UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 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, Massachusetts 02109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 338-6900
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Voting stock held by non-affiliates of the registrant: Not Applicable.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Part of the Form 10-K Document
into which Incorporated Incorporated by Reference
I Prospectus of the registrant dated December
19, 1988 (the "Prospectus").
III The Prospectus.
<PAGE>
K-2
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Sequential
Page No. Page No.
PART I
Item 1 Business K- 3 4
Item 2 Properties K- 7 8
Item 3 Legal Proceedings K- 7 8
Item 4 Submission of Matters to a
Vote of Unit Holders K- 7 8
PART II
Item 5 Market for the Registrant's
Units and Related Unit
Holder Matters K- 8 9
Item 6 Selected Financial Data K- 9 10
Item 7 Management's Discussion and
Analysis of Financial
Condition and Results of
Operations K-10 11
Item 8 Financial Statements and
Supplementary Data K-16 17
Item 9 Changes In and Disagreements
with Accountants on Accounting
and Financial Disclosure K-16 17
PART III
Item 10 Director and Executive
Officer of the Registrant K-17 18
Item 11 Executive Compensation K-18 19
Item 12 Unit Ownership of Certain
Beneficial Owners and
Management K-18 19
Item 13 Certain Relationships and
Related Transactions K-19 20
PART IV
Item 14 Exhibits, Financial Statement
Schedules and Reports on
Form 8-K K-20 21
SIGNATURES K-21 22
SUPPLEMENTAL INFORMATION K-22 23
PART I
Item 1. Business
Historic Preservation Properties 1989 Limited Partnership (HPP'89, also referred
to as the Partnership), a Delaware limited partnership, was organized under the
Delaware Revised Uniform Limited Partnership Act on September 1, 1988, for the
purpose of investing in a diversified portfolio of real properties which
qualified for rehabilitation tax credits (Rehabilitation Tax Credits) afforded
by Section 47 of the Internal Revenue Code of 1986, as amended (the Code), and
rehabilitating such properties (or acquiring such properties in the process of
rehabilitation and completing such rehabilitation) in a manner intended to
render the cost of such rehabilitation eligible for classification as "Qualified
Rehabilitation Expenditures", as such term is defined in the Code, and thus
eligible for Rehabilitation Tax Credits. The Partnership was initially
capitalized with contributions of $100 from its general partner and $100 from
each of three initial limited partners. On September 2, 1988, the Partnership
filed a Registration Statement on Form S-11, File Number 33-24129 (the
Registration Statement), with the Securities and Exchange Commission (the
Commission) with respect to the public offering of units of limited partnership
interest (Units) in the Partnership. The Registration Statement, covering the
offering of up to 100,000 Units at a purchase price of $1,000 per Unit (an
aggregate of $100,000,000), was declared effective on December 19, 1988. The
offering of Units terminated on December 29, 1989, at which time the Partnership
had received gross offering proceeds of $26,588,000 from 2,505 investors.
The general partner of the Partnership is Boston Historic Partners Limited
Partnership (the General Partner), a Massachusetts limited partnership. The
general partners of the General Partner are (i) Portfolio Advisory Services,
Inc. (PAS), a Massachusetts corporation organized for the purpose of acting as a
general partner of the General Partner, and (ii) Terrence P. Sullivan
(Sullivan). Limited partnership interests in the General Partner are held by
investors unaffiliated with the General Partner (except for an approximately
one-half percent limited partnership interest which is owned by Sullivan).
The Partnership does not have any employees.
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 The Cosmopolitan at Mears Park
to provide asset management, accounting and investor services for an annual fee
of $76,800 and reimbursement of all operating expenses of providing such
services. Commencing July 1, 1996, the annual fee for such services was reduced
to $67,200. The contract with CMC, which originally expired on June 30, 1997,
was renewed until June 30, 1998. On July 1, 1998, HPP'89 engaged Gunn Financial,
Inc. (GFI), an unaffiliated Massachusetts Corporation, to provide asset
management, accounting and investor services for an annual fee of $63,000 and
reimbursement of all operating expenses of providing such services. The
agreement expires on the earlier of June 30, 2006 or the liquidation of the
Partnership, as defined. The Partnership's only business is investing in real
properties for which the cost of rehabilitating such properties qualifies for
Rehabilitation Tax Credits. A presentation of information about industry
segments is not applicable and would not be helpful in understanding the
Partnership's business taken as a whole. The Partnership's investment objectives
and policies are described on pages 28-36 of its Prospectus dated December 19,
1988 (the Prospectus) under the caption "Investment Objectives and Policies",
which description is incorporated herein by this reference. The Prospectus was
filed with the Commission pursuant to Rule 424 (b) on January 5, 1989.
The Partnership originally invested an aggregate of $11,158,064 in three limited
partnerships (collectively, the "Investee Partnerships") through the acquisition
of general partnership interests in the Investee Partnerships, each of which
owned or acquired real properties, the rehabilitation of which qualified for
Rehabilitation Tax Credits. The Partnership also originally invested $5,000,000
in a real property that the Partnership purchased directly (the Cosmopolitan
Building), as well as $2,000,000 in operating reserves for such property. As of
December 31, 1999, 100% of the Limited Partners' capital contributions (net of
selling commissions, organizational and sales costs, acquisition fees and
reserves) had been invested in real property investments.
As discussed below, in March 1996, the Partnership contributed its interest in
the property it owned directly to an Investee Limited Liability Company, of
which the Partnership maintained an interest.
The Investee Partnerships and the Investee Limited Liability Company 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 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 an other member, or their
affiliates, to provide development, management and other services, for which the
local general partners, other member, or their affiliates, are paid fees by the
respective Investee Entity. All the Investee Entities are subject to first
mortgage loans (except for Jenkins Court Associates Limited Partnership, as
discussed below). See Management's Discussion and Analysis of Financial
Condition and Results of Operations included as part of this Annual report on
Form 10-K for further detail.
The Investee Entities of the HPP'89 are 402 Julia Street Associates Limited
Partnership, Jenkins Court Associates Limited Partnership (liquidated
effective December 31 1999), The Cosmopolitan at Mears Park LLC and Portland
Lofts Associates Limited Partnership.
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.
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.
On September 16, 1993, the Partnership sold one-third of its general partnership
interest in 402 Julia to the developer general partner. The Partnership's
percentage interest in 402 Julia was thereby reduced from 98% to 65%.
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.
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 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.
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
unlikelihood of a successful plan of reorganization, Jenkins Court negotiated
with the mortgage holder to transfer the deed and title of the property to the
mortgage holder in lieu of foreclosure. 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,
98.5% of the Limited Partners' tax credits were vested prior to the loss of the
property. 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.
On December 18, 1989, HPP'89 acquired the Cosmopolitan Building (The
Cosmopolitan) 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 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.
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.
In March 1996, the Partnership contributed The Cosmopolitan and certain other
assets and liabilities to The Cosmopolitan at Mears Park, LLC (TCAMP), a
Delaware limited liability company, for a 50% ownership interest in TCAMP.
Concurrently, a party related to CMC contributed $650,000 in cash to TCAMP for a
50% ownership interest in TCAMP. Simultaneously, TCAMP issued a mortgage note,
the proceeds of which, along with the $650,000 cash contribution, were used to
settle in full the Partnership's mortgage note related to The Cosmopolitan.
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
including 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.
HPP'89 contributed $3,820,000 through December 31, 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.
The Investee Entities are, and will continue to be, subject to competition from
existing and future projects in their respective geographic areas. The success
of the Partnership will depend on factors, many of which are beyond the control
of the Partnership and which cannot be predicted at this time. Such factors
include general economic and real estate market conditions, both on a national
basis and in those geographic areas where the projects are located, the
availability and cost of borrowed funds, real estate tax rates, operating
expenses, energy costs and government regulations. In addition, other risks
inherent in real estate investment may influence the ultimate success of the
Partnership, including (i) possible reduction of rental income due to an
inability to maintain high occupancy levels or adequate rental levels, or (ii)
possible adverse changes in general economic conditions and adverse local
conditions, such as competitive overbuilding, or a decrease in employment or
adverse changes in real estate laws, including building codes. In particular,
changes in federal and state income tax laws affecting real estate ownership or
limited partnerships could have a material and adverse effect on the business of
the Partnership.
Item 2. Properties
See Item 1 above.
Item 3. Legal Proceedings
The Partnership and its Investee Entities are not party to, to the best
knowledge of the General Partner, any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Unit Holders.
No matters were submitted to a vote of Unit holders.
<PAGE>
PART II
Item 5. Market for Registrant's Units and Related Unit Holder Matters.
(a) There is no established public market for the Units and no such market
is expected to develop. Trading in the Units is limited and sporadic
and occurs solely through private transactions.
(b) As of March 15, 2000, there were 2,520 holders of Units.
The Amended and Restated Agreement of Limited Partnership (the Partnership
Agreement) requires that any Cash Flow (as defined therein) be distributed
quarterly to the investor limited partners (Limited Partners) in specified
proportions and priorities and that Sale or Refinancing Proceeds (as defined
therein) be distributed as and when available. There are no restrictions on the
Partnership's present or future ability to make distributions of Cash Flow or
Sale or Refinancing Proceeds. For the years ended December 31, 1999, 1998 and
1997, no distributions of Cash Flow or Sale or Refinancing Proceeds were paid or
accrued to the Limited Partners.
<PAGE>
Item 6. Selected Financial Data.
Periods Ended
December 31,
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------------- ------------- --------------- ---------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Revenue $ 7,943 $ 6,667 $ 8,912 $ 552,395 $ 2,164,691
Net Income (Loss) $ 277,932 $ 60,571 $ (96,522) $ 43,848 $ (1,928,010)
Net Income (Loss) per weighted average
Unit outstanding:
Loss before extraordinary gain $ 10.35 $ 2.26 $ (3.59) $ (324.25) $ (71.79)
Extraordinary gain - $ - $ - $ 341.89 $ -
Net Income (Loss) $ 10.35 $ 2.26 $ (3.59) $ 17.64 $ (71.79)
Total Assets as of December 31, $1,132,363 $ 849,087 $ 783,736 $ 892,540 $ 17,160,719
Long Term Debt, excluding discount
as of December 31, $ 0 $ 0 $ 0 $ 0 $ 17,579,606
Cash Distributions per weighted
average Unit Outstanding $ 0 $ 0 $ 0 $ 0 $ 0
Rehabilitation Tax Credit per Unit $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
See Item 7 for a discussion of the factors that may materially affect the
foregoing information in future years.
K-9
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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 with traditional, annual
operating leases to individuals that expire within one year of signing. This 255
unit building operates in a very competitive lowertown St. Paul, Minnesota
market.
Effective March 15, 1996, HPP'89 contributed The Cosmopolitan, 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. 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 $90,803; the
mortgage matures in March 2003, at which time all unpaid principal and accrued
interest is due. After March 14, 1996, HPP'89 no longer had any operations
directly related to real estate activity or generated cash from rental activity
of The Cosmopolitan. As of March 15, 1996, the Partnership accounts for its
investment in TCAMP under the equity method of accounting.
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.
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. These liabilities included, among others, a $250,000 default loan
<PAGE>
and accrued interest thereon, which had 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 is not expected to be liable as a
general partner of Jenkins Court for any remaining obligations of Jenkins Court.
In September 1999, HPP'89 collected $113,752 from the proceeds of the collateral
securing HPP'89's default loan receivable 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 is 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 by December 31, 1999.
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.
Portland Lofts is a mix-use property 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 pay in full all
of Portland Lofts' mortgage and other debt as well as all related closing costs.
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 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 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 tax 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 the year ended December 31, 1999, the Partnership
<PAGE>
received distributions from Portland Lofts and TCAMP totaling $156,000 and
$250,000, respectively. For the year ended December 31, 1998, the Partnership
received distributions from Portland Lofts and TCAMP totaling $156,000 and
$75,000, respectively, and for the year ended December 31, 1997, the Partnership
received distributions from Portland Lofts totaling $156,000.
As of December 31, 1999 and 1998, the Partnership had $476,949 and $170,981,
respectively, of total cash and cash equivalents. 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 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.
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.
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. As a result of the contribution of The Cosmopolitan to
TCAMP for a 50% ownership interest in TCAMP, subsequent to March 14, 1996 HPP'89
no longer had operations directly related to real estate activity. As of the
date of contribution, the Partnership accounts for its investment in TCAMP under
the equity method of accounting.
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
<PAGE>
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 December 31, 1999, 402 Julia leased 100% of its residential units and
commercial space. 402 Julia has benefited from a relatively strong New Orleans
market and continues to record stable operations in recent years. 402 Julia
rents units to residential tenants, and at December 31, 1999 approximately half
of which are under short-term operating leases expiring within one year from
signing with the remaining rented under month-to-month arrangements. For the
year ended December 31, 1999, 402 Julia recorded net income of approximately
$10,200 which included depreciation and amortization of approximately $43,800.
At December 31, 1999, Portland Lofts had leased approximately 89% of its
residential apartment units and 100% of the commercial space for a combined
occupancy of 92%. 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 December 31, 1999, the
Partnership had entered into twelve commercial leases with the remaining
commercial tenants under month-to-month agreements. The Partnership's largest
commercial tenant occupancies 23% of the commercial space at December 31, 1999,
representing only 5.8% of the total square feet of the property. For the year
ended December 31, 1999, Portland Lofts recorded net income of approximately
$51,300 which included depreciation and amortization of approximately $285,900.
TCAMP operates in the competitive lowertown district of St. Paul, Minnesota.
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.
TCAMP has achieved stable occupancy and had an economic occupancy of 97% for the
year ended December 31, 1999. TCAMP recorded net income of approximately
$466,600, which included depreciation and amortization expense of approximately
$278,700, for the year ended December 31, 1999.
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. 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, 1997 totaling $95,391 and recorded distributions received
of $54,203 as equity income of Investee Entities. Although HPP'89's investment
in Portland Lofts has been reduced to zero,Portland Lofts has stabilized
operations and will continue to provide distributions to HPP'89.
<PAGE>
For the years ended December 31, 1999 and 1998, the Partnership was allocated
net income of $50,786 and $4,404, respectively, from the Portland Lofts
investment, reducing the unrecorded losses to $40,202 at December 31, 1999. For
each of the years ended December 31, 1999 and 1998, the Partnership received
distributions of $156,000 from Portland Lofts which are recorded as equity
income of Investee Entities.
The Partnership recorded net income, under generally accepted accounting
principles, of $277,932 for the year ended December 31, 1999, compared to net
income of $60,671 for the year ended December 31, 1998. This increase in net
income is primarily due to the increase in equity in income of investee entities
of $236,885. This increase in the Partnership's share of equity in income from
investee entities is due to the increased allocated net income from TCAMP and
402 Julia of approximately $99,000 and $24,000, respectively, and the $113,752
received from developer of Jenkins Court. TCAMP's allocated net income increased
primarily due to an increase in rental revenue as a result of higher rental
rates. 402 Julia's allocated net income increased mainly due to a decrease in
amortization of which the 1998 activity is further discussed below. The proceeds
of $113,752 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.
The Partnership recorded net income, under generally accepted accounting
principles, of $60,571 for the year ended December 31, 1998, compared to a net
loss of $96,522 for the year ended December 31, 1997. This increase is primarily
due to the increase in equity in income of investee entities of $210,651, offset
by an increase in operating administrative expenses of $51,313. The increase in
the Partnership's share of equity in income from investee entities is mainly due
to the activity from Portland Lofts and an increase in TCAMP's allocated net
income, offset by an increase in 402 Julia's allocated net loss. As mentioned
above, the Partnership's net investment balance in Portland Lofts had been
reduced to zero in the third quarter of 1997, as a result of allocated net
losses and distributions received. Therefore, for the year ended December 31,
1997, the Partnership had recorded a net loss from Portland Lofts of $78,314
offset by distributions of $54,206 received in excess of the net investment
balance compared to distributions of $156,000 from Portland Lofts recorded as
equity income of investee entities for the year ended December 31, 1998. The
increase in TCAMP's allocated net income of $35,630 for 1998 compared to 1997,
is primarily due to increased revenue due to higher rental rates and furniture
rental, offset by a slight increase in operating expenses. The increase in 402
Julia's net loss of $6,749 for 1998 compared to 1997, is primarily attributed to
the amortization of the deferred loan commitment fee related to 402 Julia's
original mortgage which was refinanced in July of 1998. The increase in
operating and administrative expense for 1998 compared to 1997 is due to an
increased overhead requirement of the Partnership.
<PAGE>
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 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.
Item 8. Financial Statements and Supplementary Data.
See the Financial Statements of the Partnership included as part of this Annual
Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
<PAGE>
PART III
Item 10. Director and Executive Officer of the Registrant.
(a) and (b) Identification of Director and Executive Officer.
The following table sets forth the name and age of the director and executive
officer of PAS and the offices held by such person.
Name Office Age
Terrence P. Sullivan President and Director 53
Mr. Sullivan has served as a director and executive officer of PAS, which
is a general partner of the General Partner since November 1986. Since
that time, he has also been a general partner of the General Partner. He
will continue to serve in the capacity indicated above until his successor
is elected and qualified. Mr. Sullivan is also an executive officer of
Boston Capital Planning Group, Inc. (Boston Capital Planning), a
Massachusetts corporation.
(c) Certain Significant Employees.
None.
(d) Family Relationships.
None.
(e) Business Experience.
The background and experience of the executive officer and director of PAS and
Boston Capital Planning identified above in Items 10(a) and 10(b) is as follows:
Terrence P. Sullivan, 53, is the founder and sole shareholder of Boston Capital
Planning, a financial consulting and real estate syndication firm, and its
wholly-owned subsidiary, Boston Bay Capital, Inc. (Boston Bay Capital). Founded
in 1979, Boston Bay Capital was an NASD-Registered broker/dealer specializing in
placement of interests in real estate limited partnerships which own historic
and restoration properties. From 1979 through December 31, 1986, Boston Bay
Capital participated in the placement of limited partnership interests in 98
real estate programs, approximately 60 of which were historic rehabilitation or
restoration partnerships, placing a total of approximately $140,000,000 in
equity. In addition, Boston Bay Capital served as dealer manager in connection
with the sale of Units of limited partnership interest in Historic Preservation
Properties Limited Partnership, Historic Preservation Properties 1988 Limited
Partnership, the Partnership, and Historic Preservation Properties 1990 L.P. Tax
Credit Fund, four public programs sponsored by the General Partner and an
affiliate of the General Partner. Such public programs sold an aggregate of
approximately $82 million of Units of limited partnership interest. From 1972 to
1978, Mr. Sullivan was Tax Shelter coordinator for the Boston office of White,
Weld & Co., Inc., an investment banking firm. Mr. Sullivan graduated from
Worcester Polytechnic Institute in 1968 with a Bachelor of Science degree in
mechanical engineering.
<PAGE>
He received a Masters in Business Administration from the University of
Massachusetts (Amherst) in 1971. Mr. Sullivan serves as a general partner of BBC
Restoration Properties II Limited Partnership, which concluded its business
affairs December 31, 1999. In addition, an entity controlled by Mr. Sullivan
serves as the general partner of Institutional Credit Partners Limited
Partnership (ICP), a partnership organized to invest in a diversified portfolio
of properties which qualify for low-income housing tax credits, Rehabilitation
Tax Credits, or both. In 1989, ICP completed a private placement of $5,790,000
of limited partnership interest to corporations and other institutional
investors.
(f) Involvement in Certain Legal Proceedings.
None.
Item 11. Executive Compensation.
The director and executive officer of PAS and Boston Capital Planning receives
no remuneration from the Partnership.
Under the Partnership Agreement, the General Partner and its affiliates are
entitled to receive various fees, expense reimbursements, commissions, cash
distributions, allocations of taxable income or loss and tax credits from the
Partnership. The amounts of these items and the times at which they are payable
to the General Partner and its affiliates are described on pages 13-15 and 36-39
of the Prospectus under the captions "Management Compensation" and "Cash
Distributions and Net Profits and Net Losses", respectively, which descriptions
are incorporated herein by this reference.
There were no expense reimbursements paid to or accrued, for the years ended
December 31, 1999, 1998 and 1997.
For the years ended December 31, 1999, 1998 and 1997 the Partnership allocated
to the General Partner unaudited taxable income (losses) of $2,053, $(370) and
$(3,748), respectively. See Note 4 of Notes to Financial Statements for
additional information about transactions between the Partnership and related
parties.
Item 12. Unit Ownership of Certain Beneficial Owners and Management.
(a) Unit Ownership of Certain Beneficial Owners.
No person or group is known by the Partnership to be the beneficial owner of
more than 5% of the outstanding Units at March 15, 2000. Pursuant to the
Partnership Agreement, the voting rights of the Limited Partners are limited
and, in some circumstances, are subject to the prior receipt of certain opinions
of counsel or judicial decisions.
<PAGE>
Under the Partnership Agreement, the right to manage the business of the
Partnership is vested solely in the General Partner, although the consent of a
majority in interest of the Limited Partners is required for the sale at one
time of all or substantially all of the Partnership's assets and with respect to
certain other matters. See Item 1 above for a description of the General Partner
and its general partners.
(b) Unit Ownership of Management.
No director or executive officer of PAS, Boston Capital Planning or their
affiliates had any beneficial ownership of Units as of March 15, 2000. However,
a former Vice President of Boston Capital Planning purchased 20 Units ($20,000)
in the Partnership during 1989. No officer or director of PAS or Boston Capital
Planning, nor any general partner of the General Partner, nor any of their
respective affiliates, possesses the right to acquire Units.
(c) Change in Control.
There exists no arrangement known to the Partnership which may at a subsequent
date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions.
See Note 4 of Notes to Financial Statements for information about transactions
between the Partnership and related parties.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements - The Financial Statements listed on the
accompanying Index to Financial Statements and Schedules are
filed as part of this Annual Report.
2. Financial Statement Schedules - The Financial Statement
Schedules listed on the accompanying Index to Financial
Statements is filed as part of this Annual Report.
3. Exhibits - The Exhibits listed on the accompanying Index to
Exhibits are filed as part of this Annual Report and
incorporated in this Annual Report as set forth in said Index.
(b) Reports on Form 8-K - The Partnership did not file any Current
Reports on Form 8-K during the fourth quarter of 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HISTORIC PRESERVATION PROPERTIES 1989
LIMITED PARTNERSHIP
By: Boston Historic Partners Limited
Partnership, General Partner
By: Portfolio Advisory Services,
Inc., General Partner
Date: March 15, 2000 By: /s/Terrence P. Sullivan
-------------- ------------------------
Terrence P. Sullivan,
President
and
Date: March 15, 2000 By: /s/Terrence P. Sullivan
Terrence P. Sullivan,
General Partner
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature Title
Individual General Partner of Boston
Historic Partners Limited
/s/Terrence P. Sullivan Partnership and President, Principal
Terrence P. Sullivan Executive Officer and Director of
Portfolio Advisory Services, Inc.,
Date: March 15, 2000 General Partner of Boston Historic
-------------- Partners Limited Partnership.
Principal Financial and Principal
Accounting Officer of Portfolio
/s/Terrence P. Sullivan Advisory Services, Inc., General
Terrence P. Sullivan Partner of Boston Historic Partners
Limited Partnership
Date: March 15, 2000
<PAGE>
Supplemental Information to be Furnished with Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act.
An annual report will be furnished to Unit holders subsequent to filing of this
Form 10-K.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Historic Preservation Properties 1989 Limited Partnership
EXHIBITS
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
Index to Exhibits
Exhibit No. Title of Documents
3(a) Certificate of Limited Partnership
of Historic Preservation Properties
1989 Limited Partnership dated as of
August 30, 1988 (filed as an exhibit
to the Partnership's Registration
Statement of Form S-11, File No.
33-24129, and incorporated herein by
this reference).
3(b) Agreement of Limited Partnership of
Historic Preservation Properties
1989 Limited Partnership dated as of
August 30, 1988 (filed as an exhibit
to the Partnership's Registration
Statement on Form S-11, File No.
33-24129, and incorporated herein by
this reference).
3(c) Amended and Restated Agreement of
Limited Partnership of Historic
Preservation Properties 1989 Limited
Partnership dated as of December 19,
1988, as currently in effect, other
than amendments thereto which
provide solely for the admission or
withdrawal of investors as limited
partners of the Partnership (filed
as an exhibit to the Partnership's
Registration Statement of Form S-11,
File No. 33-2419, and incorporated
herein by this reference).
4(a) See Exhibits 3(a), 3(b) and 3(c).
10(a)Sales Agency Agreement between Historic
Preservation Properties 1989 Limited
Partnership and Boston Bay Capital,
Inc., dated December 19, 1989 (filed
as Exhibit No. 10(a) to the
Partnership's Form 10-K as of
December 31, 1989 and incorporated
herein by this reference).
<PAGE>
Index to Exhibits
(Continued)
Exhibit No. Title of Documents
10(b) Escrow Deposit Agreement between
Historic Preservation Properties
1989 Limited Partnership and
Wainwright Bank and Trust Company
dated December 19, 1989 (filed as
Exhibit No. 10(b) to the
Partnership's Form 10-K as of
December 31, 1989 and incorporated
herein by this reference).
10(c) Documents relating to the
acquisition of a general partnership
interest in Jenkins Court Associates
Limited Partnership (filed as part
of Post-Effective Amendment No. 1 to
the Partnership's Registration
Statement of Form S-11, File No.
33-24129, and incorporated herein by
this reference).
10(d) Documents relating to the acquisition
of a general partnership interestin
Portland Lofts Associates Limited
Partnership(filed as part of Post-
Effective Amendment No.2 to the
Partnership's Registration Statement
on Form S-11, File No. 33-24129, and
incorporated herein by this
reference).
10(e) Documents relating to the acquisition
of a general partnership interest in
402 Julia Street Associates Limited
Partnership(filed as a part of Post-
Effective Amendment No. 2 to the
Partnership's Registration Statement
on Form S-11, File No.33024129, and
incorporated by this
reference).
10(f) Documents relating to the acquisition
of the Cosmopolitan Building,St.Paul,
Minnesota.
I. Purchase and Sale Agreement
between Historic Landmarks Realty
Growth Fund: The Cosmopolitan
(the "Seller"), as Seller, and
Historic Preservation Properties
1989 Limited Partnership (the
"Partnership"), as Buyer, dated
as of July 14, 1989 (filed as
part of Post-Effective Amendment
No. 2 to the Partnership's
Registration Statement on Form
S-11, File No. 33-24129, and
incorporated herein by this
reference).
II.Amendment to Purchase and Sale
Agreement dated September, 1989,
between the Seller and the
Partnership (filed as Exhibit No.
10(f) to the Partnership's Form
10-K as of December 31, 1989 and
incorporated herein by this
reference).
III. Loan Agreement dated December
18, 1989 between the Partnership
and Meritor Savings Bank (filed
as Exhibit No. 10(f) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
IV.Allonge to First Loan Note and
Second Loan Note dated December
18, 1989, between the Partnership
and Meritor Savings Bank (filed
as Exhibit No. 10(f) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
V. Mortgage, Security Agreement,
Modification, Consolidation and
Amendment Agreement dated
December 18, 1989, between the
Partnership and Meritor Savings
Bank (filed as Exhibit No. 10(f)
to the Partnership's Form 10-K as
of December 31, 1989 and
incorporated herein by this
reference).
VI.Security Agreement dated December
18, 1989 between the Partnership
and Meritor Savings Bank (filed
as Exhibit No. 10(f) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
VII. Assignment of Leases,
Consolidation and Modification
Agreement dated December 18, 1989
between the Partnership and
Meritor Savings Bank (filed as
Exhibit No. 10(f) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
VIII. Assignment of Depository
accounts dated December 18, 1989
between the Partnership and
Meritor Savings Bank (filed as
Exhibit No. 10(f) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
IX.Assignment and Subordination of
Management and Leasing
Consolidation and Modification
Agreement dated December 18, 1989
between the Partnership and
Meritor Savings Bank (filed as
Exhibit No. 10(f) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
X. Management and Leasing Agreement
dated as of October 17, 1989
between the Partnership and
McKenna Management Associates
(filed as Exhibit 10(f) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
10(g) Documents relating to $400,000 loan
to Portland Lofts Associated
Limited Partnership
I. Promissory Note, dated December
29, 1989, delivered by Portland
Lofts Associates Limited
Partnership to Capital
Consultants, Inc. (filed as
Exhibit 10(g) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
II.Deed of Trust and Security
Agreement dated December 29,
1989, between Portland Lofts
Associates Limited Partnership
and Capital Consultants, Inc.
(filed as Exhibit No. 10(g) to
the Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
III. Assignment of Surplus dated
December 29, 1989, delivered by
Joseph W. Angel II and Lynne I.
Angel to Capital Consultants,
Inc. (filed as Exhibit No. 10(g)
to the Partnership's Form 10-K as
of December 31, 1989 and
incorporated herein by this
reference).
IV.Guaranty of Note and Deed of
Trust dated December 29, 1989,
delivered by Joseph W. Angel II
and Dennis M. Gilman to Capital
Consultants, Inc. (filed as
Exhibit No. 10(g) to the
Partnership's Form 10-K as of
December 31, 1989 and
incorporated herein by this
reference).
10(h) Management Agreement dated August20,
1989 between Portland Lofts
Associates Limited Partnership and
Great Northwest Management(filed as
Exhibit No. 10(h) to the
Partnership's Form 10-K as of
December 31, 1989 and incorporated
herein by this reference).
10(i) Documents relating to Settlement of
Fleet National Bank Loan to Jenkins
Court Associates Limited Partnership
(all dated as of February 7, 1991).
I. Settlement Agreement between
Fleet National Bank ("Fleet") and
Jenkins Court Associates Limited
Partnership ("Jenkins Court")
(filed as Exhibit No. 10(i) to
the Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
II.Agreement between Fleet and
Jenkins Court (filed as Exhibit
No. 10(i) to the Partnership's
Form 10-K as of December 31, 1991
and incorporated herein by this
reference).
III. $250,000 Promissory Note of
Jenkins Court (filed as Exhibit
No. 10(i) to the Partnership's
Form 10-K as of December 31, 1991
and incorporated herein by this
reference).
IV.$20,820,000 Amended and Restated
Promissory Note of Jenkins Court
(filed as Exhibit No. 10(i) to
the Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
V. Open End Mortgage Modification
Agreement between Fleet and
Jenkins Court (filed as Exhibit
No. 10(i) to the Partnership's
Form 10-K as of December 31, 1991
and incorporated herein by this
reference).
VI.Assignment Modification
Agreement between Fleet and
Jenkins Court (filed as Exhibit
No. 10(i) to the Partnership's
Form 10-K as of December 31, 1991
and incorporated herein by this
reference).
10(j) Documents relating to Amended
Settlement of Fleet Loan to Jenkins
Court (all dated as of January 29,
1992).
I. First Amended and Restated
Settlement Agreement between
Fleet and Jenkins Court (filed as
Exhibit No. 10(j) to the
Partnership's Form 10-K as of
December 31, 1991 and
incorporated herein by this
reference).
II.First Allonge to Amended and
Restated Promissory Note of
Jenkins Court (filed as Exhibit
No. 10(j) to the Partnership's
Form 10-K as of December 31, 1991
and incorporated herein by this
reference).
III. Open End Mortgage Modification
Agreement between Fleet and
Jenkins Court (filed as Exhibit
No. 10(j) to the Partnership's
Form 10-K as of December 31, 1991
and incorporated herein by this
reference).
IV.Assignment Modification
Agreement between Fleet and
Jenkins Court (filed as Exhibit
No. 10(j) to the Partnership's
Form 10-K as of December 31, 1991
and incorporated herein by this
reference).
V. Closing Letter between Fleet and
Jenkins Court (filed as Exhibit
No. 10(j) to the Partnership's
Form 10-K as of December 31, 1991
and incorporated herein by this
reference).
10(k) Agreement for Extension of Debt and
Related Matters between Security
Pacific Bank Oregon, Portland Lofts
Associates Limited Partnership and
Joseph W. Angel, II dated May 7,
1991 (filed as Exhibit No. 10(k) to
the Partnership's Form 10-K as of
December 31, 1991 and incorporated
herein by this reference).
10(l) Documents related to the Second Amended
Settlement of Fleet Loan to Jenkins
Court dated as of July 2, 1992.
I. Second Amended and Restated
Settlement Agreement between Fleet
and Jenkins Court (filed as Exhibit
No. 10(l) to the Partnership's Form
10-K as of December 31, 1992 and
incorporated herein by this
reference).
10(m) Documents relating to the Amended
$6,800,000 Construction Loan to
Portland Lofts Associates Limited
Partnership (all dated as of March
31, 1992).
I. Promissory Note of Portland Lofts
to Security Pacific Bank Oregon
(Security Pacific) (now Bank of
America) (filed as Exhibit No.
10(m) to the Partnership's Form
10-K as of December 31, 1992 and
incorporated herein by this
reference).
II.Deed of Trust and Security
Agreement between Portland Lofts
and Security Pacific (filed as
Exhibit No. 10(m) to the
Partnership's Form 10-K as of
December 31, 1992 and incorporated
herein by this reference).
III. Assignment of Leases and
Conditional Assignment of Rentals
by Portland Lofts to Security
Pacific (filed as Exhibit No. 10(m)
to the Partnership's Form 10-K as
of December 31, 1992 and
incorporated herein by this
reference).
IV.Guarantees of Note and Deed of
Trust delivered by East Bank
Development, Inc., Joseph W. Angel,
II, Dennis M. Gilman and Martin J.
Soloway to Security Pacific (filed
as Exhibit No. 10(m) to the
Partnership's Form 10-K as of
December 31, 1992 and incorporated
herein by this reference).
V. Arbitration Agreement between
Portland Lofts and Security Pacific
(filed as Exhibit No. 10(m) to the
Partnership's Form 10-K as of
December 31, 1992 and incorporated
herein by this reference).
10(n) Management Agreement dated April 1,1992
between Portland Lofts Associates
Limited Partnership and C & R Realty
(filed as Exhibit No. 10(n) to the
Partnership's Form 10-K as of
December 31, 1992 and incorporated
herein by this reference).
10(o) Documents relating to the sale of a
portion of the general partnership
interest in 402 Julia Street Associates
Limited Partnership (all dated
September 16, 1993)
I. Second Amendment to the Amended and
Restated Agreement of Limited
Partnership of 402 Julia Street
Associates Limited Partnership
(filed as Exhibit No. 10(o) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
II.Assignment and Assumption
Agreement between the Partnership,
and Henry M. Lambert and R. Carey
Bond. (filed as Exhibit No. 10(o)
to the Partnership's Form 10-K as
of December 31, 1993 and
incorporated herein by this
reference).
III. Security Agreement between the
Partnership, and Lambert and Bond
(filed as Exhibit No. 10(o) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
10(p) Agreement for Extension of Loan from
Fleet Bank to Jenkins Court Associates
Limited Partnership (dated as of
June 15, 1993) (filed as Exhibit No.
10(p) to the Partnership's Form 10-K
as of December 31, 1993 and
incorporated herein by this
reference).
10(q) Agreement for Extension of Loan from
Capital Consultants, Inc. to Portland
Lofts Associates Limited Partnership
(dated January 3, 1994) (filed as
Exhibit No. 10(q) to the Partnership's
Form 10-K as of December 31, 1993 and
incorporated herein by this reference).
10(r) Documents relating to the $15,000 loan
to Portland Lofts Associates Limited
Partnership (all dated March 2, 1992)
I. Rehabilitation Loan Agreement
between Portland Lofts and the City
of Portland (acting by and through
the Portland Development
Commission) (filed as Exhibit No.
10(r) to the Partnership's Form
10-K as of December 31, 1993 and
incorporated herein by this
reference).
II.Promissory Note between Portland
Lofts and the City of Portland
(acting by and through the Portland
Development Commission) (filed as
Exhibit No. 10(r) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
III. Trust Deed between Portland Lofts
and the City of Portland (acting by
and through the Portland
Development Commission) (filed as
Exhibit No. 10(r) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
10(s) Documents relating to the settlement
of amounts payable between Portland
Lofts and Richard E. Ragland, AIA
I. Letter of agreement signed by
Portland Lofts and Ragland (dated
March 17, 1994) (filed as Exhibit
No. 10(s) to the Partnership's Form
10-K as of December 31, 1993 and
incorporated herein by this
reference).
II.Promissory Note between Portland
Lofts and Ragland (dated February
22, 1994) (filed as Exhibit No.
10(s) to the Partnership's Form
10-K as of December 31, 1993 and
incorporated herein by this
reference). III. Release of Claims
between Portland Lofts and Ragland
(dated February 22, 1994) (filed as
Exhibit No. 10(s) to the
Partnership's Form 10-K as of
December 31, 1993 and incorporated
herein by this reference).
IV.Release of All Claims between
Ragland and Portland Lofts (dated
March 1, 1994) (filed as Exhibit
No. 10(s) to the Partnership's Form
10-K as of December 31, 1993 and
incorporated herein by this
reference).
10(t) Documents relating to the amendment
of loan documents by and between
Historic Preservation Properties 1989
Limited Partnership and Mellon Bank,
N.A.(all dated December 28, 1994, but
executed January 4, 1995), (filed as
Exhibit 10(t) to the Partnership's
Form 10-K as of December 31, 1994
and incorporated herein by the
reference).
I. First Amendment to Note Mortgage
and Assignment of Leases.
II.Second Amendment to Loan Agreement
III. Letter Agreement on Payment of
Legal Fees
10(u) Letter Agreement on Management Functions
by and between Historic Preservation
Properties 1989 Limited Partnership
and Jenkins Court Investors Limited
Partnership (dated September 8,
1994), (filed as Exhibit 10(u) to
the Partnership's Form 10-K as of
December 31, 1994 and incorporated
herein by this reference).
10(v) Stipulation of Settlement, and
Transfer Deed, dated August 31,
1995, by and among Jenkins Court
Associates Limited Partnership,
Miles S. Katzen, Jenkins Court
Investors Limited Partnership, MSK
Associates, Inc., Jane Katzen, Frank
Seidman, the Jane II Corporation and
Jenkins Court Pennsylvania L.P,
(filed as Exhibit 10(v) to the
Partnership's Form 10-K as of
December 31, 1995 and incorporated
herein by this reference).
10(w) Asset Management Agreement, dated
October 1, 1995, by and among
Historic Preservation Properties
Limited Partnership, Historic
Preservation Properties 1988 Limited
Partnership, Historic Preservation
Properties 1989 Limited Partnership,
Historic Preservation Properties
1990 L.P. Tax Credit Fund and
Claremont Management Corporation,
(filed as Exhibit 10(w) to the
Partnership's Form 10-K as of
December 31, 1995 and incorporated
herein by this reference).
10(x) Property Management Agreement, dated
November 1, 1995, by and between
Historic Preservation Properties
1989 L.P. and Claremont Management
Corporation, (filed as Exhibit 10(x)
to the Partnership's Form 10-K as of
December 31, 1995 and incorporated
herein by this reference).
10 (y) First Amendment to Loan Documents, dated
June 1,1995, by and between Portland
Lofts Associates Limited Partnership and
Capital Consultants, Inc., (filed as
Exhibit 10(y)to the Partnership's Form
10-K as of December 31, 1995 and
incorporated herein by this reference).
10 (z) Documents relating to the organization
and management of The Cosmopolitan at
Mears Park, LLC. 1996 (filed as Exhibit
10(z) to the Partnership's Form 10-K as
of December 31, 1996 and incorporated
herein by this reference).
I. Operating Agreement of the
Cosmopolitan at Mears Park, LLC,
dated March 15, 1996 (filed as
Exhibit 10(z) to the Partnership's
Form 10-K as of December 31, 1996
and incorporated herein by this
reference).
II.Management Agreement between The
Cosmopolitan at Mears Park, LLC and
Claremont Management Corporation,
dated March 20, 1996 (filed as
Exhibit 10 (z) to the Partnership's
Form 10-K as of December 31, 1996
and incorporated herein by this
reference).
10 (aa) Documents relating to the refinancing
of The Cosmopolitan at Mears Park, LLC
Mortgage Debt. (filed as Exhibit 10(aa)
to the Partnership's Form 10-K as of
December 31,1996 and incorporated
herein by this reference).
I. Promissory Note between the
Cosmopolitan at Mears Park, LLC and
Heller Financial, Inc., dated March
20, 1996 (filed as Exhibit 10 (aa)
to the Partnership's Form 10-K as
of December 31, 1996 and
incorporated herein by this
reference).
II.Mortgage, Assignment of Rents and
Security Agreement between the
Cosmopolitan at Mears Park, LLC and
Heller Financial, Inc., dated March
20, 1996 (filed as Exhibit 10 (aa)
to the Partnership's Form 10-K as
of December 31, 1996 and
incorporated herein by this
reference).
III. Letter Agreement between Patrick
Carney and Heller Financial
regarding Personal Liability for
carve-outs to non-recourse language
dated March 20, 1996 (filed as
Exhibit 10 (aa) to the
Partnership's Form 10-K as of
December 31, 1996 and incorporated
herein by this reference).
10 (bb) Settlement Agreement of the
Amended Construction Loan to
Portland Lofts Associates, L.P.,
(Amended Construction Loan
Agreement filed as Exhibit No.
10(m) to the Partnership's Form
10-K as of December 31, 1992)
(filed as Exhibit 10 (bb) to the
Partnership's Form 10-K as of
December 31, 1996 and incorporated
herein by this reference).
10 (cc) Documents relating to the refinancing
of the Portland Lofts Associates, L.P.
Mortgage Debt, (all dated as of June 20,
1996).
I. Promissory Note between Portland
Lofts Associates, L.P. and Bank of
America Oregon (filed as Exhibit 10
Form 10-K as of December 31, 1996
and incorporated herein by this
reference).
II.The Standing Loan Agreement between
Portland Lofts Associates, L.P. and
Bank of America Oregon (filed as
Exhibit 10 (cc) to the
Partnership's Form 10-K as of
December 31, 1996 and incorporated
herein by this reference).
III. The Deed of Trust, with
Assignment of Rents, Security
Agreement and Fixture Filing
between Portland Lofts Associates,
L.P. and Bank of America Oregon
(filed as Exhibit 10 (cc) to the
Partnership's Form 10-K as of
December 31, 1996 and incorporated
herein by this reference).
IV.The Payment Guaranty between Joseph
W. Angel, II and Bank of America
Oregon (filed as Exhibit 10 (cc) to
the Partnership's Form 10-K as of
December 31, 1996 and incorporated
herein by this reference).
V. The Payment Guaranty between Lynne
I. Angel and Bank of America Oregon
(filed as Exhibit 10 (cc) to the
Partnership's Form 10-K as of
December 31, 1996 and incorporated
herein by this reference).
10 (dd) Promissory Note between
Portland Loft Associates, L.P. and
Joseph Angel and Lynne Angel, dated
December 18, 1996 (filed as Exhibit
10 (dd) to the Partnership's Form
10-K as of December 31, 1996 and
incorporated herein by this
reference).
10 (ee) Forbearance Agreement between
Historic Preservation Properties
1989, L.P. and East Bank Angel
Joint Venture, dated July 1, 1997
(filed as Exhibit 10(ee) to the
Partnership's Form 10-K as of
December 31, 1997 and incorporated
herein by this reference).
10 (ff) Asset Management agreement
between Historic Preservation
Properties 1989, L.P. and Gunn
Financial Incorporated, dated July
1, 1998 (filed as Exhibit 10 (ff)
to the Partnership's Form 10-K as
of December 31, 1998 and
incorporated herein by this
reference).
10 (gg) Documents relating to the
refinancing of 402 Julia Street
Associates, L.P.'s Mortgage Debt,
dated July 9, 1998 (filed as
Exhibit 10 (gg) to the
Partnership's Form 10-K as of
December 31, 1998 and incorporated
herein by this reference).
I. Multifamily Note between 402 Julia
Street Associates, L.P. and
Investment Property Mortgage,
L.L.C. (filed as Exhibit 10 (gg) to
the Partnership's Form 10-K as of
December 31, 1998 and incorporated
herein by this reference).
II.Multifamily Mortgage, Assignment of
Rents and Security Agreement
between 402 Julia Street and
Investment Property Mortgage L.L.C.
(filed as Exhibit 10 (gg) to the
Partnership's Form 10-K as of
December 31, 1998 and incorporated
herein by this reference).
22 List of Investee Partnerships
(filed as Exhibit No. 22 to the
Partnership's Form 10-K as of
December 31, 1989 and incorporated
herein by this reference).
28(ii)(a) Pages 13-25, 28-36 and 36-39 of the
Partnership's Prospectus dated December
19, 1988 (filed with the Commission
pursuant to Rule 424(b) on January 5,
1989 and incorporated herein by this
reference).
28(ii)(b) Supplement No. 1 to the
Partnership's Prospectus dated
January 20, 1989 (filed as a part
of Post-Effective Amendment No. 1
to the Partnership's Registration
Statement on Form S-11, File No.
33-24129, and incorporated herein
by this reference).
28(ii)(c) Supplement No. 2 to the
Partnership's Prospectus dated June
30, 1989 (filed as part of
Post-Effective Amendment No. 2 to
the Partnership's Registration
Statement on Form S-11, File No.
33-24129 and incorporated herein by
this reference).
28(ii)(d) Supplement No. 3 to the
Partnership's Prospectus dated July
25, 1989 (filed as a part of
Post-Effective Amendment No. 2 to
the Partnership's Registration
Statement on Form S-11, File No.
33-24129, and incorporated herein
by this reference).
28(ii)(e) Supplement No. 4 to the Partnership's
Prospectus dated September 13, 1989
(filed as a part of Post-Effective
Amendment No. 2 to the Partnership's
Registration Statement on Form S-11,
File No. 33-24129, and incorporated
herein by this reference).
28(ii)(f) Supplement No. 5 to the Partnership's
Prospectus dated September 19, 1989
(filed as a part of Post-Effective
Amendment No. 2 to the Partnership's
Registration Statement on Form S-11,
File No. 33-24129, and incorporated
herein by this reference).
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
ANNUAL REPORT ON FORM 10-K
Items 14 (a) (1) and (2) and 14 (d)
INDEX TO FINANCIAL STATEMENTS
Financial Statements of Historic Preservation
Properties 1989 Limited Partnership
Independent Auditors' Report F-3
Balance Sheets as of December 31, 1999 and 1998 F-4
Statements of Operations for the Years Ended December 31, 1999,
1998 and 1997 F-5
Statements of Changes in Partners' Equity (Deficit) for the
Years Ended December 31, 1999, 1998 and 1997 F-6
Statements of Cash Flows for the Years Ended December 31, 1999,
1998 and 1997 F-7
Notes to Financial Statements F-8
Independent Auditors' Report on Accompanying Information F-15
Financial Statement Schedule:
Real Estate and Accumulated Depreciation Held Directly
and by Investee Entities F-16
Financial Statements of The Cosmopolitan at Mears Park, LLC
(the St. Paul, Minnesota Investee Entity)
Independent Auditors' Report F-23
Balance Sheets as of December 31, 1999 and 1998 F-24
Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997 F-25
Statements of Changes in Members' Equity (Deficit) for the
Years Ended December 31, 1999, 1998 and 1997 F-26
Statements of Cash Flows for the Years Ended December 31, 1999,
1998 and 1997 F-27
Notes to Financial Statements F-28
Financial Statements of Portland Lofts Associates
Limited Partnership (the Portland, Oregon
Investee Partnership)
Independent Auditors' Report F-34
Balance Sheets as of December 31, 1999 and 1998 F-35
Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997 F-36
Statements of Changes in Partners' Equity for the
Years Ended December 31, 1999, 1998 and 1997 F-37
Statements of Cash Flows
for the Years Ended December 31, 1999, 1998 and 1997 F-38
Notes to Financial Statements F-39
Financial Statements of 402 Julia Street Associates
Limited Partnership (the New Orleans, Louisiana
Investee Partnership)
Independent Auditors' Report F-45
Balance Sheets as of December 31, 1999 and 1998 F-46
Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997 F-47
Statements of Changes in Partners' Equity (Deficit) for the
Years Ended December 31, 1999, 1998 and 1997 F-48
Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997 F-49
Notes to Financial Statements F-50
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Historic Preservation Properties 1989 Limited Partnership
Boston, Massachusetts
We have audited the accompanying balance sheets of Historic Preservation
Properties 1989 Limited Partnership (the Partnership) as of December 31, 1999
and 1998, and the related statements of operations, partners' equity (deficit)
and cash flows for each of the years in the three-year period ended December 31,
1999. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Historic Preservation
Properties 1989 Limited Partnership as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1999 in conformity with generally accepted
accounting principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 4, 2000
F-3
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
-------------------- -------------------
<S> <C> <C>
INVESTMENTS IN INVESTEE ENTITIES $ 4,060,681 $ 4,074,023
Less reserve for realization of investments
in Investee Entities (3,469,267) (3,469,267)
-------------------- -------------------
591,414 604,756
CASH AND CASH EQUIVALENTS 476,949 170,981
OTHER ASSETS 64,000 73,350
-------------------- -------------------
$ 1,132,363 $ 849,087
==================== ===================
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 43,686 $ 38,342
-------------------- -------------------
Total liabilities 43,686 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 1,309,126 1,033,973
General Partner's Deficit (220,449) (223,228)
-------------------- -------------------
Total partners' equity 1,088,677 810,745
-------------------- --------------------
$ 1,132,363 $ 849,087
==================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------------- -------------- ---------------
<S> <C> <C> <C>
REVENUE:
Interest and other income $ 7,943 $ 6,667 $ 8,912
---------------- -------------- ---------------
EXPENSES:
Operating and administrative 236,421 215,621 164,308
---------------- -------------- ---------------
LOSS FROM OPERATIONS (228,478) (208,954) (155,396)
EQUITY IN INCOME
OF INVESTEE ENTITIES 506,410 269,525 58,874
---------------- -------------- ---------------
NET INCOME (LOSS) $ 277,932 $ 60,571 $ (96,522)
================ ============== ===============
NET INCOME (LOSS) ALLOCATED
TO GENERAL PARTNER $ 2,779 $ 606 $ (965)
================ ============== ===============
NET INCOME (LOSS) ALLOCATED
TO LIMITED PARTNERS $ 275,153 $ 59,965 $ (95,557)
================ ============== ===============
NET INCOME (LOSS) PER UNIT OF INVESTOR LIMITED
PARTNERSHIP INTEREST, BASED ON 26,588 UNITS
ISSUED AND OUTSTANDING
$ 10.35 $ 2.26 $ (3.59)
================ ============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
<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, 1996 26,588 $ 1,069,565 $ (222,869) $ 846,696
Net Loss - (95,557) (965) (96,522)
--------------- --------------- ----------------- -----------------
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 - 275,153 2,779 277,932
--------------- --------------- ----------------- -----------------
BALANCE, December 31, 1999 26,588 $ 1,309,126 $ (220,449) $ 1,088,677
=============== =============== ================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------------- --------------- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 277,932 $ 60,571 $ (96,522)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Equity in income of investee entities (over) under
distributions received 13,342 (38,525) 97,126
Decrease in other assets 9,350 4,155 23,650
Increase (decrease) in accounts payable and
accrued expenses 5,344 4,780 (12,282)
---------------- --------------- ----------------
Net cash provided by operating activities 305,968 30,981 11,972
---------------- --------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Contribution to investee entity - (35,288) -
---------------- --------------- ----------------
Cash used in investing activities - (35,288) -
---------------- --------------- ----------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 305,968 (4,307) 11,972
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 170,981 175,288 163,316
---------------- --------------- ----------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 476,949 $ 170,981 $ 175,288
================ =============== ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(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).
Boston Historic Partners Limited Partnership (BHP), a Massachusetts
limited partnership, is the general partner of HPP'89. 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 December 31, 1999, BHP had
established three such partnerships, including HPP'89. Officers of
Boston Capital Planning Group, Inc. (BCPG), an affiliate of BHP, were
the initial limited partners of HPP'89. The initial limited partners
withdrew as limited partners upon the first admission of Investor
Limited Partners (Limited Partners). Prior to admission of the Limited
Partners, all costs incurred by HPP'89 were paid by BHP. On May 3,
1989, the first Limited Partners were admitted to HPP'89 and operations
commenced.
The Amended and Restated Agreement of Limited Partnership (Partnership
Agreement) of HPP'89 generally provides that all net profits, net
losses, tax credits and cash distributions of HPP'89 from normal
operations subsequent to admission of Limited Partners shall be
allocated 99% to the Limited Partners and 1% to BHP. Proceeds from
sales or refinancings generally will be distributed 100% to the Limited
Partners until they have received an amount equal to their Adjusted
Capital Contributions (as defined in the Partnership Agreement) plus,
priority returns and additional incentive priority returns for certain
Limited Partners admitted to HPP'89 on or prior to certain specified
dates.
(2) Summary of Significant Accounting Policies
Investments in Investee Entities
HPP'89 accounts for its investments in its four investee entities
(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.
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.
Expenditures attributable to HPP'89's investments (primarily evaluation
and acquisition fees and interest expense incurred during construction
periods) are treated as additional investment basis and are amortized
on a straight-line basis over the estimated life of the investee assets
(40 years).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
F-8
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(2) Summary of Significant Accounting Policies (Continued)
Cash, Cash Equivalents and Concentration of Credit Risk
HPP'89 considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. At December 31,
1999 and 1998, cash equivalents totaled $427,019 and $170,981,
respectively.
At December 31, 1999 and 1998, HPP'89 had approximately $27,000 and
$71,000, respectively, of cash and cash equivalents on deposit in a
bank in excess of amounts insured by the Federal Deposit Insurance
Corporation. Also at December 31, 1999, HPP'89 had $352,019 of money
market funds which are not insured or guaranteed.
Income Taxes
No provision (benefit) for income taxes is reflected in the
accompanying financial statements of HPP'89. Partners of HPP'89 are
required to report on their tax returns their allocable share of
income, gains, losses, deductions and credits determined on a tax
basis.
(3) Investments in Investee Entities and Real Estate;
Commitments and Contingencies
HPP'89 has general partnership interests in two Investee Entities
(three as of December 31, 1998) and is a managing member in another
Investee Entity.
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:
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 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
F-9
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP NOTES TO
FINANCIAL STATEMENTS (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 1999,
1998 AND 1997
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
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 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. Partnership assets included
approximately $312,000 of unsecured receivables from the developer and
its affiliates which had been fully reserved for, partnership
liabilities included approximately $94,000 of trade payables (which had
been fully reserved for since HPP'89 did not believe such amount would
be recourse to HPP'89), 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.
In September 1999, HPP'89 collected $113,752 from the proceeds of the
collateral securing HPP'89's default loan receivable 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
is 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. At December 31, 1999, 402 Julia had leased 100% (unaudited)
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.
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 December 31, 1999 and 1998, the remaining uncollected payments total
$64,000 and $67,500, 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 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 $6,634 for
the year ended December 31, 1999, and a net loss of $17,345 and
$10,596, respectively, for the years ended December 31, 1998,and 1997,
as well as amortization of $3,252 for each of the years ended December
31, 1999, 1998 and 1997.
F-10
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
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 December
31, 1999, Portland Lofts had leased approximately 89% (unaudited) of
its residential apartment units and 100% (unaudited) of the commercial
space for a combined occupancy of 92% (unaudited).
HPP'89 contributed $3,820,000 through December 31, 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.
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 a
debt refinancing completed in June 1996, Portland Lofts is expected to
continue as a going concern.
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. As
mentioned in Note 2, 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, 1997, HPP'89 had cumulative unrecorded losses
totaling $95,392 relating to the Portland Lofts investment.
For the years ended December 31, 1999 and 1998, HPP'89 was allocated
net income of $50,786 and $4,404, respectively, from Portland Lofts,
thereby decreasing the cumulative unrecorded loss relating to the
Portland Lofts investment to $40,202 at December 31, 1999.
For each of the years ended December 31, 1999, 1998 and 1997, HPP'89
received distributions of $156,000 from the Portland Lofts investment.
Distributions received of $156,000 for each of the years ended December
31, 1999 and 1998, and $54,206 for the year ended December 31, 1997,
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. During the year ended December 31, 1999, the
economic occupancy of TCAMP was 97% (unaudited).
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.
F-11
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
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. 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.
HPP'89 recorded net income of $233,276, $134,122 and $96,834 for the
years ended December 31, 1999, 1998 and 1997, respectively, from the
TCAMP Investment. HPP'89 received cash distributions of $250,000 and
$75,000 from TCAMP for the years ended December 31, 1999 and 1998,
respectively.
HPP'89's investments in the Investee Entities at December 31, 1999 and
1998 are summarized as follows:
<TABLE>
<CAPTION>
Cumulative: 1999 1998
--------------------- ---------------------
<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 (483,131) (879,041)
Reserves for realization of investments (3,469,267) (3,469,267)
Amortization of certain costs (52,980) (49,728)
Distributions received from Investee Entities (917,200) (511,200)
Sale of one third interest of Investee Entity (241,620) (241,620)
--------------------- ---------------------
$ 591,414 $ 604,756
===================== =====================
</TABLE>
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 $395,910 (prior to recovery
of $113,752 default loan receivable), $272,777 and $62,126 for the
years ended December 31, 1999, 1998 and 1997, respectively, and annual
amortization of certain costs of $3,252, for the years ended December
31, 1999, 1998 and 1997, respectively.
F-12
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(3) Investments in Investee Entities and Real Estate; Commitments and
Contingencies (Continued)
Summary combined balance sheets of the Investee Entities as of December
31, 1999 and 1998, and summary combined statements of operations for
the years ended December 31, 1999, 1998 and 1997 are as follows. The
combined balance sheet and statements of operations do not include the
Jenkins Court Investment for the year ended December 31, 1999.
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS
ASSETS
1999 1998
------------------ -------------------
<S> <C> <C>
Buildings and improvements, (net of accumulated
depreciation; $4,004,320, 1999; $3,446,938, 1998) $ 14,878,362 $ 15,344,965
Land 2,041,326 2,041,326
Other assets (net of accumulated amortization;
$174,866, 1999; $123,795, 1998) 437,574 600,899
Cash and cash equivalents 453,186 287,348
------------------ -------------------
Total assets $ 17,810,448 $ 18,274,538
================== ===================
LIABILITIES AND PARTNERS' EQUITY
1999 1998
------------------ ------------------
Liabilities:
Mortgage and notes payable $ 13,151,807 $ 13,339,188
Other liabilities 687,191 726,135
------------------ ------------------
Total liabilities 13,838,998 14,065,323
------------------ ------------------
Partners' equity:
HPP'89 2,794,074 3,311,062
Other partners 1,177,376 898,153
------------------ ------------------
Total partners' equity 3,971,450 4,209,215
------------------ ------------------
Total liabilities and partners' equity $ 17,810,448 $ 18,274,538
================== ==================
</TABLE>
Members' equity in TCAMP has been classified as partners'equity in the
combined balance sheets.
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF OPERATIONS
1999 1998 1997
------------------- ----------------- -------------------
<S> <C> <C> <C>
Revenue:
Rental revenue $ 4,178,519 $ 3,904,024 $ 3,626,904
Interest and other income 78,077 56,095 76,817
------------------- ----------------- -------------------
4,256,596 3,960,119 3,703,721
------------------- ----------------- -------------------
Interest expense 1,207,119 1,239,999 1,269,792
Depreciation and amortization 608,453 613,471 594,870
Operating expenses 1,913,019 1,860,506 1,837,075
------------------- ----------------- -------------------
3,728,591 3,713,976 3,701,737
------------------- ----------------- -------------------
Net income from operations $ 528,005 $ 246,143 $ 1,984
=================== ================= ===================
Net income (loss) allocated to HPP'89 $ 290,696 $ 121,182 $ (87,472)
=================== ================= ===================
Net income allocated to other partners $ 237,309 $ 124,961 $ 89,456
=================== ================= ===================
</TABLE>
F-13
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(4) Transactions With Related Parties and Commitments
HPP'89 engaged Claremont Management Corporation (CMC), a Massachusetts
corporation related party 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 period January 1, 1998
through June 30, 1998 and for the year ended December 31, 1997, CMC was
reimbursed $50,716 and $73,850, respectively, 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 year
ended December 31, 1999 and for the period July 1, 1998 through
December 31, 1998, GFI was reimbursed $120,218 and $56,109 for
operating costs, respectively.
(5) Fair Value of Financial Instruments
The fair values of cash and cash equivalents and accounts payable and
accrued expenses at December 31, 1999 and 1998 approximate their
carrying amounts due to their short maturities.
F-14
<PAGE>
Independent Auditors' Report on Accompanying Information
The Partners
Historic Preservation Properties 1989 Limited Partnership
Boston, Massachusetts
We have audited, in accordance with generally accepted auditing standards, the
financial statements of Historic Preservation Properties 1989 Limited
Partnership as of December 31, 1999 and 1998, and for each of the years in the
three-year period ended December 31, 1999 included in this Form 10-K and have
issued our report thereon dated February 4, 2000. Our audits were made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The supplemental schedule is the responsibility of the Partnership's
management and is presented for the purposes of complying with the Securities
and Exchange Commission's rules and is not part of the basic financial
statements. The information included in this schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements, and
in our opinion fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
as a whole.
Lefkowitz, Garfinkel, Champi & DeRienzo, P.C.
Providence, Rhode Island
February 4, 2000
F-15
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY
BY INVESTEE ENTITIES
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Costs Capitalized
Initial Costs Subsequent to Acquisition
Description and Building & Improvements Carrying
Ownership Percentage Encumbrances Land Improvements- Cost
<S> <C> <C> <C> <C> <C>
Residential Building/Commercial Building
402 Julia Street Associates L.P.
New Orleans, Louisiana
65% $ 1,084 $ 133 $ 282 $ 1,154 $ 145
Residential Building/Commercial Building
Portland Lofts Associates L.P.
Portland, Oregon
99% 5,385 900 886 9,273 610
Residential Building
The Cosmopolitan at Mears Park, LLC
St. Paul, Minnesota
50% 6,683 1,009 6,074 458 -
---------------- ---------- --------------- --------------- ----------
Total $ 13,152 $2,042 $ 7,242 $ 10,885 $ 755
================ ========== =============== =============== ==========
</TABLE>
F-16
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY
BY INVESTEE ENTITIES
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Gross Amounts at
December 31, 1999 (Note 1)
Description and Building & Total Accumulated
Ownership Percentage Land Improvements- (Note 3) Depreciation
(Note 2)
<S> <C> <C> <C> <C>
Residential Building/Commercial Building
402 Julia Street Associates L.P.
New Orleans, Louisiana
65% $ 133 $ 1,581 $ 1,714 $ 395
Residential Building/Commercial Building
Portland Lofts Associates L.P.
Portland, Oregon
99% 900 10,769 11,669 2,719
Residential Building
The Cosmopolitan at Mears Park, LLC
St. Paul, Minnesota
50% 1,009 6,532 7,541 890
---------- ---------------- --------------- ----------------
Total $2,042 $ 18,882 $ 20,924 $ 4,004
========== ================ =============== ================
</TABLE>
F-17
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY
BY INVESTEE ENTITIES
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
Description and Construction or Interest Life
Ownership Percentage Rehabilitation Acquired (Years)
<S> <C> <C> <C>
Residential Building/Commercial Building
402 Julia Street Associates L.P.
New Orleans, Louisiana
65% 8/1/89 7/25/89 40
Residential Building/Commercial Building
Portland Lofts Associates L.P.
Portland, Oregon
99% 8/31/89 8/8/89 40
Residential Building
The Cosmopolitan at Mears Park, LLC
St. Paul, Minnesota
50% 12/18/89 3/15/96 34
</TABLE>
F-18
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY
BY INVESTEE ENTITIES (CONTINUED)
DECEMBER 31, 1999
(IN THOUSANDS)
Note 1: The aggregate cost of each property on a tax basis net of the
reduction due to the rehabilitation tax credit at December 31, 1999,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Jenkintown, Pennsylvania $ - $ - $ -
New Orleans, Louisiana 1,457 1,457 1,457
Portland, Oregon 4,207 4,207 4,207
St. Paul, Minnesota 16,710 16,638 16,598
----------------- --------------------- ---------------------
$ 22,374 $ 22,302 $ 22,262
================= ===================== =====================
Note 2: The changes in accumulated depreciation for the years ended
December 31, 1999, 1998 and 1997 are as follows:
1999 1998 1997
----------------- --------------------- ---------------------
Balance at beginning of period $ 3,447 $ 2,897 $ 2,351
Depreciation during the year 557 550 546
Transfer of property - - -
----------------- --------------------- ---------------------
$ 4,004 $ 3,447 $ 2,897
================= ===================== =====================
</TABLE>
F-19
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1989 LIMITED PARTNERSHIP
REAL ESTATE & ACCUMULATED DEPRECIATION HELD DIRECTLY
BY INVESTEE ENTITIES (CONTINUED)
DECEMBER 31, 1999
(IN THOUSANDS)
Note 3: The changes in total costs of land, building and improvements for
the years ended December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------- --------------------- ---------------------
<S> <C> <C> <C>
Balance at beginning of period $ 20,834 $ 20,794 $ 20,774
Additional improvements 90 40 20
----------------- --------------------- ---------------------
Balance at end of period $ 20,924 $ 20,834 $ 20,794
================= ===================== =====================
</TABLE>
F-20
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 476,949
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,132,363
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,132,363
<SALES> 0
<TOTAL-REVENUES> 7,943
<CGS> 0
<TOTAL-COSTS> 236,421
<OTHER-EXPENSES> (506,410)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 277,932
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 277,932
<EPS-BASIC> 10.35
<EPS-DILUTED> 10.35
</TABLE>
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 1999, 1998 AND 1997
Table of Contents
Page
Independent Auditors' Report F-23
Balance Sheets as of December 31, 1999 and 1998 F-24
Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997 F-25
Statements of Changes in Members' Equity (Deficit) for the
Years Ended December 31, 1999, 1998 and 1997 F-26
Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997 F-27
Notes to Financial Statements F-28
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Members
The Cosmopolitan at Mears Park, LLC
Boston, Massachusetts
We have audited the accompanying balance sheets of The Cosmopolitan at Mears
Park, LLC (the "Company") as of December 31, 1999 and 1998, and the related
statements of operations, changes in members' equity (deficit) and cash flows
for each of the years in the three-year period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Cosmopolitan at Mears Park,
LLC as of December 31, 1999 and 1998, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1999 in conformity with generally accepted accounting principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 4, 2000
F-23
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
-------------------- --------------------
<S> <C> <C>
Investment in real estate:
Land $ 1,009,000 $ 1,009,000
Building and improvements 6,272,312 6,215,517
Furniture and equipment 260,044 226,060
-------------------- --------------------
7,541,356 7,450,577
Less accumulated depreciation 889,745 644,376
-------------------- --------------------
6,651,611 6,806,201
Cash and cash equivalents 170,117 58,439
Cash equivalent, security deposits 20,428 82,275
Real estate tax escrow 81,557 94,279
Replacement reserve 23,750 43,023
Rent receivable 3,241 1,949
Prepaid expenses 20,711 20,080
Deferred financing fees, less accumulated amortization
(1999, $125,033; 1998, $91,697) 108,364 141,700
-------------------- --------------------
$ 7,079,779 $ 7,247,946
==================== ====================
LIABILITIES AND MEMBERS' EQUITY
Liabilities:
Mortgage note payable $ 6,682,598 $ 6,779,916
Accounts payable and accrued expenses 66,493 102,821
Accrued interest 50,899 51,640
Security deposits 110,298 110,630
-------------------- --------------------
Total liabilities 6,910,288 7,045,007
Commitments (Notes 4 and 5)
Members' equity 169,491 202,939
-------------------- --------------------
$ 7,079,779 $ 7,247,946
==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Revenue:
Rental income $ 2,650,904 $ 2,464,338 $ 2,302,138
Interest and other income 37,229 23,559 26,254
---------------------- ---------------------- ----------------------
Total revenue 2,688,133 2,487,897 2,328,392
---------------------- ---------------------- ----------------------
Expenses:
Operating and administrative 280,630 272,679 232,858
Management fee 107,525 99,507 93,136
Repairs and maintenance 243,328 224,506 228,972
Utilities 317,562 325,242 315,586
Real estate taxes 344,886 370,602 332,496
Insurance 34,012 32,980 32,590
Depreciation and amortization 278,705 270,670 267,827
---------------------- ---------------------- ----------------------
Total expenses 1,606,648 1,596,186 1,503,465
---------------------- ---------------------- ----------------------
Income from operations 1,081,485 891,711 824,927
Interest expense 614,933 623,467 631,259
---------------------- ---------------------- ----------------------
Net income $ 466,552 $ 268,244 $ 193,668
====================== ====================== ======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
STATEMENTS OF CHANGES IN MEMBERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Historic
Preservation
Properties 1989 Total
Lillian Limited Members'
Carney Partnership Equity
------------------- --------------------- --------------------
<S> <C> <C> <C>
Balance, December 31, 1996 $ 620,584 $ (65,866) $ 554,718
Distributions (468,262) - (468,262)
Net income 96,834 96,834 193,668
------------------- --------------------- --------------------
Balance, December 31, 1997 249,156 30,968 280,124
Distributions (305,717) (75,000) (380,717)
Contribution - 35,288 35,288
Net income 134,122 134,122 268,244
------------------- --------------------- --------------------
Balance, December 31, 1998 77,561 125,378 202,939
Distributions (250,000) (250,000) (500,000)
Net income 233,276 233,276 466,552
------------------- --------------------- --------------------
Balance, December 31, 1999 $ 60,837 $ 108,654 $ 169,491
=================== ===================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ----------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 466,552 $ 268,244 $ 193,668
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 278,705 270,670 267,827
Increase in rent receivable (1,292) (174) (1,077)
Increase in prepaid expenses (631) (2,517) (2,352)
Increase (decrease) in accounts payable and accrued
expenses (36,328) 41,322 (2,548)
Decrease (increase) in cash equivalent, security
deposits, net 61,515 (54,531) 87,589
Decrease in accrued interest (741) (677) (618)
---------------- ----------------- -----------------
Net cash provided by operating activities 767,780 522,337 542,489
---------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of improvements, furniture and equipment (90,779) (39,280) (16,721)
Decrease (increase) in real estate tax escrow and
replacement reserve 31,995 (42,104) 6,661
---------------- ----------------- -----------------
Net cash used in investing activities (58,784) (81,384) (10,060)
---------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from member contribution - 35,288 -
Principal payments on mortgage note payable (97,318) (88,848) (81,115)
Distributions to members (500,000) (380,717) (468,262)
---------------- ----------------- -----------------
Net cash used in financing activities (597,318) (434,277) (549,377)
---------------- ----------------- -----------------
NET INCREASE (DECREASE) IN CASH 111,678 6,676 (16,948)
CASH, BEGINNING 58,439 51,763 68,711
---------------- ----------------- -----------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 170,117 $ 58,439 $ 51,763
================ ================= =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 615,674 $ 624,144 $ 631,877
================ ================= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(1) Organization and Description of Business
The Cosmopolitan at Mears Park, LLC (TCAMP), a Limited Liability
Company, was formed on March 15, 1996, under the Delaware Limited
Liability Company Act. The purpose of TCAMP is to engage in investment
in, and operation and development of, real estate and interests
therein. The members of TCAMP are Historic Preservation Properties 1989
Limited Partnership and Lillian Carney (the Members).
Effective March 15, 1996, Historic Preservation Properties 1989 Limited
Partnership (HPP'89) contributed land, building and improvements and
furniture and equipment (Contributed Real Estate), and certain other
assets and liabilities to TCAMP for a 50% ownership interest.
Concurrently, Lillian Carney contributed $650,000 cash to TCAMP for a
50% ownership interest. Simultaneously, TCAMP issued a $7,000,000
mortgage note, 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 Contributed Real Estate. The fair value of the
Contributed Real Estate 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 HPP'89's mortgage
note payable related to the Contributed Real Estate.
TCAMP owns a residential apartment complex containing 255 units located
at 250 6th Street, St. Paul, Minnesota. During the year ended December
31, 1999, the economic occupancy of TCAMP was 97% (unaudited).
(2) Basis of Presentation and Summary of Significant Accounting Policies
Basis of accounting
TCAMP's financial statements are prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
Investment in real estate and depreciation
Investment in real estate is held for lease. Contributed Real Estate
was recorded at fair value and subsequent additions are stated at cost.
Depreciation is computed on a straight-line basis over the estimated
economic lives of the assets.
Depreciation expense for the years ended December 31, 1999, 1998 and
1997 totaled $245,369, $237,322 and $234,485, respectively.
F-28
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(2) Basis of Presentation and Summary of Significant Accounting Policies
(Continued)
Cash, cash equivalents and concentration of credit risk TCAMP considers
all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents. Cash equivalents at December 31,
1999 and 1998 totaled $45,595 and $81,990, respectively.
At December 31, 1999 and 1998, TCAMP had $134,139 and $81,990,
respectively, of cash and cash equivalents on deposit in banks in
excess of amounts insured by the Federal Deposit Insurance Corporation.
Deferred financing fees
Deferred financing fees have been capitalized and are being amortized
on a straight-line basis over the term of the mortgage note payable.
Amortization expense for the years ended December 31, 1999, 1998 and
1997 totaled $33,336, $33,348 and $33,342, respectively.
Revenue recognition
Revenue, principally under annual operating leases, is recorded when
due. In most cases, management expects that in the normal course of
business, leases will be renewed or replaced by other leases.
Income taxes
No provision (benefit) for income taxes is reflected in the
accompanying financial statements since the Members of TCAMP are
required to report their allocable share of net income (loss) on their
respective income tax returns.
(3) Mortgage Note Payable and Escrow Accounts
TCAMP's mortgage note with the lender bears interest at 9.14% per annum
and amortizes over a 25 year schedule. The mortgage note requires
monthly payments of principal and interest, real estate tax escrow
deposits and replacement reserve deposits of $59,416, $27,136 and
$4,250, respectively. The mortgage note matures in March 2003, at which
time all unpaid principal and accrued interest is due. The mortgage
note is secured by TCAMP's property, rents and assignments of leases.
At December 31, 1999, annual maturities of the mortgage note are as
follows:
Year Ending December 31, Amount
2000 $ 106,599
2001 116,761
2002 127,891
2003 6,331,347
F-29
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(4) Related Party Transaction and Commitment
TCAMP entered into a management agreement with Claremont Management
Corporation (CMC) to manage the property. The sole shareholder of CMC
is related to Lillian Carney. The agreement expires on June 30, 2000
and automatically renews thereafter on an annual basis, unless
terminated as provided for in the agreement. The management agreement
requires the payment of a management fee equal to the greater of $5,200
monthly or 4% of gross receipts, as defined in the agreement, plus the
reimbursement of all CMC's costs of providing these services.
Management fees under the management agreement totaled $107,525,
$99,507 and $93,136, respectively, for the years ended December 31,
1999, 1998 and 1997. Expense reimbursements to CMC for the years ended
December 31, 1999, 1998 and 1997 totaled $248,445, $282,412 and
$264,484, respectively.
(5) Liability of Members and Distributions of Cash
The liability of the Members for losses, debts and obligations of TCAMP
is limited to their capital contributions, except under applicable law
Members may, under certain circumstances, be liable to TCAMP to the
extent of previous distributions received by the Members in the event
TCAMP does not have sufficient assets to discharge its liabilities.
Distributions by TCAMP to the Members at the end of each fiscal year,
or at such time as determined by the Board of Managers, are as follows:
(i) First, to Lillian Carney in payment of any current or accrued
portion of the 12% preferred return on her unreturned original
capital contribution;
(ii) Second, to HPP'89, as the Preferred Return, in an amount when
added to all other cash available to HPP'89 from its
operations or any other source equals $140,000;
(iii) Third, to Lillian Carney in payment of any unpaid principal
portion of Lillian Carney's original capital contribution;
(iv) Fourth, to the payment of any principal or interest due with
respect to any loans from Members, with any such payments to
be applied first to accrued but unpaid interest and then to
principal; and
(iv) Fifth, the balance, if any, to the Members in accordance with
their respective percentage interests (50% HPP'89 and 50%
Lillian Carney).
To the extent that HPP'89 accumulated from whatever sources operating
reserve amounts greater than $140,000 at the end of any fiscal year,
HPP'89 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 Lillian Carney as a return of the
outstanding portion of her original capital contribution until her
original capital contribution was reduced to zero.
F-30
<PAGE>
THE COSMOPOLITAN AT MEARS PARK, LLC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(5) Liability of Members and Distributions of Cash (Continued)
Distributions to Lillian Carney for the years ended December 31, 1998
and 1997 include a 12% preferred return of $6,944 and $42,035,
respectively. Distributions to Lillian Carney for the years ended
December 31, 1998 and 1997 also include a return of $223,773 and
$426,227 of her original capital contribution. On February 27, 1998,
HPP'89 contributed to TCAMP an additional $35,288 representing
operating reserves in excess of $140,000 as of December 31, 1997. The
funds were then distributed to Lillian Carney by TCAMP as a return of
her original capital contribution. On May 18, 1998, TCAMP had returned
the total outstanding portion of Lillian Carney's original $650,000
capital contribution. For the remainder of 1998, TCAMP also distributed
$75,000 each to HPP'89 and Lillian Carney.
(6) Fair Value of Financial Instruments
At December 31, 1999 and 1998, the carrying amounts of cash and cash
equivalents, cash equivalent security deposits, real estate tax escrow,
replacement reserve, rent receivable, prepaid expenses, accounts
payable and accrued expenses, accrued interest and security deposits
approximate their fair values due to their short maturities. The fair
value of the mortgage note payable at December 31, 1999 and 1998
approximates its carrying amount based on interest rates available to
TCAMP for similar financing arrangements. All financial instruments are
held for non-trading purposes.
F-31
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Table of Contents
Page
Independent Auditors' Report F-34
Balance Sheets as of December 31, 1999 and 1998 F-35
Statements of Operations for the Years Ended December 31,
1999, 1998 and 1997 F-37
Statements of Changes in Partners' Equity for the
Years Ended December 31, 1999, 1998 and 1997 F-38
Statements of Cash Flows for the Years Ended December 31,
1999, 1998 and 1997
Notes to Financial Statements F-38
F-33
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Portland Lofts Associates Limited Partnership
Boston, Massachusetts
We have audited the accompanying balance sheets of Portland Lofts Associates
Limited Partnership (the Partnership) as of December 31, 1999 and 1998, and the
related statements of operations, changes in partners' equity and cash flows for
each of the years in the three-year period ended December 31, 1999. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Portland Lofts Associates
Limited Partnership as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 4, 2000
F-34
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
------------------- ------------------
<S> <C> <C>
Investment in real estate:
Land $ 899,526 $ 899,526
Buildings and improvements 10,684,704 10,684,704
Furniture and equipment 84,051 84,051
------------------- ------------------
11,668,281 11,668,281
Less accumulated depreciation 2,719,446 2,446,972
------------------- ------------------
8,948,835 9,221,309
Cash 64,160 13,716
Cash, security deposits 15,880 -
Rent receivable 18,796 8,663
Prepaid expenses 21,908 25,742
Replacement reserve 53,220 21,960
Deferred costs, less accumulated amortization
(1999, $43,751; 1998, $30,309) 69,611 81,583
------------------- ------------------
$ 9,192,410 $ 9,372,973
=================== ==================
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes payable:
Mortgage $ 5,385,199 $ 5,463,137
General partner 273,530 298,152
Accounts payable and accrued expenses 73,317 40,399
Accrued interest 49,113 49,923
Security deposits 27,365 32,775
------------------- ------------------
Total liabilities 5,808,524 5,884,386
Commitments (Note 5)
Partners' equity 3,383,886 3,488,587
------------------- ------------------
$ 9,192,410 $ 9,372,973
=================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- ------------------- --------------------
<S> <C> <C> <C>
Revenue:
Rental income $ 1,290,607 $ 1,211,437 $ 1,092,135
Interest and other income 37,137 27,038 41,061
-------------------- ------------------- --------------------
Total revenue 1,327,744 1,238,475 1,133,196
-------------------- ------------------- --------------------
Expenses:
Operating and administrative 109,553 83,510 154,526
Management fees 67,576 65,902 63,289
Repairs and maintenance 169,759 152,375 154,355
Utilities 59,109 54,242 54,917
Real estate taxes 40,980 40,186 37,888
Insurance 24,263 22,813 23,407
Depreciation and amortization 285,916 286,396 282,981
-------------------- ------------------- --------------------
Total expenses 757,156 705,424 771,363
-------------------- ------------------- --------------------
Income from operations 570,588 533,051 361,833
Interest expense 519,289 528,603 537,298
-------------------- ------------------- --------------------
Net income (loss) $ 51,299 $ 4,448 $ (175,465)
==================== =================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
PORTLAND LOSTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Historic
Preservation East Bank
Properties Angel Total
1989 Limited Joint Partners'
Partnership Venture Equity
--------------------- -------------------- --------------------
<S> <C> <C> <C>
Balance, December 31,1996 $ 2,924,499 $ 1,047,105 $ 3,971,604
Distributions (156,000) - (156,000)
Net loss (173,710) (1,755) (175,465)
--------------------- -------------------- --------------------
Balance, December 31,1997
2,594,789 1,045,350 3,640,139
Distributions (156,000) - (156,000)
Net income 4,404 44 4,448
--------------------- -------------------- --------------------
Balance, December 31, 1998
2,443,193 1,045,394 3,488,587
Distributions (156,000) - (156,000)
Net income 50,786 513 51,299
--------------------- -------------------- --------------------
Balance, December 31, 1999 $ 2,337,979 $ 1,045,907 $ 3,383,886
===================== ==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- -------------------- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 51,299 $ 4,448 $ (175,465)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 285,916 286,396 282,981
Increase in rent receivable (10,133) (3,657) (2,165)
Decrease (increase) in prepaid expenses 3,834 (5,953) 4,684
Increase in deferred costs (1,470) - (9,152)
Increase (decrease) in accounts payable and
accrued expenses 32,918 (46,532) 3,347
Decrease in accrued interest (810) (742) (10,067)
Increase (decrease) in security deposits, net (21,290) 16,765 7,605
-------------------- -------------------- --------------------
Net cash provided by operating activities 340,264 250,725 101,768
-------------------- -------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of tenant improvements - - (3,000)
Decrease (increase) in replacement reserve (31,260) 10,827 128,933
-------------------- -------------------- --------------------
Net cash provided by (used in) investing activities (31,260) 10,827 125,933
-------------------- -------------------- --------------------
Principal payments on mortgage and general
partner notes payable (102,560) (94,056) (89,107)
Distributions (156,000) (156,000) (156,000)
-------------------- -------------------- --------------------
Cash used in financing activities (258,560) (250,056) (245,107)
-------------------- -------------------- --------------------
NET INCREASE (DECREASE) IN CASH 50,444 11,496 (17,406)
CASH, BEGINNING OF YEAR 13,716 2,220 19,626
-------------------- -------------------- --------------------
CASH, END OF YEAR $ 64,160 $ 13,716 $ 2,220
==================== ==================== ====================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 520,099 $ 529,345 $ 547,365
==================== ==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE>
1. Organization and Description of Business
Portland Lofts Associates Limited Partnership (the Partnership), a
Delaware limited partnership, was formed on August 8, 1989 to acquire,
rehabilitate and operate three buildings and the related land (the
Property) containing 89 residential apartment units and 29,250 net
rentable square feet of commercial space, located at 555 Northwest Park
Avenue, Portland, Oregon.
The general partners of the Partnership are East Bank Angel Joint
Venture (EBAJV), an Oregon general partnership (also known as the
developer), and Historic Preservation Properties 1989 Limited
Partnership (HPP'89), a Delaware limited partnership whose sole general
partner is Boston Historic Partners Limited Partnership. EBAJV, whose
venturers are Pacific Star Corporation and Joseph Angel (Angel), is also
the only limited partner (see Note 5).
At December 31, 1999 the Partnership had leased 89% (unaudited) of the
residential apartment units and 100% (unaudited) of the commercial space
for a combined occupancy of 92% (unaudited).
2. Basis of Presentation and Significant Accounting Policies
Basis of accounting
The Partnership's financial statements are prepared on the accrual basis
of accounting in accordance with generally accepted accounting
principles.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
Investment in real estate and depreciation
Investment in real estate is held for lease and stated at cost.
Depreciation is computed on a straight-line basis over 40 years for
buildings and improvements, and over 5 to 7 years for personal property.
Depreciation expense for the years ended December 31, 1999, 1998 and
1997 totaled $272,474, $273,444 and $272,094, respectively.
Cash, cash equivalents and concentration of credit risk
The Partnership considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. The
Partnership had no cash equivalents at December 31, 1999 and 1998.
At December 31, 1999 and 1998, the Partnership had $40,863 and $0,
respectively, of cash on deposit in banks in excess of amounts insured
by the Federal Deposit Insurance Corporation.
F-39
<PAGE>
PORTLAND LOFTS ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2. Basis of Presentation and Significant Accounting Policies (Continued)
Deferred costs
Costs to lease residential apartment units are generally expensed;
however, leasing costs associated with commercial space are capitalized
and amortized on a straight-line basis over the related lease terms.
Amortization of costs associated with leasing for the years ended
December 31, 1999, 1998 and 1997 totaled $3,968, $3,478 and $1,413,
respectively.
Direct costs attributable to obtaining financing are capitalized and
amortized on a straight-line basis over the terms of the related debt.
For each of the years ended December 31, 1999, 1998 and 1997,
amortization of financing costs totaled $9,474.
Revenue recognition
Rental revenue from commercial leases is recorded by recognizing the
aggregate minimum rentals to be received over the terms of each lease in
equal monthly installments over the related lease terms. Rental income
recorded prior to actual cash collections under the terms of the leases
is included in rent receivable ($11,163 and $4,988 as of December 31,
1999 and 1998, respectively). Approximately two-thirds of all
residential apartment units are rented under month-to-month arrangements
and rent is recorded when due.
Income taxes
No provision (benefit) for income taxes is reflected in the accompanying
financial statements since income or loss of the Partnership is required
to be reported in the tax returns of the respective partners.
3. Mortgage and Notes Payable
On June 20, 1996, the Partnership issued a promissory mortgage note to a
bank in the amount of $5,625,000 and a promissory note to Angel in the
amount of $340,000. The mortgage note bears interest at 9%; 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. The mortgage note is secured by the
property, rents and assignment of leases.
The Angel Note bears interest at 11%; amortizes over a 10-year schedule;
requires monthly principal and interest payments in the amount of
$4,684; and matures January 1, 2007.
At December 31, 1999, aggregate annual maturities under the mortgage
note payable and note payable to general partner for each of the next
five years are as follows:
Year Ending Mortgage Note Payable to
December 31, Note Payable General Partner Total
------------ ------------ ---------------- ---------------
2000 $ 85,249 $ 27,471 $ 112,720
2001 93,246 30,650 123,896
2002 101,994 34,197 136,191
2003 111,561 38,154 149,715
2004 122,026 42,570 164,596
F-40
<PAGE>
6. Partners' Equity
Profits, losses and tax credits shall be distributed to the partners, as
defined in the Partnership Agreement, as follows: 99% to HPP'89, .9% to
EBAJV and .1% to EBAJV as a limited partner. However, if cash flows are
distributed to the partners in accordance with (b) and (c) below, then
profits, losses and tax credits shall be distributed in accordance with
those same formulas.
Cash flows from operations shall be distributed to the partners, as
defined in the Partnership Agreement, as follows:
a. 100 percent to the payment of accrued interest on, and then the
unpaid principal balance of, any outstanding loans made to the
Partnership by HPP'89.
b. Thereafter, 100 percent to HPP'89 until HPP'89 has
received distributions of cash flow in such year in an amount
equal to an 8 percent cumulative, noncompounded return on its
weighted average HPP'89 invested capital for such year.
c. The remaining balance, if any, prior to call/put date (discussed
below), 50% to HPP'89, 49.9% to EBAJV and .1% to EBAJV as
limited partner, and after the call/put date, 75% to HPP'89,
24.9% to EBAJV and .1% to EBAJV as limited partner.
The Partnership Agreement provides HPP'89 with certain put rights, as
defined in the agreement, to require the Developer to purchase HPP'89's
interest in the Partnership. On July 1, 1997, HPP'89 and the Developer
entered into an agreement under which the parties acknowledged that
HPP'89's put right commenced July 1, 1997 and HPP'89 agreed not to
exercise its put right until July 1, 2000 provided it receives
distributions of no less than $30,000 per quarter. Under the put right,
the Developer is required to pay HPP'89 the excess of $5,750,000, plus
$25,467 for each month commencing July 1, 1997 through the month in which
the closing of the sale of HPP'89's interest is consummated pursuant to
the put right, less the amount previously distributed to HPP'89. The
Developer, provided it has met certain conditions defined in the
agreement, shall have the right to locate a third party to purchase
HPP'89's interest on behalf of the Developer. Cash from the sale or
refinancing of the Property shall be distributed to repay any outstanding
loans and related interest and then to the partners, as defined in the
Partnership Agreement.
6. Transactions with Related Parties and Commitments
Interest expense for the years ended December 31, 1999, 1998 and 1997
totaled $31,354, $33,931 and $36,241, respectively, related to the Angel
Note. At December 31, 1999 and 1998, $8,724 and $8,949 is included in
accrued interest.
In November 1996, the Partnership entered into an agreement to pay EBAJV
a monthly fee of $2,400 for partnership management services provided to
the Partnership. Partnership management fees totaled $28,800 for each of
the years ended December 31, 1999, 1998 and 1997.
The Partnership has a month-to-month management agreement with an
unrelated party to manage the property for a fee equal to 3% of gross
receipts as defined in the agreement. Management fees for the years ended
December 31, 1999, 1998 and 1997 totaled $38,776, $37,102 and $34,489.
The unrelated party also receives leasing commissions equal to 5% of
amounts due under commercial leases.
F-41
<PAGE>
6. Minimum Future Rentals under Operating Leases
The Partnership rents space to commercial tenants under operating leases
of varying terms expiring through 2004. Approximately 36% of all
residential apartment units are rented to tenants under short-term
operating leases and the remaining rented under month-to-month
arrangements. As of December 31, 1999, the Partnership had entered into
twelve commercial leases covering 71% (unaudited) of the building's net
rentable commercial space with the remaining commercial tenants under
month-to-month leases. The Partnership's largest commercial tenant
occupancies 23% of the commercial space at December 31, 1999,
representing only 5.8% of the total square feet of the property.
At December 31, 1999, minimum future rentals, excluding reimbursement of
real estate taxes and certain operating expenses, to be received under
noncancellable commercial leases for each of the next five years are as
follows:
Year Ending December 31, Amount
-------------------------- ---------------
2000 $ 176,707
2001 115,689
2002 78,744
2003 53,180
2004 44,317
The above amounts do not include additional rentals that will become due
as a result of escalation provisions in the commercial leases.
In most cases, management expects that in the normal course of business,
commercial leases will be renewed or replaced by other leases and
month-to-month arrangements with residential tenants will be continued
or replaced by short-term operating leases.
7. Fair Value of Financial Instruments
The carrying amounts of cash, cash security deposits, rent receivable,
prepaid expenses, replacement reserve, accounts payable and accrued
expenses, accrued interest and security deposits at December 31, 1999
and 1998 approximate their fair values due to their short maturities.
The fair values of the Partnership's mortgage note payable and general
partner note payable at December 31, 1999 and 1998 approximate their
carrying amounts based on interest rates currently available to the
Partnership for similar financing arrangements. All financial
instruments are held for non-trading purposes.
F-42
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Table of Contents
Page
Independent Auditors' Report F-45
Balance Sheets as of December 31, 1999 and 1998 F-46
Statements of Operations for the Years Ended December 31, 1999,
1998 and 1997 F-47
Statements of Changes in Partners' Equity (Deficit) for the Years
Ended December 31, 1999, 1998 and 1997 F-48
Statements of Cash Flows for the Years Ended December 31, 1999,
1998 and 1997 F-49
Notes to Financial Statements F-50
F-44
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
402 Julia Street Associates Limited Partnership
Boston, Massachusetts
We have audited the accompanying balance sheets of 402 Julia Street Associates
Limited Partnership (the Partnership) as of December 31, 1999 and 1998, and the
related statements of operations, changes in partners' equity (deficit) and cash
flows for each of the years in the three-year period ended December 31, 1999.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of 402 Julia Street Associates
Limited Partnership as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1999 in conformity with generally accepted accounting
principles.
Lefkowitz, Garfinkel, Champi & DeRienzo P.C.
Providence, Rhode Island
February 4, 2000
F-45
<PAGE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
-------------------- ----------------------
<S> <C> <C>
Investment in real estate:
Land $ 132,800 $ 132,800
Building and improvements 1,581,571 1,581,571
-------------------- ----------------------
1,714,371 1,714,371
Less accumulated depreciation 395,129 355,590
-------------------- ----------------------
1,319,242 1,358,781
Cash 109,638 91,640
Cash equivalent, security deposits 19,743 19,318
Accounts receivable 1,500 1,314
Real estate tax and insurance escrow 24,592 24,119
Replacement reserve 26,699 26,039
Deferred financing fees, less accumulated
amortization (1999, $6,082; 1998 $1,789) 36,845 41,138
-------------------- ----------------------
$ 1,538,259 $ 1,562,349
==================== ======================
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Mortgage note payable $ 1,084,010 $ 1,096,135
Accounts payable and accrued expenses 8,824 12,325
Accrued interest 6,043 6,111
Security deposits 21,309 21,359
-------------------- ----------------------
Total liabilities 1,120,186 1,135,930
Commitments (Note 4)
Partners' equity 418,073 426,419
-------------------- ----------------------
$ 1,538,259 $ 1,562,349
==================== ======================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-46
<PAGE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
<S> <C> <C>
Revenue:
Rental income $ 237,008 $ 228,249 $ 232,631
Interest and other income 3,711 5,498 9,502
------------------ ------------------ ------------------
Total revenue 240,719 233,747 242,133
------------------ ------------------ ------------------
Expenses:
Operating and administrative 27,347 29,695 37,681
Management fees 19,377 23,842 23,075
Repairs and maintenance 46,005 39,366 33,249
Utilities 6,220 7,757 5,401
Real estate taxes 6,066 5,967 5,836
Insurance 8,821 9,335 7,813
Depreciation and amortization 43,832 56,405 44,062
------------------ ------------------ ------------------
Total expenses 157,668 172,367 157,117
------------------ ------------------ ------------------
Income from operations 83,051 61,380 85,016
Interest expense 72,897 87,929 101,235
------------------ ------------------ ------------------
Net income (loss) $ 10,154 $ (26,549) $ (16,219)
================== ================== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-47
<PAGE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Historic
Preservation
Properties
1989 Limited Limited
Partnership Developers Partner Total
------------------- ------------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Balance,
December 31, 1996 $ 368,747 $ 137,471 $ (31) $ 506,187
Distributions - (18,500) - (18,500)
Net loss (10,596) (5,623) - (16,219)
------------------- ------------------- ----------------- ------------------
Balance, December 31, 1997 358,151 113,348 (31) 471,468
Distributions - (18,500) - (18,500)
Net loss (17,344) (9,205) (26,549)
------------------- ------------------- ----------------- ------------------
Balance,December 31, 1998 340,807 85,643 (31) 426,419
Distributions - (18,500) - (18,500)
Net income 6,634 3,520 - 10,154
------------------- ------------------- ----------------- ------------------
Balance,
December 31, 1999 $ 347,441 $ 70,663 $ (31) $ 418,073
=================== =================== ================= ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---------------- --------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 10,154 $ (26,549) $ (16,219)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 43,832 56,405 44,062
Increase in accounts receivable (186) - (1,314)
Increase (decrease) in accounts payable and
accrued expenses (3,501) (3,000) 10,700
Increase (decrease) in security deposits, net (475) 1,376 (78)
Decrease in accrued interest (68) (2,302) (50)
---------------- --------------- --------------
Net cash provided by operating activities 49,756 25,930 37,101
---------------- --------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in real estate tax and insurance escrow
and replacement reserve (1,133) (5,514) (11,457)
---------------- --------------- --------------
Cash used in investing activities (1,133) (5,514) (11,457)
---------------- --------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from refinancing - 1,100,000 -
Payment on mortgage note payable - (1,005,764) -
Payment of deferred financing fees - (42,927) -
Principal payments on mortgage notes payable (12,125) (7,652) (6,002)
Distributions (18,500) (18,500) (18,500)
---------------- --------------- --------------
Net cash provided by (used in) financing activities (30,625) 25,157 (24,502)
---------------- --------------- --------------
NET INCREASE IN CASH 17,998 45,573 1,142
CASH, BEGINNING OF YEAR 91,640 46,067 44,925
---------------- --------------- --------------
CASH, END OF YEAR $ 109,638 $ 91,640 $ 46,067
================ =============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 72,965 $ 90,231 $ 101,285
================ =============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
402 JULIA STREET ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(1) Organization and Description of Business
402 Julia Street Associates Limited Partnership (the Partnership), a
Delaware limited partnership, was formed on July 25, 1989 to acquire a
19,000 square foot site and the building situated thereon in New
Orleans, Louisiana, and rehabilitate the building into 24 residential
apartment units and approximately 3,500 net rentable square feet of
commercial space known as the Loft (the Property). The Partnership is
owned by Historic Preservation Properties 1989 Limited Partnership (HPP
1989) as a general partner (65.33%), by Henry M. Lambert and R. Carey
Bond (the Developers) as general partners (34.66%), and by John D.
Lambert III (the Limited Partner) as a limited partner (.01%).
At December 31, 1999, the Partnership had leased 100% (unaudited) of
the residential apartment units and commercial space.
(2) Basis of Presentation and Significant Accounting Policies
Basis of accounting
The Partnership's financial statements are prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
Investment in real estate and depreciation
Investment in real estate is held for lease and stated at cost.
Depreciation is provided over the estimated economic useful lives of
the assets using the straight-line method.
Depreciation expense for each of the years ended December 31, 1999,
1998 and 1997 totaled $39,539.
Cash, cash equivalents and concentration of credit risk
The Partnership considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents. Cash
equivalents at December 31, 1999 and 1998 totaled $19,743 and $19,318,
respectively.
At December 31, 1999 and 1998, the Partnership had $36,132 and $13,041,
respectively of cash and cash equivalents on deposit in banks in excess
of amounts insured by the Federal Deposit Insurance Corporation.
Deferred financing fees
Deferred financing fees are being amortized on a straight-line basis
over the term of the mortgage note. Amortization expense for the years
ended December 31, 1999, 1998, and 1997 totaled $4,293, $16,866 and
$4,523, respectively. Amortization expense for the year ended December
31, 1998 includes $15,077 of previously deferred fees relating to the
mortgage note refinanced during July 1998 (see Note 3).
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<PAGE>
(2) Basis of Presentation and Significant Accounting Policies (Continued)
Revenue recognition
Revenue from commercial units, principally under short-term operating
leases, is recorded when due. Approximately half of all residential
apartment units are rented under short-term operating leases and the
remaining residential apartment units and all commercial space is
rented under month-to-month arrangements. Rental revenue is recorded
when due.
Income taxes
No provision (benefit) for income taxes is reflected in the
accompanying financial statements since income or loss of the
Partnership is required to be reported in the tax returns of the
respective partners.
(3) Mortgage Note Payable
On July 17, 1998, 402 Julia refinanced its mortgage note payable by
issuing a promissory note to a new lender in the amount of $1,100,000,
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
real estate tax and insurance escrow deposits in the aggregate amounts
of $7,091, and $1,312, respectively. The mortgage note also requires
monthly replacement reserve deposits of $300 which the lender has
waived until the lender determines that the Property is not being
maintained in accordance with, or an event of default occurs under, the
agreements related to the mortgage note payable.
At December 31, 1999, annual maturities of the mortgage note for each
of the next five years are as follows:
Year Ending December 31, Amount
2000 $ 12,962
2001 13,856
2002 14,812
2003 15,834
2004 16,926
The mortgage note is secured by the Partnership's property, rents and
assignment of leases.
(4) Transactions with Related Party and Commitments
The Partnership has a month-to-month property management and lease
broker agreement with a company owned by the Developers (the Affiliate)
to manage the Property for a fee equal to 6% of gross rental receipts
and to serve as the lease broker for a fee equal to one half of one
month's rent for each lease signed or continuation of existing rental
relationship. For the years ended December 31, 1999, 1998 and 1997,
fees paid under this agreement totaled $19,377, $23,842 and $23,075,
respectively.
The Partnership reimbursed to the Affiliate certain payroll and related
payroll costs totaling $12,723, $11,686 and $11,437 for the years ended
December 31, 1999, 1998 and 1997, respectively.
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<PAGE>
(5) Leases
Real estate tax and operating expense reimbursements for the years
ended December 31, 1999, 1998 and 1997 totaled $1,284, $1,401 and
$2,655, respectively, and have been reported as a reduction of expenses
in the accompanying financial statements.
In most cases, management expects that in the normal course of
business, commercial leases will be renewed or replaced by other leases
and month-to-month arrangements with residential and commercial tenants
will be continued or replaced by short-term operating leases.
(6) Fair Value of Financial Instruments
The carrying amounts of cash, cash equivalent security deposits,
accounts receivable, real estate tax and insurance escrow, replacement
reserve, accounts payable and accrued expenses, accrued interest and
security deposits approximate their fair values at December 31, 1999
and 1998 due to their short maturities. The fair value of the mortgage
note payable at December 31, 1999 and 1998 approximates its carrying
amount based on the interest rates currently available to the
Partnership for similar financing arrangements. All financial
instruments are held for non-trading purposes.
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