FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-13983
ASSOCIATED PLANNERS REALTY GROWTH FUND
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4119808
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5933 W. CENTURY BLVD., SUITE 900
LOS ANGELES, CALIFORNIA 90045
(Address of principal executive offices)
(Zip Code)
(310) 670-0800
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No
ITEM 1. FINANCIAL STATEMENTS
In the opinion of the General Partners of Associated Planners Realty Growth Fund
(the "Partnership"), all adjustments necessary for a fair presentation of the
Partnership's results for the three months ended March 31, 1996 and 1995 have
been made in the following financial statements which are of normal recurring
entries in nature. However, such financial statements are unaudited and are
subject to any year-end adjustments that may be necessary.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
MARCH 31, DECEMBER 31,
1996 1995
ASSETS
RENTAL REAL ESTATE, net of
accumulated depreciation (Notes 2 & 3) $1,268,008 $1,285,445
CASH AND CASH EQUIVALENTS 8,041 -----
OTHER RECEIVABLES 19,868 26,329
OTHER ASSETS 14,014 16,289
$1,309,931 $1,328,063
LIABILITIES AND PARTNERS' EQUITY
BANK OVERDRAFT $ ----- $ 328
PAYABLE TO AFFILIATES 211,060 240,095
OTHER ACCRUED LIABILITIES 81,919 35,336
NOTE PAYABLE - RELATED PARTY (Note 4 (d)) 150,000 150,000
SECURITY DEPOSITS AND PREPAID RENTS 23,687 25,977
NOTE PAYABLE (Note 3) 1,689,309 1,676,385
TOTAL LIABILITIES 2,155,975 2,128,121
COMMITMENTS AND CONTINGENCIES
PARTNERS' EQUITY:
Limited Partners:
$1,000 stated value per unit;
authorized 10,000 units;
issued - 2,061 (829,618) (784,092)
General Partners: (16,426) (15,966)
TOTAL PARTNERS' EQUITY (846,044) (800,058)
$1,309,931 $1,328,063
[FN]
See accompanying notes to financial statements.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
LIMITED PARTNERS GENERAL
TOTAL UNITS AMOUNT PARTNER
BALANCE, DECEMBER 31, 1995 $(800,058) 2,061 $(784,092) $(15,966)
Net loss (45,986) --- (45,526) (460)
BALANCE, MARCH 31, 1996 $(846,044) 2,061 $(829,618) $(16,426)
THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
LIMITED PARTNERS GENERAL
TOTAL UNITS AMOUNT PARTNER
BALANCE, DECEMBER 31, 1994 $1,301,837 2,061 $1,296,785 $5,052
Net loss (38,712) --- (38,325) (387)
BALANCE, MARCH 31, 1995 $1,263,125 2,061 $1,258,460 $4,665
[FN]
See accompanying notes to financial statements.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1996 MARCH 31, 1995
REVENUES:
Rental $56,962 $55,877
Interest 6 51
56,968 55,928
COSTS AND EXPENSES:
Operating 33,642 18,327
Property taxes 2,610 4,496
Property management fees (Note 4 (b) ) 2,633 2,299
Interest 46,284 41,616
General and administration 9,865 11,303
Depreciation and amortization 7,920 16,599
102,954 94,640
NET LOSS $(45,986) $(38,712)
NET LOSS PER
LIMITED PARTNERSHIP UNIT $(22.09) $(18.60)
[FN]
See accompanying notes to financial statements
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1996 1995
Cash flow from operating activities:
Net Loss $(45,986) $(38,712)
Adjustments to reconcile net (loss) to
net cash provided by operating activities:
Depreciation and amortization 7,920 16,599
Accruedinterest on note payable 29,479 ---
Increase (decrease) from changes in:
Other receivables and assets 18,253 14,365
Accounts payable 2,132 11,090
Security deposits and prepaid rent (2,290) (1,756)
Net cash provided by operating activities 9,508 1,586
Cash flows from financing activities:
Repayments on note payable (1,467) (3,841)
Net cash (used in) financing activities (1,467) (3,841)
Net increase (decrease) in cash &
cash equivalents 8,041 (2,255)
Cash and cash equivalents at beginning of period ---- 5,657
CASH AND CASH EQUIVALENTS AT END OF PERIOD $8,401 $3,402
[FN]
See accompanying notes to financial statements.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
BUSINESS
Associated Planners Realty Growth Fund (the "Partnership"), a California limited
partnership, was formed on March 9, 1987 under the Revised Limited Partnership
Act of the State of California. The Partnership met its minimum funding of
$1,200,00 on August 29, 1988 and terminated its offering on September 5, 1989.
The Partnership was formed to acquire income-producing real property throughout
the United States with emphasis on properties located in California and
southwestern states. The Partnership intends to purchase such properties by
borrowing up to an aggregate of fifty percent of the purchase price of such
properties and intends to own and operate such properties for investment over an
anticipated holding period of approximately five to ten years.
BASIS OF PRESENTATION
The financial statements do not give effect to any assets that the partners
may have outside of their interest in the partnership, nor to any personal
obligations, including income taxes, of the partners.
The Partnership's financial statements for the quarter ended March 31, 1996 have
been prepared on a going concern basis which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of
business. The Partnership has suffered recurring loses from operations and has
a net capital deficiency of $846,044 at March 31, 1996. The deficiency is
attributable to a $1,912,727 impairment loss recognized in the fourth quarter of
1995 on the difference between the carrying amount of rental real estate and the
fair value less cost to sell. The Partnership plans to seek relief from the
debt holder, while at the same time seeking to enhance the value of the property
by increasing occupancy and contracting long-term leases. Failure to obtain
additional funding from the General Partner, relief from the lender, or
significantly improved operations could result in the eventual loss of the
building through foreclosure proceedings.
RENTAL REAL ESTATE AND DEPRECIATION
Assets are stated at the lower of cost or market. Depreciation is computed
using the straight-line method over estimated useful lives ranging from 31.5 to
40 years for financial reporting and income tax reporting purposes.
In the event that facts and circumstances indicate that the cost of an asset may
be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows associated
with the asset would be compared to the carrying amount to determine if a write-
down to market value is required. Prior to the adoption of SFAS 121, the
Partnership would not record an impairment in the value of properties unless
circumstances and surrounding facts dictated that the value of the property
could not possibly be recovered upon future sale. Prior to 1995, there were no
circumstances or facts that dictated the recording of an impairment in value.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
LOAN ORIGINATION FEES
Loan origination fees are capitalized and amortized over the life of the loan.
LEASE COMMISSIONS
Lease commissions which are paid to real estate brokers for locating tenants are
capitalized and amortized over the life of the lease.
RENTAL REVENUE
Rental revenue is recognized on a straight-line basis to the extent that rental
revenue is deemed collectible.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Partnership considers cash in
the bank and all highly liquid investments purchased with original maturities of
three months or less to be cash and cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1995
NOTE 1 - NATURE OF PARTNERSHIP
The Partnership began accepting subscriptions in October 1987 and closed the
offering on September 5, 1989. The Partnership began operations in September
1988.
Under the terms of the partnership agreement, the General Partners (West Coast
Realty Advisors, Inc., and W. Thomas Maudlin, Jr.) are entitled to cash
distributions from 10% to 15%. The General Partners are also entitled to net
income (loss) allocations varying from 1% to 15% in accordance with the
partnership agreement. Further, the General Partners will receive acquisition
fees for locating and negotiating the purchase of rental real estate, management
fees for operating the Partnership and a commission on the sale of the
partnership properties.
NOTE 2 - RENTAL REAL ESTATE
The Partnership owns the following two rental real estate properties, one
wholly-owned and the second, a 10% undivided interest.
Location (Property Name) Date Purchased Cost
Santa Ana, California November 17, 1989 $ 3,228,102
San Marcos, California January 9, 1990 311,878
The major categories of property are:
March 31, 1996 December 31, 1995
Land $519,777 $519,777
Building and Improvements 796,951 806,468
1,316,728 1,326,245
Less accumulated depreciation 48,720 40,800
Net rental real estate 1,268,008 1,285,445
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1995
(CONTINUED)
NOTE 2- RENTAL REAL ESTATE (CONTINUED)
A significant portion of the Partnership's rental revenue was earned from
tenants whose individual rents represent more than 10% of total rental revenue.
Specifically:
One tenant accounted for 50% in 1996;
Two tenants accounted for 14% and 41% in 1995.
In December 1994, the County of Orange (where the Santa Ana Building is located)
declared bankruptcy due to large losses in connection with unauthorized
derivative and bond investment activity. The County's problems had a trickle
down effect on the entire area as a large number of businesses dependent upon
County purchases went out of business or moved away. This put further pressure
on all commercial property owners to further lower rents to attract or retain
tenants. The Partenrship saw the negative cash flow situation on the Santa Ana
Building worsen as a result of these problems.
In December 1995, the property tax assessment on the Santa Ana, California
office building was significantly reduced. At that time, the Partnership
determined that the total expected future cash flows from operations and
disposition of the property are less than the carrying value of the property.
Therefore the property was deemed to be impaired. As a result, an impairment
loss of $1,912,727 was recorded, measured as the amount by which the carrying
amount of the asset exceeded its fair value, less costs to sell. Fair value was
determined based on comparable sales. The Partnership intends to continue to
annually assess the carrying values of its long-lived assets.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1995
(CONTINUED)
NOTE 3 - NOTE PAYABLE
The Partnership has a 9.75% promissory note payable secured by a Deed of Trust.
This note is due January 1, 2000, and provides significant prepayment penalties.
Payments are made in monthly installments of $15,088 including principal and
interest. The outstanding balance is $1,689,309 and $1,676,385 at March 31,
1996 and December 31, 1995. The balance of the note increased during the
quarter due to the lender allowing the Partnership to defer making the January
1996 payment and adding the payment to the balance of the note.
The carrying amount is a reasonable estimate of fair value of notes payable
because the interest rates approximate the borrowing rates currently available
for mortgage loans with similar terms and average maturities.
The aggregate annual future maturities at March 31, 1996 are as follows:
Amount
1996 $ 29,735
1997 20,129
1998 22,182
1999 24,443
2000 1,592,820
Total $1,689,309
NOTE 4 - RELATED PARTY TRANSACTIONS
(a) For administrative services rendered by the corporate General
Partner, in accordance with the partnership agreement, the Partnership incurred
$3,000 for the quarters ended March 31, 1996 and March 31, 1995 for these
services.
(b) Property management fees incurred in accordance with the partnership
agreement with West Coast Realty Management, Inc., an affiliate of the corporate
General Partner, totaled $2,633 for the quarter ended March 31, 1996, and $2,299
for the quarter ended March 31, 1995.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1995
(CONTINUED)
NOTE 4 - RELATED PARTY TRANSACTIONS (CONTINUED)
(c) During the year ended December 31, 1990, the Partnership, in a joint
venture with Associated Planners Realty Income Fund (an affiliate), purchased a
one-story office building located in San Marcos, California (Note 2). The
acquisition was paid for entirely in cash totaling $3,119,000 of which $311,900
was provided by the Partnership and $2,807,100 by Associated Planners Realty
Income Fund. The Partnership owns a 10% interest in this joint venture.
(d) The Partnership has a note payable to a General Partner of $150,000
at December 31, 1995 and March 31, 1996. The note outstanding bears interest of
7.5% and is payable in equal installments of principal and interest amortized
over a 10 year period, with all remaining unpaid interest and principal due on
May 1, 1997. Accrued interest payable on the note was $99,375 and $88,125 as
of March 31, 1996 and 1995.
NOTE 5 - NET LOSS AND CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT
The Net Loss per Limited Partnership Unit was computed in accordance with the
partnership agreement using the weighted average number of outstanding Limited
Partnership Units of 2,061 for 1996 and 1995.
No distributions were made in 1996 or 1995.
NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS
Statements of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of"
(SFAS No. 121) issued by the Financial Accounting Standards Board (FASB) is
effective for financial statements for fiscal years beginning after December 15,
1995. The new standard establishes new guidelines regarding when impairment
losses on long-lived assets, which include plant and equipment, and certain
identifiable intangible assets, should be recognized and how impairment losses
should be measured. The Partnership has elected the early adoption of SFAS No.
121. An impairment loss of $1,912,727 was recorded in the statement of loss for
the year ended December 31, 1995.
Prior to adoption of SFAS 121, there were no facts or circumstances that
dictated the recordation of an impairment in value of the Santa Ana Property.
The effect of regional factors that affected the value of the Santa Ana property
did not become known to management until the finalization of the property tax
reassessment process in December 1995.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1995
(CONTINUED)
NOTE 7 - SUBSEQUENT EVENT - PARKCENTER OFFICE BUILDING FORECLOSURE
On March 4, 1996 the Partnership requested that the lender re-structure the loan
on the ParkCenter Office Building. On April 4, 1996, the Partnership received a
reply from the lender denying the request to modify the loan and also notified
the Partnership that an event of default had occurred under the deed of trust
securing the loan due to the Partnership's nonpayment of the March 1, 1996 loan
payment. The Partnership also did not make the loan payments due April 1, and
May 1, 1996.
It is anticipated that the lender will initiate foreclosure proceedings against
the property. Unless the lender is willing to modify the loan (and there is no
indication that the lender will do so), there is a substantial likelihood that
the Partnership's investment in the ParkCenter Office Building will be lost.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Associated Planners Realty Growth Fund (the "Partnership") was organized in
December 1986, under the California Revised Limited Partnership Act. The
Partnership began offering units for sale on October 20, 1987. As of December
31, 1989, the Partnership had raised $2,061,000 in gross capital contributions.
The Partnership netted approximately $1,820,000 after sales commissions and
syndication costs.
The Partnership was organized for the purpose of investing in, holding, and
managing improved, leveraged income-producing property, such as residential
property, office buildings, commercial buildings, industrial properties, and
shopping centers. The Partnership intends to own and operate such properties
for investment over an anticipated holding period of approximately five to ten
years.
The Partnership's principal investment objectives are to invest in rental real
estate properties which will:
(1) Preserve and protect the Partnership's invested capital;
(2) Provide for cash distributions from operations;
(3 Provide gains through potential appreciation; and
(4) Generate Federal income tax deductions so that during the early years
of property operations, a portion of cash distributions may be treated
as a return of capital for tax purposes and, therefore, may not
represent taxable income to the limited partners.
The ownership and operation of any income-producing real estate is subject to
those risks inherent in all real estate investments, including national and
local economic conditions, the supply and demand for similar types of
properties, competitive marketing conditions, zoning changes, possible casualty
losses, increases in real estate taxes, assessments, and operating expenses, as
well as others.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The Partnership is operated by West Coast Realty Advisors, Inc. ("WCRA") (the
corporate General Partner) and Mr. W. Thomas Maudlin Jr. (an individual General
Partner), collectively the "General Partner," subject to the terms of the
Amended and Restated Agreement of Limited Partnership. The Partnership has no
employees, and all administrative services are provided by WCRA, the corporate
General Partner.
LIQUIDITY AND CAPITAL RESOURCES
Due to the recurring losses from operations and a net capital deficiency of
$800,058 at December 31, 1995, the Partnership's independent certified public
accountants have included an explanatory paragraph in their report at December
31, 1995 stating that these factors raise substantial doubt as to Partnership
ability to continue as a going concern.
From 1992 to 1994, the overall operations of the Partnership gradually improved;
however, the Partnership continued to generate net losses and negative cash
flows. (These negative cash flows first started appearing in calendar 1991).
For example, the net loss for 1993 of $123,357 was $17,737 (13%) less than the
$141,094 net loss for 1992, while the negative cash flow (net loss excluding
depreciation and amortization) dropped from $70,738 to $54,276, a $16,462 (23%)
decrease. Progress continued in 1994, with the net loss of $115,143 that year
being $8,214 (7%) less than that for 1993, and the negative cash flow dropping
to $47,779, a $6,497 (12%) decrease from 1993's level. Despite these
improvements, the fact remained that the Partnership's operations were still
insufficient to support the Company without cooperation from the General Partner
in deferring collection of various management fees, interest expense, and
overhead cost allocations. As of March 31, 1996, the amount payable to the
General Partner and its affiliates for deferred fees, overhead expense
allocations, cash advances, and interest on those advances, was $211,060.
The Partnership hopes to sell the Santa Ana property when conditions, at a
minimum, would result in the full payment of the outstanding debt on the
property. At this time, those conditions are not being met. In the absence of
an impairment in the value of the property, foreclosure by the lender is
inevitable.
1995 was a turning point in terms of the viability of the Partnership. Although
the general economy in which the Santa Ana building is located was generally
poor from 1990 to 1994, the operations of the Partnership's building were still
somewhat stable (if not overly profitable) as explained above. However, in
December of 1994, the County of Orange (in which the Santa Ana Building is
located) declared bankruptcy due to large losses in connection with unauthorized
derivative and bond investment activity. The County's problems had a trickle
down effect on the entire area as a large number of small businesses dependent
upon County purchases went out of business or moved away. This put further
pressure on all commercial property owners to further lower rents to attract or
retain tenants. The Partnership saw the negative cash flow situation on
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
the Santa Ana building worsen as a result of these problems. On July 31, 1995,
at the Partnership's request, the holder of the first deed of trust on the
Santa Ana property agreed to provide relief to the Partnership by deferring
collection of debt payments due on the loan for September 1995 to January 1996.
The General Partner used this opportunity to improve the liquidity of the
Partnership, and to allow for the implementation of necessary capital
improvements to the Property. However, the relief offered by the lender in the
latter part of 1995 and the first month of 1996 was not sufficient to improve
the operating results for the Partnership. Largely as a result of the economic
problems in Orange County, the net loss from operations for the Partnership
increased to $189,168 a $74,025 (64%) increase in loss. Cash basis loss (net
loss from operations less depreciation expense) increased from $47,779 to
$122,772 - a $74,993 (157%) increase. In addition, during the fourth quarter,
despite the Partnership's best efforts to enhance the value of the property with
tenant improvements and greater occupancy, it was determined that the
surrounding economic conditions of the area dictated a thorough review of the
carrying value of the property. Using recent comparative building sales data
for the general area in which the building is located, it was determined that a
$1,912,727 impairment loss in the value of the building should be recorded on
the Partnership's Statement of Loss for 1995. This loss is unrealized, and thus
does not flow through to the partners for tax purposes, and may not flow
through until the Park Center Office Building is sold or otherwise disposed of.
This allowance, in itself, does not directly affect the liquidity of the
Partnership, which as previously set forth, is extremely poor. This impairment
in value means that the equity of the Partnership is now a deficit, and the sale
of the Santa Ana property would probably result in less proceeds than what is
currently outstanding on the first deed of trust attached to the building.
In February 1996, the Partnership failed to make the first payment due
following the debt relief period granted by the holder of the first deed of
trust. The Partnership again approached the holder of the first deed of trust
to attempt to obtain additional debt relief. The holder of the note declined to
provide additional relief, and demanded immediate payment of the installment due
to prevent immediate foreclosure of the property. The Partnership met this
demand and default provisions were not instituted. The General Partner has made
no commitment at this time concerning the availability of further cash advances
to the Partnership. The Partnership will continue to seek relief from the debt
holder, while at the same time seeking to enhance the value of the property by
increasing occupancy and contracting long term leases. Failure to obtain
additional funding from the General Partner, relief from the lender, or
significantly improved operations could result in the eventual loss of the
building through foreclosure proceedings.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Management intends upon increasing occupancy at the Santa Ana property by
offering concessions to potential long term tennants (such as free rent, no
security deposit requirement, generous leasehold improvement allowances) and by
offering to pay local brokers a higher commission for bringing in qualified,
long-term tennants. Although these plans by the Company are intended to enable
it to operate in such a manner to overcome its financial difficulties, there is
still no assurance that these plans will be successful in achieving that goal.
Thus, there is no assurance that the Company will be able to operate as a going
concern within the next twelve months, or even beyond that period.
On March 4, 1996 the Partnership requested that the lender re-structure the loan
on the ParkCenter Office Building. On April 4, 1996, the Partnership received a
reply from the lender denying the request to modify the loan and also notified
the Partnership that an event of default had occurred under the deed of trust
securing the loan due to the Partnership's nonpayment of the March 1, 1996 loan
payment. The Partnership also did not make the loan payments due April 1, and
May 1, 1996.
It is anticipated that the lender will initiate foreclosure proceedings against
the property. Unless the lender is willing to modify the loan (and there is no
indication that the lender will do so), there is a substantial likelihood that
the Partnership's investment in the ParkCenter Office Building will be lost.
Due to the large amount of vacancies, general economic problems in the area, and
an increase in maintenance and repair expenses at the Santa Ana Property, the 3%
reserve remained depleted during the quarter ended March 31, 1996. In addition,
the General Partner has made loans to the Partnership and deferred collection of
miscellaneous amounts owed to it by the Partnership. For this reason, there
were no distributions made to the limited partners during the quarter ended
March 31, 1996. It is the Partnership's intention to eliminate partner
distributions until such time as the reserves are built back up to acceptable
levels and various deferred liabilities due to the Advisor and its affiliates
are paid. It is uncertain at this point how long it will take the Partnership
to rebuild cash reserves and operate profitability on a cash basis; however, the
possibility of partners receiving future cash distributions or a significant
portion of their original investment back is considered remote. The
Partnership's ability to meet cash requirements in the short-run is dependent
upon the willingness of the General Partner and its affiliates to defer
collection of amounts due for property management fees and overhead allocations,
advance cash as needed for ongoing operating expenses, and the stabilization of
the tenant base and rental rates at the Santa Ana property. The ability of the
General Partner to make advances to the Partnership is also dependent upon the
liquidity of the Parent company of the General Partner. The General Partner is
a wholly owned subsidiary of Associated Financial Group (the "Parent"), which
consolidated, as of December 31, 1995, had $6.2 million in assets, $2.1 million
in cash and cash equivalents, and $3.3 million in equity, and had net income of
$.2 million for the year ended December 31, 1995. In addition, the General
Partner must be willing to make advances, and as of March 31, 1996, the General
Partner has no future commitments to do so.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
In the long run, the Partnership's cash requirements will be further affected by
the need to pay off the Deed of Trust that secures the Santa Ana property. This
note is due on January 1, 2000, and is projected to have a balance of
approximately $1,592,820 at that time. A sale or refinance of the property will
be necessary prior to that date.
The Partnership has a 10% interest in a building in San Marcos, California. In
February 1995, the building was leased to a tenant at a rate 70% of the previous
rental rate. Because the Partnership has such a small percentage interest in
this property, the decrease in rent resulted in only a $750 per month decrease
in cash flow. This particular decrease is not expected to have a material
impact on operations.
The San Marcos property has no debt financing and there are currently no plans
by the Partnership or Associated Planners Realty Income Fund to seek financing
on that jointly owned property. In the short-term, the fact that this property
has a quality tenant and operates under a triple net lease, allows the
Partnership to collect a nominal amount of cash from the operations of this
property. In the long-run, the Partnership expects to benefit from the sale of
this property when it is sold. The General Partner anticipates that the San
Marcos property will be sold prior to the year 2000.
The condition of the properties is relatively good, therefore there are no
unusually large capital improvements or repair costs that would severely deplete
the cash reserves.
The Tax Reform Acts of 1986 and 1987 and the Revenue Reconciliation Acts of 1990
and 1993 did not have a material impact on the Partnership's operations.
During the years of the Partnership's existence, inflationary pressures in the
U.S. economy have been minimal, and this has been consistent with the experience
of the Partnership in operating rental real estate in California. The
Partnership has several clauses in its leases with some of its properties'
tenants that will help alleviate some of the negative impact of inflation.
However, the lack of inflation is hurting the Partnership due to the stagnation
of office rental rates.
There are currently no plans for any material renovation, improvement or further
development of the properties.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
RESULTS OF OPERATIONS-QUARTER ENDED MARCH 31, 1996
Operations for the quarter ended March 31, 1996 and 1995 reflect full quarters
of rental activities for the Partnership's properties. For the quarter ended
March 31, 1996, the return on funds invested in property was -1.8% vs. -.2% in
the quarter ended March 31, 1995.
Rental revenue increased $1,085 (2%) from March 31, 1996 vs. March 31, 1995, as
a result of timing differences in the recognition of revenue. Interest expense
increased $4,668 (11%) due to a increase in the monthly mortgage payments on the
note payable that is attributable to the prior six months deferral of the
mortgage. However, the provisions of the debt relief did not require an
increase in the use of cash as a result of this. Operating expenses increased
$15,315 (83.6%) due to increased maintenance expenses incurred in order to
improve the appearance of the Santa Ana Building.
The cash basis loss for the quarter ended March 31, 1996 was $38,066 vs. $22,113
for the quarter ended March 31, 1995. This loss continued to push the
Partnership close to default on its ability to meet its current loan and
property tax obligations. As previously discussed, continual support from the
lender and/or the General Partner and its affiliates will be necessary to avoid
foreclosure of the Partnership's primary real estate asset.
During the quarter ended March 31, 1996, $9,508 in cash was provided by
operating activities. This resulted from an increase in accounts payable of
$2,132 (primarily resulting from an increase in the deferral of payment of
amounts due to the General Partner and affiliates) plus $18,253 decrease in
receivables and other assets (primarily due to the write-off of prepaid
insurance and amortization of repairs and maintenance costs incurred in 1995)
plus $29,479 increase in accrued interest on notes payable (resulting from the
relief of the Partnership received in making payments on the debt), offset by
the net cash basis loss of $38,066 from operations (net loss plus depreciation
expense) and the $2,290 decrease in security deposits and prepaid rent, (due to
a security deposit refund to a vacated tenant during the quarter). There were
no investing activities during the quarter by the Partnership; in recent years,
some cash had been used for capital improvements to the properties. Financing
activities resulted in a use of cash of $1,467 in connection with the
Partnership's debt payment on the Santa Ana Building. Cash increased a net
$8,041 as a result of the net cash provided by operating activities. As a
result, the net cash at the end of the quarter was $8,041.
The number of limited partnership units outstanding remained at 2,061.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
PART II
O T H E R I N F O R M A T I O N
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) Information required under this section has been included in the
financial statements.
(b) Reports on Form 8-K
None
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
S I G N A T U R E S
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.
ASSOCIATED PLANNERS REALTY GROWTH FUND
A California Limited Partnership
(Registrant)
May 15, 1996 By: WEST COAST REALTY ADVISORS, INC.
A California Corporation,
A General Partner
William T. Haas
Director and Executive Vice President/Secretary
May 15, 1996 Michael G. Clark
Vice President/Treasurer