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, 1997 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)
6210 Campbell Road Suite 140
Dallas, Texas 75248
-------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (972) 380-8000.
----------------
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:
----- -----
REGISTRANT IS A LIMITED PARTNERSHIP
TABLE OF CONTENTS
Item 1. Financial Statements
- -------
The following Unaudited financial statements are filed herewith:
Consolidated Balance Sheet as of September 30, 1997 and
December 31, 1996 Page 3
Consolidated Statements of Operations for the Three
Months Ended September 30, 1997and 1996 Page 4
Consolidated Statements of Cash Flows for the Three
Months Ended September 30, 1997 and 1996 Page 5
Item 2. Results of Operations and Management's Discussion
- ------- and Analysis of Financial Condition
Page 6
Liquidity and Capital Resources Page 7
Other Information Page 8
Signatures Page 9
The statements, insofar as they relate to the period subsequent to
December 31, 1996, are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
----------------------------------
AMERICAN REPUBLIC REALTY FUND I
Condensed Consolidated Balance Sheets
September 30, December 31,
1997 1996
------ ------
(Unaudited)
ASSETS
Real Estate assets, at cost
Land $1,822,718 $1,822,718
Buildings and improvements 14,994,509 14,994,509
------------- -------------
16,817,227 16,817,227
Less: Accumulated depreciation (8,850,635) (8,397,635)
------------ -------------
Real Estate,net 7,966,592 8,419,592
Cash including cash investments 2,081 23,211
Escrow deposits 699,797 182,966
Prepaid Expenses 258,871 19,614
----------- -----------
TOTAL ASSETS $8,927,341 $8,645,383
=========== ============
LIABILITIES AND PARTNERS'EQUITY:
LIABILITES
Mortgage and notes payable $10,785,087 $7,239,679
Note Payable to affiliates 582,703 2,935,310
Amounts due affiliates 6,957 1,282,696
Real estate taxes payable 200,056 0
Security deposits 50,981 45,746
Accounts payable & 170,731 117,202
accrued expenses ------------ ----------
Total liabilities 11,796,515 11,620,633
------------ ------------
PARTNERS CAPITAL (DEFICIT)
Limited Partners (2,926,177) (3,031,192)
General Partner 57,003 55,942
------------- -------------
Total Partners Capital (Deficit) (2,869,174) (2,975,250)
------------- -------------
TOTAL LIABILITES AND PARTNER $8,927,341 $8,645,383
DEFICIT =========== ===========
See notes to Condensed Consolidated Financial Statements
AMERICAN REPUBLIC REALTY FUND I
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -------------------
REVENUES 1997 1996 1997 1996
---- ---- ---- ----
Rental income $606,530 $606,345 1,842,164 1,783,439
Other property 15,812 9,829 39,802 27,789
--------- -------- --------- ---------
Total revenues 622,342 616,174 1,881,966 1,811,228
EXPENSES
Salaries & wages 67,875 63,209 208,513 201,670
Maintenance & repairs 206,704 63,836 318,222 173,057
Utilities 40,825 44,722 133,836 137,312
Real estate taxes 66,900 60,900 200,700 182,700
General administrative 28,665 25,601 58,086 67,967
Contract services 29,282 24,721 88,747 71,955
Insurance 15,227 12,098 40,974 34,962
Interest 387,527 66,971 513,794 202,821
Depreciation and amortization 165,871 155,000 467,871 465,000
Property management fees (a) 31,029 30,825 93,983 90,608
--------- -------- -------- ---------
Total expenses 1,039,905 547,883 2,124,726 1,628,052
NET INCOME before ($417,563) $68,291 ($242,760) $183,176
extraordinary item
Extraordinary item- $348,836 0 348,836 0
Gain on Debt Extinguish
Net Income ($68,727) 68,291 106,076 183,176
=========== ========== ========== =========
NET INCOME PER UNITS $ (6.25) $ 6.21 $ 9.64 $ 16.65
============ ========== ========= =========
See Notes to Condensed Consolidated Financial Statements
AMERICAN REPUBLIC REALTY FUND I
Condensed Consolidated Statement of Cash Flows
Nine Months Ended
September 30,
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACITIVTY
Net income (loss) ($242,760) $183,176
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 53,000 465,000
Extraordinary Item 348,836
Net Effect of changes in operating accounts
Escrow deposits (516,831) (222,908)
Prepaid expenses (239,257) (14,970)
Accrued real estate taxes 200,056 168,700
Security deposits 5,235 9,075
Accounts payable 53,529 120,811
Other assets 0 (9,653)
--------- ----------
Net cash provided by (used for) 61,808 699,231
operating activities --------- -----------
CASH FLOWS FROM INVESTING ACTIVITES
Proceeds from mortgage notes (10,800,000) 0
Repayment of mortgage notes payable 14,345,408 (636,1040)
Repayment of notes payable to affiliates (2,352,607) 0
Repayment from amounts due affiliates (1,275,739) (205,153)
Proceeds of amounts due affiliates 0 208,407
---------- ---------
Net cash used for investing activities (82,938) (632,850)
---------- --------
NET INCREASE (DECREASE) IN CASH (21,130) 66,381
AND CASH EQUVILENTS
CASH AND CASH EQUIVELNTS, 23,211 19,047
BEGINNING OF PERIOD
CASH AND CASH EQUIVELNTS, END OF $2,081 $85,428
PERIOD
See Notes to Condensed Consolidated Financial Statements
Basis of Presentation:
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although
the Partnership believes that the disclosures are adequate
to make the information presented not misleading. It is
suggested that these condensed financial statements be read
in conjunction with the financial statements and notes
thereto included in the Partnership's latest annual report
on Form 10-K.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
FIRST NINE MONTHS 1997 COMPARED TO FIRST NINE MONTHS 1996
At September 30, 1997 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 93.70% for the first Nine Months of
1997, as compared to 94.8% for the first Nine Months of
1996.
Revenue from property operations increased $70,738, or
3.91%, for the first Nine Months of 1997, as compared to the
1996 first Nine Months. The increase in other income of
$12,013 or 43.23% is primarily due to a increase in late and
returned check charges over the prior year. The following
table illustrates the components:
Increase Per
Cent
(Decreas Change
e)
Rental income $58,725 3.29%
Other property 12,013 43.23%
$70,738 3.91%
Property operating expenses increased $496,674, or 30.51%,
for the first Nine Months of 1997, as compared to the same
period in 1996, primarily due to increases in interest
expense and maintenance & repairs. The increase in interest
expense is due to the interest paid on the new mortgages and
special limited partner equity. Maintenance and repairs
increased primarily due to maintenance projects required by
under the new mortgage notes. Contract services increased
16,792 or 23.34% due to increased costs for lawn care and
rubbish. Insurance costs rose $6,012 or 17.2% due to higher
overall insurance costs at the annual renewal. The
following table illustrates the components by category:
Increase Per Cent
(Decrease) Change
Salaries & wages $6,843 3.39%
Maintenance & repairs 145,165 83.88%
Utilities (3,476) 2.53%
Real estate taxes 18,000 9.85%
General administrative (9,881) 14.54%
Contract services 16,792 23.34%
Insurance 6,012 17.20%
Interest 310,973 153.32%
Depreciation and 2,871 0.62%
amortization
Property management fees 3,375 3.72%
(a)
Net Increase (Decrease) $496,674 30.51%
THIRD QUARTER 1997 COMPARED TO THIRD QUARTER 1996
At September 30, 1997 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 93.8% for the third quarter of 1997, as
compared to 97% for the third quarter of 1996.
Revenue from property operations increased $6,168, or 1.00%,
for the third quarter of 1997, as compared to the 1996 third
quarter. The increase in other income of $5,983 or 60.87% is
primarily due to an increase in late and returned check
charges from the prior year. The following table illustrates
the components:
Increase Percent
(Decrease) Change
Rental income $185 0.03%
Other property 5,983 60.87
%
Net Increase $6,168 1.00%
(Decrease)
Property operating expenses increased $492,022, or 89.8%,
for the third quarter of 1997, as compared to the same
period in 1996, primarily due to increases in interest
expense and maintenance & repairs. The increase in interest
expense is due to the interest paid on the new mortgages and
special limited partner equity. Maintenance and repairs
increased primarily due to maintenance projects required by
under the new mortgage notes. Contract services increased
$4,561 or 18.45% due to increased costs for lawn care and
rubbish. Insurance costs rose $3,129 or 25.86% due to
higher overall insurance costs at the annual renewal.. The
following table illustrates the components by category:
Increase Percent
(Decrease) Change
Salaries & wages $4,666 7.38%
Maintenance & 142,868 223.8
repairs 0%
Utilities (3,897) 8.71%
Real estate taxes 6,000 9.85%
General 3,064 11.97
administrative %
Contract services 4,561 18.45
%
Insurance 3,129 25.86
%
Interest 320,556 478.6
5%
Depreciation and 10,871 7.01%
amortization
Property management 204 0.66%
fees (a)
Net Increase $492,022 89.80%
(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, 1997, the Partnership had $2,081 in cash
and cash equivalents as compared to $23,211 as of December
31, 1996 . The net decrease in cash of $21,130 is
principally due to the partnership reducing it debt to
affiliates.
Each asset of the fund refinanced its debt during the
quarter. The fund retired debt with a face value of
$6,500,000 and replace it with debt of $10,800,000. The new
mortgages in the amounts of $4,000,000 $6,800,000 carry
interest rates of 7.8% and 7.92% respectively. The notes
come due August, 2007.
Net proceeds from the refinancing were used to reduce the
notes payable to affiliates. During July, 1997 payments of
$3,500,000 were made to reduce the debt to affiliates. This
together with interest on the debt reduced the amounts due
affiliates to $582,703 at September 30,1997.
A gain on retirement of debt arose with the note refinancing
being triggered by the early retirement of the debt. The
recognized gain of $348,836, was the difference between the
carrying value of the debt and the funds necessary to retire
the debt.
The properties were encumbered by two non-recourse mortgage
notes as of December 31, 1996. These mortgages payable had
a carrying value of $7,239,679 at December 31, 1996. The
mortgage notes were entered into during 1993 and 1992 to
refinance certain mortgage notes which were in default. The
Partnership accounted for these transactions as troubled
debt restructuring, and accordingly, are being carried at
the total future cash outflows for principal and interest.
Accordingly, no interest expense was or will be recorded on
these notes.
Additionally, the general partner has provided funding to
the Partnership in the form of notes payable with balances
at December 31,1996 totaling $2,935,310 which accrue
interest at prime plus 2% and are due on June 30, 2001, or
upon demand. Additional funds have been provided by the
general partner in the form of advances which totaled
$1,282,696 at December 31, 1996. The general partner is not
obligated to provide additional funding to the Partnership.
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.
Formerly, the Partnership's required principal payments due
under the stated terms of the Partnership's mortgage notes
payable and notes payable to affiliates were $124,505,
$2,580,216 and $4,021,625 for each of the next three years.
The Partnership was not generating sufficient cash flows to
meet these obligations. Management believed it would be
able to refinance these debt obligations, and as discussed
above management did obtain refinancing.
Other Information
Item 1. Legal Proceedings
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.2-81074
effective 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
(B) Reports on Form 8-K for the quarter ended September 30,
1997.
1 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 17, 1997