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 September 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
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 September 30, At December 31,
1996 1995
Assets
Impaired mortgage loan receivable (Note 1) $ - $ 34,424,227
Valuation allowance - (30,284,265)
- 4,139,962
Cash and cash equivalents 251,119 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 $ 251,119 $4,217,513
Liabilities and Partners' Capital
Liabilities:
Accounts payable and accrued expenses $ 38,495 $239,938
Due to affiliates 34,078 125,970
Deferred income - 2,164
Total Liabilities 72,573 368,072
Partners' Capital (Deficit):
General Partner (125,614) (124,905)
Limited Partners (Depository units:
10,000,000 authorized; 1,739,000 issued) 304,160 3,974,346
Total Partners' Capital 178,546 3,849,441
Total Liabilities and Partners' Capital $251,119 $4,217,513
Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $3,974,346 $(124,905) $3,849,441
Net loss (70,186) (709) (70,895)
Distribution (3,600,000) - (3,600,000)
Balance at September 30, 1996 $ 304,160 $(125,614) $ 178,546
Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Income
Interest income net of valuation
allowance in 1996 of $0 and
$853,796 for the three and nine
months ended, respectively $3,379 $2,973 $60,823 $9,266
Total Income 3,379 2,973 60,823 9,266
Expenses
Amortization of organizational costs
and deferred charges - 30,792 63,250 92,376
General and administrative 18,018 35,333 57,218 88,339
Investment management fee 3,750 3,750 11,250 11,250
Total Expenses 21,768 69,875 131,718 191,965
Net Loss $(18,389) $(66,902) $(70,895) $(182,699)
Net Loss Allocated:
To the General Partner $(184) $(669) $(709) $(1,827)
To the Limited Partners (18,205) (66,233) (70,186) (180,872)
$(18,389) $(66,902) $(70,895) $(182,699)
Per limited partnership unit
(1,739,000 outstanding) $(.01) $(.03) $(.04) $(.10)
Statements of Cash Flows
For the nine months ended September 30, 1996 1995
Cash Flows From Operating Activities:
Net loss $ (70,895) $ (182,699)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Allowance for doubtful accounts 853,796 2,854,937
Recovery of valuation allowance 4,139,962 -
Amortization of organizational costs and
deferred charges 63,250 92,376
Amortization of deferred income on loan (2,164) (7,373)
Increase (decrease) in cash arising from changes in
operating assets and liabilities:
Mortgage loan receivable (853,796) (2,854,937)
Accounts payable and accrued expenses (201,443) 22,134
Due to affiliates (91,892) 26,747
Net cash provided by (used for) operating activities 3,836,818 (48,815)
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 236,818 (48,815)
Cash and cash equivalents, beginning of period 14,301 66,789
Cash and cash equivalents, end of period $ 251,119 $ 17,974
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 September 30, 1996 and the results of operations and cash flows
for the nine months ended September 30, 1996 and 1995 and the statement of
partners' capital (deficit) for the nine months ended September 30, 1996.
Results of operations for the periods 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 require 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 "prepackaged" 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, if any, would 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
(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, if
any, 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 September 30, 1996, the Partnership's cash balance totaled $251,119,
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, and the payment of General and
Administrative expenses.
Organizational costs and deferred charges, net of accumulated amortization,
decreased from $63,250 at December 31, 1995 to $0 at September 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 $38,495 at September 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 $34,078 at
September 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
For the three and nine months ended September 30, 1996, the Partnership
reported net losses of $18,389 and $70,895, compared to net losses of $66,902
and $182,699 for the corresponding periods in 1995. The lower net losses are
primarily due to an increase in interest income arising from the Partnership's
higher cash balance following the receipt of the Settlement proceeds, lower
organizational costs and deferred charges, and lower general and administrative
expenses in the 1996 period.
Interest income was $3,379 and $60,823 for the three and nine months ended
September 30, 1996 compared to $2,973 and $9,266 for the corresponding periods
in 1995. The increase in the nine month period is the result of the
Partnership's higher cash balance following the receipt of the Settlement
proceeds.
Amortization of organizational costs and deferred charges decreased from
$30,792 and $92,376 for the three and nine months ended September 30, 1995 to
$0 and $63,250 for the same periods in 1996, reflecting the write-off of
unamortized organizational costs upon disposition of the Partnerships loan at
the closing of the Settlement.
General and administrative expenses decreased for both the three and nine
months ended September 30, 1996 in comparison to 1995 due to lower legal
expenses relating to 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 September 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: November 13, 1996 BY: /s/ Kenneth L. Zakin
Director and President
Date: November 13, 1996 BY: /s/ Daniel M. Palmier
Vice President and
Chief Financial Officer
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<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 251,119
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<RECEIVABLES> 0
<ALLOWANCES> 0
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