<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM 10-Q
MARK ONE
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-10643
---------
HALLWOOD REALTY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
---------
DELAWARE 75-2313955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3710 RAWLINS
SUITE 1500
DALLAS, TEXAS 75219-4298
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 528-5588
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
----- -----
THE REGISTRANT IS A LIMITED PARTNERSHIP AND ISSUES UNITS REPRESENTING
OWNERSHIP OF LIMITED PARTNER INTERESTS.
NUMBER OF UNITS OUTSTANDING AT NOVEMBER 8, 1996: 1,672,556 UNITS.
================================================================================
<PAGE> 2
HALLWOOD REALTY PARTNERS, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PART I - FINANCIAL INFORMATION PAGE
- ---- ------------------------------ ----
<S> <C> <C>
1 Financial Statements:
Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995 3
Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
2 Results of Operations and Management's Discussion
and Analysis of Financial Condition 8
PART II - OTHER INFORMATION
---------------------------
1-6 Other Information 11
Signatures 12
</TABLE>
Page 2
<PAGE> 3
HALLWOOD REALTY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT UNIT AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Real estate:
Land $ 56,820 $ 56,461
Buildings and improvements 257,794 257,706
Tenant improvements 18,214 16,311
----------- ----------
332,828 330,478
Accumulated depreciation and amortization (146,908) (138,212)
----------- ----------
Real estate, net 185,920 192,266
Cash and cash equivalents 6,920 14,302
Accounts receivable 2,099 1,080
Prepaid lease commissions, net 6,646 4,518
Lease concessions 2,190 2,498
Loan reserves and escrows 6,194 4,966
Loan costs, net 3,683 3,905
Prepaid expenses and other assets, net 1,431 1,824
----------- ----------
Total assets $ 215,083 $ 225,359
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
Liabilities:
Mortgages payable $ 161,355 $ 166,675
Unamortized mortgage payable forgiveness 10,911 8,912
Accounts payable and accrued expenses 6,387 5,170
Prepaid rent and security deposits 3,266 2,685
----------- ----------
Total liabilities 181,919 183,442
----------- ----------
Partners' capital:
Limited partners - 1,672,556 and 1,747,765
units outstanding, respectively 32,832 41,498
General partner 332 419
----------- ----------
Total partners' capital 33,164 41,917
----------- ----------
Total liabilities and partners' capital $ 215,083 $ 225,359
=========== ==========
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 4
HALLWOOD REALTY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- ---------- -----------------------
1996 1995 1996 1995
-------- ---------- --------- --------
<S> <C> <C> <C> <C>
REVENUES:
Property operations $ 12,095 $ 12,727 $ 36,323 $ 37,614
Interest 182 110 644 328
-------- ---------- --------- --------
Total revenues 12,277 12,837 36,967 37,942
-------- ---------- --------- --------
EXPENSES:
Property operations 6,148 6,090 18,572 17,807
Interest 3,195 3,978 10,240 12,017
Depreciation and amortization 4,269 4,401 12,818 13,129
General and administrative 768 641 2,284 2,101
-------- ---------- --------- --------
Total expenses 14,380 15,110 43,914 45,054
-------- ---------- --------- --------
LOSS BEFORE EXTRAORDINARY ITEM (2,103) (2,273) (6,947) (7,112)
Extraordinary item -
Loss on early extinguishment of debt - (765) - (765)
-------- ---------- --------- --------
NET LOSS $ (2,103) $ (3,038) $ (6,947) $ (7,877)
======== ========== ========= ========
ALLOCATION OF NET LOSS:
Limited partners $ (2,082) $ (3,007) $ (6,878) $ (7,798)
General partner (21) (31) (69) (79)
-------- ---------- --------- --------
Total $ (2,103) $ (3,038) $ (6,947) $ (7,877)
======== ========== ========= ========
LOSS PER UNIT:
Loss before extraordinary item $ (1.24) $ (1.30) $ (4.03) $ (4.05)
Loss on early extinguishment of debt - (0.43) - (0.43)
-------- ---------- --------- --------
Net loss $ (1.24) $ (1.73) $ (4.03) $ (4.48)
======== ========== ========= ========
WEIGHTED AVERAGE UNITS
OUTSTANDING 1,673 1,748 1,706 1,742
======== ========== ========= ========
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 5
HALLWOOD REALTY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (6,947) $ (7,877)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 12,818 13,129
Amortization of debt forgiveness (1,239) -
Lease concessions 308 528
Changes in assets and liabilities:
Receivables (1,019) 119
Prepaid lease commissions, net (2,128) (688)
Prepaid expenses and other assets, net 558 1,219
Accounts payable and other liabilities 1,798 (6,290)
---------- ----------
Net cash provided by operating activities 3,033 140
---------- ----------
INVESTING ACTIVITIES:
Property and tenant improvements (4,773) (3,450)
Property acquisition (1,699) -
Mortgage receivable principal payments 64 58
---------- ----------
Net cash used for investing activities (6,408) (3,392)
---------- ----------
FINANCING ACTIVITIES:
Mortgage principal payments (2,082) (1,883)
Mortgage principal proceeds - 88,400
Mortgage principal refinanced - (70,171)
Loan reserves - (11,099)
Loan fees (119) (3,618)
Purchase of Units (1,806) -
Sale of Units to General Partner - 360
Purchase of fractional Units - (176)
---------- ----------
Net cash provided by (used for) financing activities (4,007) 1,813
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (7,382) (1,439)
BEGINNING CASH AND CASH EQUIVALENTS 14,302 7,786
---------- ----------
ENDING CASH AND CASH EQUIVALENTS $ 6,920 $ 6,347
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash during the period $ 11,551 $ 13,180
========== ==========
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE> 6
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1 ORGANIZATION AND ACCOUNTING POLICIES
Hallwood Realty Partners, L.P. ("HRP" or the "Partnership"), a publicly
traded Delaware limited partnership, is engaged in diversified real estate
activities, including the acquisition, ownership and operation of commercial
office, industrial real estate and other real estate related assets. Units
of limited partners' interest in the Partnership ("Units") are traded on the
American Stock Exchange under the symbol "HRY".
Hallwood Realty Corporation ("HRC" or "General Partner"), a Delaware
corporation and wholly-owned subsidiary of The Hallwood Group Incorporated
("Hallwood") is responsible for asset management of the Partnership and its
Properties. Hallwood Commercial Real Estate, Inc. ("HCRE"), formerly named
Hallwood Management Company, another wholly-owned subsidiary of Hallwood,
provides property management services to the Partnership's real estate
properties.
The consolidated financial statements have been prepared in accordance with
the instructions to Form 10-Q and do not include all of the information and
disclosures required by generally accepted accounting principles, although,
in the opinion of management, all adjustments considered necessary for a
fair presentation have been included. These financial statements should be
read in conjunction with the audited consolidated financial statements and
related disclosures thereto included in Form 10-K for the year ended
December 31, 1995. Certain reclassifications have been made to the prior
period amounts to conform to the classifications used in the current period.
The reclassifications had no effect on the previously reported net loss.
2 TRANSACTIONS WITH RELATED PARTIES
HRC and HCRE are compensated for services provided to HRP and its
Properties. The following table sets forth such compensation and
reimbursements of costs paid by HRP for the periods presented (in
thousands):
<TABLE>
<CAPTION>
ENTITY THREE MONTHS NINE MONTHS
PAID OR ENDED ENDED
REIMBURSED SEPTEMBER 30, SEPTEMBER 30,
----------- ------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Asset management fees HRC $ 111 $ 114 $ 336 $ 332
Property management fees HCRE 339 369 1,062 1,098
Lease commissions HCRE 1,467 484 2,251 1,210
Construction fees HCRE 125 63 279 207
Acquisition fee HRC - - 17 -
Reimbursements of costs (a) HRC 583 492 1,704 1,447
</TABLE>
(a) These costs are mostly recorded as general and administrative
expenses and represent reimbursement, at cost, for salaries,
employee and director insurance and certain overhead. HRP pays
the balance of its account with HRC monthly.
Page 6
<PAGE> 7
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
3 PARTNERS' CAPITAL
HRP purchased, in private transactions, 74,760 Units for $1,776,000 in May
1996 and 449 Units for $12,000 in July 1996. In addition, the General
Partner's capital account was adjusted by $18,000 in order to maintain its
1% general partner interest, in accordance with HRP's Partnership Agreement.
Accordingly, HRP's outstanding Units have decreased from 1,747,765 Units to
1,672,556 Units.
The following table illustrates the changes to Partners' Capital for the
nine months ended September 30, 1996 (in thousands except Unit amounts):
<TABLE>
<CAPTION>
Limited
Partner
General Limited Units
Partner Partners Total Outstanding
------- -------- --------- -----------
<S> <C> <C> <C> <C>
Partners' capital, January 1, 1996 $ 419 $ 41,498 $ 41,917 1,747,765
Purchase and retirement of Units (18) (1,788) (1,806) (75,209)
Net loss for the first nine months of 1996 (69) (6,878) (6,947) -
-------- --------- --------- ---------
Partners' capital, September 30, 1996 $ 332 $ 32,832 $ 33,164 1,672,556
======== ========= ========= =========
</TABLE>
4 FIRST MARYLAND BUILDING - LEASE RENEWAL AND MORTGAGE PAYABLE
Per the loan modification agreement described below, HRP is required to
spend $2,700,000 for the costs of improvements and the leasing commission
for the lease renewal of First Maryland Building's major tenant. The
tenant's previous lease was not scheduled to expire until mid-1997, however
the tenant had been in negotiations with HRP in an effort to reduce their
rental rate of $25 per square foot per annum, which was substantially above
the prevailing market rate in downtown Baltimore, Maryland. Concurrently
with the loan modification, HRP executed a revised ten- year lease with the
tenant which calls for rents ranging from $15 to $17 per square foot per
annum and increases their space from 62% to 71% of the property's net
rentable space of approximately 343,000 square feet.
On October 3, 1996, but effective May 1, 1996, the lender for First Maryland
Building extended the loan to April 30, 2003 with an unchanged interest rate
of LIBOR plus 3.25% (currently at 8.813%) and forgave $3,237,000 of the loan
in addition to the $9,250,000 of forgiveness granted in September 1995.
Under this agreement, 49.9% of the property's net cash flow must be used to
amortize the principal of the loan. The outstanding loan balance, net of
the loan forgiveness, as of September 30, 1996 is $25,552,000.
For financial reporting purposes, the loan forgiveness is treated as a
troubled debt restructuring and accordingly, HRP did not recognize a gain.
Instead, the loan forgiveness remains on the balance sheet of the
Partnership and is being amortized over the life of the loan. Interest
expense is computed in such a way that a constant effective interest rate
(currently equal to approximately 1.3%) is applied to the carrying amount of
the loan.
The contingent nature of the forgiveness that was part of the September 1995
loan modification was removed with the October 1996 loan modification.
Accordingly, for federal income tax purposes, the total loan forgiveness of
$12,487,000 will be reported as a gain to the partners of HRP on their 1996
Schedule K-1s. Based on available records, the General Partner believes
that most individuals who were partners at the time of HRP's formation in
November 1990 and certain other partners possibly have enough prior years'
suspended losses to absorb a part, if not all, of this gain. Partners
should consult their own tax advisor or preparer to assess the tax
consequences of this transaction.
Page 7
<PAGE> 8
HALLWOOD REALTY PARTNERS, L.P.
ITEM 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION
RESULTS OF OPERATIONS
THIRD QUARTER 1996 COMPARED TO THIRD QUARTER 1995
REVENUE FROM PROPERTY OPERATIONS decreased $632,000, or 5.0%, for the third
quarter of 1996, as compared to the 1995 third quarter. The following table
illustrates the components of the change, in thousands:
<TABLE>
<S> <C>
Rental income, net $ (755)
Expense recoveries (60)
Other property income 183
--------
Net decrease $ (632)
========
</TABLE>
Overall rental occupancies and rates remained fairly consistent with the prior
period. The decrease in rental income is primarily due to a reduction in rental
rates at First Maryland Building, a decrease in occupancy at Parklane Towers
and Corporate Square, partially offset by a rise in occupancy at Executive Park
and the addition of the Joy Road property in February 1996. The First Maryland
Building rental rate reduction is discussed in Note 4 to the financial
statements. Corporate Square's decrease in occupancy was temporary due to the
expiration of a significant lease in late 1995; earlier in 1996, the space was
re-leased and effective September 25, 1996, the new tenant took possession,
which increased the property's occupancy from about 72% to 91%.
INTEREST INCOME increased $72,000 as a result of an increase in HRP's average
cash position between periods and therefore increased funds available for
investment.
PROPERTY OPERATING EXPENSES increased $58,000, or 1.0%, for the third quarter
of 1996, as compared to the same period in 1995, primarily due to higher
leasing commission amortization and security control costs, partially offset by
lower utility costs and one-time professional fees incurred in the 1995 period.
The following table illustrates the components of the change, in thousands:
<TABLE>
<S> <C>
Administrative costs $ 26
Management fees (33)
Marketing and leasing 65
Utilities (68)
Janitorial and other services 68
Repairs and maintenance (37)
Real estate taxes 33
Insurance 4
--------
Net increase $ 58
========
</TABLE>
INTEREST EXPENSE decreased $783,000 due to $569,000 of amortization of First
Maryland's debt forgiveness in the 1996 period, a reduction in loan cost
amortization of $28,000, lower litigation cost interest of $62,000, and
$124,000 of other net decreases in interest costs. In October 1995, HRP began
amortizing $9,250,000 of debt forgiveness associated with the First Maryland
Building against the carrying value of the debt over the life of the loan. On
October 3, 1996, but effective May 1, 1996, an additional $3,237,000 of debt
forgiveness was granted (see Note 4 to the financial statements).
DEPRECIATION AND AMORTIZATION EXPENSE decreased $132,000 primarily due to
reduced building improvement depreciation.
GENERAL AND ADMINISTRATIVE EXPENSES increased $127,000 in the comparable third
quarters as the result of increased business/franchise taxes, certain
professional fees and overhead costs.
LOSS ON EARLY EXTINGUISHMENT OF DEBT in the 1995 third quarter of $765,000
represents pre-payment penalties incurred with the early pay off of loans
associated with new financing and the write off of certain loan costs.
Page 8
<PAGE> 9
HALLWOOD REALTY PARTNERS, L.P.
RESULTS OF OPERATIONS - CONTINUED
FIRST NINE MONTHS OF 1996 COMPARED TO FIRST NINE MONTHS OF 1995
REVENUE FROM PROPERTY OPERATIONS decreased $1,291,000, or 3.4%, during the
first nine months of 1996, as compared to the first nine months of 1995. The
following table illustrates the components of the change, in thousands:
<TABLE>
<S> <C>
Rental income, net $ (579)
Expense recoveries (875)
Other property income 163
---------
Net decrease $ (1,291)
=========
</TABLE>
Overall rental occupancies and rates remained fairly consistent with the prior
period. The decrease in rental income is primarily due to a reduction in
rental rates at First Maryland Building, a decrease in occupancy at Parklane
Towers and Corporate Square, partially offset by a rise in occupancy at
Executive Park and the addition of the Joy Road property in February 1996. The
First Maryland Building rental rate reduction is discussed in Note 4 to the
financial statements. Corporate Square's decrease in occupancy was temporary
due to the expiration of a significant lease in late 1995; earlier in 1996, the
space was re-leased and effective September 25, 1996, the new tenant took
possession, which increased the property's occupancy from about 72% to 91%.
During the first quarter of 1995, expense recoveries were abnormally high due
to adjustments made to the amount of real estate tax recoveries from tenants in
the state of Michigan for the two years prior to 1995. Accordingly, expense
recoveries for the 1996 period decreased from the prior year period.
INTEREST INCOME increased $316,000 as a result of an increase in HRP's average
cash position between periods and therefore increased funds available for
investment.
PROPERTY OPERATING EXPENSES increased $765,000, or 4.3%, for the first nine
months of 1996, as compared to the same period in 1995, primarily due to higher
utility costs, leasing commission amortization, security control costs and
repairs to heating and air duct systems, partially offset by one-time costs for
certain professional fees incurred in the 1995 period. The following table
illustrates the components of the change, in thousands:
<TABLE>
<S> <C>
Administrative costs $ (51)
Management fees (32)
Marketing and leasing 215
Utilities 221
Janitorial and other services 150
Repairs and maintenance 165
Real estate taxes 84
Insurance 13
-------
Net increase $ 765
=======
</TABLE>
INTEREST EXPENSE decreased $1,777,000 due to $1,239,000 of amortization of
First Maryland's debt forgiveness in the 1996 period, a reduction in loan cost
amortization of $113,000, lower litigation cost interest of $206,000, and
$219,000 of other net decreases in interest costs. In October 1995, HRP began
amortizing $9,250,000 of debt forgiveness associated with the First Maryland
Building against the carrying value of the debt over the life of the loan. On
October 3, 1996, but effective May 1, 1996, an additional $3,237,000 of debt
forgiveness was granted (see Note 4 to the financial statements).
DEPRECIATION AND AMORTIZATION EXPENSE decreased $311,000 primarily due to
reduced building improvement depreciation.
GENERAL AND ADMINISTRATIVE EXPENSES increased $183,000 in the first nine months
of 1996, as compared to the corresponding period of 1995, primarily due to
increased personnel costs, business/franchise taxes, certain professional fees
and overhead costs.
LOSS ON EARLY EXTINGUISHMENT OF DEBT in the 1995 third quarter of $765,000
represents pre-payment penalties incurred with the early pay off of loans
associated with new financing and the write off of certain loan costs.
Page 9
<PAGE> 10
HALLWOOD REALTY PARTNERS, L.P.
LIQUIDITY AND CAPITAL RESOURCES
HRP is engaged in diversified real estate activities, including the
acquisition, ownership and operation of commercial office, industrial real
estate and other real estate related assets. While it is the General Partner's
primary intention to operate HRP's existing real estate investments and to
acquire and operate additional real estate investments, HRC also continually
evaluates each of HRP's real estate investments in light of current economic
trends and operations to determine if any should be considered for disposal.
At this time, there are no plans to dispose of any of HRP's real estate
properties.
As of September 30, 1996, HRP owned twelve properties (the "Properties), of
which seven are office building properties and five are industrial park
properties containing approximately 2,610,000 and 2,557,000 net rentable square
feet, respectively. The Properties are located in six states. The Partnership
seeks to maximize the value of the Properties by making capital and tenant
improvements, by executing marketing programs to attract and retain tenants and
by reducing operating expenses where possible.
As of September 30, 1996, HRP had cash and cash equivalents of $6,920,000 as
compared to $14,302,000 as of December 31, 1995. Therefore, HRP's cash
position decreased $7,382,000 during the first nine months of 1996. The
sources of cash during the period were $3,033,000 of cash provided by operating
activities and $64,000 of payments from a mortgage receivable. Uses of cash
during the period were $4,773,000 of property and tenant improvements,
$1,699,000 to purchase the Joy Road property in February 1996, $2,082,000 of
mortgage principal payments, $1,806,000 to purchase 75,209 limited partner
Units (see Note 3 to the Financial Statements), and $119,000 of loan fees.
Substantially all of the buildings in eleven of HRP's twelve Properties were
encumbered by non-recourse mortgages as of September 30, 1996. Based upon loan
maturities currently in effect, in the aggregate, HRP is required to pay about
$247,000 of principal payments for the remainder of 1996.
Per the loan modification agreement described below, HRP is required to spend
$2,700,000 for the costs of improvements and the leasing commission for the
lease renewal of First Maryland Building's major tenant. The tenant's previous
lease was not scheduled to expire until mid-1997, however the tenant had been
in negotiations with HRP in an effort to reduce their rental rate of $25 per
square foot per annum, which was substantially above the prevailing market rate
in downtown Baltimore, Maryland. Concurrently with the loan modification, HRP
executed a revised ten-year lease with the tenant which calls for rents ranging
from $15 to $17 per square foot per annum and increases their space from 62% to
71% of the property's net rentable space of approximately 343,000 square feet.
On October 3, 1996, but effective May 1, 1996, the lender for First Maryland
Building extended the loan to April 30, 2003 with an unchanged interest rate of
LIBOR plus 3.25% (currently at 8.813%) and forgave $3,237,000 of the loan in
addition to the $9,250,000 of forgiveness granted in September 1995. Under
this agreement, 49.9% of the property's net cash flow must be used to amortize
the principal of the loan. The outstanding loan balance, net of the loan
forgiveness, as of September 30, 1996 is $25,552,000.
The contingent nature of the forgiveness that was part of the September 1995
loan modification was removed with the October 1996 loan modification.
Accordingly, for federal income tax purposes, the total loan forgiveness of
$12,487,000 will be reported as a gain to the partners of HRP on their 1996
Schedule K-1s. Based on available records, the General Partners believes that
most individuals who were partners at the time of HRP's formation in November
1990 and certain other partners possibly have enough prior years' suspended
losses to absorb a part, if not all, of this gain. Partners should consult
their own tax advisor or preparer to assess the tax consequences of this
transaction.
Executive Park's mortgage notes matured on June 16, 1996. On October 8, 1996,
the lender and HRP entered into a renewal and loan modification agreement,
which extended the maturity date fifteen years to November 15, 2011 and set the
initial interest rate at 8.87%. The notes are self-amortizing and include call
options every three years for evaluation of financial performance. The
interest rate may be adjusted, within certain parameters, at the call option
dates.
For the foreseeable future, the Partnership anticipates that mortgage and note
principal payments (excluding balloon mortgage payments), tenant improvements
and capital expenditures will be funded by net cash from operations. The
primary sources of capital to fund future Partnership acquisitions and balloon
mortgage payments will be proceeds from the sale, financing, or refinancing of
its Properties.
Each quarter HRC, as General Partner, reviews the Partnership's capacity to
make cash distributions. No such cash distributions are anticipated for the
immediate future.
Page 10
<PAGE> 11
HALLWOOD REALTY PARTNERS, L.P.
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
Item
----
<S> <C>
1 Legal Proceedings None.
-----------------
2 Changes in Securities None.
---------------------
3 Defaults upon Senior Securities None.
-------------------------------
4 Submission of Matters to a Vote of Security Holders None.
---------------------------------------------------
5 Other Information None.
-----------------
6 Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27 - Financial Data Schedule Page 13
(b) Reports on Form 8-K None.
</TABLE>
Page 11
<PAGE> 12
HALLWOOD REALTY PARTNERS, L.P.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Quarterly Report of Form 10-Q for the quarter ended September 30, 1996 has been
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.
HALLWOOD REALTY PARTNERS, L.P.
------------------------------------
(Registrant)
By: HALLWOOD REALTY CORPORATION
General Partner
Date: November 12, 1996 By: /s/ WILLIAM L. GUZZETTI
----------------- --------------------------------
William L. Guzzetti
President
(Chief Operating Officer)
Date: November 12, 1996 By: /s/ JEFFREY D. GENT
----------------- --------------------------------
Jeffrey D. Gent
Vice President - Finance
(Principal Financial and
Accounting Officer)
Page 12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,920
<SECURITIES> 0
<RECEIVABLES> 2,099
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 332,828
<DEPRECIATION> 146,908
<TOTAL-ASSETS> 215,083
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 32,832
<OTHER-SE> 332
<TOTAL-LIABILITY-AND-EQUITY> 215,083
<SALES> 0
<TOTAL-REVENUES> 12,277
<CGS> 0
<TOTAL-COSTS> 11,185
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,195
<INCOME-PRETAX> (2,103)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,103)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,103)
<EPS-PRIMARY> (1.24)
<EPS-DILUTED> (1.24)
</TABLE>
