SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2006
Commission file number 0-11578
AMERICAN REPUBLIC REALTY FUND I
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1421936
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification
Number)
2800 N. Dallas Pkwy Suite 100
Plano, Texas 75093-5994
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 836-8000.
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: Y No:
Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the
Exchange Act).
Yes: No: N
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange
Act).
Yes: No: N
REGISTRANT IS A LIMITED PARTNERSHIP
TABLE OF CONTENTS
Part I
Item 1. Financial Statements
The following Unaudited financial statements are filed herewith:
Consolidated Balance Sheet as of September 30, 2006 and
December 31, 2005 Page 3
Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 2006 and 2005 Page 4
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2006 and 2005 Page 5
Item 2. Results of Operations and Management Discussion and
Analysis of Financial Condition Page 6
Item 3. Quantitative and Qualitative Disclosures about Market
RiskLiquidity and Capital Resources Page 8
Item 4. Controls and Procedures Other Information Page 8,9
Part II
Other Information Page 9
Signatures Page 10
The statements, insofar as they relate to the period subsequent
to December 31, 2005, are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN REPUBLIC REALTY FUND I
Condensed Consolidated Balance Sheets
September 30 December 31,
2006 2005
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,822,718 $1,822,718
Buildings and improvements 16,396,299 16,337,299
18,219,017 18,160,017
Less: Accumulated depreciation (14,881,239) (14,386,239)
Real Estate, net 3,337,778 3,773,778
Cash including cash investments 239,039 178,644
Escrow deposits 579,681 541,874
Prepaid Expenses 89,582 40,962
Deferred Financing Fees 17,206 34,413
TOTAL ASSETS $4,263,286 $4,569,671
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage payable $9,622,131 $9,754,216
Amounts due affiliates 0 695
Real estate taxes payable 227,940 0
Security deposits 80,014 71,020
Accounts payable & accrued expenses 120,106 317,754
Total liabilities 10,050,191 10,143,685
PARTNERS CAPITAL (DEFICIT)
Limited Partners (5,813,324) (5,602,562)
General Partner 26,419 28,548
Total Partners Deficit (5,786,905) (5,574,014)
TOTAL LIABILITIES AND $4,263,286 $4,569,671
PARTNER DEFICIT
AMERICAN REPUBLIC REALTY FUND I
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
REVENUES 2006 2005 2006 2005
Rental income 653,587 631,776 1,958,541 1,849,549
Other property 30,540 23,989 72,562 60,599
Total revenues 684,127 655,765 2,031,103 1,910,148
EXPENSES
Salaries & wages 86,911 92,627 264,003 260,733
Maintenance & repairs 44,399 67,191 114,685 190,503
Utilities 58,681 56,432 178,945 176,730
Real estate taxes 72,750 69,016 218,250 203,314
General administrative 34,905 31,929 94,930 86,370
Contract services 30,942 29,747 90,257 88,023
Insurance 34,310 35,143 96,620 101,919
Interest 190,041 193,430 572,724 582,695
Depreciation and amortization 170,735 170,735 512,207 512,207
Property management fees 34,095 32,758 101,373 95,435
Total expenses 757,769 779,008 2,243,994 2,297,929
Net Loss ($73,642) ($123,243) ($212,891) ($387,781)
NET LOSS PER UNIT $(6.63) $(11.09) $(19.16) $(34.90)
Partnership units outstanding 11,000 11,000 11,000 11,000
See Notes to Condensed Consolidated Financial Statements
AMERICAN REPUBLIC REALTY FUND I
Condensed Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2006 2005
CASH FLOWS FROM OPERATING ACTIVITY
Net loss ($212,891) ($387,781)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 512,207 512,208
Net Effect of changes in
operating accounts
Escrow deposits (37,807) (81,393)
Prepaid expenses (48,620) (31,654)
Accrued real estate taxes 227,940 209,727
Security deposits 8,994 2,683
Accounts payable (197,648) (174,432)
payable
Net cash provided by operating activities 252,175 49,358
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Real Estate (59,000) (93,415)
Net cash used for investing activities (59,000) (93,415)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of mortgage notes payable (132,085) (122,114)
Proceeds from amounts due affiliates (695) 1,773
Net cash used for financing activities (132,780) (120,341)
NET INCREASE (DECREASE) IN CASH AND 60,395 (164,398)
CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING 178,644 353,871
OF PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD $239,039 $189,473
See Notes to Condensed Consolidated Financial Statements
Basis of Presentation:
The accompanying unaudited condensed consolidated financial
statements have been prepared by American Republic Realty
Fund I (the "Partnership") pursuant to the rules and
regulations of the Securities and Exchange Commission. The
financial statements reflect all adjustments that are, in
the opinion of management, necessary to fairly present such
information. All such adjustments are of a normal recurring
nature. Although the Partnership believes that the
disclosures are adequate to make the information presented
not misleading, certain information and footnote
disclosures, including a description of significant
accounting policies normally included in financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America, have
been condensed or omitted pursuant to such rules and
regulations.
These financial statements should be read in conjunction
with the financial statements and notes thereto included in
the Partnership's 2005 Annual Report on Form 10-K filed with
the Securities and Exchange Commission. The results of
operations for interim periods are not necessarily
indicative of the results for any subsequent quarter or the
entire fiscal year ending December 31, 2005.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
At September 30, 2006 the Partnership owned two properties with
approximately 416,623 net rentable square feet. Both properties
are apartment communities. The portfolio had an average
occupancy of 92.8% for the third quarter of 2006, as compared to
89.9% for the third quarter of 2005.
FIRST NINE MONTHS 2006 COMPARED TO FIRST NINE MONTHS 2005
Revenue from property operations increased $120,955 or 6.33%, for
the first nine months of 2006, as compared to the first nine
months of 2005. The increase in rental income of $108,992 or
5.89% is primarily due to an increase in occupancy. The increase
in other income of $11,963 or 19.74% is primarily due to an
increase in late and other fee collections from the properties.
The following table illustrates the components:
Increase Percent
(Decrease) Change
Rental income 108,992 5.89%
Other property 11,963 19.74%
Net Increase 120,955 6.33%
Property operating expenses decreased $54,185 or 2.36%, for the
first nine months of 2006, as compared to the same period in
2005. Maintenance & repairs decreased $75,818 or 39.8% due to one-
time expenses in 2005. General and administrative increased
$8,310 or 9.62% due to increased advertising. Real estate
taxes increased $14,936 or 7.35% due to increased property
valuation. The following table illustrates the components by
category:
Increase
(Decrease)
Salaries & wages 3,270 1.25%
Maintenance & repairs (75,818) 39.80%
Utilities 2,215 1.25%
Real estate taxes 14,936 7.35%
General administrative 8,310 9.62%
Contract services 2,234 2.54%
Insurance (5,299) 5.20%
Interest (9,971) 1.71%
Depreciation and amortization 0 0.00%
Property management fees 5,938 6.22%
Net Increase (Decrease) (54,185) 2.36%
THIRD QUARTER 2006 COMPARED TO THIRD QUARTER 2005
Revenue from property operations increased $28,362, or 4.33%, for
the third quarter of 2006, as compared to the 2005-third quarter.
The increase in rental income of $21,811 or 3.45% is primarily
due to an increase in occupancy. The increase in other income of
$6,551 or 27.31% is primarily due to an increase in late and
other fee collections from the properties. The following table
illustrates the components:
Increase Percent
(Decrease) Change
Rental income 21,811 3.45%
Other property 6,551 27.31%
Net Increase 28,362 4.33%
(Decrease)
Property operating expenses decreased $21,489 or 2.76%, for the
third quarter of 2006, as compared to the same period in 2005.
Maintenance & repairs decreased $22,792 or 33.92% due to roof
repairs in the prior year. Salaries and wages decreased $5,716 or
6.17% due to fewer maintenance employees. General &
Administrative increased $2,726 or 8.54% due to increased
advertising. Real estate taxes increased $3,734 or 5.41% due to
increased property valuation. The following table illustrates the
components by category:
Increase Percent
(Decrease) Change
Salaries & wages (5,716) 6.17%
Maintenance & repairs (22,792) 33.92%
Utilities 2,249 3.99%
Real estate taxes 3,734 5.41%
General administrative 2,726 8.54%
Contract services 1,195 4.02%
Insurance (833) 2.37%
Interest (3,389) 1.75%
Depreciation and amortization 0 0.00%
Property management fees 1,337 4.08%
Net Increase (21,489) 2.76%
(Decrease)
LIQUIDITY AND CAPITAL RESOURCES
While it is the General Partners primary intention to
operate and manage the existing real estate investments, the
General Partner also continually evaluates this investment in
light of current economic conditions and trends to determine if
this asset should be considered for disposal. At this time, there
is no plan to dispose of either property.
As of September 30, 2006, the Partnership had $239,039 in
cash and cash equivalents as compared to $178,644 as of December
31, 2005. The net increase in cash of $60,395 is principally due
to cash flow from operating activities.
Each asset of the fund refinanced its debt during July 1997.
The fund retired debt with a face value of $6,500,000 and
replaced with debt of $10,800,000. The new mortgages in the
amounts of $4,000,000, and $6,800,000 carry interest rates of
7.8% and 7.92% respectively. The notes come due August 2007. The
Partnerships required principal payments due under the stated
terms of the Partnerships mortgage notes payable are $177,870,
and $9,576,345 for each of the next two years.
For the foreseeable future, the Partnership anticipates that
mortgage principal payments (excluding any balloon mortgage
payments), improvements and capital expenditures will be funded
by net cash from operations. The primary source of capital to
fund future Partnership acquisitions and balloon mortgage
payments will be proceeds from the sale, financing or refinancing
of the Properties.
Item 3 - Quantitative and Qualitative Disclosure about Market
Risk
The Partnership is exposed to interest rate changes
primarily as a result of its real estate mortgages. The
Partnerships interest rate risk management objective is to limit
the impact of interest rate changes on earnings and cash flows
and to lower it's overall borrowing costs. To achieve its
objectives, the Partnership borrows primarily at fixed rates.
The Partnership does not enter into derivative or interest rate
transactions for any purpose.
The Partnerships' activities do not contain material risk
due to changes in general market conditions. The partnership
invests only in fully insured bank certificates of deposits, and
mutual funds investing in United States treasury obligations.
Item 4 - Controls and Procedures
Based on their most recent evaluation, which was completed
within 90 days of the filing of this Form 10-Q, our Acting
Principal Executive Officer and Chief Financial Officer, believe
our disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) are effective. There were not any
significant changes in internal controls or in other factors that
could significantly affect these controls subsequent to the date
of their evaluation, and there has not been any corrective action
with regard to significant deficiencies and material weaknesses.
Part II. Other Information
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security
Holders
None
Item 5. Other Information
None
Item 6. Exhibit and Reports on Form 8-K
(A)The following documents are filed herewith or
incorporated herein by reference as indicated as
Exhibits:
Exhibit Designation Document Description
2 Certificate of Limited partnership, as
amended, incorporated by reference to
Registration Statement No.2-81074
effective May 2, 1983.
Limited Partnership Agreement,
incorporated by reference to Registration
Statement No.2-81074effective May 2,1983.
11 Not Applicable
15 Not Applicable
18 Not Applicable
19 Not Applicable
20 Not Applicable
23 Not Applicable
24 Not Applicable
25 Power of Attorney, incorporated by
reference to Registration Statement
No. 2-81074 effective May 2, 1983.
28 None
31.1 Certification Pursuant to
Rules 13a-14 and 15d-14 Under
the Securities Exchange Act of
1934, as Adopted Pursuant to
Section 302 of the Sarbanes-
Oxley Act of 2002, filed
herewith.
32.1 Certification Pursuant to 18
U.S.C. Section 1350, as
Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act
of 2002, filed herewith.
(B) Reports on Form 8-K for the quarter ended September 30, 2006.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
AMERICAN REPUBLIC REALTY FUND I
a Wisconsin limited partnership
By: /s/ Robert J. Werra
Robert J. Werra,
General Partner
Date: October 4, 2006
Exhibit 31.1
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I Robert J. Werra, Acting Principal Executive Officer and Chief
Financial Officer of American Republic Realty Fund I ("the
Company"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
Partnership;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
report, fairly present in all material respects the
financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented
in this quarterly report;
4. I am responsible for establishing and maintaining
disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Partnership
and have:
a. designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material
information relating to the Partnership and its
consolidated subsidiaries is made known to me by others
within those entities, particularly for the periods
presented in this quarterly report;
b. designed such internal control over financial reporting,
or caused such internal control over financial reporting
to be designed under my supervision, to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles.
c. evaluated the effectiveness of the Partnerships
disclosure controls and procedures and presented in this
report my conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation;
and
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - continued
d. disclosed in this report any change in the Partnerships
internal control over financial reporting that occurred
during the Partnerships most recent fiscal quarter that
has materially affected, or is reasonably likely to
materially affect, the Partnerships internal control
over financial reporting; and
5. I have disclosed based on my most recent evaluation of
internal control over financial reporting, to the
Partnerships auditors and Audit Committee of the Board
of Directors (or persons fulfilling the equivalent
function):
a. all significant deficiencies and material weaknesses in
the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the Partnerships ability to record,
process, summarize, and report financial data; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant
role in the Partnerships internal control over financial
reporting.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial
Officer
October 4, 2006
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Republic
Realty Fund I ("the Partnership") on Form 10-Q for the period
ending September 30, 2006 as filed with the Securities and
Exchange Commission on the date hereof ("the Report"), I,
Robert J. Werra, Acting Principal Executive Officer and Chief
Financial Officer of the Company, certify, pursuant to 18
U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results
of operations of the Partnership.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
October 4, 2006