UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarter ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number 33-24129
Historic Preservation Properties 1989 Limited Partnership
(Exact name of registrant as specified in its charter)
Delaware 04-3021042
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
Batterymarch Park II, Quincy, Massachusetts 02169
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 472-1000
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Voting stock held by non-affiliates of the registrant: Not
Applicable.
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
FORM 10-Q
SEPTEMBER 30, 1996
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Partners' Equity (Deficiency) 5
Statements of Cash Flows 6
Notes to Financial Statements 7-15
Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-19
PART II - OTHER INFORMATION 20
Signatures 21
2
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
1996 1995
INVESTMENT IN REAL ESTATE:
Building and building improvements $ - $ 15,922,298
Land and land improvements - 1,171,079
Furniture and equipment - 526,875
17,620,252
Accumulated depreciation - (2,853,348)
- 14,766,904
INVESTMENTS IN INVESTEE ENTITIES 4,531,698 3,923,802
Less reserve for realization of
investments in Investee Entities (3,469,267) (3,469,267)
1,062,431 454,535
CASH, of which $542,088 was
restricted in 1995 155,235 788,602
DEFERRED EVALUATION AND ACQUISITION COSTS,
net of accumulated amortization
of $186,640 in 1995 - 1,057,739
OTHER ASSETS 78,655 92,939
$ 1,296,321 $17,160,719
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Mortgage payable $ - $17,579,606
Less discount on mortgage payable - (1,059,719)
- 16,519,887
Accounts payable 3,155 5,366
Accrued expenses and other liabilities 22,088 262,618
Total liabilities 25,243 16,787,871
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY
Limited Partners' Equity-Units of
Investor Limited Partnership
Interest, $1,000 stated value per
Unit-Issued and outstanding 26,588
units 1,489,702 600,455
General Partner's equity (deficiency) (218,624) (227,607)
Total partners' equity 1,271,078 372,848
$ 1,296,321 $ 17,160,719
The accompanying notes are an integral part of these financial
statements.
3
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
REVENUES:
Rental and related income $ - $ 511,562 $ 533,027 $ 1,529,081
Interest and other income 4,950 27,398 26,939 99,634
4,950 538,960 559,966 1,628,715
EXPENSES:
Operating and
administrative 32,285 24,124 115,731 81,066
Professional fees 1,630 4,020 24,186 14,856
Depreciation and amortiz - 130,885 124,804 392,656
Property operating expenses:
Payroll services - 49,066 52,597 148,001
Utilities - 85,826 84,691 229,621
Real estate taxes - 87,000 85,698 261,008
Other operating - 124,341 87,266 321,851
33,915 505,262 574,973 1,449,059
(28,965) 33,698 (15,007) 179,656
PROVISION FOR IMPAIRMENT OF REAL
ESTATE AT TRANSFER OF OWNERSHIP
INTEREST IN REAL ESTATE TO
INVESTEE ENTITY - - (7,787,963) -
INCOME (LOSS) FROM OPERATIONS (28,965) 33,698 (7,802,970) 179,656
INTEREST EXPENSE - (544,948) (507,513) (1,620,333)
EQUITY IN INCOME (LOSS)
OF INVESTEE PARTNERSHIP 16,637 (43) 26,696 (14,108)
NET LOSS BEFORE EXTRAORDINARY
GAIN (12,328) (511,293) (8,283,787) (1,454,785)
EXTRAORDINARY GAIN ON
EXTINGUISHMENT OF DEBT - - 9,182,017 -
NET INCOME (LOSS) $(12,328) $(511,293) $898,230 $(1,454,785)
NET INCOME (LOSS) ALLOCATED
TO GENERAL PARTNER $ (123) $(5,113) $8,983 $(14,548)
NET INCOME (LOSS) ALLOCATED
TO LIMITED PARTNERS $(12,205) $(506,180) $889,247 $(1,440,237)
NET INCOME (LOSS) PER UNIT OF
INVESTOR LIMITED PARTNERSHIP
INTEREST, BASED ON 26,588 UNITS
ISSUED AND OUTSTANDING $ (.46) $ (19.04) $ 33.44 $ (54.17)
The accompanying notes are an integral part of these financial statements.
4
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
Units of
Investor Investor
Limited Limited General
Partnership Partners' Partner's
Interest Equity (Deficiency) Total
BALANCE,
December 31, 1994 26,588 $ 2,509,185 $ (208,327) $ 2,300,858
Net loss - (1,908,730) (19,280) (1,928,010)
BALANCE,
December 31, 1995 26,588 600,455 (227,607) 372,848
Net income - 889,247 8,983 898,230
BALANCE,
September 30, 1996 26,588 $ 1,489,702 $ (218,624) $ 1,271,078
The accompanying notes are an integral part of these financial
statements.
5
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 898,230 $(1,454,785)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 124,804 392,656
Amortization of discount on mortgage payable 233,893 700,886
Provision for impairment of real estate at
transfer of ownership interest in real
estate to investee entity 7,787,963 -
Extraordinary gain on extinguishment of debt (9,182,017) -
Deferred interest expense added to
the principal of mortgage payable 78,237 289,616
Equity in (income) loss in investee entity (26,696) 14,108
Decrease in due from investee entity - 300
Increase in other assets (807) (35,824)
Decrease in accounts payable (2,211) (19,355)
Increase in accrued expenses and other
liabilities 68,698 60,843
Net cash used in operating activities (19,906) (51,555)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (2,694) -
Cash payment at transfer of ownership interest
in investment in real estate to investee
entity (679,567) -
Cash distribution from investee partnerships 68,800 -
Net cash used in investing activities (613,461) -
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of mortgage payable - (1,310,625)
NET DECREASE IN CASH (633,367) (1,362,180)
CASH, BEGINNING OF PERIOD 788,602 2,213,934
CASH, END OF PERIOD $155,235 $851,754
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $301,349 $659,463
Noncash financing activity:
Interest expense not paid from net
cash flow and added to the mortgage
payable balance. $ 78,237 $289,616
The accompanying notes are an integral part of these financial statements.
6
(1) Basis of Presentation
The accompanying unaudited financial statements of Historic Preservation
Properties 1989 Limited Partnership (HPP'89) have been prepared in
accordance with generally accepted accounting principles for interim
financial information and generally with instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1996. For further information, refer to the unaudited financial
statements and footnotes thereto included in the Annual Report on Form 10-K
for the year ended December 31, 1995 for HPP'89, as filed with the
Securities and Exchange Commission.
(2) General Partner
The general partner of HPP'89 is Boston Historic Partners Limited
Partnership (BHP), a Massachusetts limited partnership. BHP was formed in
November 1986 for the purpose of organizing, syndicating and managing
three publicly offered real estate limited partnerships (Public
Rehabilitation Partnerships). As of September 30, 1996, BHP has established
three such partnerships, including HPP'89.
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies
During 1989, HPP'89 acquired a general partnership interest in the
Investee Partnerships, as well as a direct interest in a property located
in St. Paul, Minnesota (Note 4). Each Investee Partnership placed a
property in service in December 1989 and commenced initial leasing
activity. HPP'89's current allocable percentage of operating losses in the
Investee Entities (see below) ranges from 50% to 99%.
As discussed below and in Note 4, in March 1996, HPP'89 completed a
transaction by which the mortgage note on property directly owned was
purchased and the property was refinanced. As part of the transaction,
HPP'89 contributed title and deed of the property to a limited liability
company in which HPP'89 maintains a 50% ownership interest.
The Investee Partnerships and the Investee Limited Liability Company
(see below) are herein collectively referred to as "the Investee Entities."
Each of the Investee Entities' agreements is different but, in general,
provides for a sharing of management duties and decisions among HPP'89 and
the respective local general partners and certain priorities to HPP'89 with
respect to return on and return of invested capital. Significant Investee
Entity decisions require the approval of both HPP'89 and the local general
partners or other manager/member. In addition, each Investee Entity has
entered into various agreements with its local general partners, or their
affiliates, to provide development, management and other services, for
which the local general partners, other manager/member (or their
affiliates), are paid fees by the respective Investee Entity.
Following is summary information regarding the Investee Entities and
HPP'89's investments therein:
Jenkins Court Associates Limited Partnership (Jenkins Court) is a
Delaware limited partnership formed on December 20, 1988 to acquire,
construct, rehabilitate, operate and manage a 144,000 net rentable square
foot five-story building and 30,000 net rentable square feet of new retail
space, including storage areas and parking facilities, located at Old York
Road and Rydal Road, Jenkintown Borough, Pennsylvania.
7
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
HPP'89 contributed $6,563,064 through September 30, 1996, to the capital
of Jenkins Court and acquired a general partnership interest therein.
HPP'89's investment in Jenkins Court originally represented approximately
36% of the aggregate amount which HPP'89 had originally contributed to the
capital of its three Investee Partnerships and to purchase its direct
interest in the Cosmopolitan Building.
Due to slow leasing activity, Jenkins Court had difficulty making debt
service payments on its construction loan since the origin of its loan. In
July 1992, Jenkins Court and the lender entered into an agreement by which
the construction loan was bifurcated into two notes and a substantial
amount of accrued interest, late fees and extension fees was forgiven. In
June 1993, the lender extended the maturity date of the notes to June 15,
1994.
Management of Jenkins Court was negotiating with the lender to extend
the Notes to June 15, 1995. On September 30, 1994, the lender sold Notes A
and B to a real estate investment entity, who became the new holder of the
notes. Management of Jenkins Court entered negotiations with the new
holder to extend or restructure the notes. On November 23, 1994, the new
holder presented a demand for payment in full of the balance of the Notes
and accrued interest thereon. On November 23, 1994, Jenkins Court filed a
petition for relief under Chapter 11 of the federal bankruptcy laws in
United States Bankruptcy Court for the jurisdiction of the Eastern District
of Pennsylvania. Under Chapter 11, certain claims against the Partnership
in existence prior to the filing of the petition for relief under federal
bankruptcy laws are stayed while Jenkins Court continues business
operations as Debtor-in-Possession. The acceptance of a plan of
reorganization through the bankruptcy proceeding was highly unlikely and
Jenkins Court had achieved a short term goal of maximizing the vesting of
the majority of its remaining tax credits on June 30, 1995.
On August 31, 1995, Jenkins Court and the mortgage holder entered into a
settlement agreement to resolve the bankruptcy litigation. As part of the
settlement agreement, Jenkins Court transferred the deed and title to the
property to the mortgage holder in lieu of foreclosure proceedings. The
mortgage holder agreed to release Jenkins Court and its guarantors for the
entire indebtedness and Jenkins Court received $25,000 to pay certain
professional fees incurred during the bankruptcy proceedings. The transfer
of deed and title of the property to the mortgage holder resulted in a
recapture of Rehabilitation Tax Credits in 1995 of $44,451 to HPP'89, of
which $44,007 was allocated to the Limited Partners of HPP'89. Tax credits
allocated to the Limited Partners of HPP'89 totaling $2,758,113 were vested
on or before June 15, 1995. Therefore, 98.4% of the Limited Partners' tax
credits were vested prior to the loss of the property.
Although Jenkins Court no longer owns its investment property and will
no longer have property operations, the Jenkins Court partnership will
remain in existence until the resolution of certain partnership assets and
liabilities. Partnership assets include approximately $312,000 of
unsecured receivables from the developer and its affiliates; partnership
liabilities include approximately $94,000 of trade payables, as well as a
$250,000 default loan and accrued interest thereon which had been provided
by HPP'89 and secured by the developer's interest in an unaffiliated
limited partnership.
Since the fourth quarter of 1990, HPP'89 had reserved against its
investment in Jenkins Court, reducing such investment to zero due to the
substantial doubt that Jenkins Court would continue as a going concern.
Since Jenkins Court no longer owns its investment property, it is not
expected to continue as a going concern. Consequently, due to Jenkins
Court's foreclosure in 1995, HPP'89's investment in Jenkins Court and its
corresponding reserve, both totaling $5,471,055, were eliminated from the
balance sheet.
HPP'89 might be liable as a general partner of Jenkins Court for certain
trade creditor claims, with recourse to HPP'89, that cannot be satisfied by
Jenkins Court or the developer general partner.
8
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
402 Julia Street Associates Limited Partnership (402 Julia) is a
Delaware limited partnership formed on July 25, 1989 to acquire, construct,
rehabilitate, operate and manage a 19,000 square foot site and the building
situated thereon and to rehabilitate the building into 24 residential units
and approximately 3,500 net rentable square feet of commercial space
located thereon at 402 Julia Street, New Orleans, Louisiana. At September
30, 1996, 402 Julia had leased 100% of its residential units and commercial
space.
HPP'89 contributed $775,000 through September 30, 1996 to the capital of
402 Julia and acquired a general partnership interest therein. HPP'89's
investment in 402 Julia originally represented approximately 4% of the
aggregate amount which HPP'89 had contributed to the capital of its three
Investee Partnerships and to purchase its direct interest in the
Cosmopolitan Building.
On September 16, 1993, HPP'89 sold one-third of its general partnership
interest in 402 Julia to the developer general partner for $185,000.
HPP'89's percentage of interest in 402 Julia was thereby reduced from 98%
to 65%. The terms of the sale require an initial payment of $100,000,
which was received in September 1993, followed by annual payments of $3,500
from 1994 to 2016 and a final payment of $4,500 in 2017. A total of
$78,000 remains uncollected as of September 30, 1996 and is secured by the
interest sold to the developer general partner. The sale transaction did
not generate any Investment Tax Credit recapture.
Portland Lofts Associates Limited Partnership (Portland Lofts) is a
Delaware limited partnership formed on August 8, 1989 to acquire,
construct, rehabilitate, operate and manage three buildings containing 107
residential units including ground floor space useable as either commercial
space or as home/studio space for artists, located at 555 Northwest Park
Avenue in Portland, Oregon. At September 30, 1996, Portland Lofts had
leased 96% of its residential units and approximately 87% of its net
rentable commercial space for a combined occupancy of approximately 94%.
HPP'89 contributed $3,820,000 through December 31, 1995 to the capital
of Portland Lofts and acquired a general partnership interest therein.
HPP'89's investment in Portland Lofts represented approximately 21% of the
aggregate amount which HPP'89 had originally contributed to the capital of
its three Investee Partnerships and to purchase its direct interest in the
Cosmopolitan Building (Note 4).
On June 30, 1995, Portland Lofts extended the maturity date of a
$400,000 note payable which matured on February 28, 1994, and which is
secured by the developer general partner's interest in an unrelated
property. The note payable was originally extended until December
31,1995, with options to further extend for five additional successive one
year periods, and had been further extended through December 31, 1996. As
discussed below, the note payable was paid in full in the refinancing of
June 20, 1996.
Portland Lofts' $6,800,000 construction loan matured on March 1, 1992.
On June 30, 1992, Portland Lofts refinanced the construction loan through a
variable rate mortgage note maturing on April 1, 1997. The note was
collateralized by the property, rents and other income, and guaranteed by
the developer general partner.
In July 1993, the mortgage loan and a $550,000 unsecured note were
purchased by a real estate investment entity (the new holder of the
mortgage and unsecured notes). The new holder claimed that the unsecured
note matured on March 1, 1992 and was in technical default. It was Portland
Lofts' position that the maturity date of the unsecured note had been
effectively extended to correspond to the maturity date of the mortgage
note. Also, the new holder claimed that a default for non-payment of the
unsecured note constituted a default of the mortgage note.
9
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
On October 7, 1994, the new holder demanded full payment of the
unsecured note by November 10, 1994. The guarantors of the note maintained
that they were unable to make full payment on the note. On November 11,
1994, the new holder filed judicial foreclosure proceedings against
Portland Lofts for non-payment of the unsecured note. Portland Lofts
successfully contested through the court the right of the new holder to
foreclose on the property. Portland Lofts' position was that the default
claimed on the unsecured note did not constitute a default on the mortgage
note. On August 25, 1995, the court issued a summary judgment in favor of
Portland Lofts. However, the new holder continued to pursue the payment of
the $550,000 unsecured note through litigation.
On May 21, 1996, Portland Lofts and the new holder entered into a
Settlement Agreement (the Agreement) to resolve the claims concerning the
mortgage note and the $550,000 unsecured note (the Notes). According to
the Agreement, Portland Lofts was allowed until July 31, 1996 to pay
$5,400,000 to the new holder in full satisfaction of the Notes.
On June 20, 1996, Portland Lofts obtained alternative financing of
$5,625,000 and contributions from one of its general partners of $340,000
to provide sufficient funds to pay in full the $5,400,000 settlement amount
with the new holder, the $400,000 note payable and all related closing
costs. The transaction resulted in an extraordinary gain on extinguishment
of debt of $1,656,579. The current $5,625,000 mortgage note on the
property: bears interest at 9.0%; amortizes over a 25 year schedule;
requires monthly payments of principal and interest of $47,205; and matures
on July 1, 2006, at which time all unpaid principal and interest is due.
HPP'89 had reserved against its investment in Portland Lofts in the
accompanying financial statements, reducing such investment to zero due to
the substantial doubt that Portland Lofts may not be able to continue as a
going concern dating back to the fourth quarter of 1990. Due to the debt
settlement and refinancing completed in June 1996, Portland Lofts is
expected to continue as a going concern. However, no transactions to the
HPP'89's investment in Portland Lofts will be recorded until HPP'89's share
of unrecorded losses from Portland Lofts has been eliminated.
The Cosmopolitan at Mears Park, LLC (TCAMP). On December 18, 1989,
HPP'89 acquired land and a building containing 255 residential units and
approximately 1,700 square feet of commercial space located at 250 6th
Street and 366 Wacouta Street, St. Paul, Minnesota (the Cosmopolitan). The
building has been renovated, and certain renovation costs have qualified
for Rehabilitation Tax Credits. HPP'89 purchased the Cosmopolitan for one
dollar and assumed mortgage indebtedness with a face value of $22,500,000.
In accordance with the terms of the Purchase and Sale Agreement, HPP'89
paid $5,000,000 at the closing which was used to repay a portion of the
outstanding mortgage loan principal.
The building was originally recorded at the net purchase price of the
net indebtedness assumed by HPP'89 plus the amount paid at the closing.
Subsequent improvements have been recorded at cost. HPP'89's investment in
The Cosmopolitan represented approximately 39% of the aggregate amount
which HPP'89 originally contributed to the capital of its three Investee
Partnerships and to purchase its direct interest in the Cosmopolitan.
10
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
On March 20, 1996, the Partnership completed a transaction by which the
mortgage note was purchased and the property was refinanced. As part of
the transaction, the Partnership contributed title and deed of the property
to The Cosmopolitan at Mears Park, LLC (TCAMP), a Delaware limited
liability company, for a 50% ownership interest in TCAMP. An affiliate of
Claremont Management Corporation (see Note 5) contributed $650,000 in cash
to TCAMP for a 50% ownership interest in TCAMP. A $7,000,000 mortgage note
on the property was obtained by TCAMP from a new lender. Simultaneously, on
March 20, 1996, the previous holder of the Cosmopolitan's mortgage was paid
$7,650,000, the agreed upon purchase price of the mortgage note. The
transaction resulted in a provision for impairment of real estate of
$7,787,963 to recognize the write-down of the real estate to its fair
market value at transfer to TCAMP and an extraordinary gain of $9,182,017
on the extinguishment of the original mortgage debt. This transaction did
not generate any recapture of Rehabilitation Tax Credits to the Partnership
because the tax credits were already fully vested. The new mortgage note
on the property: bears interest at 9.14%; amortizes over a 25 year
schedule; requires monthly payments of principal and interest, real estate
tax escrow and replacement reserve payments of $59,416, $28,069 and $4,250,
respectively; and matures in April 2003, at which time all unpaid principal
and accrued interest is due.
In 1996, TCAMP paid to HPP'89 $68,800 of distributions which were used
to fund a portion of the operating and administrative expenses of HPP'89.
HPP'89's investments in the Investee Entities at September 30,1996 and
December 31,1995 are summarized as follows:
Cumulative: 1996 1995
(Unaudited) (Unaudited)
Investments and advances made in cash $ 4,845,000 $ 4,845,000
Transfer of investment of real estate interest to
investee entity 650,000 -
Evaluation and acquisition costs 835,709 835,709
Interest capitalization and other costs 39,615 39,615
Equity in losses of Investee Entities (1,485,794) (1,514,930)
Reserves for realization of investments (3,469,267) (3,469,267)
Amortization of certain costs (42,412) (39,972)
Distributions received from Investee Entity (68,800) -
Sale of one third interest of Investee Entity (241,620) (241,620)
$1,062,431 $454,535
The above summary of HPP'89's investments in Investee Entities does not
include the investment in Jenkins Court and accumulated activity thereon.
For the nine months ended September 30, 1996 and 1995, the equity in
losses of Investee Entities reflected in the accompanying statements of
operations includes the unaudited allocated income (loss) from Investee
Partnerships of $29,135 and ($11,669), respectively, and the amortization
of certain costs of $2,439.
11
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
Summary combined balance sheets of the Investee Entities as of September
30, 1996 and 1995, and summary combined statements of operations for the
nine months ended September 30, 1996 and 1995 are as follows:
COMBINED BALANCE SHEETS
ASSETS
1996 1995
(Unaudited) (Unaudited)
Buildings and improvements, net of accumulated
depreciation
(1996, $2,264,899; 1995,$1,789,892) $ 17,235,902 $ 10,596,985
Land 2,099,576 1,032,326
Other assets, net of accumulated amortization
(1996, $57,970; 1995,$53,813) 759,023 351,421
Cash 441,756 77,775
Total assets $ 20,536,257 $ 12,058,507
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgage and construction notes payable $13,604,944 $ 7,599,546
Other liabilities 1,528,123 1,723,012
Total liabilities 15,133,067 9,322,558
Partners' equity:
HPP'89 3,932,002 1,880,191
Other partners 1,471,188 855,758
Total partners' equity 5,403,190 2,735,949
Total liabilities and partners' equity $20,536,257 $12,058,507
Operating activity for the Cosmopolitan property for the quarters ended
September 30, 1996 and June 30, 1996, as owned by TCAMP, has been recorded
in the Combined Statements of Operations, and for the quarter ended March
31, 1996, as owned by HPP'89, has been recorded in HPP'89's statement of
operations.
12
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
COMBINED STATEMENTS OF OPERATIONS
1996 1995
(Unaudited) (Unaudited)
Revenues:
Rental revenue $ 2,137,324 $ 2,321,024
Interest and other income 50,177 41,855
2,187,501 2,362,879
Expenses:
Interest expense 914,541 622,843
Depreciation and amortization 385,103 923,240
Operating expenses 932,657 913,040
2,232,301 2,459,123
Net loss from operations $ (44,800) $(96,244)
Extraordinary items:
Gain on settlement of debt 1,656,579 -
Loss of transfer of property - (1,117,247)
Net income (loss) $ 1,611,779 $ (1,213,491)
Net income (loss) allocated to HPP'89 $ 1,611,477 $ (1,153,078)
Net income (loss) allocated to other
partners $ 302 $ (60,413)
(4) Mortgage Payable and Restricted Cash
As discussed in Note 3, the original mortgage that HPP'89 assumed
relating to its original purchase of the Cosmopolitan was purchased and the
property was transferred to TCAMP on March 20, 1996. The original mortgage
note had an original maturity date of December 18, 1999. In December 1992,
the Cosmopolitan's original mortgage lender was purchased by Mellon Bank,
N.A., referred to as the holder of the mortgage note.
For the first 36 months, interest due was at the lesser of the contract
interest rate (principal outstanding at 7% interest) or net cash flow, as
defined under the note. During the 37th through the 120th months of the
note, interest is due at the contract interest rate. To the extent that
contract interest exceeded net cash flow during the 37th (January 1993)
through the 120th month, such amounts accrued were added to the principal
balance (Additional Principal). The entire unpaid principal balance,
including Additional Principal, contract interest and Contingent Interest,
as defined, was to be due and payable at maturity.
13
(4) Mortgage Payable and Restricted Cash (Continued)
In accordance with the terms of the original mortgage agreement related
to the Cosmopolitan, HPP'89 was required to establish an interest bearing
operating account (Operating Account) with the mortgage lender for the
Cosmopolitan in the initial amount of $1,000,000. An additional $1,000,000
was added to this account on January 15, 1990. Principal funds may have
been withdrawn from the operating account if the expenditures were in
accordance with the approved budget between the mortgage lender and HPP'89,
with the approval of the mortgage lender, or after HPP'89 makes six
consecutive debt service payments. Any principal funds remaining in this
account may have been returned to HPP'89 under the terms of the original
loan agreement.
Contract interest due from January 1, 1996 through March 20, 1996 and
for the nine months ended September 30, 1995 totaled $273,618 and $919,447,
respectively, of which $78,237 and $289,616, respectively, exceeded net
cash flow and has been added to the principal balance. Net cash flow due
for the period January 1, 1996 to March 20, 1996 totaled $169,535 and was
paid in full as of March 20, 1996.
In January 1995, HPP'89 consummated an agreement with the holder of the
mortgage note to amend certain provisions within the mortgage note
including the maturity date.
For financial reporting purposes, the discount on the mortgage note
payable has been recorded to reflect an effective interest rate of 10% over
the life of the loan. Due to the advancement of the maturity date, as
discussed below, the effective interest rate was amended on January 1, 1995
to 14.04% to amortize the remaining discount over the remaining life of the
mortgage note. Amortization of the discount amounted to $233,893 and
$700,886 for the period January 1, 1996 to March 20, 1996, and for the
nine months ended September 30, 1995, and is reflected as interest expense.
On January 5, 1995, HPP'89 consummated the Second Amendment to the Loan
Agreement (Second Amendment) with the holder of the mortgage note on the
Cosmopolitan to resolve a dispute over funds in the restricted escrow
account (which had a balance of approximately $1,732,000). HPP'89
maintained that the interest earned from the escrow account of
approximately $300,000 and a previous overfunding of approximately $120,000
should be paid to HPP'89. The holder maintained that interest earned was
additional security on the mortgage note. The terms of the Second
Amendment allowed HPP'89 to be paid the interest earned on the escrow
account and overfunded amount. Also, HPP'89 received an option to buy the
mortgage note for the fair market value of the property. In exchange,
HPP'89 released the principal funds of the escrow account (approximately
$1,311,000) for payment to the outstanding mortgage and agreed to reduce
the maturity date of the note from December 18, 1999 to December 18, 1996.
In summary, at the January 5, 1995 closing of the Second Amendment, HPP'89
received approximately $286,000 (consisting of the overfunding, interest
earned thereon, and one-half of interest earned on principal funds of the
original Operating Account) and released for payment approximately
$1,311,000 for mortgage principal and approximately $15,000 for finance
fees. As of December 31, 1995, $122,593 remained in the escrow account.
Also in accordance with the Cosmopolitan's mortgage agreement, HPP 1989
established a working capital reserve (Working Capital Account) for
apartment rollover expenses and working capital items. As of December 31,
1995, the balance of the Working Capital Account totaled $123,129.
Furthermore, due to HPP'89's cash flow debt service mortgage agreement, the
cash accounts maintained for the daily operations of the Cosmopolitan were
effectively reserved for the Cosmopolitan only. As of December 31, 1995,
the balance of Cosmopolitan's operating accounts equaled $202,172.
HPP'89 was paid the remaining amounts in the escrow account and working
capital reserve on March 20, 1996, the date of purchase of the mortgage
note. Further information on the March 20 1996 transaction is provided in
Note 3.
14
(5) Transactions With Related Parties and Commitments
In July 1993, HPP'89 engaged Portfolio Advisory Services, Inc. (PAS),
corporate general partner of BHP, to provide asset management,
accounting, and investor services to HPP'89. PAS performed such services
for no fee, but was reimbursed for all operating costs of providing such
services. This agreement extended until September 30, 1995.
On October 1, 1995, HPP'89 engaged Claremont Management Corporation
(CMC), an unaffiliated Massachusetts corporation, to provide asset
management, accounting and investor services. The initial term of the
contract with CMC extends until June 30, 1997, and is automatically
extended on a yearly basis unless otherwise terminated, as provided for in
the agreement. According to the contract, CMC is reimbursed for all
operating costs and is paid an annual fee of $72,000 in 1996. For the nine
months ending September 30, 1996, CMC was paid fees of $55,200 and was
reimbursed for operating costs totaling approximately $47,000.
HPP'89 entered into a management agreement with an unrelated management
agent (previous management agent) to manage The Cosmopolitan. The
agreement expired on August 31, 1995, and was renewed on a month-to-month
basis through October 31, 1995. On November 1, 1995, HPP'89 entered into a
management agreement with CMC, expiring June 30, 1997, to manage The
Cosmopolitan. CMC subcontracted with the previous management agent to co-
manage The Cosmopolitan through December 31, 1995. The previous management
agreement and CMC's management agreement require the payment of management
fees equal to the greater of $5,200 monthly or 4% of gross receipts as
defined in the agreements. The CMC management agreement also required The
Cosmopolitan to maintain with CMC at all times an Operating Account in the
amount of $100,000 and a Contingency Reserve Account in the amount of
$50,000 for the benefit of The Cosmopolitan. The property management
contract between HPP'89 and CMC terminated on March 20, 1996 when the
property was transferred to TCAMP.
On March 20, 1996, TCAMP entered into a management agreement with CMC to
manage the Cosmopolitan property for a fee of 4% of gross receipts. The
agreement expires on June 30, 1997 and is renewed thereafter on an annual
basis as defined in the agreement.
During the nine months ending September 30, 1996, HPP'89 paid accounting
and other fees on behalf of a certain Investee Partnership totaling $5,850.
(6) Fair Value of Financial Instruments
The carrying amounts of cash, other assets, accounts payable, accrued
expenses, and other liabilities approximate their fair values due to their
short maturities. As of December 31, 1995, the fair value of HPP'89's
mortgage note payable in the carrying amount of $16,519,887 was
approximately $7,650,000 based on the amount accepted by the holder in full
settlement of amounts due under the mortgage note payable on March 20,
1996. The mortgage note payable was held for nontrading purposes.
15
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1996
(UNAUDITED)
Liquidity and Capital Resources. The Partnership terminated its
offering of Units on December 29, 1989, at which time Limited Partners had
purchased 26,588 Units, representing gross capital contributions of
$26,588,000. As of September 30, 1996, the Partnership had invested an
aggregate of $11,158,064 in three Investee Entities which owned or acquired
real properties, the rehabilitation of which has qualified for
Rehabilitation Tax Credits. The Partnership had also originally invested
$5,000,000 in real property that the Partnership has purchased directly and
was required to place a total of $2,000,000 in an escrow account with the
mortgage lender for this property for the purpose of funding operating
deficits. As discussed below, on March 20, 1996, HPP'89 consummated a
transaction by which it transferred its ownership interest in this property
to a new entity, in which HPP'89 has a 50% interest. Such amounts
contributed represent approximately 100% of the Limited Partners' capital
contributions after deduction of selling commissions, organizational and
sales costs, acquisition fees and reserves. The Partnership does not
expect to make any additional investments in new real estate.
On March 20, 1996, the Partnership completed a transaction by which
the mortgage note was purchased and the property was refinanced. As part
of the transaction, the Partnership contributed title and deed of the
property to the Cosmopolitan at Mears Park, LLC (TCAMP), a Delaware limited
liability company, for a 50% ownership interest in TCAMP. An affiliate of
CMC contributed $650,000 in cash to TCAMP for a 50% ownership interest in
TCAMP. A $7,000,000 mortgage note on the property was obtained by TCAMP
from a new lender. Simultaneously on March 20, 1996, the previous holder of
the Cosmopolitan's mortgage was paid $7,650,000, the agreed upon purchase
price of the mortgage note. The transaction resulted in a provision for
impairment of real estate of $7,787,963 to recognize the write-down of the
real estate to its fair market value at transfer to TCAMP and an
extraordinary gain of $9,182,017 on the extinguishment of the original
mortgage debt. This transaction will not generate any recapture of
Rehabilitation Tax Credits to the Partnership. The new mortgage note on the
property: bears interest at 9.14%; amortizes over a 25 year schedule;
requires monthly payments of principal and interest, real estate tax escrow
and replacement reserve payments of $59,416, $28,069 and $4,250,
respectively; and matures in April 2003, at which time all unpaid principal
and accrued interest is due.
As of September 30, 1996, the Partnership had approximately $155,235
of total cash, $55,160 of which was not insured by the Federal Deposit
Insurance Corporation.
As further discussed later under Results of Operations, Jenkins Court
filed for protection under Chapter 11 federal bankruptcy laws on November
23, 1994. Considering the unlikelihood of a successful plan of
reorganization, Jenkins Court negotiated a transfer to the mortgage holder
of the deed and title to the property in lieu of foreclosure on August 31,
1995, after maximum vesting of the remaining Rehabilitation Tax Credits had
been achieved for 1995.
Also, as further discussed in the Results of Operations section, on
May 21, 1996, Portland Lofts reached a settlement agreement with the new
holder of its mortgage note and an unsecured note. On June 20, 1996,
Portland Lofts obtained alternative financing to fully satisfy the mortgage
note and unsecured note, as well as a separate note payable.
402 Julia has reached stabilized occupancy levels which currently
allows it to pay its operating and debt service obligations. However, 402
Julia Street is not expected to generate any additional cash flow to
distribute to the Partnership.
On September 16, 1993, the Partnership sold one-third of its general
partnership interest in 402 Julia to the developer general partner for
$185,000. The Partnership's percentage of interest in 402 Julia was
thereby reduced from 98% to 65%. The terms of the sale require an initial
payment of $100,000 which was paid in September 1993, followed by annual
payments of $3,500 from 1994 to 2016 and a final payment of $4,500 in 2017.
The sale transaction did not generate any Rehabilitation Tax Credit
recapture.
16
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1996
(UNAUDITED)
As mentioned above, the Partnership refinanced the mortgage loan of
the Cosmopolitan property and transferred deed and title to the property to
TCAMP in March 1996. Also, Portland Lofts refinanced its debt in June
1996. Both TCAMP and Portland Lofts have stabilized operations and due to
their recent respective refinancings, these Investee Entities do generate
some additional cash flow. The Partnership expects to strengthen its
short term liquidity position through a low to moderate amount of cash
flow from TCAMP and Portland Lofts. An additional source of future
liquidity may be the sale of the remaining interest in 402 Julia. The
Partnership expects these Investee Entities to be the primary sources of
future long-term liquidity.
Results of Operations. The Partnership's allocable share of operating
losses in the Investee Entities ranges from 50% to 99%. For the nine months
ended September 30, 1996, income allocated from the Investee Entities to
the Partnership totaled approximately $26,700 which represents the equity
in income from 402 Julia of approximately $11,000, including amortization
of approximately $2,400, and the equity in income from TCAMP of
approximately $15,700. Generally, under the equity method of accounting,
an investment may not be carried below zero. Accordingly, since the Jenkins
Court and Portland Lofts investments were fully reserved for in 1990, the
Partnership has not recorded its share of losses beyond its 1992 investment
in and advances to these Investee Partnerships. In the future, income from
Portland Lofts will not be recorded until all the unrecorded losses have
been offset.
The Partnership incurred total income under generally accepted
accounting principles of approximately $898,200 for the nine months ended
September 30, 1996, including its allocable share of income from an
Investee Entity of approximately $26,700. Since inception, the Partnership
has received $4,351,001 of Rehabilitation Tax Credits from its direct
interest in the St. Paul, Minnesota property and was allocated an
additional $4,861,910 from its three original Investee Entities. Such
amounts were in turn allocated to the Partnership's partners.
As a result of the March 20, 1996 transfer of 50% of the ownership of
the Cosmopolitan property, HPP'89 will no longer have operations directly
due to real estate activity. HPP'89 will account for its investment in
TCAMP under the equity method of accounting.
The increase in operating and administrative expenses and professional
fees are due to the fees and other administrative expenses associated with
engaging a third party entity to perform asset management, accounting and
investor services for HPP'89.
In general, the Investee Entities, including TCAMP, have completed the
lease-up phase. Three properties have essentially met leasing
expectations, albeit in some cases at rents below original expectations,
while Jenkins Court had slower leasing than was originally projected.
Both 402 Julia and the Cosmopolitan are residential properties with
traditional, annual leases to individuals that expire within one year of
signing. Portland Lofts is a mixed-use building with 91 residential units
and 29,250 square feet of commercial space. The residential leases are
traditional, annual leases to individuals that expire within one year of
signing. There are 19 commercial units, with leases which range in length
from one to seven years. The largest commercial tenant occupies only 5.8%
of the total square feet of the property.
402 Julia has had better than 90% occupancy levels since July 1990 and
was 100% leased at September 30, 1996. This 24 unit residential building
has benefited from a relatively strong New Orleans market.
TCAMP had leased approximately 99% of its units at September 30, 1996
and has met occupancy projections. This 255 unit property operates in a
very competitive lowertown St. Paul market and has leased over 95% of its
units since 1992. Consequently, increased rental operations resulted in
increased expenses, particularly expenses associated with utilities and
real estate taxes.
17
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1996
(UNAUDITED)
Due to slow leasing activity and a decline in office rental rates,
Jenkins Court had difficulty making debt service payments since the start
of its loan on its construction loan. In July 1992, Jenkins Court and the
lender entered into an agreement by which the construction loan was
bifurcated into two notes and a substantial amount of accrued interest,
late fees and extension fees were forgiven. In June 1993, the lender
extended the maturity date of the notes to June 15, 1994.
Management of Jenkins Court was negotiating with the lender to further
extend the Notes. On September 30, 1994, the lender sold Notes A and B to
a real estate investment entity, the new holder of the notes. Management
of Jenkins Court entered into negotiations with the new holder to extend or
restructure the notes. On November 23, 1994, the new holder presented a
demand for payment in full of the balance of the Notes and accrued interest
thereon. On November 23, 1994, Jenkins Court filed a petition for relief
under Chapter 11 of the federal bankruptcy laws in United States Bankruptcy
Court for the jurisdiction of the Eastern District of Pennsylvania. Under
Chapter 11, certain claims against the Partnership in existence prior to
the filing of the petition for relief under federal bankruptcy laws were
stayed while Jenkins Court continued business operations as Debtor-in-
Possession.
Considering the unlikelihood of a successful plan of reorganization,
and that maximum vesting of the remaining Rehabilitation Tax Credits had
been achieved for 1995 as of June 30, 1995, Jenkins Court negotiated with
the new holder for a resolution to the bankruptcy litigation. On August
31, 1995, Jenkins Court and the new holder entered into a settlement
agreement by which: Jenkins Court transferred the deed and title to the
property to the new holder; the new holder released Jenkins Court and its
Guarantors from all indebtedness; and Jenkins Court was provided $25,000 to
pay certain professional fees incurred during the bankruptcy proceedings.
Although Jenkins Court no longer owns its investment property and will
no longer have property operations, the Jenkins Court partnership will
remain in existence until the resolution of certain partnership assets and
liabilities. Partnership assets include approximately $312,000 of
unsecured receivables from the developer and its affiliates; partnership
liabilities include approximately $94,000 of trade payables, as well as a
$250,000 default loan and accrued interest thereon which had been provided
by HPP'89 and secured by the developer's interest in an unaffiliated
limited partnership.
As of September 30, 1996, Portland Lofts had approximately 97%
occupancy of residential units and 89% occupancy of net rentable commercial
space for a combined occupancy of approximately 93%.
The construction loan on this property and an unsecured note were
extended to March 1, 1992. On June 30, 1992, Portland Lofts refinanced its
construction loan to a variable rate mortgage note requiring monthly
principal and interest payments and maturing on April 1, 1997.
In July 1993, a $6,800,000 mortgage note and a $550,000 unsecured note
were purchased by a real estate investment entity, referred to as the new
holder of the mortgage and unsecured notes. The new holder claims that the
unsecured note has matured and is in default. It is Portland Lofts'
position that the maturity date of the unsecured note had been effectively
extended to correspond with the maturity date of the mortgage note. Also,
the new holder claims that a default on the unsecured note constitutes a
default on the mortgage note.
On October 7, 1994, the new holder demanded full payment of the
unsecured note by November 10, 1994. The guarantors of the unsecured note
maintained that they did not have the funds to payoff the unsecured note.
On November 11, 1994, the new holder filed judicial foreclosure proceedings
against Portland Lofts for non-payment of the unsecured note. Portland
Lofts successfully contested through the Circuit Court of Oregon, Multnomah
County, the new holder's right to foreclose on the property. Portland
Lofts' position was that the default claimed on the unsecured note did not
constitute a default on the mortgage note. On August 25,1995, the court
issued a summary judgment in favor of Portland Lofts and affirmed that the
new holder cannot foreclose on the property due to the default claimed on
the unsecured note. However, the new holder continued to pursue the
payment of the $550,000 unsecured note through litigation.
18
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1996
(UNAUDITED)
On May 21, 1996, Portland Lofts and the new holder entered into a
Settlement Agreement (the Agreement) to resolve the claims concerning the
mortgage note and the unsecured note. According to the Agreement, Portland
Lofts was allowed until July 31, 1996 to pay $5,400,000 to the new note
holder in full satisfaction of the mortgage note and the unsecured note.
On June 20, 1996, Portland Lofts obtained alternative financing of
$5,625,000 and contributions from one of its general partners of $340,000
to provide sufficient funds to pay in full the $5,400,000 settlement amount
with the new holder, the $400,000 note payable and all related closing
costs. The transaction resulted in an extraordinary gain on extinguishment
of debt of $1,656,579. The current $5,625,000 mortgage note on the
property: bears interest at 9.0%; amortizes over a 25 year schedule;
requires monthly payments of principal and interest of $47,205; and matures
on July 1, 2006, at which time all unpaid principal and interest is due.
As discussed above, on August 31, 1995, Jenkins Court transferred
title and ownership of its property to the new holder of the mortgage
through a deed in lieu of foreclosure to maximize the vesting of
Rehabilitation Tax Credits. Such a transfer resulted in only a minimal
recapture of Rehabilitation Tax Credits generated in 1991. Both Jenkins
Court and Portland Lofts are fully reserved for at September 30, 1996.
Also, the Partnership, as a general partner of the Investee Entities, may
be liable for certain creditor claims with recourse that cannot be
satisfied by the Investee Entities.
Inflation and Other Economic Factors. Recent economic trends have
kept inflation relatively low, although the Partnership cannot make any
predictions as to whether recent trends will continue. The assets of the
Partnership are highly leveraged in view of the fact that each property is
subject to a first mortgage loan. Operating expenses and rental revenues
of each property are subject to inflationary factors. Low rates of
inflation could result in slower rental rate increases, and to the extent
that these factors are outpaced by increases in property operating expenses
(which could arise as a result of general economic circumstances such as an
increase in the cost of energy or fuel, or from local economic
circumstances), the operations of the Partnership could be adversely
affected. Actual deflation in prices generally would, in effect, increase
the economic burden of the mortgage debt service with a corresponding
adverse effect.
High rates of inflation, on the other hand, raise the operating
expenses for projects, and to the extent they cannot be passed on to
tenants through higher rents, such increases could also adversely affect
Partnership operations. Although, to the extent rent increases are
commensurable, the burden imposed by the mortgage leverage is reduced with
a favorable effect. Low levels of new construction of similar projects and
high levels of interest rates may foster demand for existing properties
through increasing rental income and appreciation in value.
19
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
SEPTEMBER 30, 1996
Item 1. Legal Proceedings
The Partnership is not a party to, to the best knowledge of
the General Partner, any material pending legal proceedings.
As mentioned in the Results of Operations section, on August
31, 1995, Jenkins Court and the mortgage holder entered into a
settlement agreement to resolve the bankruptcy litigation. As
part of the settlement agreement, Jenkins Court transferred the
deed and title to the property to the mortgage holder in lieu of
foreclosure proceedings. The mortgage holder agreed to release
Jenkins Court and its guarantors for the entire indebtedness and
Jenkins Court received $25,000 to pay certain professional fees
incurred during the bankruptcy proceedings. Although Jenkins
Court no longer owns its investment property and will no longer
have property operations, the Jenkins Court partnership will
remain in existence until the resolution of certain partnership
assets and liabilities.
Also, as mentioned in the Results of Operations section, on
November 11, 1994 the holder of the mortgage note and an
unsecured note (mortgage holder) of Portland Lofts filed judicial
foreclosure proceedings against Portland Lofts for non-payment of
the unsecured note. It was Portland Lofts' position that the
unsecured note is not due and that the maturity date of the
unsecured note had been effectively extended to correspond with
the maturity date of the mortgage note. The mortgage holder
claimed that a default on the unsecured note constitutes a
default on the mortgage note. Portland Lofts successfully
contested through the Circuit Court of Oregon, Multnomah County,
the mortgage holder's right to foreclose on the property.
Portland Lofts' position was that the default claimed on the
unsecured note does not constitute a default on the mortgage
note. On August 25, 1995, the court issued a summary judgment in
favor of Portland Lofts, affirming that the mortgage holder
cannot foreclose on the property due to the claimed default on
the unsecured note. However, the mortgage holder continued to
pursue the payment of the unsecured note through direct
negotiations with Portland Lofts, as well as through the court.
On May 21, 1996, Portland Lofts and the mortgage holder entered
into a Settlement Agreement to resolve claims concerning the
mortgage note and the unsecured note. On June 20, 1996, Portland
Lofts obtained alternative financing and general partner
contributions to fully satisfy the obligations of the mortgage
note and unsecured note, as well as an unrelated note payable.
To the best knowledge of the General Partner, Jenkins Court,
Portland Lofts, 402 Julia nor The Cosmopolitan at Mears Park is
currently subject to any material pending legal proceedings.
Item 2. Changes in Securities - Not applicable.
Item 3. Defaults Upon Securities - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders - Not
applicable.
Item 5. Other Information - Not applicable.
Item 6. Exhibits and Reports from Form 8-K
(a) Exhibits
None.
(b) Reports from Form 8-K
None.
20
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
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.
HISTORIC PRESERVATION PROPERTIES 1989
LIMITED PARTNERSHIP
By: Boston Historic Partners Limited Partnership
General Partner
By: Portfolio Advisory Services, Inc.
General Partner
Date: November 14, 1996 By: /s/Terrence P. Sullivan
Terrence P. Sullivan,
President
and
Date: November 14, 1996 By: /s/Terrence P. Sullivan
Terrence P. Sullivan,
General Partner
21
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 155,235
<SECURITIES> 0
<RECEIVABLES> 78,655
<ALLOWANCES> 0
<INVENTORY> 0
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0
0
<COMMON> 0
<OTHER-SE> 0
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<SALES> 0
<TOTAL-REVENUES> 559,966
<CGS> 0
<TOTAL-COSTS> 8,362,936
<OTHER-EXPENSES> 26,696
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 507,513
<INCOME-PRETAX> (8,283,787)
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