<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 JUNE 30, 1998
[ ] 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 JULY 31, 1998: 1,672,556 UNITS.
================================================================================
Page 1
<PAGE> 2
HALLWOOD REALTY PARTNERS, L.P.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
Page
----
<S> <C> <C>
Item 1 Financial Statements (unaudited):
Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997 3
Consolidated Statements of Income for the
Three and Six Months Ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations, Liquidity and Capital Resources 8
PART II - OTHER INFORMATION
Items 1 to 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>
JUNE 30, December 31,
1998 1997
---------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land $ 56,441 $ 56,441
Buildings and improvements 260,017 259,220
Tenant improvements 18,419 18,734
--------- ---------
334,877 334,395
Accumulated depreciation and amortization (158,743) (155,367)
--------- ---------
Real estate, net 176,134 179,028
Cash and cash equivalents 12,604 6,665
Accounts receivable 1,428 1,162
Deferred lease commissions, net 7,154 7,049
Lease concessions 2,684 2,511
Loan reserves and escrows 7,227 6,215
Loan costs, net 3,883 3,213
Prepaid expenses and other assets, net 441 1,291
--------- ---------
Total assets $ 211,555 $ 207,134
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgages payable $ 162,876 $ 157,911
Unamortized mortgage payable forgiveness 8,079 8,926
Accounts payable and accrued expenses 4,154 4,157
Prepaid rent and security deposits 2,428 2,764
Payable to affiliates 129 335
--------- ---------
Total liabilities 177,666 174,093
--------- ---------
Partners' capital:
Limited partners - 1,672,556 units outstanding 33,550 32,711
General partner 339 330
--------- ---------
Total partners' capital 33,889 33,041
--------- ---------
Total liabilities and partners' capital $ 211,555 $ 207,134
========= =========
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 4
HALLWOOD REALTY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Property operations $ 13,552 $ 13,312 $ 27,228 $ 26,085
Interest 219 131 366 266
-------- -------- -------- --------
Total revenues 13,771 13,443 27,594 26,351
-------- -------- -------- --------
EXPENSES:
Property operations 5,150 5,408 10,741 11,229
Interest 3,135 3,239 6,318 6,456
Depreciation and amortization 3,010 3,010 6,088 5,995
General and administrative 821 850 1,723 1,667
-------- -------- -------- --------
Total expenses 12,116 12,507 24,870 25,347
-------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM 1,655 936 2,724 1,004
Extraordinary item -
Loss on early extinguishment of debt (265) -- (1,876) --
-------- -------- -------- --------
NET INCOME $ 1,390 $ 936 $ 848 $ 1,004
======== ======== ======== ========
ALLOCATION OF NET INCOME:
Limited partners $ 1,376 $ 927 $ 839 $ 994
General partner 14 9 9 10
-------- -------- -------- --------
Total $ 1,390 $ 936 $ 848 $ 1,004
======== ======== ======== ========
NET INCOME PER UNIT AND
POTENTIAL UNIT:
Earnings per unit - basic
Income before extraordinary item $ .98 $ .55 $ 1.61 $ .59
Loss on early extinguishment of debt (.16) -- (1.11) --
-------- -------- -------- --------
Net income $ .82 $ .55 $ .50 $ .59
======== ======== ======== ========
Earnings per unit - assuming dilution
Income before extraordinary item $ .94 $ .54 $ 1.55 $ .58
Loss on early extinguishment of debt (.15) -- (1.07) --
-------- -------- -------- --------
Net income $ .79 $ .54 $ .48 $ .58
======== ======== ======== ========
WEIGHTED AVERAGE UNITS USED IN
COMPUTING NET INCOME PER UNIT AND
POTENTIAL UNIT:
Basic 1,673 1,673 1,673 1,673
======== ======== ======== ========
Assuming dilution 1,743 1,721 1,741 1,721
======== ======== ======== ========
</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>
SIX MONTHS ENDED
JUNE 30,
---------------------
1998 1997
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 848 $ 1,004
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 6,088 5,995
Loss on early extinguishment of debt 1,876 --
Amortization of mortgage principal forgiveness (847) (834)
Lease concessions (173) 17
Changes in assets and liabilities:
Receivables (266) 261
Prepaid lease commissions (1,230) (1,193)
Prepaid expenses and other assets, net 604 617
Accounts payable and other liabilities (545) (1,481)
-------- --------
Net cash provided by operating activities 6,355 4,386
-------- --------
INVESTING ACTIVITIES:
Property and tenant improvements (2,054) (2,431)
Tenant improvement escrow -- 566
Property acquisition -- (646)
Mortgage receivable principal payments -- 46
-------- --------
Net cash used for investing activities (2,054) (2,465)
-------- --------
FINANCING ACTIVITIES:
Mortgage principal proceeds 41,500 549
Mortgage principal refinanced (35,046) --
Mortgage prepayment penalties (1,655) --
Mortgage principal payments (1,489) (1,638)
Loan reserves (550) --
Loan fees (1,122) 25
-------- --------
Net cash provided by (used for) financing activities 1,638 (1,064)
-------- --------
INCREASE IN CASH AND CASH EQUIVALENTS 5,939 857
BEGINNING CASH AND CASH EQUIVALENTS 6,665 3,556
-------- --------
ENDING CASH AND CASH EQUIVALENTS $ 12,604 $ 4,413
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash during the period $ 6,933 $ 7,068
======== ========
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE> 6
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
1 ORGANIZATION AND ACCOUNTING POLICIES
Hallwood Realty Partners, L.P. ("HRP"), a publicly traded Delaware limited
partnership, is engaged in diversified real estate activities, including the
acquisition, ownership and operation of commercial office and industrial
real estate and other real estate related assets. The limited partners'
interests 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 HRP's general partner and is responsible for asset
management of the partnership and its real estate properties. Hallwood
Commercial Real Estate, Inc. ("HCRE"), another wholly-owned subsidiary of
Hallwood, provides property management services for HRP's real estate
properties.
HRP has adopted Statements of Financial Accounting Standards No. 130 -
"Reporting on Comprehensive Income" effective January 1, 1998. As HRP had no
items of other comprehensive income in the period presented, comprehensive
income is not reported.
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, 1997.
2 TRANSACTIONS WITH RELATED PARTIES
HRC and HCRE are compensated for services provided to HRP and its real
estate properties and are set forth in the following table for the periods
presented (in thousands):
<TABLE>
<CAPTION>
ENTITY THREE MONTHS SIX MONTHS
PAID OR ENDED ENDED
REIMBURSED JUNE 30, JUNE 30,
---------- --------------- ----------------
1998 1997 1998 1997
---- ---- ----- -----
<S> <C> <C> <C> <C> <C>
Asset management fee HRC $123 $118 $244 $221
Property management fee HCRE 396 404 787 748
Lease commissions HCRE 649 464 1,036 809
Construction fees HCRE 48 81 105 149
Acquisition fee HRC -- 7 -- 7
Reimbursements of costs (a) HRC 512 569 1,158 1,214
</TABLE>
(a) These costs are mostly recorded as general and administrative expenses and
represent reimbursement to HRC, at cost, for partnership level salaries,
employee and director insurance, and certain overhead costs. HRP pays, on a
monthly basis, the balance of its account with HRC.
3 MORTGAGES PAYABLE
On February 27, 1998, HRP entered into an agreement to refinance the
mortgage loan secured by Executive Park that became effective March 20,
1998. The new loan reduces the interest rate from 8.87% to an effective
interest rate of 7.32% and extends the amortization period from fifteen
years to approximately twenty-seven years with a maturity date of April 11,
2008. The loan proceeds of $34,000,000 were used (i) to pay the outstanding
principal balance of $28,707,000 with the former lender, (ii) to pay
transaction costs of approximately $894,000, (iii) to pay a prepayment
penalty of $1,465,000, (iv) to pay $550,000 of net loan reserves, and (v)
for general working capital. The prepayment penalty along with the write off
of $146,000 of unamortized loan costs associated with the retired loan were
expensed and are included in the Statements of Income as an extraordinary
item as a loss on early extinguishment of debt.
Page 6
<PAGE> 7
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
3 MORTGAGES PAYABLE - CONTINUED
On June 1, 1998, HRP refinanced the mortgage loan secured by Seattle
Business Parks into two new loans which reduced the interest rate from 9.25%
to 6.97%. The new loans lengthen the amortization period from twenty-two
years to thirty years and the maturity date was extended by seven years to
June 7, 2008. The loan proceeds of $7,500,000 were used (i) to pay the
outstanding principal balance of $6,339,000 with the former lender, (ii) to
pay transaction costs of approximately $228,000, (iii) to pay a prepayment
penalty of $190,000, and (iv) for general working capital. The prepayment
penalty along with the write off of $75,000 of unamortized loan costs
associated with the retired loan were expensed and are included in the
Statements of Income as an extraordinary item as a loss on early
extinguishment of debt.
4 EARNINGS PER UNIT
Basic earnings per unit is computed by dividing net income attributable to
the limited partners' interests by the weighted average number of units
outstanding. Earnings per unit assuming dilution is computed by dividing net
income attributable to the limited partners' interests by the weighted
average number of units and potential units outstanding. Options to acquire
units were issued during 1995 and are considered to be potential units. The
number of potential units is computed using the treasury stock method which
assumes that the increase in the number of units is reduced by the number of
units which could have been repurchased by HRP with the proceeds from the
exercise of these options. The following table illustrates the amounts used
to calculate the weighted average number of units outstanding:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
----------------- ------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Weighted average units outstanding - basic 1,673 1,673 1,673 1,673
Issuance of units from options 86 86 86 86
Repurchase of units from unit option proceeds (16) (38) (18) (38)
------ ------ ------ ------
Weighted average units outstanding - assuming dilution 1,743 1,721 1,741 1,721
====== ====== ====== ======
</TABLE>
5 LITIGATION
Reference is made to Note 9 to the audited consolidated financial statements
contained in Form 10-K for the year ended December 31, 1997. Beginning in
1997, HRP has been involved in two lawsuits with Gotham Partners, L.P. The
first complaint seeks access to certain books and records of HRP, a list of
the limited partners and reimbursement of the plaintiff's expenses. The
second complaint alleges claims of breach of fiduciary duties, breach of
HRP's partnership agreement, fraud, and as to Hallwood, aiding and abetting
these alleged breaches.
On June 27, 1997, the parties entered into a Stipulation and Order under
which HRP provided to plaintiff copies of certain of the documents
requested. The other claims in the two actions remain outstanding.
On August 27, 1997, defendants moved to dismiss the complaint in the second
action for plaintiff's failure either to make a demand on the general
partner to bring suit or to allege adequately that such a demand was futile.
On February 6, 1998, the Court granted defendants' motion to dismiss but
gave plaintiff thirty days to file an amended complaint. Plaintiffs filed an
amended complaint on March 6, 1998, which defendants have again moved to
dismiss.
HRP's management believes that the claims are without merit and intend to
defend the cases vigorously, but because of their early stages, cannot
predict the outcome of the claims or any possible effect an adverse outcome
might have.
Page 7
<PAGE> 8
HALLWOOD REALTY PARTNERS, L.P.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES
RESULTS OF OPERATIONS
SECOND QUARTER OF 1998 COMPARED TO THE SECOND QUARTER OF 1997
REVENUE FROM PROPERTY OPERATIONS increased $240,000, or 1.8%, for the second
quarter of 1998, compared to the 1997 second quarter. The following table
illustrates the components of the change, in thousands:
<TABLE>
<S> <C>
Rental income, net $ 435
Expense recoveries (243)
Other property income 48
-----
Net increase $ 240
=====
</TABLE>
Although average occupancy between the comparable periods dropped slightly from
93.6% to 93.2%, rental income increased primarily due to rental rate increases
at a number of properties. As of June 30, 1998, HRP had leases executed and in
place for 94.2% of the portfolio's net rentable square feet. Expense recoveries
decreased due to (i) adjustments made for certain tenant lease provisions that
lowered recoveries as a result of reduced operating expenses and (ii) due to
certain recoveries unique to the 1997 period.
INTEREST INCOME increased $88,000 as a result of additional earnings on
overnight investments due to higher average cash balances available for
investment between the periods.
PROPERTY OPERATING EXPENSES decreased $258,000, or 4.8%, for the second quarter
of 1998, compared to the same period in 1997. The decrease is comprised of the
following components:
o Real estate taxes decreased $401,000 primarily due to tax refunds received
in 1998 for tax years 1994 to 1997 for Parklane Towers and Raintree
Industrial Park.
o Janitorial costs increased $76,000 due to the increase in year-to-date
occupancy discussed on the next page.
o Combined, all other operating costs increased only $67,000, or 1.2%,
between the periods.
INTEREST EXPENSE diminished $104,000, or 3.2%, principally due to the reduction
in the aggregate average interest rate between the periods as a result a
decrease in interest rates for refinanced loans discussed in Note 3 to the
consolidated financial statements.
DEPRECIATION AND AMORTIZATION EXPENSE was consistent between the periods.
GENERAL AND ADMINISTRATIVE EXPENSES decreased $29,000 for the second quarter of
1998, as compared to the 1997 period, primarily due to lower corporate insurance
and investor mailing costs, partially offset by certain professional fees
incurred in the 1998 period and an increase in state franchise taxes.
LOSS ON EARLY EXTINGUISHMENT OF DEBT of $265,000 in the 1998 period represents a
prepayment penalty of $190,000 incurred with the early payoff of a loan secured
by Seattle Business Parks and the write off of $75,000 of unamortized loan costs
associated with the retired loan. The refinancing reduced the loans' interest
rate from 9.25% to 6.97% and increased the principal balance from $6,339,000 to
$7,500,000 (see Note 3 to the consolidated financial statements for more
information about the refinancing).
Page 8
<PAGE> 9
HALLWOOD REALTY PARTNERS, L.P.
RESULTS OF OPERATIONS - CONTINUED
FIRST SIX MONTHS OF 1998 COMPARED TO THE FIRST SIX MONTHS OF 1997
REVENUE FROM PROPERTY OPERATIONS increased $1,143,000, or 4.4%, for the first
six months of 1998, compared to the first six months of 1997. The following
table illustrates the components of the change, in thousands:
<TABLE>
<S> <C>
Rental income, net $ 1,315
Expense recoveries (288)
Other property income 116
-------
Net increase $ 1,143
=======
</TABLE>
Rental income increased due to rental rate increases at a number of properties
(primarily at those in the Atlanta market) and also due to a rise in average
occupancy between the comparable periods from 92.8% to 93.6%. As of June 30,
1998, HRP had leases executed and in place for 94.2% of the portfolio's net
rentable square feet. Expense recoveries decreased due to (i) adjustments made
for certain tenant lease provisions that lowered recoveries as a result of
reduced operating expenses and (ii) due to certain recoveries unique to the 1997
period.
INTEREST INCOME increased $100,000 as a result of additional earnings on
overnight investments due to higher average cash balances available for
investment between the periods.
PROPERTY OPERATING EXPENSES decreased $488,000, or 4.3%, for the first six
months of 1998, compared to the same period in 1997. The decrease is comprised
of the following components:
o Real estate taxes decreased $472,000 primarily due to tax refunds received
in 1998 for tax years 1994 to 1997 for Parklane Towers and Raintree
Industrial Park.
o Utilities dropped $114,000 primarily due to a milder winter at the Michigan
properties.
o Snow removal and sweeping costs fell $55,000 also due to a milder winter.
o Janitorial costs increased $94,000 due to the increase in occupancy.
o Management fees rose $62,000 due to the increase in occupancy and net
rental income mentioned above.
o Combined, all other operating costs decreased $3,000 between the periods.
INTEREST EXPENSE diminished $138,000, or 2.1%, principally due to the reduction
in the aggregate average interest rate between the periods as a result a
decrease in interest rates for refinanced loans discussed in Note 3 to the
consolidated financial statements.
DEPRECIATION AND AMORTIZATION EXPENSE increased $93,000 primarily due to an
increase in lease commission amortization as a result of new leases executed
during 1997 which have increased the portfolio's occupancy.
GENERAL AND ADMINISTRATIVE EXPENSES increased $56,000 for the first six months
of 1998, as compared to the same period in 1997, due to certain professional
fees incurred in the 1998 period and an increase in state franchise taxes in
Michigan, partially offset by lower corporate insurance and investor mailing
costs.
LOSS ON EARLY EXTINGUISHMENT OF DEBT of $1,876,000 in the 1998 period represents
prepayment penalties of $1,655,000 incurred with the early payoff of a loans
secured by Executive Park and Seattle Business Parks, along with the write off
of $221,000 of unamortized loan costs associated with the retired loans (see
Note 3 to the consolidated financial statements for more information about the
loan refinancings).
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 and 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.
As of June 30, 1998, HRP owned twelve real estate properties located in six
states. Seven are commercial office building properties and five are industrial
park properties containing approximately 2,609,000 and 2,554,000 net rentable
square feet, respectively. HRP seeks to maximize the value of its real estate by
making capital and tenant improvements, by executing marketing programs to
attract and retain tenants, and reducing operating expenses where possible.
On June 1, 1998, HRP refinanced the mortgage loan secured by Seattle Business
Parks into two new loans which reduced the interest rate from 9.25% to 6.97%.
The new loans lengthen the amortization period from twenty-two years to thirty
years and the maturity date was extended by seven years to June 7, 2008. The
loan proceeds of $7,500,000 were used (i) to pay the outstanding principal
balance of $6,339,000 with the former lender, (ii) to pay transaction costs of
approximately $228,000, (iii) to pay a prepayment penalty of $190,000, and (iv)
for general working capital.
HRP's cash position increased $5,939,000 during the first six months of 1998
from $6,665,000 as of December 31, 1997 to $12,604,000 as of June 30, 1998. The
sources of cash during the period were $41,500,000 of mortgage principal
proceeds and $6,355,000 of cash provided by operating activities. Uses of cash
during the period were $35,046,000 of mortgage principal repayments from
refinancing proceeds, $2,054,000 of property and tenant improvements, $1,655,000
of mortgage prepayment penalties, $1,489,000 of scheduled mortgage principal
payments, $1,122,000 of loan fees, and $550,000 of net loan reserve
requirements.
Substantially all of the buildings in eleven of HRP's real estate properties
were encumbered by and pledged as collateral under non-recourse mortgages as of
June 30, 1998. HRP has no mortgage loans maturing or requiring balloon principal
payments until the year 2003. Based upon loan amortizations in effect, HRP is
required to pay $1,414,000 of principal payments for the remainder of 1998.
HRP estimated and budgeted tenant and capital improvements of approximately
$5,370,000 and lease commissions of about $1,570,000 for 1998. HRP has incurred
$2,054,000 of tenant and capital improvements and $1,230,000 of lease
commissions in the first six months of 1998.
For the foreseeable future, HRP anticipates that mortgage principal payments,
tenant and capital improvements, and lease commissions will be funded by net
cash from operations. The primary sources of capital to fund any future
acquisitions will be proceeds from the sale, financing or refinancing of one or
more of its real estate properties.
Each quarter HRC, as General Partner, reviews the Partnership's capacity to make
cash distributions. HRP has not made any cash distributions since February,
1992.
HRP realizes that all information systems currently do not have the ability to
recognize four digit date code fields and accordingly, they do not have the
ability to distinguish 21st century dates from 20th century dates. Therefore,
many companies and organizations are spending considerable resources to update
and modify their systems for Year 2000 compliance. HRP has assessed its systems
(including computers and building operating systems) and anticipates that it
will be in compliance and will not incur any costs, except for testing the
systems, which are expected to be minimal and will be met with existing
resources. HRP is currently in the process of verifying that service providers
and other external parties are addressing and resolving their Year 2000
compliance. HRP believes that it will not have any detrimental affects on its
operations from Year 2000 compliance issues.
This Form 10-Q contains certain forward-looking statements. These statements
include the plans and objectives of management for future operations. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond the control of HRP. Although HRP believes that the assumptions underlying
the forward-looking statements are reasonable, any of the assumptions could be
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Form 10-Q will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by HRP or any other person that the objectives and plans of HRP
will be achieved.
Page 10
<PAGE> 11
HALLWOOD REALTY PARTNERS, L.P.
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
Item
----
<S> <C> <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, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HALLWOOD REALTY PARTNERS, L.P.
------------------------------------
(Registrant)
By: HALLWOOD REALTY CORPORATION
General Partner
Date: August 3, 1998 By: /s/ WILLIAM L. GUZZETTI
--------------------------------
William L. Guzzetti
President
(Chief Operating Officer)
Date: August 3, 1998 By: /s/ JEFFREY D. GENT
--------------------------------
Jeffrey D. Gent
Vice President - Finance
(Principal Financial and Accounting Officer)
Page 12
<PAGE> 13
HALLWOOD REALTY PARTNERS, L.P.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
27.1 Financial Data Schedule
27.2 Financial Data Schedule (Restated)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 12,604
<SECURITIES> 0
<RECEIVABLES> 1,428
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 334,877
<DEPRECIATION> 158,743
<TOTAL-ASSETS> 211,555
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 33,550
<OTHER-SE> 339
<TOTAL-LIABILITY-AND-EQUITY> 211,555
<SALES> 0
<TOTAL-REVENUES> 27,594
<CGS> 0
<TOTAL-COSTS> 18,552
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,318
<INCOME-PRETAX> 2,724
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,724
<DISCONTINUED> 0
<EXTRAORDINARY> (1,876)
<CHANGES> 0
<NET-INCOME> 848
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.48
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997
<CASH> 3,020 4,413 4,765 6,665
<SECURITIES> 0 0 0 0
<RECEIVABLES> 1,774 1,345 1,361 1,162
<ALLOWANCES> 0 0 0 0
<INVENTORY> 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0
<PP&E> 333,863 333,068 333,568 334,395
<DEPRECIATION> 152,380 152,068 153,720 155,367
<TOTAL-ASSETS> 208,364 207,814 206,653 207,134
<CURRENT-LIABILITIES> 0 0 0 0
<BONDS> 0 0 0 0
30,444 31,371 31,934 32,711
0 0 0 0
<COMMON> 0 0 0 0
<OTHER-SE> 308 317 323 330
<TOTAL-LIABILITY-AND-EQUITY> 208,364 207,814 206,653 207,134
<SALES> 0 0 0 0
<TOTAL-REVENUES> 12,908 26,351 39,884 53,899
<CGS> 0 0 0 0
<TOTAL-COSTS> 9,623 18,891 28,601 38,597
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 3,217 6,456 9,710 12,945
<INCOME-PRETAX> 68 1,004 1,573 2,357
<INCOME-TAX> 0 0 0 0
<INCOME-CONTINUING> 68 1,004 1,573 2,357
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 68 1,004 1,573 2,357
<EPS-PRIMARY> 0.04 0.59 0.93 1.40
<EPS-DILUTED> 0.04 0.58 0.90 1.35
</TABLE>
