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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-17651
HIGH CASH PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3347257
- ------------------------------------------ ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Pembroke Companies Inc.
70 East 55th Street 7th Floor
New York, New York 10022
- ------------------------------------------ ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-350-9900
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
- ------------------------------------------ --------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
------------------------------------------
(Title of class)
Indicate by check mark whether 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 Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
PART I
Item 1. Business
High Cash Partners, L.P. (the "Partnership") is a Delaware limited partnership
formed in 1986 for the primary purpose of investing in, holding, operating and
otherwise acting with respect to office buildings, shopping centers and other
commercial and industrial properties.
In 1989, the Partnership used all the net proceeds from its public offering of
units of limited partnership interest ("Units") to acquire Sierra Marketplace, a
community retail shopping center completed in October 1988 and situated on 18.67
acres in the southern portion of Reno, Nevada ("Sierra Marketplace" or the
"Property.") Sierra Marketplace consists of two main buildings and three "out
parcel" structures containing approximately 233,000 square feet of net leasable
area. Sierra Marketplace has 36 tenants. Three tenants, Smith's Management
Corp., a grocery and drug store, Good Guys, Inc. ("Good Guys"), a consumer
electronics store, and Bell Furniture, Inc., a furniture store, accounted for
approximately 18%, 19% and 14%, respectively, of the Partnership's total rental
income revenues in 2000. The Property is subject to a mortgage, the terms of
which have been modified, pursuant to a mortgage loan modification agreement
(the "Mortgage Loan Modification Agreement") between the Partnership and the
mortgagee, Resources Accrued Mortgage Investors 2 L.P. ("RAM 2"), which became
effective on January 31, 2001. The mortgage and the Mortgage Loan Modification
Agreement are described in Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
Until November 1997, Levitz Furniture Corporation ("Levitz") had occupied
approximately 53,000 square feet at Sierra Marketplace under a lease that
extended through 2008. Levitz accounted for approximately 16% of the
Partnership's total rental income revenues in 1997. During 1997, Levitz filed
for bankruptcy protection under Chapter 11 of the United States Bankruptcy Code.
In November 1997, Levitz vacated its premises, and ceased paying rent under the
lease as of April 2, 1998. During 1999, the Partnership entered into a
short-term lease on the Levitz space at an annual rent substantially less than
under the Levitz lease; this lease is terminable by the Partnership upon written
notice to the tenant, in the event the Partnership secures a long-term,
creditworthy tenant for the space. The Partnership is continuing to seek such a
tenant.
Good Guys vacated its premises in 1999 and ceased paying rent under the lease as
of December 1, 2000. The Partnership has instituted legal proceedings against
Good Guys in respect of its non-payment of rent. See Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources."
Property Location and Competition
The Partnership believes there are approximately 9.3 million square feet of
retail space in the Reno area, in a total of 78 regional malls and community,
neighborhood and strip centers. Sierra Marketplace is located in the southern
section of Reno, which is well developed commercially along major thoroughfares
with substantial residential development along secondary streets. The primary
trade area is considered affluent to middle class. Although there is little room
for significant new competing development in the immediate geographical vicinity
of the Property, the competition for tenants (including existing tenants whose
leases expire) is strong among existing centers. In addition, a portion of the
land available for development in the immediate geographic vicinity of the
Property recently has been developed by centers predominantly occupied by large
anchor tenants, which has created additional competition for the Property. See
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations Liquidity and Capital Resources" and "Real Estate Market."
I-1
Employees
The Partnership does not have any employees. Through December 31, 2000, services
were performed for the Partnership by Pembroke HCP, LLC, the Partnership's
Managing General Partner (the "Managing General Partner"), Pembroke Realty
Management LLC ("Pembroke Realty"), an affiliate of the Managing General
Partner, and certain other parties that may be deemed to be affiliated with the
Managing General Partner. Through December 31, 2000, certain services were
performed for Pembroke Realty by Colliers Nevada Management, LLC, an
unaffiliated management company ("Colliers"). In connection with its entering
into the Mortgage Loan Modification Agreement, the Partnership retained Kestrel
Management LP ("Kestrel"), an affiliate of RAM 2, to manage the Property
commencing on January 2, 2001. Kestrel has assumed the property management
services previously performed by Pembroke Realty and Colliers, pursuant to the
terms of a management agreement. See Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources," Item 10, "Directors and Executive Officers of Registrant,"
Item 11, "Executive Compensation," Item 12, "Security Ownership of Certain
Beneficial Owners and Management," and Item 13, "Certain Relationships and
Related Transactions."
Item 2. Properties
See Item 1, "Business" above.
Item 3. Legal Proceedings
See Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources," with regard to
litigation involving the Partnership and Good Guys.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of 2000.
I-2
PART II
Item 5. Market for Registrant's Securities and Related Security Holder Matters
There is no established public trading market for the Units, and it is not
anticipated that such a market will develop.
There are certain restrictions in the Partnership's Partnership Agreement that
may limit the ability of a limited partner to transfer Units. Such restrictions
could impair the ability of a limited partner to liquidate its investment in the
event of an emergency or for any other reason.
As of March 15, 2001, there were 1347 holders of Units, owning an aggregate of
96,472 Units.
There were no distributions made during 1998. In May 1999, October 1999, January
2000 and May 2000, the Partnership paid cash distributions of approximately
$4,100,000, $700,000, $700,000 and $750,000, respectively, or $42.07, $7.18
$7.18, and $7.70 per Unit, respectively, to Unitholders of record on May 11,
1999, October 20, 1999, January 1, 2000 and May 30, 2000, respectively.
There are no material legal restrictions on distributions in the Partnership's
Partnership Agreement. See Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources," for a discussion of financial conditions and the terms of the
Mortgage Loan Modification Agreement affecting the Partnership's ability to make
distributions.
Item 6. Selected Financial Data
>
Year ended December 31,
--------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-------------- -------------- ------------- -------------- ---------------
Revenues $ 2,639,242 $ 2,521,650 $ 2,479,904 $ 2,686,095 $ 2,637,022
Net Loss (1) $ (1,297,109) $ (1,147,548) $ (925,947) $ (7,238,860) $ (640,184)
Net (Loss) Per Unit (1)(2) $ (13.31) $ (11.78) $ ( 9.50) $ (74.29) $ (6.57)
Distributions Per Unit (2) $ 14.88 $ 49.25 $ - $ - $ 12.52
Long-term Obligations (3) $ 24,526,844 $ 21,935,131 $ 19,617,279 $ 17,540,481 $ 15,691,865
Total Assets $ 16,119,572 $ 16,191,090 $ 19,834,203 $ 18,716,205 $ 24,485,903
- --------------------------------------
(1) Net loss for 1997 includes a write-down for impairment of $(6,475,500), or
$(66.45) per Unit.
(2) Based upon the weighted average number of Units outstanding.
(3) Consists of the principal amount of the RAM 2 loan plus deferred interest
on that loan, which are described in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
II-1
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Partnership uses undistributed cash flow from operations as its primary
measure of liquidity. At December 31, 2000, working capital reserves amounted to
approximately $1,070,000, which does not include the Partnership's mortgage loan
payable to RAM 2 (the "Mortgage Loan") or deferred interest thereon which may be
currently due and payable upon the occurrence of certain specified events. Such
reserves may be used to fund operating expenses of the Partnership, capital
expenditures, insurance, real estate taxes and loan payments. All expenditures
during 2000 were funded from cash flow from operations.
At December 31, 2000, the total amount outstanding on the Mortgage Loan was
$24,526,844, which included deferred interest payable of $18,026,844. The
scheduled maturity date of the Mortgage Loan was originally February 28, 2001,
at which time the total amount outstanding on the mortgage was approximately
$25,000,000.
Because the Partnership believed that it would be unable either to repay or
refinance the Mortgage Loan at that time, the Managing General Partner
negotiated and caused the Partnership to enter into the Mortgage Loan
Modification Agreement with RAM 2 in order to effect a modification of the
Mortgage Loan and prevent the immediate foreclosure of the Mortgage Loan and the
consequent loss of the Property. The Mortgage Loan Modification Agreement became
effective on January 31, 2001.
Pursuant to the Mortgage Loan Modification Agreement, RAM 2 has agreed to
forbear for not less than one year and up to two years in the exercise of its
rights and remedies under the Mortgage Loan triggered by the Partnership's
failure to repay fully all amounts due and payable thereunder at maturity.
Under the Mortgage Loan Modification Agreement, the deed to the Property, along
with a bill of sale, assignment of leases and other conveyance documents (the
"Conveyance Documents") have been placed in escrow with counsel to RAM 2. The
Conveyance Documents will not be released to RAM 2 until the earliest to occur
of (such date referred to herein as the "Extended Maturity Date"):
(i) any date on which any action taken or omitted to be taken by the
Partnership in bad faith, intended to hinder or impede RAM 2's exercise of
its rights or remedies under the terms of the Mortgage Loan Modification
Agreement, remains uncured for more than 10 days after notice of same from
RAM 2;
(ii) any date on or after March 1, 2002, upon the closing date of the sale or
other conveyance of the Property (a) if RAM 2 identifies a bona fide third
party purchaser to acquire the Property or (b) for any other reason deemed
reasonably necessary by RAM 2 to avoid a material economic disadvantage to
it; and
(iii) March 1, 2003.
The Mortgage Loan Modification Agreement further provides that 100% of the net
operating income generated by the Property allocable to the period ending
February 28, 2001, the original maturity date of the Mortgage Loan, will be
retained by the Partnership. From and after March 1, 2001 until such time as the
Conveyance Documents have been released, the Partnership will be entitled to
receive $100,000 per annum pro-rated monthly and paid monthly to the extent cash
flow permits and RAM 2 will be entitled to receive the balance of the net
operating income generated by the Property to be applied to the outstanding
principal and deferred interest on the Mortgage Loan. In addition, RAM 2 has
agreed to release the Partnership and its affiliates from all claims for
principal or interest due under the Mortgage Loan effective on the date that the
Conveyance Documents are released to RAM 2 or such other party as agreed to by
RAM 2. Such release will be effective provided that the Partnership (i) does not
become the subject of any bankruptcy proceeding on or before one year from the
date of release of the Conveyance Documents and (ii) has not perpetrated any
fraud upon RAM 2. In addition,
II-2
the Partnership will be entitled to a refund of expenses previously paid by it,
to the extent that such expenses relate to any time period subsequent to
February 28, 2001. Thereafter, the Partnership will use its cash flow and cash
reserves to fund the payment of Partnership fees and expenses. To the extent not
used to pay Partnership fees and expenses, these funds will be available for
distribution to the Limited Partners. However, there can be no assurance that
the Partnership will have excess cash available, or that future distributions
will be made to the Limited Partners. At December 31, 2000, the Partnership had
cash and cash equivalents of $1,103,651.
Under the terms of the Mortgage Loan, the Partnership was obligated to provide
RAM 2 with a current appraisal of the Property upon RAM 2's request. If it was
determined, based upon the requested appraisal, that the sum of (i) the
principal balance of the Mortgage Loan plus all other then outstanding
indebtedness secured by the Property and (ii) all accrued and unpaid interest on
the Mortgage Loan calculated at a rate of 6.22% per annum compounded monthly
through the date of such appraisal (that sum, the "Measurement Amount"),
exceeded 85% of the appraised value of the Property, an amount equal to such
excess (the "Excess Payment") would become immediately due and payable to RAM 2.
Any amount so paid by the Partnership would be applied first against accrued and
unpaid interest on the Mortgage Loan, and the balance, if any, against the
principal thereof. In accordance with the terms of the Mortgage Loan
Modification Agreement, RAM 2 is entitled to request an appraisal of the
Property; however, if such appraisal indicated that no Excess Payment was due,
RAM 2 would have no further appraisal rights. RAM 2 requested that the Property
be appraised by Greenwich Realty Advisors, a real estate appraisal firm
unaffiliated with the Partnership, the Managing General Partner or RAM 2. The
appraisal, which was performed on March 1, 2001, indicated a fair market value
of $20 million for the Property. As of March 1, 2001 the Measurement Amount was
$13,684,645. Because the Measurement Amount did not exceed 85% of the appraised
value of the Property on that date, no Excess Payment was or is payable to RAM
2. Consequently, under the terms of the Mortgage Loan Modification Agreement,
RAM 2 has no further appraisal right pursuant to the terms of the Mortgage Loan.
Under the terms of the Mortgage Loan Modification Agreement, the Partnership
will retain its interest in the Property until and unless the Conveyance
Documents are released to RAM 2 in accordance with the terms thereof. In
addition, the Partnership retained the right to repay the Mortgage Loan in
accordance with its terms on any date prior to March 1, 2001. Thereafter, and
prior to March 1, 2003, until RAM 2 notifies the Partnership that it has entered
into a contract to sell or convey the Property, the Partnership will have the
right to satisfy the Mortgage Loan for an amount equal to the sum of (x) the
then unpaid principal balance of the Mortgage Loan, and all accrued interest
thereon and otber charges due thereunder and (y) 66% of the value of the
Property in excess of the amount described in clause (x) above, as additional
interest on the Mortgage Loan. If the Mortgage Loan is satisfied, the Conveyance
Documents will be returned to the Partnership.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. However, if the Partnership is
unable to refinance or otherwise restructure this outstanding indebtedness prior
to the Extended Maturity Date of March 1, 2003, the Partnership will lose its
entire interest in its property. These circumstances raise substantial doubt as
to the Partnership's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
In connection with the Partnership's entering into the Mortgage Loan
Modification Agreement, Lawrence J. Cohen, the sole shareholder and director of
Pembroke Companies Inc., which is the sole member and the manager of the
Managing General Partner, has executed an unconditional limited guaranty of
payment in the amount of the principal balance of the Mortgage Loan, all accrued
and unpaid interest thereon and all other charges due thereunder, that will be
effective only if Mr. Cohen or his affiliates cause the Partnership to file for
bankruptcy or to commence a civil action seeking to hinder, impede or delay RAM
2's exercise of any right or remedy available to it.
Until November 1997, Levitz had occupied approximately 23% of the Partnership's
Property. In November 1997, Levitz, which had filed for protection under Chapter
11 of the Bankruptcy Code, vacated its space. Levitz ceased paying rent to the
Partnership as of April 2, 1998.
In 1999, Good Guys vacated its premises and ceased paying rent under the lease
as of December 1, 2000. The Partnership has instituted legal proceedings against
Good Guys in respect of its non-payment of rent.
The vacancies at the Levitz and Good Guy spaces have resulted in a loss of
income to the Partnership. These vacancies may have adversely affected the
surrounding tenants and the Partnership's ability to attract new tenants,
particularly in light of the limited visibility those tenants have to the main
thoroughfare. See "Real Estate Market" below. The Partnership is actively
seeking long-term, creditworthy substitute tenants. However, there can be no
assurance the Partnership will succeed in finding long-term, creditworthy
substitute tenants promptly or on terms comparable to those under the
II-3
Levitz or Good Guys leases. In addition, if a substitute tenant is obtained, the
Partnership expects to make substantial expenditures in order to secure such
tenant and in connection with the new lease.
During 1999, the Partnership entered into a short-term lease for the Levitz
space with a then existing tenant at an annual rent substantially less than
under the Levitz lease. The Partnership has the right to terminate this lease
upon written notice in the event that the Partnership secures a long-term,
creditworthy tenant for the space.
The level of leasing activity cannot be predicted, particularly in light of the
Levitz and Good Guys situations, and, therefore, the amount of further capital
expenditures arising from leasing activity is uncertain. There can be no
assurance the Partnership will have sufficient liquidity to make such capital
expenditures.
Real Estate Market
The market value of the Property reflects real estate market conditions in the
vicinity of Sierra Marketplace. Recently built shopping centers in the vicinity
have increased competition for tenants. This competitive factor, together with
the fact that much of the unleased space in the Partnership's Property
(including the Levitz space) has only limited visibility to the main
thoroughfare and the fact that the space previously occupied by Good Guys is
vacant and is being marketed for sublet by Good Guys have hindered the lease-up
of new space.
Results of Operations
2000 vs. 1999
The Partnership realized a net loss of $1,297,109 ($13.31 per Unit) for 2000
compared to a net loss of $1,147,548 ($11.78 per Unit) for 1999, an increased
loss of $149,561. The increased loss was primarily a result of an increase in
mortgage loan interest expense, partially offset by an increase in rental
income.
Revenues increased from 1999 to 2000 due to increases in base rentals, primarily
due to the signing of new leases. The increase in rental income was partially
offset by a decrease in interest income due to the distributions made by the
Partnership.
Costs and expenses increased from 1999 to 2000 primarily due to an increase in
mortgage loan interest expense, partially offset by decreases in operating
expenses.
Mortgage loan interest expense increased due to the compounding effect from the
deferral of the interest expense on the zero coupon mortgage.
1999 vs. 1998
The Partnership realized a net loss of $1,147,548 for 1999, compared with a net
loss of $925,947 for 1998, an increased loss of $221,601. The increased loss was
primarily a result of an increase in mortgage loan interest expense.
Revenues increased from 1998 to 1999 due to an increase in base rentals.
Costs and expenses increased from 1998 to 1999 primarily due to an increase in
mortgage loan interest expense.
Mortgage loan interest expense increased due to the compounding effect of the
deferral of interest expense on the zero coupon mortgage.
II-4
Inflation
Inflation has not had a material impact on the Partnership's operations or
financial condition during the last three years and is not expected to have a
material impact in the future.
Year 2000
Costs associated with the year 2000 conversion did not have a material effect on
the Partnership.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Cautionary Statement Concerning Forward-Looking Statements
This document and the documents incorporated by reference into this Form 10-K,
including Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources," contain both
historical and forward-looking statements. All statements other than statements
of historical fact are, or may be deemed to be, forward-looking statements
within the meaning of section 27A of the Securities Act of 1933 and section 21E
of the Securities Exchange Act of 1934 (the "Exchange Act"). These
forward-looking statements are not based on historical facts, but rather reflect
the Partnership's current expectations concerning future results and events.
These forward-looking statements generally can be identified by use of
statements that include phrases such as "believe," "expect," "anticipate,"
"intend," "plan," "foresee," "likely," "will" or other similar words or phrases.
Similarly, statements that describe the Partnership's objectives, plans or goals
are or may be forward-looking statements. These forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Partnership to be
different from any future results, performance and achievements expressed or
implied by these statements.
II-5
Item 8. Financial Statements and Supplementary Data
INDEX
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Page
Number
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Independent Auditor's Report F-1
Financial statements:
Balance sheets F-2
Statements of operations F-3
Statement of partners' equity (deficit) F-4
Statements of cash flows F-5
Notes to financial statements F-6
Schedule II:
Valuation and qualifying accounts F-14
Schedule III:
Real estate and accumulated depreciation F-15
All other financial statement schedules are omitted because they are not
applicable or the required information is presented in the financial statements
or notes thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
II-6
To the Partners of
High Cash Partners, L.P.
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying balance sheets of High Cash Partners, L.P. (a
limited partnership) as of December 31, 2000 and 1999, and the related
statements of operations, partners' equity (deficit) and cash flows for each of
the three years in the period ended December 31, 2000. Our audits also included
the financial statement schedules listed in the Index at Item 14(a)2. These
financial statements and the financial statement schedules are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on the financial statements and financial statement schedules based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of High Cash Partners, L.P. as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2000 in conformity
with accounting principles generally accepted in the United States. Also, in our
opinion, such financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 5 to the
financial statements, the Partnership's mortgage loan, which had an outstanding
balance of $24,526,844 at December 31, 2000, was scheduled to mature on February
28, 2001. The Partnership has entered into an agreement with the holder of the
mortgage loan which extends the maturity date to a date not later than March 1,
2003 assuming the Partnership complies with all of the provisions of the
agreement. The agreement also requires that substantially all of the cash flow
generated from the Partnership's property be remitted to the mortgage holder to
be applied against outstanding principal and deferred interest. If the
Partnership is unable to refinance or otherwise restructure this outstanding
indebtedness prior to the Extended Maturity Date of March 1, 2003, the
Partnership will lose its entire interest in its property. These circumstances
raise substantial doubt as to the Partnership's ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 5. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Hays & Company
March 3, 2001
New York, New York
F-1
HIGH CASH PARTNERS, L.P.
BALANCE SHEETS
December 31,
-----------------------------------
2000 1999
---------------- ---------------
ASSETS
Real estate, net $ 14,722,456 $ 15,040,394
Cash and cash equivalents 1,103,651 957,503
Other assets 173,206 98,425
Tenant receivables, net 86,896 66,632
Prepaid insurance premiums 33,363 28,136
---------------- ---------------
$ 16,119,572 $ 16,191,090
================ ===============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgage loan payable $ 6,500,000 $ 6,500,000
Deferred interest payable 18,026,844 15,435,131
Accounts payable and accrued expenses 154,300 69,681
Tenants' security deposits payable 68,129 68,867
---------------- ---------------
Total liabilities 24,749,273 22,073,679
================ ===============
Commitments and contingencies (Notes 3, 4, 5 and 8)
Partners' deficit
Limited partners' deficit
(96,472 units issued and outstanding) (8,543,402) (5,823,761)
General partners' deficit (86,299) (58,828)
---------------- ---------------
(8,629,701) (5,882,589)
---------------- ---------------
$ 16,119,572 $ 16,191,090
================ ===============
See notes to financial statements.
F-2
HIGH CASH PARTNERS, L.P.
STATEMENTS OF OPERATIONS
Year ended December 31,
-------------------------------------------------
2000 1999 1998
-------------- --------------- -------------
Revenues
Rental income $ 2,604,141 $ 2,420,332 $ 2,306,202
Other Income -- 12,526 2,217
Interest Income 35,101 88,792 171,485
--------------- --------------- -------------
2,639,242 2,521,650 2,479,904
--------------- --------------- -------------
Cost and expenses
Mortgage loan interest 2,591,713 2,317,852 2,076,798
Operating 488,600 510,366 508,467
Depreciation and amortization 366,176 365,510 349,554
Partnership management fees 301,475 301,475 301,475
Administrative 111,106 101,839 101,255
Property management fees 77,281 72,156 68,302
--------------- --------------- -------------
3,936,351 3,669,198 3,405,851
--------------- --------------- -------------
Net loss $ (1,297,109) $ (1,147,548) $ (925,947)
=============== =============== =============
Net loss attributable to
Limited partners $ (1,284,138) $ (1,136,073) $ (916,688)
General partners (12,971) (11,475) (9,259)
--------------- --------------- -------------
$ (1,297,109 $ (1,147,548) $ (925,947)
=============== =============== =============
Net loss per unit of limited
partnership interest (96,472
units outstanding) $ (13.31) $ (11.78) $ (9.50)
=============== =============== =============
See notes to financial statements.
F-3
HIGH CASH PARTNERS, L.P.
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
PERIOD FROM JANUARY 1, 1998 THROUGH DECEMBER 31, 2000
General Limited Total
Partners' Partners' Partners'
Equity (Deficit) Equity (Deficit) Equity (Deficit)
-------------------- -------------------- --------------------
Balance, January 1, 1998 $ 9,906 $ 980,669 $ 990,575
Net loss - 1998 (9,259) (916,688) (925,947)
-------------------- -------------------- --------------------
Balance, December 31, 1998 647 63,981 64,628
Net loss - 1999 (11,475) (1,136,073) (1,147,548)
Distributions (48,000) (4,751,669) (4,799,669)
-------------------- -------------------- --------------------
Balance, December 31, 1999 (58,828) (5,823,761) (5,882,589)
Net loss - 2000 (12,971) (1,284,138) (1,297,109)
Distributions (14,500) (1,435,503) (1,450,003)
-------------------- -------------------- --------------------
Balance, December 31, 2000 $ (86,299) $ (8,543,402) $ (8,629,701)
==================== ==================== ====================
See notes to financial statements.
F-4
HIGH CASH PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
Year ended December 31,
------------------------------------------------------------------
2000 1999 1998
---------------- ---------------- ----------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
Cash flows from operating activities
Net loss $ (1,297,109) $ (1,147,548) $ (925,947)
Adjustments to reconcile
net loss to net cash provided
by operating activities
Deferred interest expense 2,591,713 2,317,852 2,076,798
Depreciation and amortization 366,176 365,510 349,554
Changes in operating assets and
liabilities
Other assets (23,019) (24,640) (87,703)
Tenant receivables, net (20,264) (2,979) (33,916)
Prepaid insurance premiums (5,227) (613) 1,988
Accounts payable and accrued expenses (15,381) (23,748) (34,251)
Tenants' security deposits payable (738) 10,000 4,288
---------------- ---------------- ----------------
Net cash provided by operating
activities 1,596,151 1,493,834 1,350,8111
---------------- ---------------- ----------------
Cash flows from investing activities
Additions to real estate -- (7,350) (132,162)
---------------- ---------------- ----------------
Cash flows from financing activities
Distributions to partners (1,450,003) (4,799,669) --
---------------- ---------------- ----------------
Net increase (decrease) in cash and cash
equivalents 146,148 (3,313,185) 1,218,649
Cash and cash equivalents, beginning of year 957,503 4,270,688 3,052,039
---------------- ---------------- ----------------
Cash and cash equivalents, end of year $ 1,103,651 $ 957,503 $ 4,270,688
================ ================ ================
See notes to financial statements.
F-5
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
1 ORGANIZATION
High Cash Partners, L.P. (formerly High Income Partners L.P. - Series 87)
(the "Partnership") was formed in May 1986 pursuant to the Delaware Revised
Uniform Limited Partnership Act for the purpose of acquiring and operating
real estate. The Partnership will terminate on December 31, 2030 or sooner,
in accordance with its Amended and Restated Agreement of Limited
Partnership (the "Limited Partnership Agreement"). The Partnership filed a
Form S-11 registration statement with the Securities and Exchange
Commission, which became effective on June 29, 1988, covering an offering
of 400,000 limited partnership units (subject to increase, if the
Underwriter exercised its right to sell an additional 200,000 units) at
$250 per unit.
The Partnership's public offering terminated on June 29, 1990, at which
time the Partnership had accepted subscriptions for 77,901 limited
partnership units (including those units sold to the initial limited
partner) for aggregate net proceeds of $17,284,566 (gross proceeds of
$19,475,250, less organization and offering costs aggregating $2,190,684).
The Partnership received $2,500 and $1,000 for contributions to the
Partnership from the initial limited partner and the general partners,
respectively. The Partnership had committed 100% of its net proceeds
available for investment to the Sierra Marketplace acquisition, a retail
shopping center.
The Partnership sold 18,571 unregistered limited partnership units to
Integrated Resources, Inc. ("Integrated"), the former parent of the
original Managing General Partner of the Partnership, for aggregate net
proceeds of $4,120,441 (gross proceeds of $4,642,750, less organization and
offering costs aggregating $522,309). Simultaneously, Integrated sold these
units to the Partnership's three bank creditors. The sale of the
aforementioned units, effective January 1, 1991, was part of a transaction
that enabled the Partnership to repay its unsecured loans on December 19,
1990.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Leases
The Partnership accounts for its leases under the operating method. Under
this method, revenue is recognized as rentals become due, except for
stepped leases, where revenue is recognized on a straight-line basis over
the life of the lease.
Depreciation
Depreciation is computed using the straight-line method over the estimated
useful life of the property, which is approximately 40 years. The cost of
the property represents the initial cost of the property to the Partnership
plus acquisition and closing costs. Repairs and maintenance are charged to
operations as incurred.
Financial statements
The financial statements include only those assets, liabilities and results
of operations that relate to the business of the Partnership.
Cash and cash equivalents
The Partnership considers all short-term investments that have original
maturities of three months or less to be cash equivalents. The
Partnership's cash balances are held at various financial
F-6
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
institutions, however, at times, cash balances may exceed limits that are
insured by the Federal Deposit Insurance Corporation.
Fair value of financial instruments
The fair value of financial instruments is determined by reference to
market data and other valuation techniques as appropriate. The
Partnership's financial instruments consist principally of cash and cash
equivalents, tenant receivables, accounts payable and accrued expenses and
a mortgage loan payable. Unless otherwise disclosed, the fair value of
financial instruments approximates their recorded values.
Net loss and distributions per unit of limited partnership interest
Net loss and distributions per unit of limited partnership interest are
computed based upon the number of units outstanding (96,472) during the
years ended December 31, 2000, 1999 and 1998.
Deferred financing costs
Costs incurred in connection with obtaining long-term debt are capitalized
and amortized over the life of the debt.
Income taxes
No provisions have been made for federal, state and local income taxes,
since they are the personal responsibility of the partners.
The income tax returns of the Partnership are subject to examination by
federal, state and local taxing authorities. Such examinations could result
in adjustments to Partnership losses, which could affect the income tax
liability of the individual partners.
Reclassifications
Certain reclassifications have been made to the financial statements shown
for the prior years in order to conform to the current year's
classifications.
Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
3 CHANGE IN GENERAL PARTNER OWNERSHIP, CONFLICTS OF INTEREST AND TRANSACTIONS
WITH RELATED PARTIES
Until June 13, 1997, the Managing General Partner of the Partnership was
Resources High Cash, Inc. ("RHC"). RHC was, until November 3, 1994, a
wholly-owned subsidiary of Integrated, at which time, pursuant to the
consummation of Integrated's Plan of Reorganization, substantially all the
assets of Integrated, but not the stock of RHC, were sold to Presidio
Capital Corp. ("Presidio"). RHC is a wholly-owned subsidiary of XRC Corp.
("XRC"), which is a subsidiary of
F-7
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Presidio. The other general partner of the Partnership was, until June 13,
1997, Presidio AGP Corp. ("AGP"), a Delaware Corporation that is a
wholly-owned subsidiary of Presidio. Presidio also is the parent of other
entities that were, or may have been, engaged in businesses that may have
been in competition with the Partnership. Accordingly, conflicts of
interest may have arisen between the Partnership and such other businesses.
Resources Accrued Mortgage Investors 2 L.P. ("RAM 2"), whose managing
general partner is owned by Presidio, made a zero coupon first mortgage
loan to the Partnership (Note 5).
Effective April 1, 1991, Integrated purchased, in an arms-length
transaction from an unaffiliated third party, 8,361 limited partnership
units ("Units"). Effective January 1, 1995, pursuant to the consummation of
Integrated's Plan of Reorganization, these Units were transferred to XRC.
On June 13, 1997, RHC and AGP sold their general partnership interests to
Pembroke HCP LLC ("Pembroke HCP") and Pembroke AGP Corp. ("Pembroke AGP")
(collectively, the "General Partners"), respectively. In the same
transaction, XRC sold its 8,361 Units to Pembroke Capital II, LLC, an
affiliate of Pembroke HCP and Pembroke AGP. Subsequently, Pembroke Capital
II LLC acquired beneficial ownership of an aggregate of an additional 6,257
Units in the secondary market.
Following the sale on June 13, 1997, an affiliate of Pembroke HCP was
engaged to perform administrative services for the Partnership. During the
years ended December 31, 2000, 1999 and 1998 reimbursable expenses paid to
the affiliate by the Partnership amounted to $48,000, $42,000 and $36,000
respectively.
The Partnership had been a party to a supervisory management agreement with
Resources Supervisory Management Corp. ("Resources Supervisory"), an
affiliate of RHC and AGP, pursuant to which Resources Supervisory performed
certain property management functions. Resources Supervisory performed such
services through June 13, 1997. Effective June 13, 1997, the Partnership
terminated this agreement and entered into a similar agreement with
Pembroke Realty Management LLC ("Pembroke Realty"), an affiliate of
Pembroke HCP and Pembroke AGP. A portion of the property management fees
payable to Resources Supervisory and Pembroke Realty were paid to
unaffiliated management companies, which had been engaged for the purpose
of performing the property management functions that were the subject of
the supervisory management agreement. For the years ended December 31,
2000, 1999 and 1998, Pembroke Realty was entitled to receive $77,281,
$72,156 and $68,302, respectively, of which $51,961, $58,513 and $56,918,
respectively, was paid to the unaffiliated management companies. No leasing
activity compensation was paid to Pembroke Realty for the years ended
December 31, 2000, 1999, and 1998.
In connection with its entering into the Mortgage Loan Modification
Agreement, the Partnership retained Kestrel Management LP ("Kestrel"), an
affiliate of RAM 2, to manage the Property commencing on January 2, 2001.
Kestrel has assumed all management services previously performed by
Pembroke Realty and the unaffiliated management company, pursuant to the
terms of a management agreement.
For managing the affairs of the Partnership, the Managing General Partner
is entitled to receive a partnership management fee in an annual amount
equal to $301,475.
The General Partners are allocated 1% of the net income or losses of the
Partnership and are also entitled to receive 1% of distributions.
F-8
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
4 REAL ESTATE, NET
Real estate assets represent the Partnership's principal asset, Sierra
Marketplace, a community marketplace located in Reno, Nevada (the
"Property"). The Property was purchased by the Partnership on February 10,
1989, and is summarized as follows:
December 31,
--------------------------------------
2000 1999
----------------- -----------------
Land $ 6,667,189 $ 6,667,189
Building and improvements 12,940,226 12,940,226
----------------- -----------------
19,607,415 19,607,415
Less accumulated depreciation (4,884,959) (4,567,021)
----------------- -----------------
$ 14,722,456 $ 15,040,394
================= =================
The land, building and improvements are collateralized by the mortgage
payable (Note 5).
Depreciation expense for the years ended December 31, 2000, 1999, and 1998
were $317,938, $325,121 and $325,176, respectively.
During 2000, each of three tenants accounted for more than 10% of the
Partnership's rental revenues. Such tenants accounted for approximately 18%
19%, and 14% of rental revenues, with leases expiring in years 2002, 2008,
and 2003, respectively.
During 1999, each of three tenants accounted for more than 10% of the
Partnership's rental revenues. Such tenants accounted for approximately
20%, 19% and 18% of rental revenues, with leases expiring in 2002, 2008 and
2003, respectively.
During 1998, each of three tenants accounted for more than 10% of the
Partnership's rental revenues. Such tenants accounted for approximately
22%, 20% and 13% of rental revenues, with leases expiring in the years
2008, 2003 and 2001, respectively.
F-9
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Minimum future rental payments receivable, excluding operating escalations
and other charges, due from tenants pursuant to the terms of existing
noncancellable leases as of December 31, 2000 are as follows:
Year ending December 31,
2001 $ 1,972,935
2002 1,757,505
2003 1,228,547
2004 703,651
2005 626,641
Thereafter $ 1,415,379
-----------------
$ 7,704,658
=================
5 MORTGAGE LOAN PAYABLE
The mortgage loan payable (the "Mortgage Loan") represents a zero coupon first
mortgage loan held by RAM 2, a public limited partnership sponsored by
affiliates of the former general partners. The Mortgage Loan bears interest at
the rate of 11.22% per annum, compounded monthly. The principal balance, along
with deferred interest thereon, is $24,526,844 at December 31, 2000, and will
aggregate approximately $25,000,000 at its original maturity date of February
28, 2001. As of December 31, 2000, the principal and deferred interest on the
Mortgage Loan exceeded the estimated fair market value of the Property.
Effective January 31, 2001, the Partnership has entered into a mortgage
loan modification agreement (the "Modification Agreement") with RAM 2.
Pursuant to the terms of the Modification Agreement, RAM 2 has agreed to
forbear, for not less than one year and up to two years, the exercise of
its rights and remedies under the Mortgage Loan for the Partnership's
failure to repay all amounts due and payable thereunder at its original
maturity. Under the Modification Agreement, the deed to the Property, along
with a bill of sale, assignment of leases and other conveyance documents
(the "Conveyance Documents") have been placed in escrow with counsel to RAM
2. The Conveyance Documents will not be released to RAM 2 until the
earliest to occur of (the "Extended Maturity Date"):
I. Any date on which any action taken or omitted to be taken by the
Partnership in bad faith, intended to hinder or impede RAM 2's
exercise of its rights or remedies under the terms of the Modification
Agreement, remains uncured for more than 10 days after notice of same
from RAM 2;
II. Any date on or after March 1, 2002, upon the closing date of the sale
or other conveyance of the Property (a) if RAM 2 identifies a bona
fide third party purchaser to acquire the Property, or (b) for any
other reason deemed reasonably necessary by RAM 2 to avoid a material
economic disadvantage to it; and
III. March 1, 2003.
The Modification Agreement further provides from March 1, 2001, until such
time as the Conveyance Documents have been released, the Partnership will
be entitled to receive $100,000
F-10
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
per annum pro-rated monthly and paid monthly to the extent cash flow
permits and RAM 2 will be entitled to receive the balance of the net
operating income generated by the Property to be applied against the
outstanding principal and deferred interest on the Mortgage Loan.
Under the terms of the Modification Agreement, the Partnership will retain
its interest in the Property until and unless the Conveyance Documents are
released to RAM 2 in accordance with the terms thereof. Prior to March 1,
2003, until RAM 2 notifies the Partnership that it has entered into a
contract to sell or convey the Property, the Partnership will have the
right to satisfy the Mortgage Loan for an amount equal to the sum of (x)
the then unpaid principal balance of the Mortgage Loan, and all accrued
interest thereon and other charges due thereunder and (y) 66% of the value
of the Property in excess of the amount described in clause (x) above, as
additional interest on the Mortgage Loan. If the Mortgage Loan is
satisfied, the Conveyance Documents will be returned to the Partnership. If
the Partnership is unable to refinance or otherwise restructure this
outstanding indebtedness prior to the Extended Maturity Date of March 1,
2003, the Partnership will lose its entire interest in its property.
Under the terms of the Mortgage Loan, the Partnership was obligated to
provide RAM 2 with a current appraisal of the Property upon RAM 2's
request. If it was determined, based upon the requested appraisal, that the
sum of (i) the principal balance of the Mortgage Loan plus all other then
outstanding indebtedness secured by the Property and (ii) all accrued and
unpaid interest on the Mortgage Loan calculated at a rate of 6.22% per
annum compounded monthly through the date of such appraisal, exceeded 85%
of the appraised value of the Property, an amount equal to such excess (the
"Excess Payment") would become immediately due and payable to RAM 2. In
accordance with the terms of the Modification Agreement, RAM 2 is entitled
to request an appraisal of the Property; however, if such appraisal
indicated that no Excess Payment was due, RAM 2 would have no further
appraisal rights. RAM 2 requested that the Property be appraised by
Greenwich Realty Advisors, a real estate appraisal firm unaffiliated with
the Partnership, the Managing General Partner or RAM 2. The appraisal,
which was performed on March 1, 2001, indicated that an Excess Payment was
not due or payable to RAM 2 at that date. Consequently, under the terms of
the Modification Agreement, RAM 2 has no further appraisal right pursuant
to the terms of the Mortgage Loan.
6 DISTRIBUTIONS
In May 1999, October 1999, January 2000 and May 2000, the Partnership paid
cash distributions of approximately $4,100,000, $700,000, $700,000 and
$750,000, respectively, or $42.07, $7.18, $7.18 and $7.70 per Unit,
respectively, to Unitholders of record on May 11, 1999, October 20, 1999,
January 1, 2000 and May 30, 2000, respectively.
7 RECONCILIATION OF NET LOSS AND NET ASSETS PER FINANCIAL STATEMENTS TO TAX
BASIS
The Partnership files its tax return on an accrual basis. The Partnership
has computed depreciation for tax purposes using the Modified Accelerated
Cost Recovery System, which is not in accordance with generally accepted
accounting principles. A reconciliation of net loss per financial
statements to the tax basis of accounting is as follows:
F-11
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Year ended December 31,
--------------------------------------------------------
2000 1999 1998
---------------- ---------------- ----------------
Net loss per financial statements $ (1,297,109) $ (1,147,548) $ (925,947)
Tax depreciation and amortization in
excess of financial statement
depreciation and amortization
(207,849) (221,800) (228,353)
---------------- ---------------- ----------------
Net loss per tax basis $ (1,504,958) $ (1,369,348) $ (1,154,300)
================ ================ ================
The differences between the Partnership's net assets per financial
statements and the tax basis of accounting are as follows:
December 31,
----------------------------------------
2000 1999
----------------- -----------------
Net assets per financial statements $ (8,629,701) $ (5,882,589)
Cumulative tax depreciation and
amortization in excess of financial
statement depreciation (1,413,946) (1,206,097)
Write-down for impairment 6,475,500 6,475,500
Syndication costs 2,712,993 2,712,993
----------------- -----------------
Net assets per tax basis $ (855,154) $ 2,099,807
================= =================
8 TENANT DEFAULTS
Until November 1997, Levitz Department Store ("Levitz") had occupied
approximately 23% of the space at the Property. Rent under the lease for
each of 1997 and 1996 was approximately $412,000, which was approximately
16% of the Partnership's total rental income revenues in each such period.
In November 1997, Levitz, which had filed for protection under Chapter 11
of the Bankruptcy Code, vacated its space. Levitz ceased paying rent as of
April 2, 1998. The Partnership is currently pursuing a claim in the Levitz
bankruptcy proceedings.
During 1999, the Partnership entered into a short-term lease with an
existing tenant at an annual rent substantially less than under the Levitz
lease; this lease is terminable by the Partnership upon written notice to
the tenant, in the event the Partnership secures a long-term, creditworthy
tenant for the space.
In 1999, Good Guys, Inc. ("Good Guys"), a consumer electronics store,
vacated its premises at the Property and ceased paying rent under the lease
as of December 1, 2000. The Partnership has instituted legal proceedings
against Good Guys in respect of its non-payment of rent.
F-12
HIGH CASH PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
The vacancies at the Levitz and Good Guys spaces have resulted in a loss of
income to the Partnership. The vacancies also may have adversely affected
the surrounding tenants, particularly in light of the limited visibility
those tenants have to the main thoroughfare. The Partnership is actively
seeking substitute tenants. However, there can be no assurance that the
Partnership will succeed in finding long-term, creditworthy substitute
tenants promptly or on terms comparable to those under the Levitz or Good
Guys leases. In addition, if such a tenant is obtained, the Partnership may
be required to make substantial expenditures in order to secure such
substitute tenant and in connection with the new lease.
F-13
HIGH CASH PARTNERS, L.P.
Schedule II - VALUATION AND QUALIFYING ACCOUNTS
ADDITIONS
--------------------------
DESCRIPTION BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER BALANCE AT
PERIOD (A) EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- ----------------------------- ------------ ----------- ----------- ----------- -------------
Year ended December 31, 2000
Reno, Nevada
Sierra Marketplace $ 6,475,500 $ - $ - $ - $ 6,475,500
============= =========== =========== =========== =============
Year ended December 31, 1999
Reno, Nevada
Sierra Marketplace $ 6,475,500 $ - $ - $ - $ 6,475,500
============= =========== =========== =========== =============
Year ended December 31, 1998
Reno, Nevada
Sierra Marketplace $ 6,475,500 $ - $ - $ - $ 6,475,500
============= =========== =========== =========== =============
(A) Represents an allowance for impairment provided on the Sierra Marketplace
property during 1997.
See notes to financial statements.
F-14
HIGH CASH PARTNERS, L.P.
Schedule III - REAL ESTATE AND ACCUMMULATED DEPRECIATION
INITIAL COST(1) COSTS CAPITALIZED GROSS AMOUNT AT WHICH CARRIED AT
------------------------- ---------------------- ------------------------------------------
Building Building
and and
Encum- Improve- Improve- Carrying Improve-
Description brances Land ments ments Cost Land ments Total
- ----------- ------------ ----------- ----------- --------- --------- ----------- ------------ ------------
Sierra
Marketplace
Retail
Shopping
Center
Reno, Nevada $ 24,526,844 $ 6,868,859 $16,494,467 $ 719,589 $ -- $ 6,667,189 $ 12,940,226 $ 19,607,415
------------ ----------- ----------- --------- --------- ----------- ------------ ------------
Life on which
Accumu- Depreciation in
lated Date of Latest Income
Deprecia- Construc- Date Statement is
tion tion Acquired Computed
- --------- --------- -------- ---------------
Straight-line
$4,884,959 10/88 2/89 method 40 years
- ---------- --------- -------- ---------------
Year ended December 31,
-----------------------------------------------
1998 1999 2000
------------- -------------- -------------
(A) RECONCILATION OF REAL
ESTATE OWNED
Balance at beginning of year $ 19,467,903 $ 19,600,065 $ 19,607,415
Subtractions during year
Write-down for impairment - - -
------------- ------------- -------------
19,467,903 19,600,065 19,607,415
Additions during
year improvements 132,162 7,350 -
------------- ------------- -------------
Balance at end of year $ 19,600,065 $ 19,607,415 $ 19,607,415
------------- ------------- -------------
F-15
(B) RECONCILIATION OF Year ended December 31,
ACCUMULATED ------------------------------------------------
DEPRECIATION
1998 1999 2000
-------------- -------------- --------------
Balance at beginning of year $ 3,916,724 $ 4,241,900 $ 4,567,021
Additions during the year
Depreciation 325,176 325,121 317,938
-------------- -------------- --------------
Balance at end of year $ 4,241,900 $ 4,567,021 $ 4,884,959
============== ============== ==============
(1) The aggregate cost for income tax purposes is $26,082,913 at December 31,
2000.
See notes to financial statements.
F-16
PART III
Item 10. Directors and Executive Officers of Registrant
The Partnership has no officers or directors. Pembroke HCP, LLC, the Managing
General Partner, manages and controls substantially all the Partnership's
affairs and has general responsibility and ultimate authority in all matters
affecting its business. Pembroke AGP Corp., the Associate General Partner, in
its capacity as such, does not devote a material amount of time or attention to
the Partnership's affairs.
Based on a review of the filings under Section 16(a) of the Exchange Act, none
of the Managing General Partner, the sole member or the officers of the Managing
General Partner or the beneficial owners of more than 10% of the Units failed to
file on a timely basis reports required by Section 16(a) of the Exchange Act
during 2000 or prior years, except for the failure by Pembroke Capital II, LLC
("PC") to file reports on Forms 4 and 5 in respect of approximately 12
transactions in 1997, 1998, 1999 and 2000 resulting in PC's acquisition of an
aggregate of 6,257 Units.
Lawrence J. Cohen, age 45, is, and for more than six years has been, the sole
shareholder and director of Pembroke Companies, Inc., which is the sole member
and the manager of each of the Managing General Partner and the Associate
General Partner. Pembroke Companies, Inc. is a privately-held investment
management company, which makes investments in, and provides management services
to, a variety of real estate-related businesses.
Item 11. Executive Compensation
The Partnership is not required to pay, and has not paid, the officers, the
manager or the sole member of the Managing General Partner or the Associate
General Partner, or the officers or directors of the sole member of the Managing
General Partner or the Assistant General Partner. Certain officers and directors
of the former managing general partner of the Partnership received compensation
from the former managing general partner or its affiliates (but not from the
Partnership) for services performed for various affiliated entities, which may
have included services performed for the Partnership; in addition, certain
individuals affiliated with the Managing General Partner receive compensation
from the Managing General Partner or its affiliates (but not from the
Partnership) for services performed for various affiliated entities, which may
have included services for the Partnership. See Item 13, "Certain Relationships
and Related Transactions."
Item 12. Security Ownership of Certain Beneficial Owners and Management
PC and Equity Resources Fund XIV Limited Partnership ("ERF") are the only
persons known by the Partnership to be the beneficial owners of more than 5% of
the Units. The Partnership believes PC and ERF beneficially own 14,618 Units and
8,998 Units, respectively, which are 15.2% and 9.3%, respectively, of the
outstanding Units. Mr. Cohen is the sole member of PC, and, therefore, he may be
deemed to be the beneficial owner of PC's 14,618 Units. See Item 10, "Directors
and Executive Officers of Registrant" above. The address of each of PC and Mr.
Cohen is Pembroke Companies, Inc., 70 East 55th Street, New York, New York
10022. The address of ERF is 14 Story Street, Cambridge, Massachusetts 02138.
III-1
Item 13. Certain Relationships and Related Transactions
During 2000, the General Partners and their respective affiliates received
compensation or payments for services from or with respect to the Partnership as
follows:
Name Capacity in Which Served Compensation
Pembroke HCP, LLC Managing General Partner $ 301,475 (1)
Pembroke AGP, LLC Associate General Partner - (2)
Pembroke Realty Management LLC Supervisory Property Manager $ 25,320 (3)
(1) Represents a partnership management fee earned by the Managing General
Partner. Under the Partnership's Partnership Agreement, .99% of the net
income, net loss and distributions of the Partnership are allocated to the
Managing General Partner. For 2000, $14,899 of the Partnership's tax loss
and $14,355 of distributions were allocated to the Managing General
Partner.
(2) Under the Partnership Agreement, .01% of the Partnership's net income, net
loss and distributions are allocated to the Associate General Partner. For
2000, $150 of the Partnership's tax loss and $145 of distributions were
allocated to the Associate General Partner.
(3) This amount was earned pursuant to a supervisory management agreement with
the Partnership for performance of certain functions related to property
management. In addition, $51,961 was paid to Colliers Nevada Management,
LLC, an unaffiliated property management company that performed services
for the Partnership.
III-2
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements: See "Index to Financial Statements" in Item 8
above.
(a)(2) Financial Statement Schedules: See "Index to Financial Statements" in
Item 8 above.
(a)(3) Exhibits:
3. (a) Second Amended and Restated Partnership Agreement ("Partnership
Agreement") of Registrant, incorporated by reference to Exhibit
3D to Amendment No. 2 to Registrant's Registration Statement on
Form S-11 filed on June 24, 1988 (Reg. No. 33-6412) (hereinafter
the "Form S-11").
(b) Amended and Restated Certificate of Limited Partnership of
Registrant, incorporated by reference to Exhibit 3C to the Form
S-11.
(c) Amendment to Partnership Agreement, incorporated by reference to
Supplement No. 1 dated August 19, 1988 to Registrant's Prospectus
filed pursuant to Rules 424(b) and 424(c) (Reg. No. 33-6412).
10. (a) Management Services Agreement between Registrant and Resources
Property Management Corp., incorporated by reference to Exhibit 1
OB to Amendment No. 2 to the Form S-11.
(b) Acquisition and Disposition Services Agreement among Registrant,
Realty Resources Inc., and Resources High Cash, Inc.,
incorporated by reference to Exhibit 10.(b) of Registrant's
Report on Form 10-K for the year ended December 31, 1988
(hereinafter the "1988 10-K").
(c) Agreement among Resources High Cash, Inc., Integrated Resources,
Inc. and Fourth Group Partners, incorporated by reference to
Exhibit 10.(c) of the 1988 10-K.
(d) Agreement of Purchase and Sale between Sierra Virginia, Inc. and
Nevada Corp., incorporated by reference to Exhibit 10A to
Registrant's Form 8 with respect to Registrant's current report
on Form 8-K dated February 10, 1989.
(e) Registered Note by Registrant to RAM 2 in connection with the
purchase of Sierra Marketplace, incorporated by reference to
Exhibit 10B to Registrant's Form 8 with respect to Registrant's
current report on Form 8-K dated February 10, 1989, incorporated
by reference to Exhibit 10(f) of Registrant's Report on Form 10-K
for the year ended December 31, 1989 (hereinafter the "1989
10-K").
(f) Settlement Agreement, dated October 17, 1990 among Registrant,
Integrated, First Interstate Bank of Denver N.A., First
Interstate Bank of Washington, N.A. and First American National
Bank, Incorporated, incorporated by reference to Exhibit 10(a) to
Registrant's Current Report on Form 8-K dated December 19, 1990.
IV-1
(g) Supervisory Management Agreement dated as of November 1, 1991
between Registrant and Resources Supervisory Management
Corporation incorporated by reference to Exhibit 10(g) to
Registrant's Report on Form 10K for the year ended December 31,
1991.
(h) Management Agreement dated as of November 1, 1991 among
Registrant, Resources Supervisory Management Corp. and CB
Commercial Real Estate Group, Inc., incorporated by reference to
Exhibit 10(h) to Registrant's Report on Form 10-K for the year
ended December 31, 1991.
(i) Exclusive Leasing Listing Agreement dated as of January 1, 1993
between Resources Supervisory Management Corp. and CB Commercial
Real Estate Group, Inc., incorporated by reference to Exhibit
10(i) to Registrant's Report on Form 10-K for the year ended
December 31, 1993.
(j) First Amendment to Exclusive Leasing Listing Agreement dated as
of January 1, 1994 between Resources Supervisory Management Corp.
and CB Commercial Real Estate Group, Inc., incorporated by
reference to Exhibit 100) to Registrant's Report on Form 10-K for
the year ended December 31, 1993.
(k) Second Amendment to Management Agreement dated as of January 1,
1994 between Resources Supervisory Management Corp. and CB
Commercial Real Estate Group, Inc., incorporated by reference to
Exhibit 10(k) to Registrant's Report on Form 10-K for the year
ended December 31, 1993.
(l) Management Agreement dated September 22, 1999 between Pembroke
Supervisory Management, LLC and Colliers Nevada Management, LLC,
incorporated by reference to Exhibit 10.1 to Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1999.
(m Exclusive Leasing Listing Agreement dated September 9, 1999
between Pembroke Supervisory Management, LLC and Colliers Nevada
Management, LLC, incorporated by reference to Exhibit 10.2 to
Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1999.
(n) Mortgage Loan Modification Agreement dated December 21, 2000
between High Cash Partners, L.P. and Resources Accrued Mortgage
Investors 2 L.P., incorporated by reference to Exhibit 10.1 to
Registrant's Current Report on Form 8-K dated February 8, 2001.
(b) Report on Form 8-K:
Registrant filed the following reports on Form 8-K during the
last quarter of the fiscal year:
Current Report on Form 8-K dated February 8, 2000.
IV-2
SIGNATURES
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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.
HIGH CASH PARTNERS, L.P.
By: Pembroke HCP, LLC
Managing General Partner
Dated: March 30, 2001 By: Pembroke Companies, Inc.
Managing Member
By: /s/ Lawrence J. Cohen
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Lawrence J. Cohen
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Registrant and in
the capacities (with respect to the Managing General Partner) and on the date
indicated.
Dated: March 30, 2001 /s/ Lawrence J. Cohen
-----------------------------------
Lawrence J. Cohen