<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 MARCH 31, 2000
[ ] 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 MAY 11, 2000: 1,672,556 UNITS.
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HALLWOOD REALTY PARTNERS, L.P.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 1 Financial Statements (unaudited) :
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999 3
Consolidated Statements of Income for the
Three Months Ended March 31, 2000 and 1999 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 2000 and 1999 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 9
Item 3 Quantitative and Qualitative Disclosures About Market Risk 12
PART II - OTHER INFORMATION
Items 1 to 6 Other Information 13
Signature 14
</TABLE>
Page 2
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HALLWOOD REALTY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT UNIT AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, December 31,
2000 1999
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land $ 60,236 $ 58,378
Buildings and improvements 289,709 282,013
Tenant improvements 21,517 17,924
------------ ------------
371,462 358,315
Accumulated depreciation and amortization (167,083) (165,501)
------------ ------------
Real estate, net 204,379 192,814
Cash and cash equivalents 6,245 8,332
Accounts receivable 2,272 2,287
Lease commissions, net 10,767 10,653
Loan reserves and escrows 8,319 7,073
Loan costs, net 3,571 3,607
Prepaid expenses and other assets 5,644 5,620
------------ ------------
Total assets $ 241,197 $ 230,386
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgages payable $ 179,680 $ 171,312
Accounts payable and accrued expenses 6,218 6,013
Prepaid rent and security deposits 3,315 2,578
Payable to affiliates, net 1,838 1,787
------------ ------------
Total liabilities 191,051 181,690
------------ ------------
COMMITMENTS AND CONTINGENCIES
Partners' capital:
Limited partners - 1,672,556 units outstanding 49,645 48,209
General partner 501 487
------------ ------------
Total partners' capital 50,146 48,696
------------ ------------
Total liabilities and partners' capital $ 241,197 $ 230,386
============ ============
</TABLE>
See notes to consolidated financial statements.
Page 3
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HALLWOOD REALTY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES:
Property operations $ 15,977 $ 14,338
Interest 192 221
------------ ------------
Total revenues 16,169 14,559
------------ ------------
EXPENSES:
Property operations 6,457 5,836
Interest 3,561 3,379
Depreciation and amortization 3,222 3,025
General and administrative 1,479 1,105
------------ ------------
Total expenses 14,719 13,345
------------ ------------
NET INCOME $ 1,450 $ 1,214
============ ============
ALLOCATION OF NET INCOME:
Limited partners $ 1,436 $ 1,202
General partner 14 12
------------ ------------
Total $ 1,450 $ 1,214
============ ============
NET INCOME PER UNIT AND
POTENTIAL UNIT:
Basic $ .86 $ .72
============ ============
Assuming dilution $ .83 $ .69
============ ============
WEIGHTED AVERAGE UNITS USED
IN COMPUTING NET INCOME PER
UNIT AND POTENTIAL UNIT:
Basic 1,673 1,673
============ ============
Assuming dilution 1,737 1,740
============ ============
</TABLE>
See notes to consolidated financial statements.
Page 4
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HALLWOOD REALTY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,450 $ 1,214
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 3,222 3,025
Effective rent adjustments (274) (228)
Changes in assets and liabilities:
Receivables 15 (226)
Lease commission payments (745) (566)
Prepaid expenses and other assets (818) 258
Accounts payable and other liabilities 1,094 (1,435)
------------ ------------
Net cash provided by operating activities 3,944 2,042
------------ ------------
INVESTING ACTIVITIES:
Property and tenant improvements (1,870) (743)
Property development cost (4,596) --
Property acquisition (7,791) --
------------ ------------
Net cash used in investing activities (14,257) (743)
------------ ------------
FINANCING ACTIVITIES:
Mortgage principal proceeds 9,087 --
Mortgage principal payments (719) (628)
Loan fees and expenses (142) --
------------ ------------
Net cash provided by (used in) financing activities 8,226 (628)
------------ ------------
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (2,087) 671
BEGINNING CASH AND CASH EQUIVALENTS 8,332 14,497
------------ ------------
ENDING CASH AND CASH EQUIVALENTS $ 6,245 $ 15,168
============ ============
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE> 6
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
1 ORGANIZATION AND ACCOUNTING POLICIES
Hallwood Realty Partners, L.P. ("HRP"), a publicly traded Delaware limited
partnership, operates in the commercial real estate business segment. HRP's
activities include the acquisition, ownership and operation of its
commercial real estate assets. Units representing limited partnership
interests are traded on the American Stock Exchange under the symbol "HRY".
As of March 31, 2000, there were 1,672,556 units outstanding.
Hallwood Realty, LLC ("Realty" or the "General Partner"), a Delaware limited
liability company and wholly-owned subsidiary of The Hallwood Group
Incorporated ("Hallwood"), is HRP's general partner and is responsible for
asset management of HRP and its real estate properties. Hallwood Commercial
Real Estate, LLC ("HCRE"), another wholly- owned subsidiary of Hallwood,
provides property management services for HRP's real estate properties.
The accompanying unaudited consolidated financial statements of Hallwood
Realty Partners, L.P. have been prepared in accordance with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnote disclosures required by
accounting principles generally accepted in the United States of America for
complete financial statements. 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, 1999. HRP had no items of other
comprehensive income in the periods presented.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of certain assets, liabilities, revenues, and expenses as of and for
the reporting periods. Actual results may differ from these estimates.
Operating results for the three months ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
2 TRANSACTIONS WITH RELATED PARTIES
Realty 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>
THREE MONTHS
ENDED
ENTITY MARCH 31,
PAID OR -----------------------
REIMBURSED 2000 1999
---------- ---- ----
<S> <C> <C>
Asset management fee Realty $ 140 $ 123
Acquisition fee Realty 74 --
Reimbursement of costs (a) Realty 612 718
Property management fee HCRE 463 410
Lease commissions HCRE 410 416
Construction fees HCRE 290 95
</TABLE>
(a) These costs are mostly recorded as general and administrative expenses
and represent reimbursement to Realty, at cost, for partnership level
salaries, bonuses, employee and director insurance, and certain
overhead costs. HRP pays the balance of its account with Realty on a
monthly basis.
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HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
3 STATEMENTS OF CASH FLOWS
Supplemental disclosure of cash flow information -
Cash interest payments were $3,371,000 (net of capitalized interest of
$151,000) and $3,259,000 in the three months ended March 31, 2000 and
1999, respectively.
Supplemental disclosure of noncash investing and financing activities -
The Partnership had a construction payable for property development
cost at Corporate Square of $2,540,000 as of March 31, 2000 and
$2,641,000 as of December 31, 1999.
4 COMPUTATION OF NET INCOME 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 Ended
March 31,
------------------------
2000 1999
--------- ---------
<S> <C> <C>
Weighted average units outstanding - basic 1,673 1,673
Issuance of units from options 86 86
Repurchase of units from unit option proceeds (22) (19)
--------- ---------
Weighted average units outstanding - assuming dilution 1,737 1,740
========= =========
</TABLE>
5 PROPERTY DEVELOPMENT
During the second quarter of 1999, HRP began construction of a 6-story
office building containing approximately 151,000 net rentable square feet.
It is being constructed on 6.1 acres of land that was acquired in May 1997
within the Corporate Square complex. A 20-year lease with the General
Services Administration for all six floors has been executed with occupancy
anticipated to take place by July 2000.
The building, tenant improvements, lease commissions and loan costs are
estimated to be $19,000,000 (excluding the land). In August 1999, HRP paid
off the outstanding loan balance of $475,000 that was secured by the land
and closed on interim-construction loan financing that will fund up to
$13,762,000 of the costs. The amount outstanding under the
interim-construction loan as of March 31, 2000 was $10,585,000. The
interim-construction loan calls for interest payments only with an interest
rate of LIBOR plus 170 basis points (7.69% as of March 31, 2000). HRP
anticipates repaying the interim-construction loan at its maturity in August
2000 from proceeds of a $21,000,000 permanent mortgage loan.
As of March 31, 2000, HRP has incurred and capitalized $13,563,000 of the
construction development costs. Additionally, HRP has paid $1,481,000, or
50%, of the lease commissions incurred in 1999; the remaining 50%, was
accrued in 1999 and will be paid when the tenant takes occupancy of the
space.
Page 7
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HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
6 PROPERTY ACQUISITION
On January 26, 2000, HRP acquired three 3-story office buildings in San
Diego, California (Fountain View Business Center) containing approximately
89,000 net rentable square feet on 4.3 acres of land. The property was 95%
occupied at the date of acquisition. The acquisition cost was approximately
$7,800,000. HRP obtained financing for $5,500,000 of the purchase price with
a new loan with two notes. The loan's monthly payment is based on a
twenty-year amortization, but matures in ten years, and has a fixed interest
rate of 8.17%.
7 LITIGATION
Reference is made to Note 10 to the audited consolidated financial
statements contained in Form 10-K for the year ended December 31, 1999.
Beginning in 1997, HRP has been involved in two lawsuits that were brought
by Gotham Partners, L.P. The first complaint sought 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 and the parties are proceeding with
discovery. Trial is currently scheduled for January 2001.
HRP's management believes that the claims are without merit and intend to
defend against the claims vigorously, but cannot predict the outcome of the
claims or any possible effect an adverse outcome might have.
On February 15, 2000, HRP filed a lawsuit in the United States District
Court for the Southern District of New York styled Hallwood Realty Partners,
L.P. v. Gotham Partners, L.P. et al (Civ. No. 00 CV 115) alleging violations
of the Securities Exchange Act of 1934 (and rules promulgated thereunder) by
certain purchasers of its units, including Gotham Partners, L.P., Gotham
Partners, III, L.P., Private Management Group, Inc., Interstate Properties,
Steven Roth and EFO Realty, Inc., by virtue of those purchasers'
misrepresentations and/or omissions in connection with filings required
under the Securities Exchange Act of 1934. HRP seeks various forms of
relief, including declaratory judgments, divestiture, corrective
disclosures, a "cooling-off" period and damages, including costs and
disbursements. In late March 2000, all defendants filed motions to dismiss
for failure to state a claim and failure to plead fraud with sufficient
particularity. On May 3, 2000, these motions were denied in their entirety,
allowing the case to proceed. One defendant also filed a motion to dismiss
for lack of proper jurisdiction and venue. The federal court reserved
decision on this motion.
HRP is from time to time involved in various legal proceedings and claims
which arise in the ordinary course of business. These matters are generally
covered by insurance. Management believes that the resolution of these
matters will not have a material adverse effect on HRP's financial position,
cash flow or operations.
7 SUBSEQUENT EVENT
As part of the resignation of Mr. Brian Troup as an officer and director of
Hallwood and HRP's general partner on December 21, 1999, Hallwood
transferred 82,608 units of HRP that it owned to a trust controlled by Mr.
Troup. On May 12, 2000, HRP purchased and retired the units at $46.825 per
unit (the average of the closing market prices of the units for the twenty
trading days prior to the purchase). Mr. Troup also exercised his unit
options to purchase 17,200 HRP units at the option plan's exercise price of
$11.875 per unit, and then sold them to HRP for $46.825 per unit. As a
result of these transactions, HRP's outstanding units have decreased from
1,672,556 to 1,589,948.
Page 8
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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
FIRST QUARTER OF 2000 COMPARED TO THE FIRST QUARTER OF 1999
REVENUE FROM PROPERTY OPERATIONS increased $1,639,000, or 11.4%, for the first
quarter of 2000, compared to the 1999 first quarter. The following table
illustrates the components of the change, in thousands:
<TABLE>
<S> <C>
Rental income, net $ 1,693
Other property income (54)
------------
Net increase $ 1,639
============
</TABLE>
Overall, net rental income increased due to higher rental rates and the addition
of three real estate properties to HRP's portfolio between the comparable
periods, partially offset by a slight decline in average occupancy between the
comparable periods from 92.3% to 92.2%.
INTEREST INCOME decreased by $29,000 as a result of reduced earnings on
overnight investments due to lower average cash balances available for
investment between the periods.
PROPERTY OPERATING EXPENSES increased $621,000, or 10.6%, for the first quarter
of 2000, compared to the same period in 1999. The increase is comprised
primarily of the following components:
o Professional fees of $267,000 in the first quarter of 2000 for research
and analysis of potential property development projects.
o Operating cost increases of $250,000 with respect to the addition of
three new real estate properties between the periods.
o Repairs and maintenance costs increased $92,000 for comparable
properties between periods primarily due to increases at Executive
Park, Fairlane Commerce Park, and Corporate Square for landscaping,
electrical repairs, heating/air conditioning repairs, maintenance
salaries, and miscellaneous repairs.
o Management fees increased $51,000 for comparable properties between
periods due to an increase in net rental income.
o Combined, all other operating costs decreased $39,000, or less than 1%,
between the periods.
INTEREST EXPENSE increased $182,000, or 5.4%, for the first quarter of 2000 as
compared to the same period in 1999, as a result of an increase in mortgage
interest of $125,000 due to a higher average mortgage balance, in the aggregate,
between the periods, and to a lesser extent, as a result of an increase in loan
cost amortization of $57,000.
DEPRECIATION AND AMORTIZATION EXPENSE increased $197,000, or 6.5%, primarily due
to an increase in building cost depreciation as a result of the addition of
three real estate properties to HRP's portfolio between the periods.
GENERAL AND ADMINISTRATIVE EXPENSES increased $374,000, or 33.8%, for the first
quarter of 2000, as compared to the same period in 1999, primarily as a result
of an increase of $436,000 in litigation costs (see Note 7 to the consolidated
financial statements). All other costs decreased $62,000 due to lower personnel
costs and state franchise taxes, partially offset by higher occupancy costs and
miscellaneous legal costs.
Page 9
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HALLWOOD REALTY PARTNERS, L.P.
LIQUIDITY AND CAPITAL RESOURCES
HRP operates in the commercial real estate business segment. HRP's activities
include the acquisition, ownership and operation of its commercial real estate
assets. While it is the General Partner's intention to operate HRP's existing
real estate investments and to acquire and operate additional real estate
investments, Realty 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 March 31, 2000, HRP owned fifteen real estate properties located in six
states containing 5,443,000 net rentable square feet. 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 by controlling or
reducing, where possible, operating expenses.
HRP's cash position decreased $2,087,000 during the first three months of 2000
from $8,332,000 as of December 31, 1999 to $6,245,000 as of March 31, 2000. The
sources of cash during the period were $3,944,000 of cash provided by operating
activities and $9,087,000 of mortgage loan proceeds. The uses of cash during the
period were $7,791,000 of property acquisition costs, $4,596,000 of property
development costs, $1,870,000 of property and tenant improvements, $719,000 of
mortgage principal payments, and $142,000 of loan fees and expenses.
For the foreseeable future, HRP anticipates that mortgage principal payments,
tenant and capital improvements, lease commissions and litigation costs will be
funded by net cash from operations. The primary sources of capital to fund any
future acquisitions will be proceeds from the sale or financing of one or more
of its Properties.
In addition to the commitments described below with regards to the development
project at Corporate Square, HRP has estimated that its budget for the remainder
of 2000 includes tenant and capital improvements of $6,500,000 and lease
commissions of about $990,000.
Each quarter Realty reviews HRP's capacity to make cash distributions. HRP has
not made any cash distributions since February, 1992.
PROPERTY DEVELOPMENT -
During the second quarter of 1999, HRP began construction of a 6-story office
building containing approximately 151,000 net rentable square feet. It is being
constructed on 6.1 acres of land that was acquired in May 1997 within the
Corporate Square complex. A 20-year lease with the General Services
Administration for all six floors has been executed with occupancy anticipated
to take place by July 2000.
The building, tenant improvements, lease commissions and loan costs are
estimated to be $19,000,000 (excluding the land). In August 1999, HRP paid off
the outstanding loan balance of $475,000 that was secured by the land and closed
on interim- construction loan financing that will fund up to $13,762,000 of the
costs. The amount outstanding under the interim- construction loan as of March
31, 2000 was $10,585,000. The interim-construction loan calls for interest
payments only with an interest rate of LIBOR plus 170 basis points (7.69% as of
March 31, 2000). HRP anticipates repaying the interim- construction loan at its
maturity in August 2000 from proceeds of a $21,000,000 permanent mortgage loan.
As of March 31, 2000, HRP has incurred and capitalized $13,563,000 of the
construction development costs. Additionally, HRP has paid $1,481,000, or 50%,
of the lease commissions incurred in 1999; the remaining 50%, was accrued in
1999 and will be paid when the tenant takes occupancy of the space.
ACQUISITION -
On January 26, 2000, HRP acquired three 3-story office buildings in San Diego,
California (Fountain View Business Center) containing approximately 89,000 net
rentable square feet on 4.3 acres of land. The property was 95% occupied at the
date of acquisition. The acquisition cost was approximately $7,800,000. HRP
obtained financing for $5,500,000 of the purchase price with a new loan with two
notes. The loan's monthly payment is based on a twenty-year amortization, but
matures in ten years, and has a fixed interest rate of 8.17%.
Page 10
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HALLWOOD REALTY PARTNERS, L.P.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) -
MORTGAGES -
Substantially all of the buildings in thirteen of HRP's real estate properties
were encumbered by and pledged as collateral under non-recourse mortgages
aggregating $179,680,000 as of March 31, 2000. Except for the construction loan
discussed previously, HRP has no other mortgage loans maturing or requiring
balloon principal payments until the year 2003. Based upon loan amortizations in
effect, HRP is required to pay approximately $2,300,000 of principal payments
during the remainder of 2000.
INFLATION -
Inflation did not have a significant impact on HRP in 1999 and is not
anticipated to have a material impact in 2000.
FORWARD-LOOKING STATEMENTS -
In the interest of providing investors with certain information regarding HRP's
future plans and operations, certain statements set forth in this Form 10-Q
relate to management's future plans and objectives. Such statements are
forward-looking statements. Although any forward-looking statements contained in
this Form 10-Q or otherwise expressed by or on behalf of HRP are, to the
knowledge and in the judgment of the officers and directors of the General
Partner, expected to prove true and come to pass, management is not able to
predict the future with absolute certainty. 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 will prove to be accurate.
Forward-looking statements involve known and unknown risks and uncertainties,
which may cause HRP's actual performance and financial results in future periods
to differ materially from any projection, estimate or forecasted result. These
risks and uncertainties include, among other things, interest rates, occupancy
rates, lease rental rates, outcome of litigation, 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; other risks and uncertainties may be described, from time to time, in HRP's
periodic reports and filings with the Securities and Exchange Commission.
Page 11
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HALLWOOD REALTY PARTNERS, L.P.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to HRP's market risks during the three
months ended March 31, 2000.
QUALITATIVE INFORMATION -
HRP's primary risk management strategy is to manage its exposure to adverse
changes in interest rates by issuing fixed rate debt, where possible. HRP
attempts to manage the exposure to adverse changes in the fair value of its
fixed rate debt by issuing fixed rate debt when business and market conditions
are favorable. There is inherent rollover risk for borrowings as they mature and
are renewed at the then current market rates. The extent of this risk is not
quantifiable or predictable because of the variability of future interest rates
and HRP's future financing requirements. HRP does not hold or issue derivative
financial instruments for trading purposes. As part of HRP's financing activity,
a derivative security was used for the sole purpose of fixing the interest rate
of HRP's only variable rate debt instrument.
SPECIFIC AND QUANTITATIVE INFORMATION -
HRP's derivative instrument, which is matched directly against an outstanding
borrowing is a "pay fixed / receive variable" interest rate swap with a highly
rated counterparty in which the interest payments are calculated on a notional
amount. The notional amount does not represent amounts exchanged by the parties
and thus are not a measure of exposure to HRP through its use of the derivative.
HRP is exposed to credit-related gains or losses in the event of non-
performance by the counterparty to this financial instrument; however, HRP does
not expect the counterparty to fail to meet its obligations. The interest rate
swap is described as follows:
<TABLE>
<CAPTION>
Variable Rate as of March 31, 2000
-------------------------------------------
Fair Value of
Notional Amount Maturity Date Fixed Rate% % Based On Swap (a)
- --------------- ------------- ----------- ----- -------- -------------
<S> <C> <C> <C> <C> <C>
$ 25,000,000 April 30, 2006 6.78% 7.21% 30 day $ 1,970,000
LIBOR
</TABLE>
(a) The estimated amount that HRP would receive upon termination of its
interest rate swap agreement as of March 31, 2000 was based on a quote
received from the swap counterparty.
Page 12
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HALLWOOD REALTY PARTNERS, L.P.
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
Item
----
<S> <C> <C>
1 Legal Proceedings None.
2 Changes in Securities and Use of Proceeds 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 15
(b) Reports on Form 8-K None.
</TABLE>
Page 13
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HALLWOOD REALTY PARTNERS, L.P.
SIGNATURE
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, LLC
General Partner
Date: May 11, 2000 By: /s/ JEFFREY D. GENT
------------ --------------------
Jeffrey D. Gent
Vice President - Finance
(Principal Financial and Accounting
Officer)
Page 14
<PAGE> 15
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-31-2000
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0
0
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