impairment write-downs recorded by the Partnership do not affect the
tax basis of the assets and are not included in the determination of
taxable income or loss.
Because the cash flows used to evaluate the recoverability of the
assets and their fair values are based upon projections of future
economic events such as property occupancy rates, rental rates,
operating cost inflation and market capitalization rates which are
inherently subjective, the amounts ultimately realized at disposition
may differ materially from the net carrying values at the balance sheet
dates. The cash flows and market comparables used in this process are
based on good faith estimates and assumptions developed by management.
Unanticipated events and circumstances may occur and some assumptions
may not materialize; therefore, actual results may vary from the
estimates and the variances may be material. The Partnership may
provide additional write-downs, which could be material in subsequent
years if real estate markets or local economic conditions change.
Depreciation
Depreciation is computed using the straight-line method over the useful
life of the property, which is estimated to be 40 years. The cost of
properties represents the initial cost of the properties to the
Partnership plus acquisition and closing costs less impairment
adjustments. Tenant improvements are amortized over the applicable
lease term.
Income taxes
No provision has been made for federal, state and local income taxes
since they are the personal responsibility of the partners.
Net income and distributions per unit of limited partnership interest
Net income and distributions per unit of limited partnership interest
is calculated based upon the number of units outstanding (371,766), for
each of the years ended December 31, 1999, 1998 and 1997.
27
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recently Issued Accounting Pronouncements
In June of 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities" as
amended by SFAS No. 137 "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement
No. 133." This statement establishes accounting and reporting standards
for derivative instruments and for hedging activities, and will be
effective for the Partnership in January of 2000. Because the
Partnership does not currently utilize derivatives of engage in hedging
activities, management does not believe that implementation of this
standard will have a material effect on the Partnership's financial
statements.
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
Resources High Equity, Inc., the Managing General Partner, is a
wholly-owned subsidiary of Presidio Capital Corp. ("Presidio").
Presidio AGP Corp., which is also a wholly-owned subsidiary of
Presidio, is the Associate General Partner (together with the Managing
General Partner, the "General Partners"). Affiliates of the General
Partners are also engaged in businesses related to the acquisition and
operation of real estate. Presidio is also the parent of other
corporations that are or may in the future be engaged in business that
may be in competition with the Partnership. Accordingly, conflicts
of interest may arise between the Partnership and such other
businesses. Subject to the rights of the Limited Partners under the
Limited Partnership Agreement, Presidio controls the Partnership
through its indirect ownership of all the shares of the General
Partners. 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 years
ended December 31, 1999 and December 31, 1998, reimbursable expenses
incurred by NorthStar Presidio amounted to approximately $56,018 and
$102,019, respectively. Effective October 21, 1999, Presidio entered
into a Services Agreement with AP-PCC III, L.P. (the "Agent") pursuant
to which the Agent was retained to provide asset management and
investor relation services to Partnership and other entities affiliated
with Partnership.
28
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
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. 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.
The Partnership has a property management services agreement with
Resources Supervisory Management Corp. ("Resources Supervisory"), an
affiliate of the Managing General Partner, to perform certain functions
relating to the management of the properties of the Partnership. A
portion of the property management fees are paid to unaffiliated
management companies which perform certain management functions for
certain properties. For the years ended December 31, 1999, 1998 and
1997, Resources Supervisory was entitled to receive $231,040, $270,074
and $305,203, in total, of which $115,352, $129,580 and $108,247, was
paid to unaffiliated management companies, respectively.
For the administration of the Partnership, the Managing General Partner
is entitled to receive a Partnership Administration Fee of a maximum of
$200,000 per year.
During 1998, for managing the affairs of the Partnership, the Managing
General Partner was entitled to receive an annual partnership
management fee equal to 1.05% of the amount of original gross proceeds
paid or allocable to the acquisition of property by the Partnership, as
adjusted for the properties sold. Pursuant to the amendment to the
Partnership Agreement, which became effective on August 20, 1999, the
annual partnership management fee for 1999 has been reduced to
$719,411. Further, the Partnership Agreement has been amended (for the
year 2000 and beyond) so that the partnership management fee will be
calculated equal to 1.25% of the Gross Asset Value of the Partnership,
defined as the appraised value of all the assets of the Partnership
based on the most recent appraisal. For each of the years ended
December 31, 1999, 1998 and 1997 the Managing General Partner earned
$719,411, $880,404 and $880,404, respectively.
29
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
3. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
The General Partners are allocated 5% of the net income of the
Partnership, which amounted to $94,758, $149,782 and $185,434 in 1999,
1998 and 1997, respectively. The General Partners are also entitled to
receive 5% of distributions, which amounted to $99,790, $199,584 and
$189,603 in the years ended December 31, 1999, 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
investments. 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
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"). 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 the 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 12,396 limited partnership units
from August 1998 through February 1999. The total of these purchases
and the units purchased from Olympia (as described above) represents
approximately 18.1% of the outstanding limited partnership units of the
Partnership.
Pursuant to the settlement agreement (see Note 9), Millenium Funding
IV LLC, a wholly owned subsidiary of Presidio, completed a tender
offer in January 2000, purchasing approximately 6.7% or 25,034 units
for $113.15 or $2,832,597.
30
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
4. REAL ESTATE
The Partnership recorded substantial write-downs for impairment prior
to 1996. No write-downs were required for 1999, 1998 or 1997. The table
below summarizes write-downs recorded on the properties:
Property
--------
568 Broadway $ 6,157,700
Sunrise 8,500,000
Livonia Plaza 2,100,000
Melrose-Phase II 2,881,000
-----------
$19,638,700
===========
The following table is a summary of the Partnership's real estate as
of:
December 31,
-------------------------------
1999 1998
---- ----
Land $ 8,040,238 $ 8,040,238
Buildings and Improvements 53,884,258 53,830,975
------------ -------------
61,924,496 61,871,213
Less: Accumulated depreciation (15,963,186) (14,549,818)
------------ ------------
$ 45,961,310 $ 47,321,395
============ ============
During 1999, revenues at the Tri-Columbus, Sunrise, Livonia, and 568
Broadway properties represented 22%, 25%, 19% and 23% of gross
revenues, respectively. No single tenant accounted for more than 10% of
the Partnership's rental revenues.
The following is summary of the Partnership's share of anticipated
future receipts under noncancellable leases:
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total
---- ---- ---- ---- ---- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Total: $6,265,000 $6,042,000 $5,573,000 $3,988,000 $2,799,000 $6,431,000 $31,098,000
========== ========== ========== ========== ========== ========== ===========
</TABLE>
31
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
5. DISTRIBUTIONS PAYABLE
December 31,
--------------------------
1999 1998
---- ----
Limited partners $ -- $948,003
General partners -- 49,896
-------- ---------
$ -- $997,899
======== =========
Such distributions were paid in subsequent quarters.
6. DUE TO AFFILIATES
<TABLE>
<CAPTION>
December 31,
--------------------------
1999 1998
---- ----
<S> <C> <C>
Partnership asset management fee $279,209 $220,101
Property management fee 69,024 72,921
Partnership administration fee 100,000 50,000
-------- --------
$448,233 $343,022
======== ========
</TABLE>
Such amounts were paid in the subsequent quarter
7. COMMITMENTS AND CONTINGENCIES
a) 568 Broadway Joint Venture is currently involved in litigation with a
number of present or former tenants who are in default on their lease
obligations. Several of these tenants have asserted claims or counter
claims seeking monetary damages. The plaintiffs' allegations include
but are not limited to claims for breach of contract, failure to
provide certain services, overcharging of expenses and loss of profits
and income. These suits seek total damages of in excess of $20 million
plus additional damages of an indeterminate amount. The Broadway Joint
Venture's action for rent against Solo Press was tried in 1992 and
resulted in a judgement in favor of the Broadway Joint Venture for rent
owed. The Partnership believes this will result in dismissal of the
action brought by Solo Press against the Broadway Joint Venture. Since
the facts of the other actions which involve material claims or
counterclaims are substantially similar, the Partnership believes that
the Broadway Joint Venture will prevail in those actions as well.
32
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
b) A former retail tenant of 568 Broadway (Galix Shops, Inc.) and a
related corporation which is a retail tenant of a building adjacent to
568 Broadway filed a lawsuit in the Supreme Court of The State of New
York, County of New York, against the Broadway Joint Venture which owns
568 Broadway. The action was filed on April 13, 1994. The Plaintiffs
allege that by erecting a sidewalk shed in 1991, 568 Broadway deprived
plaintiffs of light, air and visibility to their customers. The
sidewalk shed was erected, as required by local law, in connection with
the inspection and restoration of the 568 Broadway building facade,
which is also required by local law. Plaintiffs further allege that the
erection of the sidewalk shed for a continuous period of over two years
is unreasonable and unjustified and that such conduct by defendants has
deprived plaintiffs of the use and enjoyment of their property. The
suit seeks a judgement requiring removal of the sidewalk shed, damages
of $20 million and punitive damages of $10 million. The Partnership
believes that this suit is merit less and intends to vigorously defend
it.
8. RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS TO
TAX REPORTING
The Partnership files its tax returns on an accrual basis and has
computed depreciation for tax purposes using the accelerated cost
recovery and modified accelerated cost recovery systems, which are not
in accordance with generally accepted accounting principles. The
following is a reconciliation of the net income per the financial
statements to net taxable income.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income per financial statements $ 1,895,156 $ 2,995,631 $ 3,708,687
Tax depreciation and straight-line rent in
excess of financial Statement depreciation (896,984) (560,212) (606,297)
----------- ----------- -----------
Net taxable income $ 998,172 $ 2,435,419 $ 3,102,390
=========== =========== ===========
</TABLE>
33
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
8. RECONCILIATION OF NET INCOME AND NET ASSETS PER FINANCIAL STATEMENTS TO
TAX REPORTING (CONTINUED)
The differences between the Partnership's assets and liabilities for
tax purposes and financial reporting purposes are as follows:
<TABLE>
<CAPTION>
December 31, 1999
-----------------
<S> <C>
Net assets per financial statements $52,856,008
Write-down for impairment 19,638,700
Tax depreciation and straight-line in excess of financial statement depreciation (5,399,444)
Fair market value step-up in connection with purchase of joint venture interest not
recognized for tax purposes 304,942
Organization costs not charged to partners' equity for tax purposes 2,788,171
Building and accumulated depreciation, tax basis, not charged to loss on abandonment for tax
purposes $ 2,294,009
-----------
Net assets per tax reporting 72,482,386
===========
</TABLE>
9. SETTLEMENT OF LAWSUIT
In April 1999, the California Superior Court approved the terms of the
settlement of a class action and derivative litigation involving the
Partnership. Under the terms of the settlement, the General Partners
agreed to take the actions described below subject to first obtaining
the consent of limited partners to amendments to the Agreement of
Limited Partnership of the Partnership summarized below. The settlement
became effective in August 1999 following approval of the amendments.
As amended, the Partnership Agreement (a) provides for a Partnership
Asset Management Fee equal to 1.25% of the gross asset value of the
Partnership and a fixed 1999 Partnership Asset Management Fee of
$719,411 or $160,993 less than the amount that would have been paid for
1999 under the prior formula and (b) fixes the amount that the General
Partners will be liable to pay to limited partners upon liquidation of
the Partnership as repayment of fees previously received (the "Fee
Give-Back Amount"). As of December 31, 1999, the Fee Give-Back Amount
was $3.57 per Unit which amount will be reduced by approximately $.40
per Unit for each full calendar year after 1999 in
34
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
9. SETTLEMENT OF LAWSUIT (CONTINUED)
which a liquidation does not occur. As amended, the Partnership
Agreement provides that, upon a reorganization of the Partnership into
a real estate investment trust or other public entity, the General
Partners will have no further liability to pay the Fee Give-Back
Amount. In accordance with the terms of the settlement, Presidio
Capital Corp., an affiliate of the General Partners, guaranteed payment
of the Fee Give-Back Amount.
As required by the settlement, an affiliate of the General Partners,
Millennium Funding IV LLC, made a tender offer to limited partners to
acquire up to 25,034 Units (representing approximately 6.7% of the
outstanding Units) at a price of $113.15 Unit. The offer closed in
January 2000 and all 25,034 Units were acquired in the offer.
The final requirement of the settlement obligated the General Partners
to use their best efforts to reorganize the Partnership into a real
estate investment trust or other entity whose shares were listed on a
national securities exchange or on the NASDAQ National Market System. A
Registration Statement was filed with the Securities and Exchange
Commission on February 11, 2000 with respect to the restructuring of
the Partnership into a publicly-traded real estate investment trust.
The Registration Statement has not yet become effective and the consent
of a majority of limited partners will be needed to effect the
restructuring.
The Limited Partnership Agreement provides for indemnification of the
General Partners and their affiliates in certain circumstances. The
Partnership has agreed to reimburse the General Partners for their
actual costs incurred in defending this litigation and the costs of
preparing settlement materials. Through December 31, 1999, the
Partnership paid the General Partners a total of $1,079,676 for these
costs, which have historically been included in administrative expenses
in the statement of operations.
35
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
36
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO FINANCIAL STATEMENTS
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Partnership has no officers or directors. The Managing
General Partner manages and controls substantially all of the Partnership's
affairs and has general responsibility and ultimate authority in all matters
affecting its business. The names and positions held by the officers and
directors of the Managing General Partner are described below.
<TABLE>
<CAPTION>
Position Held with the Has Served as a Director
Name Managing General Partner or Officer Since
- ---- ------------------------ ----------------
<S> <C> <C>
Michael L. Ashner President and Director 10-99
David G. King, Jr. Vice President 11-97
Peter Braverman Executive Vice President 10-99
Lara K. Sweeney Vice President and Secretary 10-99
Carolyn Tiffany Vice President and Treasurer 10-99
</TABLE>
Michael L. Ashner, age 47, has been the Chief Executive
Officer of Winthrop Financial Associates, A Limited Partnership ("WFA") since
January 15, 1996. From June 1994 until January 1996, Mr. Ashner was a Director,
President and Co-chairman of National Property Investors, Inc., a real estate
investment company ("NPI"). Mr. Ashner was also a Director and executive officer
of NPI Property Management Corporation ("NPI Management") from April 1984 until
January 1996. In addition, since 1981 Mr. Ashner has been President of Exeter
Capital Corporation, a firm which has organized and administered real estate
limited partnerships.
David G. King, Jr., 37, has been a Vice President and
Assistant Treasurer of NorthStar Capital Investment Corp. since November 1997.
He is also a Vice President of the General Partner. For more than the previous
five years he was a Senior Vice President of Finance at Olympia & York Companies
(USA).
Peter Braverman, age 48, has been a Vice President of WFA
since January 1996. From June 1995 until January 1996, Mr. Braverman was a Vice
President of NPI and NPI Management. From June 1991 until March 1994, Mr.
Braverman was President of the Braverman Group, a firm specializing in
management consulting for the real estate and construction industries. From 1988
to 1991, Mr. Braverman was a Vice President and Assistant Secretary of Fischbach
Corporation, a publicly traded, international real estate and construction firm.
37
<PAGE>
Lara K. Sweeney, age 27, has been a Senior Vice President of
WFA since January 1996. Prior to joining WFA, Ms. Sweeney was an officer of NPI
and NPI Management in the asset management and investor relations departments.
Carolyn Tiffany, age 33, has been employed with WFA since
January 1993. From 1993 to September 1995, Ms. Tiffany was a Senior Analyst and
Associate in WFA's accounting and asset management departments. From October
1995 to present Ms. Tiffany was a Vice President in the asset management and
investor relations departments of WFA until December 1997, at which time she
became the Chief Operating Officer of WFA.
Each director and officer of the General Partner will hold
office until the next annual meeting of stockholders of the General Partner and
until his successor is elected and qualified.
One or more of the above persons are also directors or
officers of a general partner (or general partner of a general partner) of a
number of limited partnerships which either have a class of securities
registered pursuant to Section 12(g) of the Securities and Exchange Act of 1934,
or are subject to the reporting requirements of Section 15(d) of such Act.
There are no family relationships among the officers and
directors of the General Partner.
Item 11. Executive Compensation
The Partnership is not required to and did not pay
remuneration to the officers and directors of the Managing General Partner or
the partners of the Associate General Partner. Certain officers and directors of
the Managing General Partner receive compensation from the Managing General
Partner and/or its affiliates (but not from the Partnership) for services
performed for various affiliated entities, which may include services performed
for the Partnership; however, the Managing General Partner believes that any
compensation attributable to services performed for the Partnership is
immaterial. See also "Item 13. Certain Relationships and Related Transactions."
38
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners.
Except as set forth below, no person or group is known by the
Partnership to be the beneficial owner of more than 5% of the outstanding Units
at March 1, 2000:
Number of
Name of Beneficial Owner Units owned % of Class
------------------------ ----------- ----------
Millennium Funding IV Corp.(1) 67,066 18.04%
Millennium Funding IV LLC(1) 25,092 6.75%
(1) The principal business address of both Millennium Funding IV Corp. and
Millennium Funding IV LLC, both of which are affiliates of the General
Partners, is 527 Madison Avenue, New York, New York 10022.
(b) Security Ownership of Management.
At March 1, 2000, Presidio, the General Partner and their affiliates,
officers and directors owned as a group own 97,628 Units representing
approximately 26.26% of the total number of Units outstanding.
(c) Changes in Control.
There exists no arrangement known to the Partnership the operation of
which may at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
The General Partners and certain affiliated entities have, during
the year ended December 31, 1999, earned or received compensation or payments
for services or reimbursements from the Partnership or subsidiaries of Presidio
as follows:
<TABLE>
<CAPTION>
Compensation from
Name of Recipient Capacity in Which Served the Partnership
- ----------------- ------------------------ ---------------
<S> <C>
Resources High Equity Inc. Managing General Partner $1,017,207(1)
Presidio AGP Corp. Associate General Partner 1,996(2)
Resources Supervisory Management Corp. Affiliated Property Managers 115,688(3)
</TABLE>
39
<PAGE>
- --------------
(1) Of this amount $97,796 represents the Managing General Partner's share
of distributions of cash from operations, $200,000 represents the
non-accountable expense reimbursement and $719,411 represents the
Partnership Asset Management Fee for managing the affairs of the
Partnership. Furthermore, under the Partnership's Limited Partnership
Agreement 4.9% of the net income and net loss of the Partnership is
allocated to the Managing General Partner. Pursuant thereto, for the
year ended December 31, 1999, $48,911 of the Partnership's taxable
income was allocated to the Managing General Partner.
(2) This amount represents the Associate General Partner's share of the
distributions of cash from operations. For the year ended December 31,
1999, $998 of the Partnership's taxable income was allocated to the
Associate General Partner pursuant to the Partnership's Limited
Partnership Agreement. The Associate General Partner is entitled to
receive 0.1% of the Partnership's net income or net loss.
(3) This amount was earned pursuant to a management agreement with
Resources Supervisory, a wholly-owned subsidiary of Presidio, for
performance of certain functions relating to the management of the
Partnership's properties and the placement of certain tenants at those
properties. The total fee payable to Resources Supervisory was $231,040
of which $115,352 was paid to unaffiliated management companies. All
property management fees payable at December 31, 1999 have subsequently
been paid.
40
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K
(a)(1) Financial Statements: See Index to Financial Statements in Item 8.
(a)(2) Financial Statement Schedule:
III. Real Estate and Accumulated Depreciation
(a)(3) Exhibits:
3, 4. (a) Amended and Restated Partnership Agreement ("Partnership
Agreement") of the Partnership, incorporated by reference to Exhibit A
to the Prospectus of the Partnership dated September 15, 1987 included
in the Partnership's Registration Statement on Form S-11 (Reg. No.
3312574).
(b) First Amendment dated as of March 1, 1988 to the Partnership's
Partnership Agreement, incorporated by reference to Exhibit 3, 4 of the
Partnership's Annual Report on Form 10-K for the year ended December
31, 1987.
(c) Amendment to the Amended and Restated Agreement of Limited
Partnership dated August 20, 1999, incorporated by reference to the
Partnership's Quarterly Report on Form 10-Q for the three months ended
September 30, 1999.
10. (a) Management Agreement between the Partnership and Resources Property
Management Corp., incorporated by reference to Exhibit 10B to the
Partnership's Registration Statement on Form S-11 (Reg. No. 33-12574).
(b) Acquisition and Disposition Services Agreement among the
Partnership, Realty Resources Inc. and Resources High Equity, Inc.,
incorporated by reference to Exhibit 10(b) of the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1987.
(c) Agreement among Resources High Equity, Inc., Integrated Resources,
Inc. and Third Group Partners, incorporated by reference to Exhibit
10(c) of the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1987.
(d) Amended and Restated Joint Venture Agreement dated February 1, 1990
among the Partnership, Integrated, High Equity Partners, Series 85, a
California Limited Partnership, and High Equity Partners L.P., Series
86, with respect to 568 Broadway, incorporated by reference to Exhibit
10(a) to the Partnership's Current Report on Form 8-K dated February 1,
1990.
41
<PAGE>
(e) First Amendment to Amended and Restated Joint Venture Agreement of
568 Broadway Joint Venture, dated as of February 1, 1990, among the
Partnership, HEP 85 and HEP 86 incorporated by reference to Exhibit
10(h) to the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1990.
(f) Form of Termination of Supervisory Management Agreement (separate
agreement entered into with respect to each individual property) and
Form of Supervisory Management, Agreement between the Partnership and
Resources Supervisory (separate agreement entered into with respect to
each individual property), incorporated by reference to Exhibit 10(h)
of the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1991.
(g) Lease Agreement between the Partnership and Handy Andy Home
Improvement Centers, Inc. dated as of December 22, 1992, incorporated
by reference to Exhibit 10(g) of the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1992.
(h) Guarantee by Presidio Capital Corp. dated August 20, 1999,
incorporated by reference to the Partnership's Quarterly Report on Form
10-Q for the three months ended September 30, 1999.
(b) Reports on Form 8-K:
The Partnership filed the following report on Form 8-K during the last
quarter of the fiscal year:
None.
42
<PAGE>
Financial Statement Schedule Filed Pursuant to
Item 14(a)(2)
HIGH EQUITY PARTNERS L.P. - SERIES 88
ADDITIONAL INFORMATION
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Additional financial information furnished
pursuant to the requirements of Form 10-K:
Schedules - December 31, 1999, 1998 and 1997
and years then ended, as required:
Schedule III - Real estate and accumulated depreciation S-1
- Notes to Schedule III - Real estate and S-2
accumulated depreciation
</TABLE>
All other schedules have been omitted because they are
inapplicable, not required, or the information is included in the financial
statements or notes thereto.
43
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused This report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HIGH EQUITY PARTNERS, L.P.-SERIES-88
By: RESOURCES HIGH EQUITY, INC.
Managing General Partner
Dated: March 29, 2000 By: /s/ Michael L. Ashner
---------------------------------
Michael L. Ashner
President and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
This report has been signed below by the following persons on behalf of the
registrant and in their capacities on the dates indicated.
Dated: March 29, 2000 By: /s/ Michael L. Ashner
--------------------------------------------
Michael L. Ashner
President and Director
(Principal Executive Officer)
Dated: March 29, 2000 By: /s/ Carolyn Tiffany
--------------------------------------------
Carolyn Tiffany
Vice President and Treasurer
(Principal Financial and Accounting Officer)
44
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
<TABLE>
<CAPTION>
Reductions
Recorded
Costs Capitalized Subsequent
Initial Cost Subsequent to to
Acquisition Acquisition
-------------------------- ------------------------- ------------
Buildings
And Carrying
Description Encumbrances Land Improvement Improvements Costs Write-downs
----------- ------------ ---- ----------- ------------ ----- -----------
<S> <C> <C> <C> <C> <C> <C>
RETAIL:
Melrose II Shopping Melrose
Center Park IL $ -- $ 1,375,000 $ 4,000,640 $ 97,509 $ -- $(2,881,000)
Sunrise Marketplace Las Vegas NV -- 3,024,968 13,469,031 1,769,942 1,342,536 (8,500,000)
SuperValu Stores Various -- -- 1,787,620 6,881,999 -- 708,358 --
Livonia Plaza Livonia MI -- 1,518,638 9,328,777 1,209,177 880,080 (2,100,000)
-------------------------------------------------------------------------------------
-- 7,706,226 33,680,447 3,076,628 2,930,974 (13,481,000)
OFFICE:
568 Broadway Office
Building New York NY -- 1,429,284 6,091,266 2,938,574 813,953 (6,157,700)
INDUSTRIAL:
TMR Warehouses Various OH -- 1,355,621 19,694,413 128,531 1,717,279 --
-------------------------------------------------------------------------------------
$ -- $10,491,131 $59,466,126 $ 6,123,733 $ 5,462,206 $(19,638,700)
=========================================================================-------=====
<CAPTION>
Gross Amount at which Carried
at Close of Period
-----------------------------------------
Buildings
And Accumulated Date
Description Land Improvements Total Depreciation Acquired
- ----------------------------------------------------------------------------------------- ----------
<S> <C> <C> <C> <C> <C>
RETAIL:
Melrose II Shopping Melrose
Center Park IL $ 638,742 $ 1,953,407 $ 2,592,149 $ 485,751 1989
Sunrise Marketplace Las Vegas NV 1,811,849 9,294,628 11,106,477 3,340,672 1989
SuperValu Stores Various -- 1,935,936 7,442,041 9,377,977 2,020,377 1989
Livonia Plaza Livonia MI 1,536,441 9,300,231 10,836,672 2,546,449 1989
--------------------------------------------------------
5,922,968 27,990,307 33,913,275 8,393,249
OFFICE:
568 Broadway Office
Building New York NY 651,057 4,464,320 5,115,377 1,760,262 1986
INDUSTRIAL:
TMR Warehouses Various OH 1,466,213 21,429,631 22,895,844 5,809,675 1988
--------------------------------------------------------
$ 8,040,238 $53,884,258 $61,924,496 $15,963,186
========================================================
</TABLE>
Note: The aggregate cost for Federal income tax purposes is $81,563,197 at
December 31, 1999.
S-1
<PAGE>
HIGH EQUITY PARTNERS L.P. - SERIES 88
NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1999
(A) RECONCILIATION OF REAL ESTATE OWNED:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $61,871,213 $61,407,086 $61,292,279
ADDITIONS DURING THE YEAR
Improvements to Real Estate 53,284 464,127 114,807
----------- ----------- -----------
BALANCE AT END OF YEAR (1) $61,924,497 $61,871,213 $61,407,086
=========== =========== ===========
</TABLE>
(1) INCLUDES THE INITIAL COST OF THE PROPERTIES PLUS ACQUISITION AND
CLOSING COSTS.
(B) RECONCILIATION OF ACCUMULATED DEPRECIATION:
<TABLE>
<CAPTION>
For the Years Ended December 31,
-----------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR $14,549,818 $13,096,743 $11,697,525
ADDITIONS DURING THE YEAR
Depreciation expense(1) 1,413,368 1,453,075 1,399,218
----------- ----------- -----------
BALANCE AT END OF YEAR $15,963,186 $14,549,818 $13,096,743
=========== =========== ===========
</TABLE>
(1) DEPRECIATION IS PROVIDED ON BUILDINGS USING THE STRAIGHT-LINE
METHOD OVER THE USEFUL LIFE OF THE PROPERTY, WHICH IS ESTIMATED TO
BE 40 YEARS AND ON TENANT IMPROVEMENTS OVER THE ESTIMATED TERM OF
THE RLEATED LEASE.
S-2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from audited financial statements for the
year ended December 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 6,433,530
<SECURITIES> 0
<RECEIVABLES> 580,598
<ALLOWANCES> (242,500)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 61,924,496
<DEPRECIATION> (15,963,186)
<TOTAL-ASSETS> 54,187,702
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 52,856,008
<TOTAL-LIABILITY-AND-EQUITY> 54,187,702
<SALES> 0
<TOTAL-REVENUES> 7,625,731
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,866,269
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,895,156
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,895,156
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,895,156
<EPS-BASIC> 4.84
<EPS-DILUTED> 4.84
</TABLE>
