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, 1998
----------------------------------------------
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)
45 Broad Street, 3rd Floor, Boston, Massachusetts 02109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 338-6900
Previous Address: Batterymarch Park II, Quincy, MA 02169
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
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
FORM 10-Q
SEPTEMBER 30, 1998
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION
Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Partners' Equity (Deficit) 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-13
PART II - Other Information 14
Signatures 15
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
ASSETS
1998 1997
----------------- ----------------
(Unaudited)
INVESTMENT IN REAL ESTATE
Building and building improvements $ 15,009,692 $ 15.178,365
Land 97,034 97,034
Furniture and equipment 973,525 970,736
Marina - land and improvements 1,602,539 1,376,259
Deferred evaluation and acquisition costs 1,102,600 1,102,600
--------------- -------------
18,785,390 18,724,994
Less accumulated depreciation and 4,178,182 3,830,865
amortization
----------------- ----------------
14,607,208 14,894,129
Reserve for realization of Marina land
and improvements (845,672) (845,672)
----------------- ----------------
13,761,536 14,048,457
CASH AND CASH EQUIVALENTS 714,037 670,811
SECURITY DEPOSITS 95,191 86,641
ESCROW DEPOSITS 497,641 152,212
DEFERRED COSTS, net of accumulated
amortization (1998,$47,193;
1997, $33,492) 135,492 149,193
OTHER ASSETS 238,447 116,807
----------------- ----------------
$ 15,442,344 $ 15,224,121
================= ================
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Note payable $ 5,657,243 $ 5,767,197
Accrued expenses and other liabilities 240,091 286,315
Security deposits 87,506 82,271
----------------- ----------------
Total liabilities 5,984,840 6,135,783
----------------- ----------------
COMMITMENTS (Note 5)
PARTNERS' EQUITY
Limited Partners'equity-Units of Investor
Limited Partnership Interest, $1,000
stated value per Unit-16,361 issued and
outstanding units 9,505,290 9,139,816
General Partner's deficit (47,786) (51,478)
----------------- ----------------
Total partners' equity 9,457,504 9,088,338
----------------- ----------------
$ 15,442,344 $ 15,224,121
================= ================
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------- --------------------
1998 1997 1998 1997
----------- ------------ ----------- -------
REVENUES:
Rental and related income $ 978,018 $ 870,031 $ 2,724,101 $ 2,406,133
Interest and other income 10,387 11,496 33,975 27,791
--------- ---------- ----------- -----------
988,405 881,527 2,758,076 2,433,924
--------- ---------- ----------- -----------
EXPENSES:
Operating and
administrative 59,151 56,220 181,347 152,229
Property operating
expenses 511,088 446,213 1,464,017 1,328,549
Depreciation and
amortization 117,507 146,114 406,848 438,090
---------- ---------- ----------- -----------
687,746 648,547 2,052,212 1,918,868
---------- ---------- ----------- -----------
INCOME FROM OPERATIONS 300,659 232,980 705,864 515,056
INTEREST EXPENSE (111,514) (118,455) (336,698) (357,337)
---------- ---------- ----------- -----------
NET INCOME $ 189,145 $ 114,525 $ 369,166 $ 157,719
========== =========== =========== ===========
NET INCOME ALLOCATED TO
GENERAL PARTNER $ 1,891 $ 1,145 $ 3,692 $ 1,577
========== ========== =========== ===========
NET INCOME ALLOCATED TO
LIMITED PARTNERS $ 187,254 $ 113,380 $ 365,474 $ 156,142
========== ========== =========== ===========
NET INCOME PER UNIT OF
INTEREST, BASED ON
16,361 UNITS
OUTSTANDING $ 11.45 $ 6.93 $ 22.34 $ 9.54
========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND
THE YEAR ENDED DECEMBER 31, 1997
Units of
Investor Investor
Limited Limited General
Partnership Partners' Partner's
Interest Equity Deficit Total
----------- ------------ ------------ ---------
BALANCE, December 31, 16,361 $8,930,109 $ (53,596) $8,876,513
1996
Net income - 209,707 2,118 211,825
---------- ---------- ---------- ----------
BALANCE, December 31, 16,361 9,139,816 (51,478) 9,088,338
1997
Net income
(Unaudited) - 365,474 3,692 369,166
---------- ---------- ---------- ----------
BALANCE, September 30,
1998 (Unaudited) 16,361 $9,505,290 $ (47,786) $9,457,504
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
1998 1997
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 369,166 $ 157,719
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 406,348 438,090
Increase in security deposits, net (3,315) (2,871)
Increase in escrow deposits (345,429) (1,116)
Increase in other assets (112,140) (88,580)
Increase (Decrease) in accrued expenses and (46,224) 4,382
other liabilities
--------- ---------
Net cash provided by operating activities 268,906 507,624
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture & equipment (12,289) -
Additions to Marina (226,280) (19,105)
Proceeds from exchange of building and building 122,843 -
improvements
--------- ---------
Net cash used in investing activities (115,726) (19,105)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of mortgage note payable (109,954) (320,647)
Decrease in deferred costs - 9,765
--------- ---------
Net cash used in financing activities (109,954) (310,882)
--------- ---------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 43,226 177,637
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 670,811 478,898
--------- ---------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 714,037 $ 656,535
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 336,698 $ 358,022
========= =========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
(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, 1998, are not necessarily indicative of
the results that may be expected for the year ending December 31, 1998. 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, 1997 for HPP'90, as filed with the Securities and Exchange
Commission.
Certain amounts in the 1997 financial statements have been reclassified to
conform to the 1998 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 149 indoor parking spaces (the
Apartments) and a 38 room inn (the 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,
1998.
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 economic occupancy for the quarter ended September 30, 1998 for the
residential units was 97% (unaudited) and the average occupancy for the inn
was 79% (unaudited).
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). On March 17, 1998, the
Building Venture exchanged a condominium unit and parking spaces with an
unrelated party in return for that unrelated party's condominium unit,
parking spaces and $135,000. The transaction resulted in net cash proceeds
of $122,843 after closing costs.
HPP'90's operations, principally consisting of accounting, investor
services and other general and administrative costs, are funded from
distributions by the Building Venture. Also, distributions from the
Building Venture are used to fund reserves for the capital needs of
HPP'90's real property entities. For the nine months ended September 30,
1998 and 1997, the Building Venture distributed to HPP'90, $1,084,000 and
$426,000, respectively.
7
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998
(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 (the 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 $938,219 as of September 30, 1998.
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 Marina Venture had operated a minimal number of slips from 1991 through
1995 due to the significant repairs necessary to be fully operational. For
the nine months ended September 30, 1998 and for the years ended December
31, 1997 and 1996, the Marina Venture added $226,280, $33,727 and $23,049,
respectively, of utility, safety and other improvements, increasing the
number of fully operational slips to 256. Substantial repairs are still
needed to maintain the Marina Venture's land which provides parking to the
Marina and Inn (see Note 5).
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).
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 Henderson's Wharf Development Corporation's (HWDC)
general partnership interest in the Marina Venture increased to 2% as of
the date of redemption. On September 30, 1997, the Building Venture
advanced the Marina Venture $200,000, and the Marina Venture then settled
in full the promissory note payable to HWFP (see Note 4).
The Building Venture and the Marina Venture are collectively referred to as
"the Ventures".
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.
(4) Note 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. 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 future sale of apartment units in the
Building Venture. The note was unsecured, bore no interest, and had no
maturity date.
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 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.
8
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998
(UNAUDITED)
(4) Note Payable (continued)
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%, 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 during the year ended December 31, 1996.
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 Building
Venture advanced the Marina Venture $200,000, and the Marina Venture
settled in full the remaining outstanding principal balance of $212,532 and
all accrued interest due under the promissory note to HWFP.
Approximate aggregate annual maturities under the deed of trust note for
each of the next five years are as follows:
Year Ending December 31, Amount
1999 $ 160,113
2000 173,145
2001 187,236
2002 202,475
2003 218,954
(5) Transactions With Related Parties, Commitments and Contingencies
The Building Venture entered into a consulting agreement (Consulting
Agreement), which expired on December 31, 1991, that required the Building
Venture to pay Hillcrest Management Inc., (HMI) a Massachusetts corporation
and former limited partner of the Ventures with whom the Ventures had
several contracts, 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).
HPP'90 entered into an agreement on behalf of the Ventures to pay contract
termination settlement payments (Settlement Payments) totaling $271,108 to
HMI. The Settlement Payments required an initial payment of $36,000 on
January 27, 1995 and require monthly payments of $3,221 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, 1998 and December 31, 1997, unpaid Settlement Payments
included in accrued expenses and other liabilities totaled $115,942 and
$144,928, respectively.
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 provided for payment
of management fees to CMC equal to 4% of apartment gross receipts, 4.5% of
inn gross receipts, and 9% of marina gross receipts, as defined,
respectively. A condition of the agreements required the Ventures to
maintain with CMC, for the benefit of the Ventures, operating cash and
contingency reserves of $190,000 and $70,000, respectively. The agreements
expired on June 30, 1998. Management fees paid to CMC by the Ventures
totaled $74,668 and $107,140 for the six months ended June 30, 1998 and the
nine months ended September 30, 1997, respectively.
9
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998
(UNAUDITED)
(5) Transactions With Related Parties, Commitments and Contingencies
(continued)
Effective July 1, 1998, the Building Venture and Marina Venture entered
into property management contracts with Gunn Financial, Inc. (GFI), an
unaffiliated Massachusetts corporation, to oversee the property management
of the apartment, inn and marina operations. The Property management
contracts will provide for the payment of management fees to GFI equal to
4% of apartment gross receipts, 4% of inn gross receipts, and 4% of marina
gross receipts, as defined, respectively. The agreements expire the earlier
of June 30, 2006 or upon the disposition of the Ventures' properties, as
defined. Also effective July 1, 1998, GFI subcontracted Winn Management
Company, an unaffiliated Massachusetts corporation who manages numerous
properties throughout the East Coast, to provide certain on-site property
management services to the apartment, inn and marina operations. Management
fees paid to GFI by the Ventures totaled $40,011 for the three months ended
September 30, 1998.
On October 1, 1995, HPP'90 engaged CMC to provide accounting, asset
management and investor services. CMC provided such services for an annual
management fee of $38,400, plus reimbursement of all its costs of providing
these services. The agreement expired on June 30, 1998. Expense
reimbursements to CMC for the six months ended June 30, 1998 and the nine
months ended September 30, 1997 totaled $83,080 and $95,212, respectively.
Effective July 1, 1998, HPP'90 engaged GFI to provide accounting, asset
management and investor services. GFI will provide such services for an
annual management fee of $36,000, plus reimbursement of all its costs of
providing these services. The agreement expires the earlier of June 30,
2006 or upon the disposition of the Ventures' properties, as defined.
Expense reimbursements to GFI for the three months ended September 30, 1998
totaled $47,109.
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.
During 1997, the Building Venture and the condominium association to which
it belongs filed suit against one unit owner for failure to pay condominium
assessments and nuisance. The suit asked for actual damages as well as
compensatory and punitive damages totaling $120,000. The unit owner filed a
counterclaim against the Building Venture, the condominium association to
which it belongs, and other third parties for alleged breach of contract
and related counts. The counterclaim asked for compensatory and punitive
damages totaling $3,901,000. In July 1998, the parties agreed to settle
these disputes out of court through an agreement by which the Building
Venture would purchase the unit owner's unit for an agreed upon market
price and other certain terms.
Within the next few years, significant repairs are needed to maintain the
Marina Venture's land which provides parking to the Marina and Inn. In
October 1997, the Marina Venture entered into a letter of intent with a
third party real estate developer to form an entity whose purpose would
include repairing the land and the developing of the marina. The letter of
intent expired on January 10, 1998 with no expectation of further
negotiations. The Partnership now anticipates that capital resources to
fund the repairs are likely to be provided by additional contributions of
the Partnership. The Marina Venture estimates the cost of replacing the
bulkhead to retain the land to be approximately $2,000,000. Also, the
Partnership is investigating other potential sources of available parking
for the Marina and Inn. It is reasonably possible that the outcome of this
uncertainty might be determined in the near term. Included in the escrow
deposits as of September 30, 1998, is $401,269 that the Partnership has
reserved for capital improvements.
(6) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, escrow deposits, accrued
expenses and other liabilities, and security deposits at September 30, 1998
and December 31, 1997 approximate their fair values due to their short
maturities. The fair value of the note payable at September 30, 1998 and
December 31, 1997 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.
10
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1998
Liquidity and Capital Resources. The Partnership 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, 1998, the Partnership had invested an aggregate of $13,152,719 in the
Building and Marina Ventures.
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, except for the occasional purchase of one of the nine third
party owned condominium units and the potential acquisition of needed off-site
parking.
As of September 30, 1998, the Ventures and HPP'90 had cash and cash equivalents,
of $577,192 and $136,845, respectively. HPP'90's cash and cash equivalents are
used primarily to fund general and administrative expenses of running the public
fund. The Venturers' cash and cash equivalents are used to fund operating
expenses and debt service of the properties. In addition, to the extent
available, the Building Venture distributes cash to HPP'90 to fund capital
reserves and general and administrative expenses of managing the public fund.
For the nine months ended September 30, 1998 and 1997, the Building Venture
distributed $1,084,000 and $426,000, respectively, 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 potential 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, 1998 and December 31, 1997,
unpaid Settlement Payments included in accrued expenses and other liabilities
totaled $115,942 and $144,928, respectively.
On February 27, 1996, the Building Venture obtained financing of $6,000,000 at
7.85% which requires monthly principal and interest payments totaling $49,628
based on a 20 year amortization. The deed of trust note matures in March 2016,
however, 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.
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 by issuing a $225,000
promissory note secured by the marina property. On September 30, 1997, the
Building Venture advanced the Marina Venture $200,000 and the Marina Venture
then settled in full the remaining outstanding principal balance of $212,532 and
all accrued interest due under the promissory note payable to HWFP.
On March 17, 1998, HWB exchanged a condominium unit and parking spaces with an
unrelated party in return for that unrelated party's condominium unit, parking
spaces and $135,000. The transaction resulted in net cash proceeds of $122,843
after closing costs.
Within the next few years, significant repairs are needed to maintain the Marina
Venture's land which provides parking to the Marina and Inn. In October 1997,
the Marina Venture entered into a letter of intent with a third party real
estate developer to form an entity whose purpose would include repairing the
land and the developing of the marina. The letter of intent expired on January
10, 1998 with no expectation of further negotiations. The Partnership now
anticipates that capital resources to fund the repairs are likely to be provided
by additional contributions of the Partnership. The Marina Venture estimates the
cost of replacing the bulkhead to retain the land to be approximately
$2,000,000. Also, the Partnership is investigating other potential sources of
available parking for the Marina and Inn. Included in the escrow deposits as of
September 30, 1998, is $401,269 that the Partnership has reserved for capital
improvements.
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, debt service requirements and reserves for capital needs and have
sufficient cash to distribute to HPP'90. The short-term liquidity of the Marina
Venture depends on its ability to generate sufficient rental income to fund
operating expenses and make capital
11
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1998
expenditures to maintain the existing capacity of the marina, make additional
capital improvements to expand the marina's existing capacity, and maintain the
marina land. HPP'90 has advanced approximately $968,000 to the Marina through
September 30, 1998 to pay off the Marina Ventures' acquisition debt, make
necessary capital improvements, and fund operations. It is not expected that the
Marina Venture will generate sufficient short-term liquidity to repay advances
made by HPP'90.
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 generated net income under generally
accepted accounting principles of $369,166 for the nine months ended September
30, 1998 which includes depreciation and amortization of $406,848.
The Building Venture was fully operational during the entire year. The Marina
Venture had operated a minimal number of its 256 slips from 1991 to 1995 due to
significant repairs necessary to be fully operational. During the nine months
ended September 30, 1998 and in the years 1997 and 1996 the Marina Venture added
$226,280, $33,727, and $23,049, respectively, of utility, safety and other
improvements increasing the number of fully operational slips to 256. However,
other substantial repairs are still needed to maintain the Marina Venture's land
which provides parking to the Marina and Inn.
The results of the Partnership's operations in future years should be comparable
to 1997 numbers provided the Building Venture is able to maintain greater than
90% economic occupancy in the Apartments and greater than 65% occupancy in the
Inn. Expense levels are expected to 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 Apartments have achieved stabilized occupancy with economic occupancy rates
of 97%, and 96% for the quarters ended September 30, 1998 and 1997,
respectively. Management is projecting economic occupancy for the Apartments to
be approximately 95% as well as a 5% increase in rental rates for calendar year
1998. Management expects economic occupancy to remain about 95% and rental rates
to increase between 3% to 5% in future years after 1998.
The Apartments also began charging parking fees for garaged parking in 1996 and
achieved full implementation of the parking fee policy by the end of 1997.
Management is projecting a 25% increase in parking fee rates for the calendar
year 1998.
The average occupancy of the Inn for the quarters ended September 30, 1998 and
1997 was 79% and 78%, respectively. Management is projecting an average annual
occupancy for the Inn of 72%, as well as a 4% increase in the average daily room
rate for calendar year 1998. The Inn occupancy in future years is expected to
stay at the same level, absent any significant adverse market conditions or
increase in existing market competition. Management expects the Inn's average
daily room rate to increase between 3% to 5% in future years after 1998.
The Partnership recorded net income of $189,145 for the three months ended
September 30, 1998, as compared to net income of $114,525 for the same period in
1997. This favorable increase in net operating results is primarily due to the
increase in rental and related income offset by an increase in property
operating expenses. Rental and related income increased for the quarter ended
September 30, 1998, compared to the same quarter in 1997, primarily due to
increased average daily room rates at the Inn and rental income rates at the
Apartments. Rental and related income also increased as a result of increased
food and beverage revenue at the Inn, occupancy at the Marina and parking
revenue at the Apartments. For the quarter ended September 30, 1998, compared to
the same quarter in 1997, the average daily room rates increased approximately
11% and the food and beverage revenue increase approximately $20,000 at the Inn.
Due to the strength of the residential rental market, the Apartment's average
rental income rate increased approximately 4% and parking revenue increased
approximately $10,000. For the three months ended September 30, 1998, compared
to the same period in 1997, the Marina recorded an increase in slip fee rental
income of approximately $18,000. Property operating expenses increased due to
increases in food and beverage activity at the Inn, repair and maintenance
expenditures at the Inn, Apartments and Marina, and also salaries for additional
staffing at the Ventures.
The Partnership recorded net income of $369,166 for the nine months ended
September 30, 1998, a $211,447 increase compared to the net income of $157,719
for the nine months ended September 30, 1997. This increase in net income is
primarily attributed to an increase in rental and related income offset by an
increase in property operating expenses. Rental and related income increased due
increased average daily room rates and occupancy at the Inn and rental income
rates at the
12
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SEPTEMBER 30, 1998
Apartments. Rental and related income also increase due to increased food and
beverage and function room rental revenue at the Inn, parking revenue at the
Apartments and slip fee rentals at the Marina. The Inn's occupancy and average
daily room rates increased approximately 3% and 15%, respectively, while food
and beverage and function room rentals increased approximately $40,000 and
$21,000, respectively, for the nine months ended September 30, 1998, compared to
the same period in 1997. While the Apartment's economic occupancy decrease
slightly for the nine months ended September 30, 1998, as compared to the nine
months ended September 30, 1997, the average rental income rate increased
approximately 4% and the parking revenue increase approximately $29,000. The
Marina recorded an increase in slip fee rentals of approximately $19,000.
Property and operating expenses increased due to increases in food and beverage
activity at the Inn, repair and maintenance expenditures at the Inn, Apartments
and Marina and also salaries for additional staffing at the Ventures.
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, 1998. 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. High levels of new construction of similar projects and low
levels of interest rates may reduce demand for existing rental properties.
Year 2000 Issues.
The Partnership and the Ventures have analyzed the effect of the Year 2000 on
their respective financial and computer systems and have incorporated and/or
expect to have incorporated the necessary modifications to avert any negative
consequences. The Partnership does not anticipate Year 2000 issues to have any
material effect on its operations or the operations of the Ventures. Also, the
Partnership does not expect to incur substantial costs to address Year 2000
issues.
13
<PAGE>
HISTORIC PRESERVATION PROPERTIES 1990 L.P. TAX CREDIT FUND
PART II - OTHER INFORMATION
SEPTEMBER 30, 1998
Item 1. Legal Proceedings - In 1997, the Building Venture and the condominium
association to which it belongs filed suit against one unit owner for
failure to pay condominium assessments and nuisance. The suit asked for
actual damages as well as compensatory and punitive damages totaling
$120,000. The unit owner filed a counterclaim against the Building
Venture, the condominium association to which it belongs, and other third
parties for alleged breach of contract and related counts. The
counterclaim asked for compensatory and punitive damages totaling
$3,901,000. In July 1998, the parties agreed to settle these disputes out
of court through an agreement by which the Building Venture would purchase
the unit owner's unit for an agreed upon market price and other certain
terms.
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.
14
<PAGE>
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, 1998 By: /s/ Terrence P. Sullivan
---------------------
Terrence P. Sullivan,
President
and
Date: November 1, 1998 By: /s/ Terrence P. Sullivan
---------------------
Terrence P. Sullivan,
15
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<PERIOD-END> SEP-30-1998
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