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 June 30, 1996
or
Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
For the Transition period from ______ to ______
Commission File Number: 33-23954
PRINCIPAL GROWTH MORTGAGE INVESTORS FUND, L.P.
Exact Name of Registrant as Specified in its Charter
Delaware 13-3499956
State or Other Jurisdiction of I.R.S. Employer Identification No.
Incorporation or Organization
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 ____
At June 30, At December 31,
Balance Sheets 1996 1995
Assets
Impaired mortgage loan receivable (Note 1) $ _ $34,424,227
Valuation allowance _ (30,284,265)
_ 4,139,962
Cash and cash equivalents 254,238 14,301
Organization costs and deferred charges, net of
accumulated amortization of $968,728 in 1996
and $905,478 in 1995 _ 63,250
Total Assets $254,238 $4,217,513
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 37,200 $ 239,938
Due to affiliates 20,103 125,970
Deferred income _ 2,164
Total Liabilities 57,303 368,072
Partners' Capital (Deficit):
General Partner (125,430) (124,905)
Limited Partners (Depositary units:
10,000,000 authorized; 1,739,000 issued) 322,365 3,974,346
Total Partners' Capital 196,935 3,849,441
Total Liabilities and Partners' Capital $254,238 $4,217,513
Statement of Partners' Capital (Deficit)
For the six months ended June 30, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $3,974,346 $ (124,905) $3,849,441
Net loss (51,981) (525) (52,506)
Distribution (3,600,000) _ (3,600,000)
Balance at June 30, 1996 $322,365 $ (125,430) $ 196,935
Statements of Operations
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
Income
Interest income net of
valuation allowance in 1996
of $0 and $853,796 for the three
and six months ended,respectively $ 44,388 $ 2,905 $ 57,444 $ 6,293
Total Income 44,388 2,905 57,444 6,293
Expenses
Amortization of organizational costs
and deferred charges _ 30,792 63,250 61,584
General and administrative 19,615 36,709 39,200 53,006
Investment management fee 3,750 3,750 7,500 7,500
Total Expenses 23,365 71,251 109,950 122,090
Net Income (Loss) $21,023 $(68,346) $(52,506) $(115,797)
Net Income (Loss) Allocated:
To the General Partner $ 210 $ (683) $ (525) $ (1,158)
To the Limited Partners 20,813 (67,663) (51,981) (114,639)
$21,023 $(68,346) $(52,506) $(115,797)
Per limited partnership unit
(1,739,000 outstanding) $.01 $(.04) $(.03) $(.07)
Statements of Cash Flows
For the six months ended June 30, 1996 1995
Cash Flows From Operating Activities:
Net loss $ (52,506) $ (115,797)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Allowance for doubtful accounts 853,796 1,865,362
Recovery of valuation allowance 4,139,962 _
Amortization of organization costs and
deferred charges 63,250 61,584
Amortization of deferred income on loan (2,164) (4,915)
Increase (decrease) in cash arising from changes
in operating assets and liabilities:
Mortgage loan receivable (853,796) (1,865,362)
Accounts payable and accrued expenses (202,738) 12,015
Due to affiliates (105,867) 19,081
Net cash provided by (used for)
operating activities 3,839,937 (28,032)
Cash Flows From Financing Activities:
Distributions paid (3,600,000) _
Net cash used for financing activities (3,600,000) _
Net increase (decrease) in cash and
cash equivalents 239,937 (28,032)
Cash and cash equivalents, beginning of period 14,301 66,789
Cash and cash equivalents, end of period $ 254,238 $ 38,757
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 June 30, 1996 and the
results of operations and cash flows for the six months ended
June 30, 1996 and 1995 and the statement of partners' capital
(deficit) for the six months ended June 30, 1996. Results of
operations for the period are not necessarily indicative of the
results to be expected for the full year.
The following significant events have 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 was 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.
On June 19, 1996, the Partnership paid a distribution to the
Limited Partners totaling $3,600,000, ($2.07 per unit) from net
proceeds received in connection with the Settlement. The General
Partner is in the process of liquidating the Partnership. Any
funds remaining after payment of the Partnership's outstanding
liabilities will be distributed to the Limited Partners.
However, such distribution will be nominal.
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 was secured by a second mortgage on the
leasehold interests of the Property and was 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 were 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 agreement (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. After the payment of fees
and expenses associated with the Settlement and the establishment
of certain reserves on account of Partnership liabilities, the
Partnership had approximately $3,600,000, or $2.07 per unit,
available for distribution. Such amount was distributed to the
Limited Partners on June 19, 1996. The General Partner is in the
process of liquidating the Partnership. Any funds remaining
after payment of the Partnership's outstanding liabilities will
be distributed to the Limited Partners. However, such
distribution will be nominal.
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 June 30, 1996, the Partnership's cash balance totaled
$254,238, 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,
offset by the subsequent distribution to the Limited Partners of
$3,600,000 on June 19, 1996.
Organizational costs and deferred charges, net of accumulated
amortization, decreased from $63,250 at December 31, 1995 to $0
at June 30, 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 $37,200 at June 30, 1996. The decrease is
primarily attributable to payment of legal and professional fees
associated with the Settlement.
Due to affiliates decreased from $125,970 at December 31, 1995 to
$20,103 at June 30, 1996. The decrease reflects the payment of
outstanding management fees and certain administrative expenses
which had been accruing but unpaid since 1992.
Results of Operations
The Partnership reported net income of $21,023 for the three
months ended June 30, 1996, compared with a net loss of $68,346
for the corresponding period in 1995. The change from net loss
to net income is primarily due to an increase in interest income
and the absence of organizational costs and deferred charges in
the 1996 period. Interest income increased from $2,905 in the
1995 second quarter to $44,388 in the 1996 period, reflecting the
Partnership's higher cash balance following the receipt of the
Settlement proceeds. Organizational costs and deferred charges
decreased from $30,792 for the three months ended June 30, 1995
to $0 for the three months ended June 30, 1996, reflecting the
write-off of unamortized organizational costs upon disposition of
the Partnerships loan at the closing of the Settlement.
For the six months ended June 30, 1996, the Partnership reported
a net loss of $52,506, compared to a net loss of $115,797 for the
corresponding period in 1995. The lower net loss was primarily
due to an increase in interest income arising from the
Partnership's higher cash balance following the receipt of the
Settlement proceeds. General and administrative expenses
decreased for both the three and six months ended June 30, 1996
in comparison to 1995 due to lower legal expenses relating to the
Settlement Agreement.
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 June 30, 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: August 14, 1996 BY: /s/ Ken L. Zakin
Director and President
Date: August 14, 1996 BY: /s/ Daniel M. Palmier
Vice President and
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> June-30-1996
<CASH> 254,238
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<OTHER-SE> 196,935
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