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,
1999
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)
45 Broad Street, 3rd Floor, Boston, Massachusetts 02109
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (617) 338-6900
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, 1999
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Partners' Equity (Deficit) 5
Statements of Cash Flows 6
Notes to Financial Statements 7-13
Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-18
PART II - Other Information 19
Signatures 20
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
ASSETS
1999 1998
------------- ------------
(Unaudited)
INVESTMENTS IN INVESTEE ENTITIES $ 4,266,399 $ 4,074,023
Less reserve for realization of investments
in investee entity (3,469,267) (3,469,267)
------------- ------------
797,132 604,756
CASH EQUIVALENTS 231,559 170,981
OTHER ASSETS 67,500 73,350
------------- ------------
$ 1,096,191 $ 849,087
============= ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 34,028 $ 38,342
------------- ------------
Total liabilities 34,028 38,342
------------- ------------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)
PARTNERS' EQUITY
Limited Partners' Equity - Units of Investor
Limited Partnership Interest, $1,000
stated value per Unit-Issued and
outstanding 26,588 units 1,282,877 1,033,973
General Partner's Deficit (220,714) (223,228)
------------- ------------
Total partners' equity 1,062,163 810,745
------------- ------------
$ 1,096,191 $ 849,087
============= ============
The accompanying notes are an integral part of these financial
statements.
3
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ----------------------
1999 1998 1999 1998
--------- ---------- ---------- ----------
REVENUES:
Interest and other income $ 115,047 $ 1,903 $118,199 $ 5,113
---------- --------- ---------- ----------
EXPENSES:
Operating and administrative 60,367 55,233 176,157 157,250
--------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 54,680 (53,330) (57,958) (152,137)
EQUITY IN INCOME OF
INVESTEE ENTITIES 89,361 54,416 309,376 190,282
--------- ---------- ---------- ----------
NET INCOME $144,041 1,086 251,418 38,145
========= ========== ========= ==========
NET INCOME ALLOCATED
TO GENERAL PARTNER $ 1,440 $ 11 $ 2,514 $ 381
========== ========= ========= ==========
NET INCOME ALLOCATED
TO LIMITED PARTNERS $142,601 $ 1,075 $248,904 $ 37,764
========== ========== ========= ==========
NET INCOME PER UNIT OF
INVESTOR LIMITED PARTNERSHIP
INTEREST, BASED ON 26,588
UNITS ISSUED AND OUTSTANDING $ 5.36 $ .04 $ 9.36 $ 1.42
========== ========== ========= ==========
The accompanying notes are an integral part of these financial
statements.
4
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND
THE YEAR ENDED DECEMBER 31, 1998
Units of
Investor Investor
Limited Limited General
PartnershipPartners' Partner's
Interest Equity Deficit Total
--------- ---------- ---------- ------------
BALANCE, December 31,
1997 26,588 $ 974,008 $ (223,834) $ 750,174
Net income - 59,965 606 60,571
--------- ---------- ---------- ------------
BALANCE, December 31,
1998 26,588 $1,033,973 $ (223,228) $ 810,745
Net income (Unaudited) - 248,904 2,514 251,418
--------- ----------- ---------- ------------
BALANCE, September 30,
1999 (Unaudited) 26,588 $1,282,877 $(220,714) $ 1,062,163
========= =========== ========== ============
The accompanying notes are an integral part of these financial
statements.
5
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
1999 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 251,418 $ 38,145
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Equity in income in investee
entities over distributions
received (192,376) (73,282)
Decrease in other assets 5,850 655
Increase (decrease) in accounts
payable and accrued expenses (4,314) 1,811
------------ ------------
Net cash provided by (used in)
operating activities 60,578 (32,671)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash contributions to investee entity - (35,288)
------------ ------------
Cash used in investing activities - (35,288)
------------ ------------
NET INCREASE (DECREASE) IN CASH 60,578 (67,959)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 170,981 175,288
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 231,559 107,329
============ ============
The accompanying notes are an integral part of these financial
statements.
6
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(UNAUDITED)
(1) Organization and General Partner - BHP
Historic Preservation Properties 1989 Limited Partnership
("HPP'89" or "the Partnership") was formed on September 1,
1988 under the Delaware Revised Uniform Limited Partnership
Act. The purpose of HPP'89 is to invest in a diversified
portfolio of real properties, for which certain costs of
rehabilitation have qualified for rehabilitation tax credits
(Rehabilitation Tax Credits).
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 publicly
offered real estate limited partnerships (Public
Rehabilitation Partnerships). As of September 30, 1999, BHP
has established three such partnerships, including HPP'89.
(2) Basis of Presentation
The accompanying unaudited financial statements of 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, 1999 are not necessarily
indicative of the results that may be expected for the year
ending December 31, 1999. For further information, refer to
the financial statements and footnotes thereto included in
the Annual Report on Form 10-K for the year ended December
31, 1998 for HPP'89, as filed with the Securities and
Exchange Commission.
Certain amounts in the 1998 Statements of Cash Flows have
been reclassified to conform to the 1999 presentation.
(3) Investments in Investee Entities and Real Estate;
Commitments and Contingencies
During 1989, HPP'89 acquired general partnership interests
in three Investee Entities, as well as a direct interest in
a property located in St. Paul, Minnesota. Each such
Investee Entity placed a property in service in December
1989 and commenced initial leasing activity.
As discussed below, in March 1996, HPP'89 contributed land,
building and improvements and furniture and equipment
related to its property located in St. Paul, Minnesota (the
Cosmopolitan Building), and certain other assets and
liabilities, to a limited liability company for a 50%
ownership interest in the Investee Entity.
HPP'89's current allocable percentage of operating income
and/or losses in the Investee Entities ranges from 50% to
99%. 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 or other managing member, 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 managing member. In addition,
each Investee Entity has entered into various agreements
with its local general partners or member, or their
affiliates, to provide development, management and other
services, for which the local general partners or other
member (or their affiliates), are paid fees by the
respective Investee Entity.
7
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(3) Investments in Investee Entities and Real Estate;
Commitments and Contingencies (Continued)
Following is a summary of information regarding the Investee
Entities and HPP'89's investments therein:
Jenkins Court Associates Limited Partnership (Jenkins Court)
is a Delaware limited partnership which was 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.
HPP'89 contributed $6,563,064 through the date of Jenkins
Court's Chapter 11 filing (see below) to the capital of
Jenkins Court and had a general partnership interest
therein. HPP'89's investment in Jenkins Court represented
approximately 36% of the aggregate amount which HPP'89
originally contributed to the capital of its three Investee
Entities acquired during 1989 and to purchase its direct
interest in the Cosmopolitan Building.
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. On August 31, 1995, after
maximum vesting of the remaining Rehabilitation Tax Credits
had been achieved for 1995 and considering the unlikelihood
of a successful plan of reorganization, Jenkins Court and
the mortgage holder entered into a settlement agreement
under which Jenkins Court transferred the deed and title of
the property to the mortgage holder. The mortgage holder
released 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 investment property or
has property operations after August 31, 1995, the Jenkins
Court partnership had remained in existence until the
resolution of certain partnership assets and liabilities.
Partnership assets include unsecured receivables from the
developer and its affiliates which had been fully reserved
for; partnership liabilities include trade payables (which
had been fully reserved for since HPP'89 does not believe
such amount will be recourse to HPP'89) and 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.
In September 1999, HPP'89 collected $113,752 from the
developer's interest in an unaffiliated limited
partnership. This amount had been received as payment on
the default loan and has been recorded as other income. In
October 1999, Jenkins Court and its affiliates and the
developer and its affiliates entered into agreements for
mutual release and agreed to liquidate Jenkins Court by
December 31, 1999.
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, 1999, 402 Julia had
leased 100% of its residential units and commercial space.
HPP'89 originally contributed $775,000 to the capital of 402
Julia and owns a general partnership interest therein.
HPP'89's original investment in 402 Julia represented
approximately 4% of the aggregate amount which HPP'89 has
contributed to the capital of its three Investee Entities
acquired in 1989 and to purchase its direct interest in the
Cosmopolitan Building.
8
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(3) Investments in Investee Entities and Real Estate;
Commitments and Contingencies (Continued)
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 required an initial payment of $100,000, which was
received in September 1993, and requires annual payments of
$3,500 through 2016 and a final payment of $4,500 in 2017.
At September 30, 1999, the remaining uncollected payments
total $67,500, which are secured by the interest sold to the
developer general partner. The sale transaction did not
generate any Investment Tax Credit recapture.
Rehabilitation Tax Credits generated by 402 Julia and
previously allocated to HPP'89 Limited Partners totaled
$248,796 since inception. As of March 31, 1995, 100% of
these credits were fully vested.
HPP'89 recorded a net income from the 402 Julia Investment
of $8,899 for the nine months ended September 30, 1999 and a
net loss of $21,753 for the nine months ended September 30,
1998, as well as amortization of $2,439 for each of the nine
months ended September 30, 1999 and 1998.
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 89 residential units and 29,250
square feet of 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, 1999, Portland Lofts had leased approximately
93% of its residential apartment units and 100% of the
commercial space for a combined occupancy of 95%.
HPP'89 contributed $3,820,000 through September 30, 1999 to
the capital of Portland Lofts and owns a general
partnership interest therein. HPP'89's investment in
Portland Lofts represents approximately 21% of the aggregate
amount which HPP'89 originally contributed to the capital of
its three Investee Entities acquired in 1989 and to purchase
its direct interest in the Cosmopolitan Building.
Rehabilitation Tax Credits generated by Portland Lofts and
allocated to HPP'89's Limited Partners totaled $1,775,571
since inception. As of April 1, 1996, 100% of these tax
credits were fully vested.
On May 21, 1996, Portland Lofts and the holder of its
mortgage note and a $550,000 unsecured note entered into a
Settlement Agreement (the Agreement) to resolve claims
concerning the mortgage note and the unsecured note (the
Notes). According to the Agreement, Portland Lofts was
allowed, until July 31, 1996, to pay $5,400,000 to the
holder in full satisfaction of the Notes.
On June 20, 1996, Portland Lofts issued a promissory
mortgage note to a bank in the amount of $5,625,000 and a
promissory note to one of its general partners in the amount
of $340,000 to provide sufficient funds to pay in full the
$5,400,000 settlement amount with the holder, a separate
$400,000 note payable and all related closing costs. The
transaction resulted in an extraordinary gain on
extinguishment of debt of $1,656,579.
In 1990, HPP'89 had reserved against its investment in
Portland Lofts reducing such investment to zero due to the
substantial doubt that Portland Lofts may not be able to
continue as a going concern. Due to the debt settlement and
refinancing completed in June 1996, Portland Lofts is
expected to continue as a going concern.
9
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(3) Investments in Investee Entities and Real Estate;
Commitments and Contingencies (Continued)
For the year ended December 31, 1997, Portland Lofts
allocated a net loss of $173,710 and paid cash distributions
of $156,000 to HPP'89. Generally, under the equity method of
accounting, an investment may not be carried below zero.
During 1997, HPP'89's investment in Portland Lofts was
reduced to zero due to allocated losses and distributions
received. Although HPP'89's investment in Portland Lofts
has been reduced to zero, Portland Lofts is expected to
continue as a going concern and to continue to provide
distributions to HPP'89. At December 31, 1998, HPP'89 had
cumulative unrecorded losses totaling $90,987 relating to
the Portland Lofts investment.
For the nine months ended September 30, 1999, HPP'89 was
allocated net income of $26,295 from Portland Lofts, thereby
reducing the cumulative unrecorded loss relating to the
Portland Lofts investment to $64,692 at September 30, 1999.
For the nine months ended September 30, 1998, unrecorded
losses allocated to HPP'89 from Portland Lofts increased by
$2,185.
For each of the nine months ended September 30, 1999 and
1998, HPP'89 received distributions of $117,000, from the
Portland Lofts investment and were recorded as equity in
income of investee entities.
The Cosmopolitan at Mears Park, LLC (TCAMP) On December 18,
1989, HPP'89 acquired the Cosmopolitan Building containing
255 residential units and approximately 2,200 square feet of
commercial space. The building was renovated, and certain
renovation costs qualified for Rehabilitation Tax Credits.
HPP'89's investment in The Cosmopolitan Building represented
approximately 39% of the aggregate amount which HPP'89
originally contributed to the capital of its three Investee
Entities acquired in 1989 and to purchase its direct
interest in the Cosmopolitan Building. For the nine months
ended September 30, 1999, the economic occupancy of TCAMP
was 97%.
Rehabilitation Tax Credits generated by the purchase of the
Cosmopolitan Building and previously allocated to HPP'89's
Limited Partners totaled $4,307,491 since inception. As of
December 31, 1994, 100% of these tax credits were fully
vested.
The mortgage HPP'89 assumed relating to its purchase of the
Cosmopolitan Building had an original maturity date of
December 18, 1999. On January 5, 1995, HPP'89 consummated
the Second Amendment to the Loan Agreement (Second
Amendment) with the holder and received an option to buy the
mortgage note for the fair market value of the property. In
exchange, HPP'89 agreed to reduce the maturity date of the
note from December 18, 1999 to December 18, 1996.
Effective March 15, 1996, HPP'89 contributed the Cosmopolitan Building,
and certain other assets and liabilities, to TCAMP (a Limited Liability
Company) for a 50% ownership interest. Concurrently, another member
contributed $650,000 cash to TCAMP for a 50% ownership interest.
Simultaneously, TCAMP issued a mortgage note in the amount of $7,000,000,
the proceeds of which along with the $650,000 contributed cash were used
to settle in full HPP'89's mortgage note payable related to the
Cosmopolitan Building. The fair value of the Cosmopolitan Building and
other assets contributed by HPP'89 approximated the fair value of
liabilities transferred to TCAMP by HPP'89 and the amount paid by TCAMP to
settle in full HP'89's mortgage note payable related to the Cosmopolitan
Building. This transaction resulted in a provision for impairment of real
estate of $8,437,963 to recognize a reduction to fair value at the date of
contribution to TCAMP and an extraordinary gain on debt extinguishment of
$9,182,017 to recognize the difference between the amount outstanding
under the mortgage payable and the amount accepted by the lender from
TCAMP in full settlement.
10
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(3) Investments in Investee Entities and Real Estate;
Commitments and Contingencies (Continued)
Distributions from TCAMP to HPP'89 and the other member are
subject to the order of distributions as specified in the
Operating Agreement of TCAMP. Until the other membe's
original $650,000 capital contribution had been repaid in
full, to the extent that the Partnership accumulates from
whatever sources operating reserve amounts greater than
$140,000 at the end of any fiscal year, the Partnership was
required to contribute such excess within thirty days of the
end of such fiscal year to TCAMP as additional capital
contributions to be distributed by TCAMP to its other member
as a return of its original capital contribution.
On February 27, 1998, HPP'89 contributed to TCAMP $35,288,
representing operating reserves in excess of $140,000 at
December 31, 1997. The funds were then distributed from
TCAMP to its other member as a return of its original
capital contribution. As of December 31, 1997, the
outstanding balance of the other member's unreturned
original $650,000 capital contribution was $223,773. On May
18, 1998, the other member's original $650,000 capital
contribution was reduced to zero, thereby eliminating any
future requirements for HPP'89 to make additional capital
contributions to TCAMP.
As a result of the contribution of the Cosmopolitan to TCAMP
for a 50% ownership interest in TCAMP, HPP'89 no longer has
operations directly related to real estate activity. As of
March 15, 1996 (the date of contribution), the Partnership
accounts for its investment in TCAMP under the equity method
of accounting.
HPP'89 recorded net income of $185,916 and $97,474 for the
nine months ended September 30, 1999 and 1998, respectively,
from the TCAMP Investment.
HPP'89's investments in the Investee Entities at September
30, 1999 and December 31, 1998 are summarized as follows:
Cumulative: 1999 1998
------------ -------------
(Audited)
Investments and advances
made in cash $ 4,880,288 4,880,288
Evaluation and acquisition
costs 835,709 835,709
Interest capitalization and
other costs 39,615 39,615
Net equity in loss of
Investee Entities (567,226) (879,041)
Reserves for realization of
investments (3,469,267) (3,469,267)
Amortization of certain costs (52,167) (49,728)
Distributions received from
Investee Entities (628,200) (511,200)
Sale of one third interest of
Investee Entity (241,620) (241,620)
------------- -------------
$ 797,132 604,756
============ =============
The above summary of HPP'89's investments in Investee
Entities does not include its investment in Jenkins Court.
The equity in income of Investee Entities reflected in the
accompanying statements of operations included income of
$311,815, and $192,721 for the nine months ended September
30, 1999 and 1998, respectively, and amortization of certain
costs of $2,439, for each of the nine months ended September
30, 1999 and 1998, respectively.
11
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(3) Investments in Investee Entities and Real Estate;
Commitments and Contingencies (Continued)
Summary combined balance sheets of the Investee Entities as
of September 30, 1999 and December 31, 1998, and summary
combined statements of operations for the nine months ended
September 30, 1999 and 1998 are as follows:
COMBINED BALANCE SHEETS
ASSETS
1999 1998
------------ ------------
(Audited)
Buildings and improvements, (net
of accumulated depreciation;
$3,856,548,1999; $3,446,938, 1998) $ 14,986,456 $ 15,344,965
Land 2,041,326 2,041,326
Other assets (net of accumulated
amortization;$166,798,1999;$123,795,
1998) 625,095 600,899
Cash and cash equivalents 763,968 287,348
------------ ------------
Total assets $ 18,416,845 $ 18,274,538
============ ============
LIABILITIES AND PARTNERS' EQUITY
1999 1998
------------ ------------
Liabilities:
Mortgage and notes payable $ 13,200,225 $ 13,339,188
Other liabilities 726,267 726,135
------------ ------------
Total liabilities 13,926,492 14,065,323
------------ ------------
Partners' equity:
HPP'89 3,415,170 3,311,062
Other partners 1,075,183 898,153
------------ ------------
Total partners' equity 4,490,353 4,209,215
------------ ------------
Total liabilities
and partners' equity $ 18,416,845 $ 18,274,538
============ ============
Members' equity in TCAMP has been classified as
partners' equity in the combined balance sheets.
12
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
(UNAUDITED)
(3) Investments in Investee Entities and Real Estate;
Commitments and Contingencies (Continued)
COMBINED STATEMENTS OF OPERATIONS
1999 1998
----------- ------------
Revenue:
Rental revenue $ 3,029,577 2,839,801
Interest and other income 119,972 100,852
----------- ------------
3,149,549 2,940,653
----------- ------------
Expenses:
Interest expense 907,832 936,195
Depreciation and amortization 447,554 459,093
Operating expenses 1,382,150 1,385,922
----------- ------------
2,737,536 2,781,210
----------- ------------
Net income $ 412,013 159,443
=========== ============
Net income allocated to HPP'89 $ 221,108 73,536
=========== ============
Net income allocated to other
partners $ 190,905 $ 85,907
=========== ============
(4) Commitments
On October 1, 1995, HPP'89 engaged Claremont Management
Corporation (CMC), a Massachusetts corporation previously
unaffiliated and a related party as of March 15, 1996
through ownership by a member of TCAMP, to provide asset
management, accounting and investor services. CMC provided
such services for an annual management fee of $67,200 plus
reimbursement of all its costs of providing these services.
The contract with CMC expired June 30, 1998. For the six
months ended June 30, 1998, CMC was reimbursed $50,716, for
operating costs.
Effective July 1, 1998, HPP'89 engaged Gunn Financial, Inc.
(GFI), an unaffiliated Massachusetts corporation, to provide
accounting, asset management and investor services. GFI
provides such services for an annual management fee of
$63,000 plus reimbursement of all its costs of providing
these services. The agreement expires on the earlier of
June 30, 2006 or liquidation of the Partnership, as
defined. For the nine months ended September 30, 1999 and
for the period July 1, 1999 to September 30, 1999, GFI was
reimbursed $87,373 and $41,299 for operating costs,
respectively.
(5) Fair Value of Financial Instruments
The fair values of cash equivalents and accounts payable and
accrued expenses at September 30, 1999 and December 31, 1998
approximate their carrying amounts due to their short
maturities.
13
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1999
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. The Partnership originally
invested an aggregate of $11,158,064 in three Investee
Partnerships which owned or acquired real properties, the
rehabilitation of which qualified for Rehabilitation Tax
Credits. The Partnership also originally invested $5,000,000 in
the Cosmopolitan, real property that the Partnership had
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.
Such amounts originally 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.
The Cosmopolitan is a 255 unit residential property located in
St. Paul, Minnesota. On March 15, 1996, HPP'89 entered into a
series of transactions to settle and pay in full the
outstanding mortgage note on the Cosmopolitan. Effective that
date, HPP'89 contributed the Cosmopolitan, and certain other
assets and liabilities, to The Cosmopolitan at Mears Park, LLC
(TCAMP) for a 50% ownership interest in TCAMP. Concurrently,
another member contributed $650,000 cash to TCAMP for a 50%
ownership interest in TCAMP. Simultaneously, TCAMP issued a
mortgage note in the amount of $7,000,000 the proceeds of which
along with the $650,000 contributed cash, were used to settle in
full HPP'89's mortgage note payable related to the Cosmopolitan
Building. TCAMP's mortgage bears interest at 9.14%: amortizes
over a 25 year schedule and requires monthly payments of
principal, interest, real estate tax and replacement reserve
deposits totaling $92,735; the mortgage matures in March 2003,
at which time all unpaid principal and accrued interest is due.
Jenkins Court was a 174,000 square foot building located in
Jenkintown, Pennsylvania leased to office and retail tenants.
Jenkins Court filed for protection under Chapter 11 Federal
Bankruptcy laws on November 23, 1994. On August 31, 1995, after
maximum vesting of the remaining Rehabilitation Tax Credits had
been achieved for 1995, and considering the unliklihood of a
successful plan of reorganization, Jenkins Court negotiated with
the mortgage holder to transfer the deed and the title of the
property to the mortgage holder, in lieu of foreclosure.
Due to the foreclosure proceeding related to Jenkins Court,
HP'89 no longer has an investment in the property. As of
December 31, 1995, the investment in Jenkins Court and its
corresponding reserve, both totaling $5,471,055, were eliminated
from the balance sheet.
Although Jenkins Court no longer owns its investment property
and will no longer have property operations, the Jenkins Court
partnership had remained in existence until the resolution of
certain partnership assets and liabilities. These liabilities
include a $250,000 default loan and accrued interest thereon,
which has been provided by HPP'89 and secured by the developer's
interest in an unaffiliated limited partnership. As a result of
the Chapter 11 proceedings, the Partnership was not expected to
be liable as a general partner of Jenkins Court for any
remaining obligations of Jenkins Court. In September 1999,
HPP'89 received $113,752 from the developer's interest in an
unaffiliated limited partnership. This amount had been received
as payment on the default loan and has been recorded as other
income. In October 1999, Jenkins Court and its affiliates and
the developer and its affiliates entered into mutual release
agreements and agreed to liquidate Jenkins Court by December 31,
1999.
Portland Lofts is a mix-use property located in Portland, Oregon
with 89 residential units and 29,250 square feet of commercial
space. In May 1996, Portland Lofts reached a settlement
agreement with the holder of its mortgage note and an unsecured
note. According to the Settlement Agreement, Portland Lofts was
allowed until July 31, 1996, to pay $5,400,000 to the holder in
full satisfaction of both the mortgage note and an unsecured
note.
14
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
On June 20, 1996, Portland Lofts issued a promissory mortgage
note in the amount of $5,625,000 and a promissory note to a
general partner in the amount of $340,000 to provide sufficient
funds to pay in full the $5,400,000 settlement amount with the
holder in full satisfaction of both the mortgage note, the
unsecured note payable and all related closing costs. The
transaction resulted in an extraordinary gain on extinguishment
of debt of $1,656,579. The current 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.
402 Julia is a mix-use property located in New Orleans, Louisiana
with 24 residential units and 3,500 square feet of commercial
space. 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 required an initial payment of $100,000, which was received
in September 1993, and requires annual payments of $3,500 through
2016 and a final payment of $4,500 in 2017. On July 17, 1998,
402 Julia refinanced its mortgage debt by issuing a promissory
note to a new lender in the amount of $1,000,000 bearing interest
at 6.69%, amortizing over 30 years and maturing in August 2008,
at which time all unpaid interest and principal is due. The
mortgage note requires monthly payments of principal and interest
and escrow deposits (real estate and insurance) in the aggregate
amount of $7,091 and $1,312, respectively.
The short-term liquidity of the Investee Entities, with the
exception of Jenkins Court, depends on their ability to generate
sufficient rental income to fund operating expenses and debt
service requirements. TCAMP, Portland Lofts and 402 Julia have
stabilized operations and, after considering the effects of
TCAMP's, Portland Lofts' and 402 Julia's recent respective
refinancings, are expected to generate cash flow. For each of
the nine months ended September 30, 1999 and 1998, the
Partnership received distributions from Portland Lofts of
$117,000, respectively.
As of September 30, 1999, the Partnership had $231,559 of total
cash. HPP'89's cash is used primarily to fund general and
administrative expenses of managing the public fund. The
Partnershi's only source of short term liquidity is from
distributions received from Investee Entities and the proceeds
from the previous sale of a partial interest in 402 Julia. The
Partnership expects to fund its expenses with cash flow
distributions from Portland Lofts and TCAMP.
Distributions from TCAMP to the Partnership and the other member
of TCAMP are subject to the order of distributions as specified
in the operating agreement of TCAMP. Until the other member's
original $650,000 capital contribution had been reduced to zero,
to the extent that the Partnership accumulated from whatever
sources operating reserve amounts greater than $140,000 at the
end of any fiscal year, the Partnership was required to
contribute such excess within thirty days of the end of such
fiscal year to TCAMP as additional capital contributions to be
distributed by TCAMP to its other member as a return of its
original capital contribution.
As of December 31, 1997, the outstanding balance of TCAMP's
other member's unreturned original $650,000 capital contribution
was $223,773. On February 27, 1998, the Partnership contributed
to TCAMP $35,288, representing operating reserves in excess of
$140,000 at December 31, 1997. The funds were then distributed
from TCAMP to its other member as a return of its original
capital contribution. On May 18, 1998, TCAMP's other member's
original $650,000 capital contribution was reduced to zero,
thereby eliminating any future requirements for the Partnership
to make additional capital contributions to TCAMP.
In late 1998, a dispute developed between HPP'89 and the other
member of TCAMP regarding distributions and property management
issues. The dispute could result in a significant delay and/or
reduction of anticipated distributions by TCAMP to HPP'89, which,
in turn, could have a detrimental effect on HPP'89's short term
liquidity. HPP'89 intends to pursue all of its rights to
distributions under TCAMP's Operating Agreement and Management
Agreement.
15
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULT OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
Cash flow generated from the Partnership's investment properties
and the Partnership's share of the proceeds from the sale of
such properties is expected to be the source of future long-term
liquidity.
Results of Operations. Due to the foreclosure proceeding related
to Jenkins Court, HPP'89 no longer has an investment in the
property. As of December 31, 1995, the investment in Jenkins
Court and its corresponding reserve, both totaling $5,471,055,
were eliminated from the balance sheet.
The Partnership accounts for its investments in its three
remaining investee entities under the equity method. In general,
under the equity method of accounting for investments, the
investment is recorded at cost and the current allocable portion
of earnings (losses) of an Investee Entity is recorded as
income (loss) with a corresponding increase (decrease) to the
investment account. The allocable portion of losses of an
Investee Entity are not recorded after the respective investment
account is reduced to zero. The allocable portion of earnings of
an Investee Entity are not recorded until all previously
unrecorded losses are absorbed. The Partnership's allocable
share of operating income and/or losses in investee entities
range from 50% to 99%.
Distributions received are recorded as reductions to the
investment account. Distributions received from an Investee
Entity whose respective investment account has been reduced to
zero are recorded as income.
As of September 30, 1999, 402 Julia leased 100% of both its
residential units and commercial space. 402 Julia has benefited
from a relatively strong New Orleans market and continues to
record stable operations. 402 Julia rents units to residential
tenants, half of which are under short-term operating leases with
the remaining rented under month-to-month arrangements. For the
nine months ended September 30, 1999, 402 Julia recorded total
net income of approximately $13,600 of which included
depreciation and amortization of approximately $32,900 total.
At September 30, 1999, Portland Lofts had leased approximately
93% of its residential apartment units and 100% of the commercial
space for a combined occupancy of 95%. Portland Lofts rents
space to residential tenants principally under month-to-month
arrangements and to commercial tenants under operating leases of
varying terms expiring through 2004. As of September 30, 1999,
the Partnership had entered into eighteen commercial leases. The
Partnership's largest commercial tenant occupancies 23% of the
commercial space at September 30, 1999, representing only 5.8% of
the total square feet of the property. For the nine months ended
September 30, 1999, Portland Lofts recorded total net income of
approximately $26,600 of which included depreciation and
amortization of approximately $214,300.
TCAMP operates its 255 unit residential property in the
competitive lowertown district of St. Paul, Minnesota with
traditional, annual operating leases to individuals that expire
within one year of signing. Despite the availability of low
mortgage rates in the single family house market, the building
has increased rental rates with the market and maintained
occupancy above 95% for several years.
For the nine months ended September 30, 1999, TCAMP had an
economic occupancy of 97%. For the nine months ended September
30, 1999, TCAMP recorded total net income of approximately
$371,800, which included depreciation and amortization expense of
approximately $200,300.
In 1990, the Partnership fully reserved against its investment
in Portland Lofts, due to the substantial doubt it would
continue as a going concern. Due to the debt settlement and
refinancing completed in June 1996, Portland Lofts is expected
to continue as a going concern.
16
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
For the year ended December 31, 1997, Portland Lofts allocated a
net loss of $173,710 and cash distributions of $156,000 to
HPP'89. Generally, under the equity method of accounting, an
investment may not be carried below zero. During 1997, HPP'89's
investment in Portland Lofts was reduced to zero due to
allocation of losses and distributions received. Accordingly,
HPP'89 had cumulative unrecorded losses at December 31, 1998 of
$90,987. For the nine months ended September 30, 1999, HPP'89
recognized net income of $26,295, thereby reducing unrecorded
losses from the Portland Lofts investment to $64,692 as of
September 30, 1999. Distributions received from Portland Lofts
for each of the nine months ended September 30, 1999 and 1998
totaled $117,000 and were recorded as equity income of investee
entities. Although HPP'89's investment in Portland Lofts has
been reduced to zero, Portland Lofts is expected to continue as a
going concern and to continue to provide distributions to
HPP'89.
The Partnership recorded net income, under generally accepted
accounting principles, of $144,041 for the three months ended
September 30, 1999, compared to net income of $1,086 for the
three months ended September 30, 1998. The increase in net
income is primarily attributable to increases in interest and
other income of approximately $113,800 and equity in income of
investee entities of approximately $35,000. The increase in
interest and other income is due to the collection of
approximately $113,800 from the developer of Jenkins Court's
interest in an unaffiliated limited partnership, as payment on a
default loan. The increase in income of investee entities is due
to the operating activities from TCAMP and 402 Julia. HPP'89's
allocated net income from TCAMP increased by approximately
$19,800 for the three months ended September 30, 1999 compared to
the three months ended September 30, 1998. TCAMP's net income
increased due to an increase in rental income, as a result of
higher apartment rental rates. TCAMP's average apartment rental
rate increased approximately 7% in the three months ended
September 30, 1999 compared to the same period of 1998. HPP'89
allocated net loss from 402 Julia decreased by approximately
$15,000 for the three months ended September 30, 1999 compared to
the three months ended September 30, 1998. 402 Julia's net loss
decreased due to an increase in rental income, as a result of
increases in occupancy and rental rates, and a decrease in
professional fees. Professional fees decreased as a result of
the refinancing of the property's mortgage in July 1998.
The Partnership recorded net income, under generally accepted
accounting principles, of $251,418 for the nine months ended
September 30, 1999 compared to net income of $38,145 for the nine
months ended September 30, 1998. The increase in net income is
primarily attributable to increases in income of investee
entities of approximately $119,000 and interest and other income
of approximately $113,000 offset by increase in operating and
administrative expenses of approximately $18,900. The increase
in equity in income of investee entities is due to the operating
activities from TCAMP and 402 Julia. HPP'89's allocated net
income from TCAMP increased by approximately $88,400 for the nine
months ended September 30, 1999 compared to the same period in
1998, due to increases in apartment and furniture rental income
and a decrease in real estate tax expense. TCAMP's average
apartment rental rate increased by approximately 9% in the nine
months ended September 30, 1999 compared to the nine months ended
September 30, 1998. HPP'89's allocated net income from 402 Julia
increased approximately $30,700 for the nine months ended
September 30, 1999 compared to the same period in 1998, as a
result of an increase in rental income, as a result of increases
in occupancy and higher rental rates and decreases in interest
and professional fee expenses. Interest and professional fee
expenses of 402 Julia decreased as a result of the refinancing of
property's mortgage in July 1998. The increase in interest and
other income is primarily due to the collection of approximately
$113,800 from the developer of Jenkins Court's interest in an
unaffiliated limited partnership, as payment on a default loan.
Operating and administrative expenses of the Partnership
increased in the nine months ended September 30, 1999 compared to
the same period in 1998, as a result of increased costs for audit
and tax preparation.
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, principally investments in Investee Entities, are
highly leveraged in view of the fact that each Investee property
is subject to a long-term first mortgage loan. Operating
expenses and rental revenue of each Investee property are
subject to inflationary factors. Low rates of inflation
could
17
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1999
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 and its Investees 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 and Investee 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.
Year 2000 Issues
The Partnership and its Investee Entities have analyzed the
effect of the Year 2000 on their respective financial and
computer systems and have incorporated and/or expect to have
incorporated the necessary modifications to avert any negative
consequences. The Partnership does not anticipate Year 2000
issues to have any material effect on its operations or the
operations of the Investee Entities, or incur substantial costs
to address Year 2000 issues.
18
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
SEPTEMBER 30, 1999
Item 1. Legal Proceedings
The Partnership is not a party to, to the best knowledge of the
General Partner, any material pending legal proceedings.
To the best knowledge of the General Partner, Jenkins Court
Associates L.P., Portland Lofts Associates L.P., 402 Julia
Street Associates L.P. nor The Cosmopolitan at Mears Park, LCC
are not 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
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.
19
<PAGE>
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 1, 1999 By: /s/ Terrence P. Sullivan
Terrence P. Sullivan,
President
and
Date: November 1, 1999 By: /s/ Terrence P. Sullivan
Terrence P. Sullivan,
General Partner
20
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 231,559
<SECURITIES> 0
<RECEIVABLES> 67,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,096,191
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,096,191
<SALES> 0
<TOTAL-REVENUES> 118,199
<CGS> 0
<TOTAL-COSTS> 176,157
<OTHER-EXPENSES> (309,376)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 251,418
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 251,418
<EPS-BASIC> 9.36
<EPS-DILUTED> 9.36
</TABLE>
