UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarter 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 33-31778
Historic Preservation Properties 1990 L.P. Tax Credit Fund
(Exact name of registrant as specified in its charter)
Delaware 04-3066191
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
Batterymarch Park II, Quincy, Massachusetts 02169
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 472-1000
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
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
FORM 10-Q
SEPTEMBER 30, 1996
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Partners' Equity
(Deficiency) 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7-12
Management's Discussion and Analysis of
Financial Condition and Results
of Operations 13-15
PART II- OTHER INFORMATION 16
Signatures 17
2
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
ASSETS
1996 1995
(Unaudited)
INVESTMENTS IN REAL ESTATE:
Building and building improvements $15,179,113 $14,736,101
Land 97,034 97,034
Furniture and equipment 983,490 964,378
Marina - land and improvements 1,334,308 1,352,790
17,593,945 17,150,303
Less accumulated depreciation 2,978,715 2,573,713
14,615,230 14,576,590
Reserve for realization of Marina land
and improvements (845,672) (845,672)
13,769,558 13,730,918
CASH 459,248 474,835
ESCROW DEPOSITS 29,490 54,270
DEFERRED EVALUATION AND ACQUISITION
COSTS, net of accumulated amortization
(1996, $158,495; 1995, $137,822) 944,105 964,778
OTHER DEFERRED COSTS, net of accumulated
amortization (1996, $11,274) 183,013 51,121
OTHER ASSETS 140,889 207,103
$15,526,303 $15,483,025
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Mortgages and note payable $6,157,752 $ 5,590,418
Accrued expenses and other liabilities 336,077 402,064
Security deposits 92,776 86,716
Total liabilities 6,586,605 6,079,198
COMMITMENTS AND CONTINGENCIES (Notes 4 and 5)
MINORITY INTEREST - 268,325
PARTNERS' EQUITY
Limited Partners' Equity
Units of Investor Limited Partnership
Interest
$1,000 stated value per unit
Issued and outstanding -16,361 units 8,992,662 9,186,508
General Partner's equity (deficiency) (52,964) (51,006)
Total partners' equity 8,939,698 9,135,502
$15,526,303 $15,483,025
The accompanying notes are an integral part of these financial
statements.
3
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES:
Rental and related income $ 785,123 $ 725,341 $ 2,163,500 $ 1,999,087
Interest and other income 8,995 37,390 39,617 129,331
794,118 762,731 2,203,117 2,128,418
EXPENSES:
Operating and administrative 28,323 36,744 157,692 74,485
Property operating expenses 430,565 544,912 1,327,110 1,404,195
Professional fees 9,650 27,058 59,802 71,209
Deprec and amortization 153,166 141,907 436,949 426,324
621,704 750,621 1,981,553 1,976,213
Income from operations 172,414 12,110 221,564 152,205
OTHER EXPENSE:
Interest Expense (121,370) (140,805) (420,712) (421,283)
MINORITY INTEREST IN LOSS
ON MARINA VENTURE - 8,968 3,344 30,446
NET INCOME (LOSS) $ 51,044 $ (119,727) $ (195,804) $ (238,632)
NET INCOME (LOSS)
ALLOCATED TO
GENERAL PARTNER $ 511 $ (1,197) $ (1,958) $ (2,386)
NET INCOME (LOSS)
ALLOCATED TO
LIMITED PARTNERS $ 50,533 $(118,530) $ (193,846) $ (236,246)
NET INCOME (LOSS) PER UNIT
OF INVESTOR LIMITED
PARTNERSHIP INTEREST,
BASED ON 16,361 UNITS
OUTSTANDING $ 3.09 $ (7.25) $ (11.85) $ (14.44)
</TABLE>
The accompanying notes are an integral part of these financial
statements.
4
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
AND THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Units of
Investor Investor
Limited Limited General
Partnership Partners' Partner's
Interest Equity (Deficiency) Total
<S> <C> <C> <C> <C>
BALANCE, December 31, 1994 16,361 $ 9,541,939 $ (47,416) $9,494,523
Net loss - (355,431) (3,590) (359,021)
BALANCE, December 31, 1995 16,361 9,186,508 (51,006) 9,135,502
Net loss (Unaudited) - (193,846) (1,958) (195,804)
BALANCE, September 30, 1996
(Unaudited) 16,361 $ 8,992,662 $ (52,964) $ 8,939,698
</TABLE>
The accompanying notes are an integral part of these financial
statements.
5
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (195,804) $(238,632)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 436,949 426,324
Minority interest
in loss on Marina Venture (3,344) (30,446)
Increase (decrease) in accrued expenses
and other liabilities (59,927) 18,211
Decrease in escrow deposits 24,780 38,509
Decrease (increase) in other assets 66,214 (120,435)
Net cash provided by operating
activities 268,868 93,531
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (19,112) (3,826)
Additions to building and improvements (443,012) (1,310)
Additions to marina land and improvements (21,499) -
Net cash used in investing activities (483,623) (5,136)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from refinancing 6,000,000 -
Payment of mortgage payable (5,590,418) -
Principal payments of mortgage payable (67,248) -
Additions to deferred costs (143,166) -
Net cash provided by financing
activities 199,168 -
NET INCREASE (DECREASE) IN CASH (15,587) 88,395
CASH, BEGINNING OF PERIOD 474,835 505,501
CASH, END OF PERIOD $459,248 $593,896
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $400,824 $421,020
Non-cash financing activity:
On February 27, 1996, the minority interest in the Marina Venture
redeemed its partnership interest for a $225,000 mortgage note on
the property. The transaction resulted in a $39,981 reduction of basis
in the marina property. See footnote 4 for further information.
The accompanying notes are an integral part of these financial statements.
6
(1) Basis of Presentation
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and generally with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine months ended September 30, 1996, are not necessarily
indicative of the results that may be expected for the year ending December
31, 1996. For further information, refer to the financial statements and
footnotes thereto included in the Annual Report on Form 10-K for the year
ended December 31, 1995 for Historic Preservation Properties 1990 L.P. Tax
Credit Fund (HPP'90), as filed with the Securities and Exchange Commission.
(2) General Partner - Boston Historic Partners II Limited Partnership
Boston Historic Partners II Limited Partnership (BHP II), the
general partner of HPP'90, was formed in June 1989 for the purpose of
organizing, syndicating and managing publicly offered real estate limited
partnerships (Public Rehabilitation Partnerships).
BHP II has a substantial amount of unpaid obligations to trade
creditors. In the event BHP II is not able to generate sufficient cash to
fund BHP II's operations and commitments and contingencies in the future,
there might be unfavorable consequences to HPP'90.
Under the partnership agreement, a bankruptcy of BHP II could
result in the dissolution of HPP'90, if at any time BHP II were to be
adjudicated bankrupt (either by way of a voluntary filing or by an issuance
of an order for relief in the event of an involuntary filing) and BHP II
continued to be the sole general partner of HPP'90. If an additional
general partner was admitted to HPP'90 prior to a bankruptcy of BHP II, the
business of HPP'90 would be able to continue.
If BHP II were to be adjudicated bankrupt, and at the time BHP II
was the sole general partner of HPP'90, HPP'90 would not be dissolved upon
the occurrence of such an event if a majority interest of the limited
partners, elect, within 90 days, to continue the business of HPP'90 and
another general partner is elected (under Delaware law, within 90 days, a
unanimous vote of the limited partners to continue HPP'90 is required).
Although the partnership agreement provides for the above
mechanisms for continuing the business of HPP'90, BHP II's general partners
believe the most likely course of action would be to seek a successor or
additional general partner for HPP'90.
If such events were to happen whereby BHP II and/or HPP'90 could
not consummate the above, HPP'90 could be dissolved resulting in adverse
tax consequences to the limited partners.
7
(3) Investment in Real Estate
During 1990, HPP'90 acquired an interest in the following entities
(see below for subsequent changes in ownership):
Henderson's Wharf Baltimore, L.P. (the Building Venture) is a
Delaware limited partnership formed on July 20, 1990 to acquire a fee
interest in a seven-story building on 1.5 acres of land and to rehabilitate
the building into 125 residential units, 149 indoor parking spaces and a 38
room inn located at 1000 Fell Street, Baltimore, Maryland. As discussed
below, in 1996 the Building Venture purchased three condominium units and
three parking spaces owned by unrelated parties, in conjunction with the
refinancing of its note payable. The building contains a total of 137
residential units, 9 of which are currently owned by unrelated parties.
The building has been substantially renovated and certain renovation costs
qualify for Rehabilitation Tax Credits. The Building Venture purchased its
interest for $6,812,500, which included seller financing of $6,350,000, and
a contingent purchase price promissory note (see Note 4). Contributions by
HPP'90 to the Building Venture totaled $12,214,500, as of September 30,
1996.
HPP'90 has made all required capital contributions to the Building
Venture in accordance with the Building Venture's partnership agreement,
and is not required to make additional contributions, although at its sole
discretion, may do so.
The renovation of the residential units was substantially complete
and a certificate of occupancy was received on December 31, 1990. The
Building Venture commenced lease-up in 1991 and has been fully operational
since 1992. For the quarter ending September 30, 1996, the average
economic occupancy for the residential units was approximately 96% and the
average occupancy for the Inn was 81%.
On February 27, 1996, the Building Venture purchased three
condominium units and parking spaces owned by unrelated parties, in
conjunction with the refinancing of its note payable (see Note 4).
HPP'90's operations, principally accounting, asset management,
investor services, and other general and administrative costs, are funded
from distributions by the Building Venture. During the nine months ending
September 30, 1996, the Building Venture distributed $137,000 to HPP'90.
Henderson's Wharf Marina, L.P. (the Marina Venture) is a Delaware
limited partnership formed on July 20, 1990 to acquire a fee interest in a
1.92 acre parcel of land together with a 256-slip marina located in
Baltimore, Maryland. HPP'90 purchased the Marina Venture for $1,266,363,
which included seller financing of $1,187,500 (see Note 4). Contributions
to the Marina Venture by HPP'90 totaled $247,219, as of September 30, 1996.
The Marina Venture had operated a minimal number of slips since
1991 due to the significant repairs necessary to be fully operational.
During the quarter ending September 30, 1996, the Marina Venture added
$21,499 of utility, safety and other improvements, and increased the number
of fully operational slips to 118. Substantial repairs are still needed to
bring the entire marina to full operation.
The Building Venture and the Marina Venture are collectively
referred to as "the Ventures."
8
(3) Investment in Real Estate (Continued)
Under the Second Amended and Restated Agreements of Limited
Partnership dated February 1, 1991 of Henderson's Wharf Baltimore, L.P. and
Henderson's Wharf Marina, L.P., Henderson's Wharf Development Corporation
(HWDC), a Delaware corporation wholly owned by HPP'90, was admitted as a
general partner of the Venture, and Hillcrest Management, Inc. (HMI), a
Massachusetts corporation, was admitted as the Limited Partner of the
Ventures and became a minority interest holder in the Ventures. On August
1, 1991, the Second Amended and Restated Agreement of Limited Partnership
of Henderson's Wharf Marina, L.P. was amended. The amendment provided for
the withdrawal by HPP'90 as a general partner and the admittance of HPP'90
as a limited partner. Consequently, HWDC became the sole general partner in
the Marina Venture.
HPP'90 and HWDC are collectively referred to as the "Henderson's
General Partners."
On December 31, 1992, the Third Amended and Restated Agreement of
Limited Partnership of Henderson's Wharf Marina, L.P. was executed. HWFP,
Inc. (HWFP), a Maryland corporation and the original holder of the purchase
money note relating to the purchase of the marina property, received a 50%
limited partnership interest in the Marina Venture and became the holder of
a minority interest (see Note 4). Concurrently, HMI withdrew as a limited
partner in the Marina Venture, HPP'90's limited partnership interest in the
Marina Venture was reduced to 49% and HWDC retained a 1% general
partnership interest in the Marina Venture. The minority interest granted
was recorded at fair market value based on an independent appraisal and a
priority distribution of proceeds from capital transactions as provided for
in the Marina Venture's Third Amended and Restated Agreement of Limited
Partnership.
Based on the fair market value of marina land and improvements
determined by independent appraisal and the priority distribution of
proceeds from capital transactions as provided for in the Marina Venture's
Third Amended and Restated Agreement of Limited Partnership, the
Partnership has reserved $845,672 against its investment in the marina land
and improvements as of December 31, 1992. At September 30, 1996,
management estimates that the future cash flows from the marina exceed the
carrying amount of the property, therefore, no further reserve is deemed
necessary.
As discussed in Note 4, on February 27, 1996, HPP'90, HWDC and
HWFP, Inc. entered into the First Amendment to the Third Amended and
Restated Agreement of Limited Partnership of Henderson's Wharf Marina, L.P.
by which HWFP, Inc. redeemed its 50% limited partnership interest in the
Marina Venture in return for a $225,000 first mortgage note secured by the
marina property. As a result of this redemption, HPP'90's limited
partnership interest in the Marina Venture was increased to 98% and HWDC
received a 1% limited partnership interest and maintained its 1% general
partnership interest in the Marina Venture.
In accordance with the termination of all HMI contracts (see Note
5), effective January 1, 1995, HMI withdrew from the Building Venture as a
.1% limited partner and was replaced by HWDC.
Generally, allocations of net profits and losses as well as cash
flow of the Building Venture are allocated 99% to HPP'90 and 1% to HWDC.
Generally, allocations of net profits and loss, as well as cash flow of the
Marina Venture are allocated 98% to HPP'90 and 2% to HWDC. The overall
management and control of the operating and financial policies of the
Ventures is solely vested in Henderson's General Partners.
9
(4) Mortgages and Note Payable
The Building Venture financed $6,350,000 of the purchase price of
the property by issuing a purchase money note to the seller, HWFP (also
referred to as "the Lender"). HPP'90 paid $1,000,000 of principal under
this note in December 1990, reducing the balance to $5,350,000 at December
31, 1990. During 1992, the maturity date of the note was extended until
January 2, 1994. In consideration for extending the maturity date of the
note, the Building Venture was required to pay $150,000 to the Lender on
the earlier of January 2, 1994 or a refinancing of the purchase money note.
The Building Venture negotiated three extensions in 1994. In April 1994,
the Lender extended the maturity date on the note until December 31, 1995
and added the $150,000 extension fee to the outstanding principal balance
of the note along with unpaid interest totaling $90,418. Interest was due
monthly on the new principal balance of the note of $5,590,418 at the
annual rate of 10%. In addition, the Lender required the Building Venture
to fund a real estate tax escrow account on a monthly basis. The note was
secured by the property, rents and assignment of leases.
In conjunction with issuing a purchase money note to the seller
during the acquisition of the property, the Building Venture entered into a
contingent purchase price promissory note with the seller for $1,250,000.
Payment on the note was contingent upon the cash flow generated from the
future sale of apartment units in the Building Venture. The note was
unsecured, bore no interest, and had no maturity date. As discussed below,
the Building Venture paid off the contingent purchase price promissory note
for $109,583 on February 27, 1996. This amount was recorded as an addition
to the building basis in 1996.
On February 27, 1996, HPP'90 obtained a $6,000,000 deed of trust
note with a third party lender which provided funds for the Building
Venture to refinance the outstanding balance of the seller financed
purchase money note totaling $5,590,418, to pay $109,583 to the seller in
release of the contingent purchase price promissory note, and to purchase
in part three condominium units and parking spaces owned by unrelated
parties for an aggregate purchase price of $333,429. The deed of trust
note bears interest at 7.85% and requires monthly principal and interest
payments in the amount of $49,628 commencing in April 1996. The note
amortizes over a 20 year schedule and all remaining unpaid principal and
interest is due in March 2006. Under the deed of trust note, the lender has
the option with six months written notice to call amounts outstanding under
the deed of trust note at the end of ten years or anytime thereafter. The
deed of trust note is secured by the Building Venture's property, rents and
assignment of leases and is guaranteed by the Building Venture.
As discussed in Note 3, on February 27, 1996, HPP'90, HWDC and
HWFP, Inc. entered into the First Amendment to the Third Amended and
Restated Agreement of Limited Partnership of Henderson's Wharf Marina, L.P.
by which HWFP, Inc. redeemed its 50% limited partnership interest in the
Marina Venture in return for a $225,000 first mortgage note secured by the
marina property. The note bears interest at 7.50%, matures in March 2006,
and requires monthly principal and interest payments in the amount of
$2,086 commencing April 1996. The transaction resulted in a $39,981
reduction of basis in the marina property.
Approximate aggregate maturities of the deed of trust note and
mortgage note for each of the next five years are as follows:
Year Ending December 31, Amount
1997 145,847
1998 157,683
1999 170,481
2000 184,317
2001 199,351
10
(5) Transactions With Related Parties and Commitments
On February 1, 1991, the Building Venture entered into a long term
property management and brokerage agreement (Management Agreement), an inn
lease (Inn Lease) and a consulting agreement (Consulting Agreement) with
HMI. The Management Agreement originally expired on December 31, 1993 and
the Inn Lease originally expired on December 31, 1995. The Management
Agreement required the payment of management fees to HMI equal to 6% of
gross rental receipts, as defined in the agreement. The Management
Agreement also required the payment of a one time lease up fee for leasing
residential units during the lease-up phase equal to one month's rent. The
Inn Lease required the payments to HMI of 50% of the operating profit, as
defined in the agreement, relating to the 38 room inn. If the total
management fees earned based on the inn's gross rental receipts were less
than $75,000 for any one year, then the Inn Lease required a payment to
HMI equal to the difference between actual management fees paid and
$75,000. The Management Agreement and Inn Lease were terminated by the
Building Venture on July 31, 1993.
The Consulting Agreement, which expired on December 31, 1991,
required the Building Venture to pay HMI a $15,000 refinancing fee upon the
closing of any significant refinancing of the Building Venture's then
existing financing. The Consulting Agreement also required the Building
Venture and the Marina Venture to pay HMI an incentive fee equal to 1% of
the gross sales proceeds resulting from the sale of each respective
property to an unaffiliated third party buyer. These commitments survive
the December 31, 1991 expiration date of the Consulting Agreement and the
termination of all other agreements with HMI (see below). The Building
Venture paid the $15,000 refinancing fee to HMI in March 1996 as a result
of refinancing its purchase price promissory note as discussed in Note 4.
On January 1, 1992, the Marina Venture entered into a long term
Property Management Agreement with HMI. The agreement provided for payment
of management fees to HMI equal to 9% of the Gross Operating Revenues, as
defined in the agreement.
As mentioned above, effective July 31, 1993, the Ventures
terminated their respective Management Agreements and Inn Lease (the
Contracts) with HMI. As of December 31, 1993, HPP'90 had not reached an
agreement with HMI as to whether any additional payments were due under the
Contracts as a result of the termination. Consequently, HPP'90 was unable
to reasonably estimate amounts due to HMI, if any, and no liability was
recorded as of December 31, 1993.
During October 1994, HPP'90 and HMI agreed in principle to an
agreement whereby the parties would settle their differences and put to
rest all further controversy and avoid substantial expense of burdensome
and protracted litigation. In January 1995, HPP'90 entered into an
agreement on behalf of the Ventures to pay HMI contract termination
settlement payments (Settlement Payments) totaling $271,108 which has been
recorded during the fourth quarter of 1994 and which has been included in
accrued expenses and other liabilities as of December 31, 1995 and
September 30, 1996. The Settlement Payments required an initial payment of
$36,000 that was paid on January 27, 1995 and monthly payments of $3,221
commencing in September 1995 through the earlier of September 2001 or the
occurrence of certain events as defined in the agreement. The Settlement
Payments are secured by 100% of HPP'90's economic interest as a partner in
the Ventures, as defined in the agreements; net sales and refinancing
proceeds; cash flow; return of capital contributions; all of HPP'90's cash
and marketable securities in excess of $150,000; and all of the Ventures'
cash in excess of the greater of $200,000 or reserves required by lenders.
No distributions to the partners of HPP'90 are permitted until all
Settlement Payments are paid in full. As of September 30, 1996, unpaid
settlement Payments included in accrued expenses and other liabilities
totaled $193,238.
11
(5) Transactions With Related Parties and Commitments (Continued)
On August 23, 1993, the Ventures hired McKenna Management
Associates, Inc. (McKenna) as the independent onsite property management
company. The management agreement with McKenna originally expired in August
1995 and was extended until October 31, 1995. The agreement required the
payment of $9,000 per month for the first year and $7,650 per month for the
second year from the Ventures.
On November 1, 1995, the Building and Marina Venture entered into
property management contracts with Claremont Management Corporation (CMC),
an unaffiliated Massachusetts corporation, to manage the apartment, inn and
marina operations. The property management contracts provide for payment of
management fees to CMC equal to 4% and 4.5% of apartment and inn gross
receipts, as defined, respectively, and 9% of marina gross receipts, as
defined. The agreements expire on June 30, 1997, and are automatically
extended on an annual basis unless otherwise terminated as provided for in
the agreements. A condition of the agreements requires the Ventures to
maintain with CMC, for the benefit of the Ventures, operating cash and
contingency reserves of $190,000 and $70,000, respectively. To facilitate
the transition of property management and through an arrangement with CMC,
McKenna continued to provide management services to the apartment, inn and
marina operations through December 31, 1995.
On July 1, 1993, HPP'90 hired Portfolio Advisory Services, Inc.
(PAS), a Massachusetts corporation, which is related to BHP II through
certain common ownership and management, to provide asset management,
accounting and investor services. The original contract was for one year
and was extended through September 30, 1995. PAS received no fee for its
services, however, it was reimbursed for all operating costs of providing
these services.
On October 1, 1995, HPP'90 engaged CMC to provide accounting, asset
management and investor services. CMC provides such services for an annual
management fee of $38,400, plus reimbursement of all its costs of providing
these services. The initial term of the agreement expires on June 30, 1997,
and is automatically extended on an annual basis unless terminated as
provided for in the agreement. For the period January 1, 1996 to September
30, 1996, CMC received management fees of $28,800 and expense reimbursement
totaling approximately $102,900.
(6) Fair Value of Financial Investments
The carrying amounts of cash, escrow deposits, accrued expenses and
other liabilities, and security deposits approximate their fair values due
to their short maturities. The fair values of the deed of trust note and
mortgage payable are deemed equal to their carrying amounts. All
financial instruments are held for non-trading purposes.
12
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30,1996
(UNAUDITED)
Liquidity and Capital Resources. HPP'90 terminated its offering of Units
on December 31, 1990, at which time Limited Partners had purchased 16,361
Units, representing gross capital contributions of $16,361,000. As of
September 30, 1996, the Partnership had invested an aggregate of
$12,461,719 in the Building and Marina Ventures. The rehabilitation of the
Building Venture was intended to qualify for Rehabilitation Tax Credits.
Such amount contributed in the Building and Marina Ventures represents
approximately 100% of the Limited Partners' capital contribution after
deducting selling commissions, organizational and sales costs, acquisition
fees and reserves. The Partnership does not anticipate making any
additional investments in new real estate.
As of September 30, 1996, the Ventures and HPP'90 had cash of $459,248
including security deposits of $93,798. HPP'90's cash is used primarily to
fund general and administrative expenses of operating the public fund. The
Ventures' cash is used to fund operating expenses of the properties. In
addition, to the extent available, the Building Venture distributes cash to
HPP'90. The short term liquidity of HPP'90 depends on the Building
Venture's ability to make monthly distributions to HPP'90.
Settlement Payments due HMI, that were negotiated as part of the
contract termination, are secured by 100% of HPP'90's economic interest as
a partner in the Ventures, as defined in the agreements; net sales and
refinancing proceeds; cash flow; return of capital contributions; all of
HPP'90's cash and marketable equity securities in excess of $150,000; and
all of the Ventures' cash in excess of the greater of $200,000 or reserves
required by its lenders.
Cash flow generated from the Partnership's present investment properties
and the Partnership's share of the proceeds from the sale of such
properties is expected to be the source of future long-term liquidity.
Results of Operations. The Partnership incurred a net loss under
generally accepted accounting principles of ($195,804) for the nine months
ended September 30, 1996, which includes depreciation and amortization of
$436,949.
The Building Venture has been fully operational during the entire year.
The Marina Venture had operated on a minimal number of its 256 slips since
1991 due to significant repairs necessary to be fully operational. During
the quarter ending September 30, 1996, the Marina Venture added $21,499 of
utility, safety and other improvements and increased the number of fully
operational slips to 118. Substantial repairs are still needed to bring
the entire marina to full operation. The results of the Partnership's
operations in future years should be comparable to 1995 numbers provided
the Ventures are able to maintain greater than 90% average annual occupancy
in the Apartments and 66% average annual occupancy in the Inn. Expense
levels should increase with the rate of inflation but, it is anticipated
that the monthly rents and the average daily room rate revenues should
increase accordingly.
The occupancy of the apartments has increased from previous years as a
result of management's decision to enter into more traditional long term,
annual leases. In addition, a market study of the competition was prepared,
and the Building Ventures' monthly rental rates were adjusted to reflect
what the actual rates should be for a property located in the Fells Point,
Baltimore neighborhood. The average economic occupancy for the residential
units was approximately 96% for the quarter ended September 30, 1996.
13
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1996
(UNAUDITED)
The average occupancy for the Inn for the quarter ending September 30,
1996 was 81%. The Inn's increased occupancy, which has improved over prior
years, was due in part to a direct competitor temporarily discontinuing
operations for major renovations. The Building Venture has engaged a full
time hospitality manager to generate new business from previously untapped
markets. In addition, the hospitality market nationwide experienced an
increase from previous years. Management is projecting 66% or greater
average occupancy for the Inn for calendar year 1996 and is expecting
occupancy for the Inn to fluctuate around that same level in future years,
depending upon market conditions from year to year.
Rental and related income increased for the three and nine months ended
September 30, 1996 as compared to the same periods in 1995, primarily due
to increases in rental rates at the Inn and the Apartments. There was no
significant changes in occupancy for the Inn and the Apartments through the
third quarter of 1996 as compared to that of 1995. Operating and
administrative expenses for the nine months ended September 30, 1996
increased in comparison to the same period in 1995 due to additional fees
and other administrative expenses associated with the engagement of an
independent third party to perform asset management, accounting and
investor services for HPP'90. For the three months ending September 30,
1996, interest expense has decreased from the same period in 1995 due to
the lower interest rates and amortization of the deed of trust note and
mortgage payable.
During 1994, HPP'90 entered into an agreement to make settlement
payments to HMI totaling $271,108 which has been recorded in the fourth
quarter of 1994. As of September 30, 1996, unpaid settlement Payments
included in accrued expenses and other liabilities totaled $193,238.
On February 27, 1996, HPP'90 obtained a $6,000,000 deed of trust
note with a third party lender which provided funds for the Building
Venture to refinance the outstanding balance of the seller financed
purchase money note totaling $5,590,418, to pay $109,583 to the seller in
release of the contingent purchase price promissory note, and to purchase
in part three condominium units and parking spaces owned by unrelated
parties for an aggregate purchase price of $333,429. The deed of trust note
bears interest at 7.85% and requires monthly principal and interest
payments in the amount of $49,628 commencing in April 1996. The note
amortizes over a 20 year schedule and all remaining unpaid principal and
interest is due in March 2006. Under the deed of trust note, the lender has
the option with six months written notice to call amounts outstanding under
the deed of trust note at the end of ten years or anytime thereafter. The
deed of trust note is secured by the Building Venture's property, rents and
assignment of leases and is guaranteed by the Building Venture.
Based on management's analysis completed during the fourth quarter of
1992 which considered the fair market value of marina land and improvements
determined by independent appraisal and priority distribution of proceeds
from capital transactions as provided for in the Marina Venture's Third
Amended and Restated Agreement of Limited Partnership, the Partnership
reserved $845,672 against its investment in the marina land and
improvements as of December 31, 1992.
On February 27, 1996, HPP'90, HWDC and HWFP, Inc. entered into the First
Amendment to the Third Amended and Restated Agreement of Limited
Partnership of Henderson's Wharf Marina, L.P. by which HWFP, Inc. redeemed
its 50% limited partnership interest in the Marina Venture in return for a
$225,000 first mortgage note secured by the marina property. The note bears
interest at 7.50%, matures in March 2006, and requires monthly principal
and interest payments in the amount of $2,086 commencing April 1996. As a
result of the redemption of HWFP's interest, HPP'90's limited partnership
interest in the Marina Venture increased to 98% and HWDC received a 1%
limited partnership interest and maintained its 1% general partnership
interest in the Marina Venture. The transaction also resulted in a $39,981
reduction of basis in the marina property
14
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1996
(UNAUDITED)
Although recent improvements have increased the number of operating
slips, the Marina Venture requires substantial rehabilitation for the
entire marina to become fully operational. After evaluating the marina
over the past few years, the Marina Venture determined that it was in its
best interest to restructure the Marina Venture before proceeding with the
significant development of the marina.
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 are highly leveraged in view of the fact that the Building
Venture is subject to a substantial deed of trust note. Operating expenses
and rental revenues of each 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 not offset by similar 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
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 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.
15
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
PART II - OTHER INFORMATION
SEPTEMBER 30, 1996
Item 1. Legal Proceedings - Not applicable.
Item 2. Changes in Securities - Not applicable.
Item 3. Defaults Upon Securities - Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders - Not
applicable.
Item 5. Other Information - Not applicable.
Item 6. Exhibits and Reports from Form 8-K
(a) Exhibits
None.
(b) Reports from Form 8-K
None.
16
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
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 1990
L.P. TAX CREDIT FUND
By: Boston Historic Partners II Limited Partnership
General Partner
By: BHP II Advisors Limited Partnership
General Partner
By: Portfolio Advisory Services II, Inc.
General Partner
Date: November 14, 1996 By: /s/Terrence P. Sullivan
Terrence P. Sullivan,
President
and
Date: November 14, 1996 By: /s/Terrence P. Sullivan
Terrence P. Sullivan,
General Partner
17
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 459,248
<SECURITIES> 0
<RECEIVABLES> 0
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