<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarter ended September 30, 2000
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
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
FORM 10-QSB
SEPTEMBER 30, 2000
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 7-12
Management's Discussion and Analysis of Financial
Condition or Plan of Operation 13-15
PART II - Other Information 16
Signatures 17
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
-------------------- --------------------
(Unaudited)
INVESTMENTS IN INVESTEE ENTITIES $ 4,107,569 $ 4,060,681
Less reserve for realization of investments
In Investee entity (3,469,267) (3,469,267)
-------------------- --------------------
638,302 591,414
CASH EQUIVALENTS 605,307 476,949
OTHER ASSETS 64,559 64,000
-------------------- --------------------
$ 1,308,168 $ 1,132,363
==================== ====================
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 41,992 $ 43,686
-------------------- --------------------
Total liabilities 41,992 43,686
-------------------- --------------------
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 1,484,850 1,309,126
General Partner's Deficit (218,674) (220,449)
-------------------- --------------------
Total partners' equity 1,266,176 1,088,677
-------------------- ---------------------
$ 1,308,168 $ 1,132,363
==================== ====================
</TABLE>
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, 2000 AND 1999
AND
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES:
Interest and other income $ 5,331 $ 1,295 $ 18,841 $ 4,447
EXPENSES:
Operating and administrative 69,797 60,367 230,230 176,157
---------------- --------------- --------------- ---------------
LOSS FROM OPERATIONS (64,466) (59,072) (211,389) (171,710)
EQUITY IN INCOME OF
INVESTEE ENTITIES 148,093 203,113 388,888 423,128
---------------- --------------- --------------- ---------------
NET INCOME $ 83,627 $ 144,041 $ 177,499 $ 251,418
================ =============== =============== ===============
NET INCOME ALLOCATED
TO GENERAL PARTNER $ 836 $ 1,440 $ 1,775 $ 2,514
================ ================ =============== ===============
NET INCOME ALLOCATED
TO LIMITED PARTNERS $ 82,791 $ 142,601 $ 175,724 $ 248,904
================ ================ =============== ===============
NET INCOME PER UNIT OF
INVESTOR LIMITED PARTNERSHIP
INTEREST, BASED ON 26,588 UNITS
ISSUED AND OUTSTANDING $ 3.12 $ 5.36 $ 6.61 $ 9.36
================ =============== =============== ===============
</TABLE>
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, 2000 AND
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Units of
Investor Investor
Limited Limited General
Partnership Partners' Partner's
Interest Equity Deficit Total
-------------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1998 26,588 $ 1,033,973 $ (223,228) $ 810,745
Net Income - 275,153 2,779 277,932
-------------- ----------------- ---------------- ------------------
BALANCE, December 31, 1999 26,588 1,309,126 (220,449) 1,088,677
Net Income (unaudited) - 175,724 1,775 177,499
-------------- ----------------- ---------------- ------------------
BALANCE, September 30, 2000 (unaudited) 26,588 $ 1,484,850 $ (218,674) $ 1,266,176
============== ================= ================ ==================
</TABLE>
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, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 177,499 $ 251,418
Adjustment to reconcile net income to
net cash provided by (used in) operating activities:
Equity in income in investee entities under
distributions received (46,888) (192,376)
Decrease (Increase) in other assets (559) 5,850
Decrease in accounts payable and accrued expenses (1,694) (4,314)
------------------ ------------------
Net cash provided by operating activities 128,358 60,578
------------------ -----------------
NET INCREASE IN CASH EQUIVALENTS 128,358 60,578
CASH EQUIVALENTS, BEGINNING OF PERIOD 476,949 170,981
------------------ -----------------
CASH EQUIVALENTS, END OF PERIOD $ 605,307 $ 231,559
================== =================
</TABLE>
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, 2000
(UNAUDITED)
(1) Organization and General Partner - BHP
Historic Preservation Properties 1989 Limited Partnership (HPP'89) 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, 2000, BHP is the
general partner of 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 principles for interim
financial information and generally with instructions to Form 10-QSB
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,
2000 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2000. 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, 1999 for
HPP'89, as filed with the Securities and Exchange Commission.
Certain amounts in the 1999 Statements of Operations have been
reclassified to conform to the 2000 presentation.
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies
HPP'89 currently has general partnership interests in two Investee
Entities and is a managing member in another Investee Entity. HPP'89
also had a general partnership interest in a former Investee Entity,
Jenkins Court.
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 members, 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 members. In addition, each Investee Entity has entered into
various agreements with its local general partners or members, or their
affiliates, to provide development, management and other services, for
which the local general partners or other members (or their
affiliates), are paid fees by the respective Investee Entity.
Following is a summary of information regarding the Investee Entities
and HPP'89's investments therein:
7
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
(UNAUDITED)
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
Jenkins Court Associates Limited Partnership (Jenkins Court) was 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 originally 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 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 owned investment property or had
property operations after August 31, 1995, the Jenkins Court
partnership remained in existence until December 31, 1999 to resolve
certain partnership assets and liabilities.
In September 1999, HPP'89 collected $113,752 from the proceeds of the
collateral securing a $250,000 default loan receivable by HPP'89 from
Jenkins Court. The $250,000 previously provided to Jenkins Court was
initially recorded as a reduction to equity in income of investee
entities by HPP'89. The $113,752 received during the year ended
December 31, 1999 was included in equity in income of investee
entities. 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 effective 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. During the nine months ended September 30, 2000, the
economic occupancy of its residential units was 96% and the economic
occupancy for its commercial space was 100% for a combined economic
occupancy of 97%.
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, 2000
(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, 2000 and December 31, 1999, the remaining uncollected
payments totaled $60,500 and $64,000, respectively, 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's Limited Partners totaled $248,796 since
inception. As of March 31, 1995, 100% of these credits were fully
vested.
HPP'89 recorded net income from the 402 Julia Investment of $24,800 and
$8,899, respectively, for the nine months ended September 30, 2000 and
1999, as well as amortization of $2,439 for each of the nine months
ended September 30, 2000 and 1999.
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. During the
nine months ended September 30, 2000, the economic occupancy of its
residential units was 88% and the economic occupancy for its commercial
space was 97% for a combined economic occupancy of 90%.
HPP'89 originally contributed $3,820,000 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.
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 be able to continue as a going concern. However, due
to a debt refinancing completed in June 1996, Portland Lofts is now
expected to continue as a going concern.
Generally, under the equity method of accounting, an investment may not
be carried below zero. Also, all prior cumulative unrecorded losses of
an investment must be taken into account in recording the balance of
such investment. As of September 30, 2000, the net cumulative activity
produced by the Portland Lofts investment since inception has resulted
in a net cumulative unrecorded loss. For the nine months ended
September 30, 2000, HPP'89 was allocated net income of $21,371 from
Portland Lofts, thereby as of September 30, 2000, the cumulative
unrecorded loss relating to the Portland Lofts investment totaled
$18,830. For the nine months ended September 30, 1999, HPP'89 was
allocated net income of $26,295 from Portland Lofts.
For each of the nine months ended September 30, 2000 and 1999, HPP'89
received distributions of $117,000 from the Portland Lofts investment
and such distributions were recorded as equity in income of investee
entities.
9
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
(UNAUDITED)
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
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. During the nine months ended September 30, 2000,
the economic occupancy of TCAMP was 94%.
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.
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. As of March 15, 1996, the
Partnership accounts for its investment in TCAMP under the equity
method of accounting.
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 member's original $650,000 capital contribution
had been repaid in full, 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.
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. 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.
HPP'89 recorded net income of $249,527 and $185,916 for the nine months
ended September 30, 2000 and 1999, respectively, from the TCAMP
Investment. HPP'89 received cash distributions of $225,000 from TCAMP
for the nine months ended September 30, 2000. As of September 30, 2000,
HPP'89 had $97,894 of undistributed cumulative earnings from the TCAMP
investment.
The equity in income of Investee Entities reflected in the accompanying
statements of operations include income of $391,327 and $425,567 for
the nine months ended September 30, 2000 and 1999, respectively, and
amortization of certain costs of $2,439, for the nine months ended
September 30, 2000 and 1999, respectively.
HPP'89's investments in the Investee Entities (excluding Jenkins
Court) at September 30, 2000 and December 31, 1999 are summarized as
follows:
10
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
(UNAUDITED)
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
<TABLE>
<CAPTION>
Cumulative: 2000 1999
--------------------- ---------------------
(Audited)
<S> <C> <C>
Investment 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 (91,804) (483,131)
Reserves for realization of investments (3,469,267) (3,469,267)
Amortization of certain costs (55,419) (52,980)
Distributions received from Investee Entities (1,259,200) (917,200)
Sale of one third interest of Investee Entity (241,620) (241,620)
--------------------- ---------------------
$ 638,302 $ 591,414
===================== =====================
</TABLE>
Summary combined balance sheets of the Investee Entities as of
September 30, 2000 and December 31, 1999, and summary combined
statements of operations for the nine months ended September 30, 2000
and 1999 are as follows (excluding the Jenkins Court Investment).
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
2000 1999
------------------ -------------------
(Audited)
<S> <C> <C>
Buildings and improvements, (net of accumulated
Depreciation; $4,387,532, 2000; $4,004,320, 1999) $ 14,599,158 $ 14,878,362
Land 2,041,326 2,041,326
Other assets (net of accumulated amortization;
$217,455, 2000; $174,866, 1999) 477,474 437,574
Cash and cash equivalents 575,162 453,186
------------------ -------------------
Total assets $ 17,693,120 $ 17,810,448
================== ===================
LIABILITIES AND PARTNERS' EQUITY
2000 1999
------------------ -------------------
Liabilities:
Mortgage and notes payable $ 12,999,923 $ 13,151,807
Other liabilities 744,021 687,191
------------------ ------------------
Total liabilities 13,743,944 13,838,998
------------------ ------------------
Partners' equity:
HPP'89 2,747,772 2,794,074
Other partners 1,201,404 1,177,376
------------------ ------------------
Total partners' equity 3,949,176 3,971,450
------------------ ------------------
Total liabilities and partners' equity $ 17,693,120 $ 17,810,448
================== ==================
</TABLE>
Members' equity in TCAMP has been classified as partners' equity in
the combined balance sheets.
11
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2000
(UNAUDITED)
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF OPERATIONS
2000 1999
------------------- ----------------
<S> <C> <C>
Revenue:
Rental revenue $ 3,230,083 $ 3,082,945
Interest and other income 77,921 66,604
---------------- ----------------
3,308,004 3,149,549
---------------- ----------------
Expenses:
Interest expense 896,586 907,832
Depreciation and amortization 424,927 447,554
Operating expenses 1,427,890 1,382,150
------------------- ----------------
2,749,403 2,737,536
------------------- ----------------
Net income from operations $ 558,601 $ 412,013
=================== ================
Net income allocated to HPP'89 $ 295,698 $ 221,108
=================== ================
Net income allocated to other partners $ 262,903 $ 190,905
=================== ================
</TABLE>
(4) Commitments
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 plus reimbursement of all its costs of providing
these services. Through June 30, 2000 the annual fee was $63,000,
however, effective July 1, 2000 the annual fee was reduced to $54,000.
The agreement expires on the earlier of June 30, 2006 or liquidation of
the Partnership, as defined.
(5) Fair Value of Financial Instruments
The fair values of cash equivalents and accounts payable and accrued
expenses at September 30, 2000 and December 31, 1999 approximate their
carrying amounts due to their short maturities.
12
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION
SEPTEMBER 30, 2000
The following discussion should be read in conjunction with the accompanying
financial statements for the nine month periods ended September 30, 2000 and
September 30, 1999 and the Form 10-K for the year ended December 31, 1999.
Special Note Regarding Forward-Looking Statements. Certain statements in this
report may constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended to
identify these forward-looking statements. The Partnership's actual results
could differ materially from those anticipated in these forward-looking
statements. Limited partners, potential investors and other readers are urged to
consider that factor and are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements included herein are
made as of the date of this report, and the Partnership undertakes no obligation
to publicly update such forward-looking statements to reflect subsequent events
or circumstances. 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.
Portland Lofts is a mix-use property located in Portland, Oregon with 89
residential units and 29,250 square feet of commercial space. 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 refinance its mortgage debt and pay in full certain other
debt and all related closing costs.
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 $1,100,000.
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,
13
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION (CONTINUED)
SEPTEMBER 30, 2000
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. The Jenkins Court
partnership remained in existence through December 31, 1999 until the resolution
of certain partnership assets and liabilities.
As of September 30, 2000, the Partnership had $605,307 of total cash. HPP'89's
cash is used primarily to fund general and administrative expenses of managing
the public fund. The Partnership's only source of short-term liquidity is from
distributions received from Investee Entities. The Partnership expects to
continue to fund its expenses with cash flow distributions from Portland Lofts
and TCAMP.
The short-term liquidity of the Investee Entities 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
TCAMP and Portland Lofts are expected to generate cash flow. The Partnership
received distributions from Portland Lofts of $117,000 for each of the nine
months ended September 30, 2000 and 1999. The Partnership received distributions
from TCAMP of $225,000 for the nine months ended September 30, 2000.
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. The Partnership recorded net income, under generally
accepted accounting principles, of $83,627 for the three months ended September
30, 2000, compared to net income of $144,041 for the three months ended
September 30, 1999. This decrease in net income is primarily attributed to a
decrease in equity in income from investee entities of approximately $55,000 and
an increase in operating and administrative expenses of approximately $9,000.
Equity in income from investee entities decrease mainly due to the proceeds of
$113,752 received in September of 1999 from the developer of Jenkins Court,
offset by increases in HPP'89's allocated net income from TCAMP of approximately
$47,900 and 402 Julia of approximately $11,000, for the three months ended
September 30, 2000 compared to the same period in 1999. The proceeds received
from the developer of Jenkins Court represents payment on the default loan which
had been provided by the Partnership and secured by the developer's interest in
an unaffiliated limited partnership. 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. No
other funds will be paid to the partnership from Jenkins Court. HPP'89's
allocated net income from TCAMP increased for the three months ended September
30, 2000, as compared to the same period in 1999, due to increases in rental
income, as a result of increased rental rates, and newly assessed parking income
and a decrease in depreciation. HPP'89's allocated net income from 402 Julia
increased primarily due to an increase in rental income, as a result of
increased rental rates. Operating and administrative expenses increased for the
three months ended September 30, 2000 compared to the three months ended
September 30, 1999 mainly due to increases in overhead costs and professional
fees. These professional fees consisted of approximately $3,750 of nonrecurring
third party costs and approximately $2,500 for additional SEC financial review
requirements.
The Partnership recorded net income, under generally accepted accounting
principles, of $177,499 for the nine months ended September 30, 2000, compared
to net income of $251,418 for the nine months ended September 30, 1999. This
decrease in net income is attributed to an increase in administrative expenses
of approximately $54,000 and by a decrease in equity income of investee entities
of approximately $34,000, offset by an increase in interest and other income of
approximately $14,400. The decrease in equity in income of investee entities is
due to the proceeds received in September 1999 from the developer of Jenkins
Court offset by operating activities from TCAMP and 402 Julia. HPP'89 is
allocated net income from TCAMP increased by approximately $63,600, for
14
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HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION (CONTINUED)
SEPTEMBER 30, 2000
the nine months ended September 30, 2000 as compared to the same period in 1999,
due to increases in rental income, as a result of increased rental rates, and
newly assessed parking income and a decrease in depreciation. HPP'89 was
allocated net income from 402 Julia increased by approximately $16,000 for the
nine months ended September 30, 2000, compared to the same period in 1999,
primarily due to increased rental income. The proceeds received from the
developer of Jenkins Court in September 1999 is discussed above. Operating and
administrative expenses increased for the nine months ended September 30, 2000,
compared to the same period in 1999, due to increases in overhead costs and
professional fees. These professional fees consisted of approximately $14,400 of
nonrecurring third party costs and approximately $7,500 for additional SEC
financial review requirements.
15
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HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
SEPTEMBER 30, 2000
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 Senior 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.
16
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HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant 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, 2000 By: /s/ Terrence P. Sullivan
Terrence P. Sullivan
President
and
Date: November 1, 2000 By: /s/ Terrence P. Sullivan
Terrence P. Sullivan
General Partner
