UNITED STATES PRIVATE
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, 1997
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, 1997
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 7-11
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-14
PART II OTHER INFORMATION 15
Signatures 16
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
(Unaudited)
<S> <C> <C>
INVESTMENT IN REAL ESTATE
Building and building
improvements $15,178,365 $15,178,365
Land 97,034 97,034
Furniture and equipment 961,236 961,236
Marina - land and improvements 1,354,963 1,335,858
Deferred evaluation and acquisition
cost 1,102,600 1,102,600
---------- ----------
18,694,198 18,675,093
Less accumulated depreciation 3,690,812 3,267,294
---------- ----------
15,003,386 15,407,799
Reserve for realization of
Marina-land and improvements (845,672) (845,672)
----------- ----------
14,157,714 14,562,127
CASH AND CASH EQUIVALENTS, including
security deposit cash (1997, $89,534;
1996, $94,364) 656,535 478,898
ESCROW DEPOSITS 101,320 100,204
DEFERRED COSTS, net of accumulated
amortization (1997, $28,926; 1996, $16,192) 153,760 178,096
OTHER ASSETS 161,458 72,879
----------- -----------
$15,230,787 $15,392,204
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Notes payable $5,802,437 $6,123,084
Accrued expenses and other liabilities 313,052 303,840
Security deposits 81,066 88,767
--------- ---------
Total liabilities 6,196,555 6,515,691
--------- ---------
COMMENTS (NOTES 4 and 5)
PARTNERS' EQUITY
Limited Partners' Equity- Units of Investor
Limited Partnership Interest, $1,000 stated
value per unit-issued and outstanding -
16,361 units 9,086,251 8,930,109
General Partner's Deficiency (52,019) (53,596)
----------- -----------
Total partners' equity 9,034,232 8,876,513
----------- -----------
$15,230,787 $15,392,204
=========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- --------- ---------
REVENUES:
Rental and related income $870,031 $785,123 $2,406,133 $2,163,500
Interest and other income 11,496 8,995 27,791 20,119
-------- -------- ---------- ----------
881,527 794,118 2,433,924 2,183,619
-------- ------- --------- ---------
EXPENSES:
Operating and administrative 49,902 44,949 136,782 139,008
Property operating expenses 441,056 416,413 1,307,678 1,339,490
Professional fees 11,475 7,176 36,318 46,608
Depreciation and amortization 146,114 153,166 438,090 436,949
------- ------- -------- --------
648,547 621,704 1,918,868 1,962,055
------- ------- --------- ---------
INCOME FROM OPERATIONS 232,980 172,414 515,056 221,564
OTHER EXPENSE:
Interest Expense (118,455) (121,370) (357,337) (420,712)
MINORITY INTEREST IN LOSS
ON MARINA VENTURE - - - 3,344
--------- -------- --------- --------
NET INCOME (LOSS) $114,525 $51,044 $157,719 $(195,804)
======== ======= ======== ==========
NET INCOME (LOSS) ALLOCATED
TO GENERAL PARTNER $ 1,145 $ 511 $ 1,577 $ (1,958)
-------- ------- -------- ----------
NET INCOME (LOSS) ALLOCATED
TO LIMITED PARTNERS $113,380 $ 50,533 $156,142 $(193,846)
======== ======== ======== ==========
NET INCOME (LOSS) PER UNIT OF
INVESTOR LIMITED PARTNERSHIP
INTEREST, BASED ON 16,361
UNITS OUTSTANDING $ 6.93 $ 3.09 $ 9.54 $ (11.85)
========= ======== ========== ==========
The accompanying notes are an integral part of these financial statements.
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
THE YEAR ENDED DECEMBER 31, 1996
Units of
Investor Investor
Limited Limited General
Partnership Partners' Partner's
Interest Equity Deficiency Total
----------- --------- ---------- ---------
BALANCE,December 31,1995 16,361 $9,186,508 $ (51,006) $9,135,502
Net loss - (256,399) (2,590) (258,989)
------ ----------- ----------- -----------
BALANCE,December 31,1996 16,361 8,930,109 (53,596) 8,876,513
Net income (Unaudited) - 156,142 1,577 157,719
------ --------- ---------- ----------
BALANCE, September 30,1997
(Unaudited) 16,361 $9,086,251 $ (52,019) $9,034,232
====== ========== =========== ==========
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, 1997 AND 1996
(UNAUDITED)
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 157,719 $(195,804)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 438,090 436,949
Minority interest in loss on Marina Venture - (3,344)
Increase (decrease) in accrued expenses and
other liabilities 1,511 (59,927)
Decrease (increase) in escrow deposits (1,116) 24,780
Decrease (increase) in other assets (88,580) 66,214
---------- ----------
Net cash provided by operating activities 507,624 268,868
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment - (19,112)
Additions to building and improvements - (443,012)
Additions to marina land and improvements (19,105) (21,499)
--------- ---------
Net cash used in investing activities (19,105) (483,623)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from refinancing - 6,000,000
Payment of mortgage payable - (5,590,418)
Principal payments of mortgage payable (320,647) (67,248)
Decrease (increase) in deferred costs 9,765 (143,166)
--------- -----------
Net cash provided (used) by financing
activities (310,882) 199,168
--------- ---------
NET INCREASE (DECREASE) IN CASH 177,637 (15,587)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 478,898 474,835
-------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 656,535 $ 459,248
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 358,022 $ 400,824
========= =========
NON-CASH INVESTING AND FINANCING ACTIVITY:
On February 27, 1996, the Partnership redeemed the minority interest in the
Marina Venture by issuing a $225,000 note payable. The transaction resulted
in a $39,981 reduction of the basis in the marina property.
The accompanying notes are an integral part of these financial statements.
6
(1) Organization and General Partner - BHP II
Historic Preservation Properties 1990 L.P. Tax Credit Fund (HPP'90) was
formed on October 4, 1989 under the Delaware Revised Uniform Limited
Partnership Act. The purpose of HPP'90 is to invest in a 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, to rehabilitate such properties (or acquire such properties in the
process of rehabilitation and complete such rehabilitation) in a manner
intended to render a portion of the costs thereof eligible for Rehabilitation
Tax Credits, and to operate such properties.
Boston Historic Partners II Limited Partnership (BHP II), a Delaware
limited partnership, is the general partner of HPP'90. BHP II was formed in
June 1989 for the purpose of organizing, syndicating, and managing publicly
offered real estate limited partnerships (Public Rehabilitation Partnerships).
(2) 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, 1997, are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. 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, 1996 for HPP'90, as filed
with the Securities and Exchange Commission.
Certain amounts in the 1996 statement of operations have been
reclassified to conform to their 1997 presentation.
(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 residential apartment units with 152 indoor parking spaces and a 38 room
inn located at 1000 Fell Street, Baltimore, Maryland. In addition to the inn,
the building contains a total of 137 residential units, 9 of which are 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, 1997.
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 ended September 30, 1997, the average economic occupancy for
the residential units was 96% and the average occupancy for the inn was 78%.
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, investor services and other
general and administrative costs, are funded from distributions by the
Building Venture. During the nine months ended September 30, 1997, the
Building Venture distributed to HPP'90 $216,000 to fund general and
administrative costs and $210,000 for cash reserves of the Partnership.
7
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
(3) Investment in Real Estate (Continued)
Rehabilitation Tax Credits generated by the Building Venture and
previously allocated to HPP'90's Limited Partners totaled $3,174,059 since
inception. As of December 31, 1996, 100% of the credits were fully vested.
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. Contributions to the Marina Venture by HPP'90
totaled $247,219 as of September 30, 1997.
HPP'90 may make additional capital contributions to the Marina Venture
as provided in the Marina Venture's partnership agreement, but is not required
to do so.
The Building Venture and the Marina Venture are collectively referred to
as "the Ventures".
The Marina Venture had operated a minimal number of slips since 1991 due
to the significant repairs necessary to be fully operational. During 1996,
the Marina Venture added $23,049 of utility, safety and other improvements.
During 1997, the Marina Venture added additional improvements totaling
$19,105, increasing the number of fully operational slips to 224. Further
repairs are still needed to bring the entire marina to full operation.
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 Ventures 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 Venture. On August 1, 1991 the Second Amended
and Restated Agreement of the Limited Partnership of Henderson's Wharf Marina,
L.P. was amended. The amendment provided for the withdrawal by HPP'90 as a
general 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. 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.
During the year ended December 31, 1992, 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 reserved against its investment in the marina
land and improvements in the amount of $845,672. Consequently, the property
is carried at the lower of cost or net realizable value at September 30, 1997.
In accordance with the termination of all HMI contracts (see Note 5),
effective January 1, 1995 HMI also withdrew from the Building Venture as a
limited partner and was replaced by HWDC.
Generally, allocations of net profits and losses as well as cash flow of
the Building Venture and Marina Venture are allocated in accordance with the
Ventures' respective amended partnership agreements.
8
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
(3) Investment in Real Estate (Continued)
On February 27, 1996, the Partnership redeemed HWFP's 50% limited
partnership interest in the Marina Venture by issuing a $225,000 promissory
note payable secured by the marina property As a result of this redemption,
HPP'90's limited partnership interest in the Marina Venture increased to 98%
and HWDC's general partnership interest in the Marina Venture increased to 2%
as of the date of redemption. On September 30, 1997, the Marina Venture
settled in full the promissory note payable to HWFP. (See Note 4).
(4) Notes Payable
The Building Venture originally financed $6,350,000 of the purchase
price of the property by issuing a purchase money note to the seller, HWFP.
The note was secured by the property, rents and assignment of leases.
In conjunction with issuing a purchase money note to the seller, 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 (as defined) generated from the 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 $109,582 on February 27, 1996.
On February 27, 1996, HPP'90 issued a $6,000,000 deed of trust note to a
third party lender which provided funds for the Building Venture to refinance
the then outstanding balance of the seller financed purchase money note
totaling $5,590,418, to pay $109,582 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 $332,682. The deed of trust note bears interest at
7.85%, amortizes over a 20-year schedule and requires monthly principal and
interest payments in the amount of $49,628, which commenced April 1996 with
the remaining unpaid principal and interest due by March 2016. 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
(February 2006) 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 mentioned in Note 3, on February 27, 1996, HPP'90, HWDC and HWFP
entered into the First Amendment to the Third Amended and Restated Agreement
of Limited Partnership of Henderson's Wharf Marina, L.P. by which the
Partnership redeemed HWFP's 50% limited partnership interest in the Marina
Venture by issuing a $225,000 promissory note payable secured by the marina
property. The note bore interest at 7.50%, originally matured in March 2006,
and required monthly principal and interest payments in the amount of $2,086
which commenced April 1996. The transaction resulted in a $39,981 reduction of
basis in the marina property. HPP'90's limited partnership interest in the
Marina Venture increased to 98% and HWDC's general partnership interest in the
Marina Venture increased to 2% as of the date of the redemption.
On September 30, 1997, the Marina Venture settled in full the remaining
outstanding principal balance of $212,532 and all accrued interest due under
promissory note payable to HWFP.
Approximate aggregate annual principal maturities of the deed of trust
note for each of the next five years is as follows:
Year Ending December 31, Amount
1998 $ 148,063
1999 160,113
2000 173,145
2001 187,236
2002 202,475
9
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
(5) Transactions With Related Parties, Commitments and Contingencies
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. On January 1, 1992, the Marina
Venture entered into a long term Property Management Agreement with HMI.
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 refinancing of the existing Building Venture's financing. The Consulting
Agreement also required the Building Venture to pay HMI an incentive fee equal
to 1% of the gross sales proceeds resulting from the sale of the building
property to an unaffiliated third party buyer. 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. The incentive fee
commitment survives the December 31, 1991 expiration date of the Consulting
Agreement and the termination of all other agreements with HMI (see below).
Effective July 31, 1993, the Ventures terminated their respective
Management Agreement and Inn Lease with HMI.
During October 1994, HPP'90 and HMI agreed in principle to an agreement
whereby the parties would settle their differences to put to rest all further
controversy and to 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. The Settlement Payments required an initial
payment of $36,000 due on January 27, 1995 and require monthly payments of
$3,221 commencing 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. The Settlement Payments may be prepaid, as defined
in the agreement, without penalty. As of September 30, 1997 and December 31,
1996, unpaid Settlement Payments included in accrued expenses and other
liabilities totaled $154,590 and $183,576, respectively.
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 are automatically extended on a year-to-year basis in
June of each year 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. As of September 30, 1997, the
Ventures' operating and contingency reserves totaled $187,247. 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.
Management fees paid to CMC by the Ventures totaled $107,140, and
$90,162 for the nine months ended September 30, 1997, and 1996, respectively.
On July 1, 1993, HPP'90 engaged Portfolio Advisory Services, Inc. (PAS),
a Massachusetts corporation, which is related to BHP II through certain common
ownership and management, to provide accounting, asset management 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. Expense
reimbursements to PAS for the period January 1, 1995 through September 30,
1995 totaled $65,903.
10
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
(5) Transactions With Related Parties, Commitments and Contingencies
(Continued)
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 agreement is automatically extended on a year-to-year
basis in June of each year unless terminated as provided for in the agreement.
Expense reimbursements to CMC for the nine months ended September 30, 1997
and 1996 totaled $95,212 and $91,157, respectively.
According to a provision in one purchase and sale contract of one of
three condominiums purchased on February 27, 1996, the purchase price for that
condominium is the greater of the seller's outstanding mortgage balance as of
the date of purchase or the fair market value of the property determined by
independent appraisal through a period extending through June 1, 1999. At the
February 27, 1996 closing, the purchase price paid was the then outstanding
balance of the seller's mortgage. If, through June 1, 1999, the fair market
value is determined to be greater than the amount paid at the closing, the
Building Venture will be required to pay the excess of the determined fair
market value over the purchase price paid at the closing to the seller. As a
part of the purchase agreement, the Building Venture has established a $25,000
collateral escrow in the event that an additional payment has to be made to
the seller.
(6) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, escrow deposits,
other assets, and accrued expenses and other liabilities, and security
deposits at September 30, 1997 and December 31, 1996 approximate their fair
values due to their short maturities. The fair value of the notes payable at
September 30, 1997 and December 31, 1996 approximate their carrying amounts
based on the interest rates currently available to HPP'90 for similar
financing arrangements. All financial instruments are held for non-trading
purposes.
11
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1997
(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, 1997, 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 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, 1997, the Ventures and HPP'90 had cash,
excluding security deposit cash, of $238,875 and $328,126, respectively.
HPP'90's cash is used primarily to fund general and administrative expenses of
managing 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 to fund general and administrative
expenses of managing the public fund.
As mentioned in Note 4 of the financial statements, on February 27,
1996, the Building Venture obtained financing of $6,000,000 at 7.85% which
requires principal and interest monthly payments of $49,628 based on a 20 year
amortization and matures in March 2016. 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 (February
2006) 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.
HPP'90's short-term liquidity depends upon its ability to receive
distributions from the Building Venture. The short-term liquidity of the
Building Venture depends on its ability to generate sufficient rental income
to fund operating expenses and debt service requirements and have sufficient
cash to distribute to HPP'90. During the nine months ended September 30,
1997, the Building Venture distributed $426,000 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, as defined in the agreements, in the Ventures; 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 Building Venture was fully operational
during the entire year. The Marina Venture had operated on a minimal number
of its 256 slips from 1991 to 1995 due to significant repairs necessary to be
fully operational. During 1996, the Marina Venture added $23,049 of utility,
safety and other improvements. During 1997, the Marina Venture added
additional improvements totaling $19,105, increasing the number of fully
operational slips to 224. Further 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 1996 numbers provided the Building Venture is able to
maintain greater than 95% occupancy in the Apartments and greater than 65%
occupancy in the Inn. Expense levels are expected to increase with the rate
of inflation, however, it is anticipated that the monthly rents and the
average daily room rate revenues should also increase accordingly.
12
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1997
(UNAUDITED)
In recent years, the occupancy of the apartments has increased from
previous years as a result of management's decision to enter into more
traditional annual leases. The Apartments have achieved stabilized occupancy
with economic occupancy rates of 96% for the quarters ended September 30, 1997
and 1996, respectively.
The average occupancy for the Inn for the quarters ended September
30, 1997 and 1996 was 78% and 81%, respectively.
The Partnership recorded net income of $114,525 for the three months
ended September 30, 1997, as compared to a net income of $51,044 for the same
period in 1996. This increase in net income was primarily attributed to an
increase in rental and related income. Furthermore, rental and related income
increased primarily due to increased rates at both the Inn and Apartments.
The Inn's average room rate increased by 8% while the Apartments rental rates
increased by 9% for the third quarter of 1997, compared to the third quarter
in 1996.
The Partnership recorded net income of $157,719 for the nine months
ended September 30, 1997, as compared to a net loss of $195,804 for the same
period in 1996. This increase in net income was primarily due to an increase
in revenue and a decrease in interest expense. The increase in revenue is
primarily attributed to increased rates at both the Inn and Apartments. The
Inn's average room rate increased by 5%, while the Apartments rental rates
increased by 7%, for the nine months ended September 30, 1997, compared to the
same period in 1996. The decrease in interest expense is due to the
refinancing of the mortgage debt in February 1996, a reduction of the Building
Venture's mortgage interest rate from 10% to 7.85% .
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, 1997 and December 31, 1996, unpaid
settlement payments included in accrued expenses and other liabilities totaled
$154,590 and $183,576, respectively.
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 $109,582 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 $332,682. The deed of trust note bears interest
at 7.85% and requires monthly principal and interest payments in the amount of
$49,628 which commenced in April 1996. 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 (February 2006) 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. This transaction released approximately $1,057,000 of suspended
rehabilitation tax credits to the Partnership from the Building Venture in
1996.
The Marina Venture requires further rehabilitation 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 full development of the marina property.
Based on the fair market value of the 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. The property is carried at the lower of cost or net realizable value.
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, 1997
(UNAUDITED)
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 the Partnership
redeemed HWFP's 50% limited partnership interest in the Marina Venture in
return for a $225,000 promissory note secured by the marina property. The
note bore interest at 7.50%, originally matured in March 15, 2006, and
required monthly principal and interest payments in the amount of $2,086. 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's general partnership
interest in the Marina Venture increased to 2%.
On September 30, 1997, the Marina Venture settled in full the
remaining outstanding principal balance of $212,532 and all accrued interest
due under the promissory note payable to HWFP.
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 mortgage debt as of September 30, 1997. 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.
14
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
PART II - OTHER INFORMATION
SEPTEMBER 30, 1997
Item 1. Legal Proceedings - None.
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.
15
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 1, 1997 By: /s/ Terrence P. Sullivan
Terrence P. Sullivan,
President
and
Date: November 1, 1997 By: /s/ Terrence P. Sullivan
Terrence P. Sullivan,
General Partner
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 656,535
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 18,694,198
<DEPRECIATION> 3,690,812
<TOTAL-ASSETS> 15,230,787
<CURRENT-LIABILITIES> 0
<BONDS> 5,802,437
0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 15,230,787
<SALES> 0
<TOTAL-REVENUES> 2,433,924
<CGS> 0
<TOTAL-COSTS> 1,918,868
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357,337
<INCOME-PRETAX> 157,719
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<CHANGES> 0
<NET-INCOME> 157,719
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