United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 33-23954
PRINCIPAL GROWTH MORTGAGE INVESTORS FUND, L.P.
Exact Name of Registrant as Specified in its Charter
Delaware
13-3499956
State or Other Jurisdiction
of Incorporation or Organization I.R.S. Employer Identification No.
3 World Financial Center, 29th Floor,
New York, NY Attn: Andre Anderson
10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 ____
Balance Sheets At March 31, At December 31,
1996 1995
Assets
Impaired mortgage loan receivable
(Note 1) $ 0 $ 34,424,227
Valuation allowance 0 (30,284,265)
---------- ------------
0 4,139,962
Cash and cash equivalents 4,042,566 14,301
Organization costs and deferred
charges, net of accumulated
amortization of $968,728 in 1996
and $905,478 in 1995 0 63,250
---------- ------------
Total Assets $ 4,042,566 $ 4,217,513
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses 127,579 239,938
Due to affiliates 139,075 125,970
Deferred income 0 2,164
---------- ----------
Total Liabilities 266,654 368,072
Partners' Capital (Deficit):
General Partner (125,640) (124,905)
Limited Partners (Depositary units:
10,000,000 authorized; 1,739,000 issued) 3,901,552 3,974,346
---------- -----------
Total Partners' Capital 3,775,912 3,849,441
---------- -----------
Total Liabilities and Partners'
Capital $ 4,042,566 $ 4,217,513
========== ===========
Statement of Partners' Capital (Deficit)
For the three months ended March 31, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $ 3,974,346 $ (124,905) $ 3,849,441
Net loss (72,794) (735) (73,529)
--------- -------- ---------
Balance at March 31, 1996 $ 3,901,552 $ (125,640) $ 3,775,912
========= ======== =========
Statements of Operations
For the three months ended March 31, 1996 1995
Income
Interest income net of valuation
allowance of $853,796 in 1996
and $932,681 in 1995 $ 13,056 $ 3,388
------- -------
Total Income 13,056 3,388
------- -------
Expenses
Amortization of organizational costs
and deferred charges 63,250 30,792
General and administrative 19,585 16,297
Investment management fee 3,750 3,750
------- -------
Total Expenses 86,585 50,839
------- -------
Net Loss $ (73,529) $(47,451)
======= =======
Net Loss Allocated:
To the General Partner $ (735) $ (475)
To the Limited Partners (72,794) (46,976)
------- --------
$ (73,529) $(47,451)
Per limited partnership unit ======= ========
(1,739,000 outstanding) $ (.04) $ (.03)
Statements of Cash Flows
For the three months ended March 31, 1996 1995
Cash Flows From Operating Activities:
Net loss $ (73,529) $ (47,451)
Adjustment to reconcile net loss to net cash
provided by (used for) operating activities:
Allowance for doubtful accounts 853,796 932,681
Recovery of valuation allowance 4,139,962 0
Amortization of organization costs and
deferred charges 63,250 30,792
Amortization of deferred income on loan (2,164) (2,457)
Increase (decrease) in cash arising from
changes in operating assets and liabilities:
Mortgage loan receivable (853,796) (932,681)
Accounts payable and accrued expenses (112,359) (11,015)
Due to affiliates 13,105 9,831
--------- --------
Net cash and provided by (used for) operating
activities 4,028,265 (20,300)
--------- --------
Net increase (decrease) in cash and cash equivalents 4,028,265 (20,300)
Cash and cash equivalents, beginning of period 14,301 66,789
--------- --------
Cash and cash equivalents, end of period $4,042,566 $46,489
========= ========
Notes to the Financial Statements
The unaudited interim financial statements should be read in conjunction with
the Partnership's annual 1995 audited financial statements within Form 10-K.
The unaudited financial statements include all adjustments which are, in the
opinion of management, necessary to present a fair statement of financial
position as of March 31, 1996 and the results of operations and cash flows for
the three months ended March 31, 1996 and 1995 and the statement of changes in
partners' capital (deficit) for the three months ended March 31, 1996. Results
of operations for the period are not necessarily indicative of the results to
be expected for the full year.
The following significant event has occurred subsequent to fiscal year 1995,
which requires disclosure in this interim report per Regulation S-X, Rule
10-01, Paragraph (a)(5).
Note 1:
On October 29, 1995, the Partnership executed a settlement agreement (the
"Settlement") with 160 Water Street Associates, G.L.O. Management, Inc. and
George Rapee (collectively, the "Borrowers") and The New England Mutual Life
Insurance Company ( the " First Mortgagee"). Pursuant to the Settlement, the
Partnership is entitled to receive from the Borrowers $1.125 million in cash
and recover approximately $3,015,000 of escrow funds which were held back from
the original mortgage loan proceeds, in exchange for the full and complete
discharge of the Partnership's loan in connection with a pre-packaged
bankruptcy filing to restructure the Borrower's debt. In February 1996, the
Settlement was approved by a majority of the Limited Partnership interests
through a proxy solicitation dated January 2, 1996.
On February 8, 1996, certain of the Borrowers filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code with the United States
Bankruptcy Court for the southern District of New York. Simultaneously
therewith, such borrowers filed a "pre- packaged" plan of reorganization
which, among other things, incorporated the Settlement. On February 29, 1996,
the Bankruptcy Court confirmed the plan of reorganization and approved the
Settlement.
On March 13, 1996, the plan of reorganization and the Settlement was
implemented which resulted in the Partnership receiving $4,139,962. The
Partnership intends to distribute the net proceeds resulting from the
Settlement (less transaction costs, Partnership indebtedness and any
outstanding liabilities) to the Unitholders and the General Partner, and work
towards the dissolution of the Partnership thereafter.
Part I, Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources
On February 6, 1989, the Partnership originated a zero coupon second mortgage
loan (the "160 Water Street Loan") in the amount of $15,200,000 to 160 Water
Street Associates Limited Partnership (the "Borrowers"), a New York limited
partnership which owns 160 Water Street (the "Property"), a twenty-four story
office building located in New York City's Financial District. The 160 Water
Street Loan is secured by a second mortgage on the leasehold interests of the
Property and is subordinate to a first mortgage note held by New England Mutual
Life Insurance Corp. (the "First Mortgagee") in the original principal amount
of $35,000,000.
Since April 29, 1992, the Borrowers were in default under the terms of both the
first mortgage and the 160 Water Street Loan, in part as a result of declining
occupancies at the Property. The declining occupancies reflect the generally
depressed market conditions for office space in downtown Manhattan as well as
certain problems inherent in the Property, particularly the presence of
asbestos in significant portions of the Property.
While the Borrowers have been unable to cure the default with respect to the
first mortgage, the First Mortgagee refrained from initiating a foreclosure
proceeding due to ongoing negotiations with respect to a potential
restructuring. These negotiations resulted in the execution of a settlement
(the "Settlement") on October 29, 1995 between the Partnership, the Borrowers
and the First Mortgagee. Pursuant to the terms of the Settlement, the
Partnership was entitled to (i) receive from the Borrowers $1.125 million in
cash; and (ii) recover approximately $3,015,000 of escrow funds which were held
back from the original mortgage loan proceeds, in exchange for the full and
complete discharge of the Partnership's loan in connection with a pre-packaged
bankruptcy filing to restructure the Borrowers' debt. In February 1996, the
Settlement was approved by a majority of the Limited Partnership interests
through a proxy solicitation dated January 2, 1996.
On February 8, 1996, certain of the Borrowers filed petitions for relief under
Chapter 11 of the United States Bankruptcy Code with the United States
Bankruptcy Court for the southern District of New York. Simultaneously
therewith, such borrowers filed a "pre- packaged" plan of reorganization which,
among other things, incorporated the Settlement. On February 29, 1996, the
Bankruptcy Court confirmed the plan of reorganization and approved the
Settlement. On March 13, 1996, the plan of reorganization and the Settlement
was implemented, resulting in the Partnership receiving $4,139,962. The
Partnership intends to distribute the net proceeds resulting from the
Settlement (less the transaction costs, Partnership indebtedness and any
outstanding liabilities) to the Unitholders and the General Partner, and work
towards the dissolution of the Partnership thereafter.
In consideration of the foregoing, the increased vacancies at the Property, and
the deterioration of the New York City real estate market, the General Partner
fully reserved for the accreted loan balance in 1992. All interest on the loan
was being fully reserved as it accreted through March 13, 1996. Pursuant to
the Settlement, the Partnership recorded a recovery of valuation allowance as
of December 31, 1995, in the amount of $4,139,962, which reflects the amount of
funds received from the Borrowers to fulfill their debt obligation to the
Partnership on March 13, 1996.
At March 31, 1996, the Partnership's cash balance totaled $4,042,566, compared
with $14,301 at December 31, 1995. The increase is primarily attributable to
the receipt of $4,139,962 on March 13, 1996, pursuant to the terms of the
Settlement.
Organizational costs and deferred charges, net of accumulated amortization,
decreased from $63,250 at December 31, 1995 to $0 at March 31, 1996. The
decrease reflects the write-off of unamortized organizational costs upon
disposition of the Partnership's loan at the closing of the Settlement.
Accounts payable and accrued expenses decreased from $239,938 at December 31,
1995 to $127,579 at March 31, 1996. The decrease is primarily attributable to
payment of legal and professional fees associated with the Settlement.
Results of Operations
The Partnership reported a net loss of $73,529 for the three months ended March
31, 1996, compared with a net loss of $47,451 for the corresponding period in
1995. The increased net loss is primarily due to the write-off of
unamortized organizational costs upon disposition of the Partnerships loan at
the closing of the Settlement.
Part II Other Information
Items 1-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(27) Financial Data Schedule
(b) Reports on Form 8-K - No reports on Form 8-K were
filed during the quarter ended March 31, 1996.
SIGNATURES
Pursuant to the requirements 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.
PRINCIPAL GROWTH MORTGAGE INVESTORS
FUND, L.P.
BY: PRINCIPAL GROWTH REALTY MANAGEMENT, INC.
General Partner
Date: May 3, 1996 BY: /s/ Kenneth L. Zakin
Director and President
Date: May 3, 1996 BY: /s/ Daniel M. Palmier
Vice President and
Chief Financial Officer
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<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Mar-31-1996
<CASH> 4,042,566
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (73,529)
<EPS-PRIMARY> (.04)
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