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 SEPTEMBER 30, 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 u No
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 1. FINANCIAL STATEMENTS
In the opinion of the General Partner of Associated Planners Realty
Growth Fund (the "Partnership"), all adjustments necessary for a fair
presentation of the Partnership's results for the three and nine months
ended September 30, 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.
BALANCE SHEETS
SEPTEMBER 30, 1996 (UNAUDITED) AND DECEMBER 31, 1995
SEPTEMBER 30, DECEMBER 31,
1996 1995
ASSETS
RENTAL REAL ESTATE, net of
accumulated depreciation (Notes 2 & 3) $265,948 $1,285,445
CASH AND CASH EQUIVALENTS 3,282 ---
OTHER RECEIVABLES ---- 26,329
OTHER ASSETS 1,102 16,289
$270,332 $1,328,063
LIABILITIES AND PARTNERS' EQUITY
PAYABLE TO AFFILIATES (Note 4 (e)) $215,073 $240,095
BANK OVERDRAFT --- 328
OTHER ACCRUED LIABILITIES 69,358 35,336
NOTE PAYABLE - RELATED PARTY (Note 4(d)) 150,000 150,000
SECURITY DEPOSIT AND PREPAID RENT 2,032 25,977
NOTE PAYABLE (Note 3) --- 1,676,385
TOTAL LIABILITIES 436,463 2,128,121
COMMITMENTS
PARTNERS' EQUITY:
Limited Partner:
$1,000 stated value per unit; authorized
10,000 units; issued - 2,061 (156,504) (784,092)
General Partner: (9,627) (15,966)
TOTAL PARTNERS EQUITY (166,131) (800,058)
$270,332 $1,328,063
[FN]
See accompanying notes to financial statements.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
LIMITED PARTNERS GENERAL
TOTAL UNITS AMOUNT PARTNER
BALANCE, DECEMBER 31, 1995 $(800,058) 2,061 $(784,092) $(15,966)
Net income 633,927 --- 627,588 6,339
BALANCE, SEPTEMBER 30, 1996 $(166,131) 2,061 $(156,504) $(9,627)
NINE MONTHS ENDED SEPTEMBER 30, 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 (118,830) --- (117,642) (1,188)
BALANCE, SEPTEMBER 30, 1995 $1,183,007 2,061 $1,179,143 $3,864
[FN]
See accompanying notes to financial statements.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
THREE THREE MONTHS NINE NINE MONTHS
MONTHS ENDED MONTHS ENDED
ENDED SEPTEMBER ENDED SEPTEMBER
SEPTEMBER 30, 1995 SEPTEMBER 30, 1995
30, 1996 30, 1996
REVENUES:
Rental $49,700 $53,564 $168,297 $174,879
Gain on ParkCenter Repossession 686,628 --- 686,628 ---
Interest 82 15 177 107
736,410 53,579 855,102 174,986
COSTS AND EXPENSES:
Operating 22,973 29,710 99,002 81,061
Property taxes (1,294) 4,495 3,926 13,485
Property management fees(Note 4(b)) 2,421 2,702 8,171 7,679
Interest expense (waived) (85,145) --- (85,145) ---
Interest expense 29,766 29,946 144,689 113,922
General and administrative 8,311 8,836 28,842 27,872
Depreciation and amortization 5,850 16,599 21,690 49,797
(17,118) 92,288 221,175 293,816
NET INCOME (LOSS) $753,528 $(38,709) $633,927 $(118,830)
NET INCOME (LOSS) PER $361.96 $(18.59) $304.51 $(57.08)
LIMITED PARTNERSHIP UNIT
[FN]
See accompanying notes to financial statements.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER SEPTEMBER
30, 30,
1996 1995
Cash flows from operating activities:
Net (loss) Income $633,927 $(118,830)
Adjustments to reconcile net (loss) income
to net cash (used in) operating activities:
Depreciation and amortization 21,690 49,797
Increase (decrease) from changes in:
Other receivables and assets 51,033 (10,304)
Accounts payable 8,672 62,016
Security deposits and prepaid rent (23,945) 9,061
Net cash provided by (used in) operating
activities 691,377 (8,260)
Cash flows from investing activities
Disposition of property (net) 988,290 ---
Net cash provided by investing activities 988,290 ---
Cash flows from financing activities:
Addition to (payments on) note payable (1,467) 18,329
Forgiveness of notes payable (1,674,918) ---
Net cash provided by (used in) financing
activities (1,676,385) 18,329
Net increase in cash and cash equivalents 3,282 10,069
Cash and cash equivalents at beginning of
period --- 5,657
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,282 $15,726
[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 $1,200,000 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 nine months ended September 30,
1996 have been prepared on a going concern basis which contemplates
the liquidation of assets and the settlement of liabilities and commitments
in the normal course of business. The Partnership has suffered recurring
losses from operations and has a net capital deficiency of $166,131 at
September 30, 1996.
NEW ACCOUNTING PRONOUNCEMENTS
Statement 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. At the beginning of the fourth
quarter of 1995, the Partnership elected the early adoption of SFAS NO. 121.
Prior to the adoption of SFAS No. 121, real estate was carried at the lower
of cost of net realizable value.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
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.
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 contigent 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 AND NINE MONTHS ENDED SEPTEMBER 30, 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 or 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 rental real estate property, a 10%
undivided interest.
Location (Property Name) Date Purchased Original Cost
San Marcos, California January 9, 1990 $311,878
The major categories of property are:
September 30, 1996 December 31, 1995
Land $80,835 $519,777
Building and Improvements 231,043 806,468
311,878 1,326,245
Less accumulated depreciation 45,930 40,800
Net rental real estate 265,948 1,285,445
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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:
One tenant accounted for 50% in 1996;
Two tenants accounted for 14% and 41%, respectively, 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 Partnership 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. It is the intention of the General
Partner to sell the Santa Ana property when it is reasonably feasible. 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.
On August 16, 1996, the Guardian Life Insurance Company of America
("Guardian"), the lender, took possession of the ParkCenter Office Building
(the "Building"), located in Santa Ana, California. This transaction was
consummated through the transfer of title in a transaction commonly
known as "deed-in-lieu-of-foreclosure". The Partnership had failed to
make mortgage payments (due on a loan to Guardian) since March 1, 1996.
Guardian recorded a Notice of Default with the County of Orange on
June 19, 1996 with respect to the Deed of Trust on the property. As a
result of the arms-length negotiations, a foreclosure of the property by the
lender was averted. The balance of accrued interest and principal at
the time of the transfer was $1,771,785. Security deposits held by the
Partnership, totaling $18,527, were retained by the Partnership as part of
the settlement of the transfer.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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 zero and $1,676,385 at
September 30, 1996 and December 31, 1995, respectively.
On August 16, 1996, the Guardian Life Insurance Company of America
("Guardian"), the lender, took possession of the ParkCenter Office Building
(the "Building"), located in Santa Ana, California. This transaction was
consummated through the transfer of title in a transaction commonly known as
"deed-in-lieu-of-foreclosure". The Partnership had failed to make mortgage
payments (due on a loan to Guardian) since March 1, 1996. Guardian recorded a
Notice of Default with the County of Orange on June 19, 1996 with respect to
the Deed of Trust on the property. As a result of the arms-length
negotiations, a foreclosure of the property by the lender was averted. The
balance of accrued interest and principal at the time of the transfer was
$1,771,785. Security deposits held by the Partnership, totaling $18,527,
were retained by the Partnership as part of the settlement of the transfer.
NOTE 4 - RELATED PARTY TRANSACTIONS
(a) For administrative services rendered by the corporate
General Partner, in accordance with the partnership agreement, the
Partnership incurred $9,000 for the nine months ended September 30, 1996
and September 30, 1995 and $3,000 for the quarter ending September 30, 1996
and 1995 for these services. These costs were unpaid as of September 30, 1996.
(b) Property management fees incurred in accordance with the
partnership agreement with West Coast Realty Management, Inc., ("WCRM") an
affiliate of the corporate General Partner, totaled $8,171 for the nine
months ended September 30, 1996, and $7,679 for the nine months ended
September 30, 1995, $2,421 for the three months ended September 30, 1996 and
$2,702 for the three months ended September 30, 1995. These costs were
unpaid as of September 30, 1996.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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 (Note 7).
(d) The Partnership has a note payable to a General Partner of $150,000
at December 31, 1995 and September 30, 1996. The note 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 $105,000
and $93,750 as of September 30, 1996 and 1995, respectively.
(e) Related party accounts payables are as follows:
SEPTEMBER 30, 1996 DECEMBER 31, 1995
West Coast Realty Advisors 125,846 108,408
West Coast Realty Management 89,227 81,056
Associated Financial Group, Inc. --- 50,631
$215,073 $240,095
The General Partner, West Coast Realty Advisors, had deferred collection of
fees and made cash advances to the Partnership, in order to allow the
Partnership to continue operating the Building, even though the combination
of low rental rates and high occupancy, was making it difficult for the
Partnership to meet its obligations under the mortgage obligation to
Guardian, and remain solvent. In the General Partner's opinion, the
long-term outlook for the property was not positive enough to justify the
continued advance of funds to the Partnership. The General Partner does
not expect to collect the majority of the deferred fees and cash advances
made, in prior periods. A decision on the disposition of those deferred
fees will be made at a later date.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1995
(CONTINUED)
NOTE 5 - NET INCOME (LOSS) AND CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT
The Net Income (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 - FOURTH QUARTER ADJUSTMENT - 1995
In the fourth quarter of 1995 the Partnership recorded an adjustment to the
carrying value of rental real estate to recognize an impairment loss of
$1,912,727 as discussed in Note 2.
NOTE 7 - SUBSEQUENT EVENTS
On November 1, 1996, Associated Planners Realty Growth Fund ("Growth Fund")
sold its remaining real estate asset to Associated Planners Realty Income Fund
("Income Fund"). This asset consisted of the 10% interest that Growth Fund
had in an office building located in San Marcos, California. This sale was
done in order to allow Growth Fund to liquidate the partnership within the
calendar 1996 year, and because the single 10% interest in this remaining
property would not be sufficient to support the operating expense of
maintaining the Partnership.
Growth Fund received $185,968 on November 2, 1996 for its interest in the San
Marcos property. This amount consisted of $188,000 for the property itself,
less $2,032 for its share of a cash security deposit from the current tenant
that Growth Fund retained. The cost basis at the time of transfer was
$266,518, resulting in a $78,518 capital loss for Growth Fund as a result of
the sale. There was no debt in connection with the property.
It is the intention of the General Partner to use the proceeds from the sale
to pay a portion of the liabilities that Growth Fund owes to the General
Partner and its affiliates, and the remainder to the limited partners as a
final distribution and liquidation of the Partnership. This payment is
expected to be made in the latter half of November 1996.
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 intention was 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 were 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
In reading the discussion of operations, the reader should understand that
the Partnership has a 100% interest in an office building in Santa Ana,
California, (through August 1996) and a 10% interest in a commercial building
in San Marcos, California. The results of the Partnership's operations have
been dominated by the results of operations for the Santa Ana building;
thus, the discussion of the Partnership's results of operations will
emphasize the operations of that building.
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 September 30, 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 $215,073.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
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 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 from 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 plus
depreciation expense) increased from $47,779 to $122,772 -- a $74,993 (157%)
increase. In addition, during the fourth quarter of 1995, 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 was unrealized in 1995, and thus did not flow through
to the partners for tax purposes in 1995. This allowance, in itself,
did not directly affect the liquidity of the Partnership, which as
previously set forth, is extremely poor.
ASSOCIATED PLANNERS REALTY GROWTH FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
This impairment in value meant that the equity of the Partnership was now at a
deficit, and the sale of the Santa Ana property would probably result in less
proceeds than what was 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 made no commitment concerning
the availability of further cash advances to the Partnership. The
Partnership continued 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.
On March 4, 1996 the Partnership requested that the lender re-structure the
loan on the Park Center 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, May 1, June 1, July 1 and August 1, 1996.
On August 16, 1996, the Guardian Life Insurance Company of America
("Guardian"), the lender, took possession of the ParkCenter Office Building
(the "Building"), located in Santa Ana, California. This transaction was
consummated through the transfer of title in a transaction commonly known
as "deed-in-lieu-of-foreclosure". The Partnership had failed to make mortgage
payments (due on a loan to Guardian) since March 1, 1996. Guardian recorded
a Notice of Default with the County of Orange on June 19, 1996 with respect
to the Deed of Trust on the property. As a result of the arms-length
negotiations, a foreclosure of the property by the lender was averted. The
balance of accrued interest and principal at the time of the transfer was
$1,771,785. Security deposits held by the Partnership, totaling $18,527,
were retained by the Partnership as part of the settlement of the transfer.
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 uses cash as its primary measure of a partnership's liquidity.
The amount of cash that represents adequate liquidity for a real estate
limited partnership depends on several factors. Among them are:
1. Relative risk of the partnership;
2. Condition of the partnership's properties;
3. Time in the partnership's life cycle (e.g., money-raising,
acquisition, operating or disposing phase) and
4. Partner distributions.
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 nine months ended September 30,
1996. For this reason, there were no distributions made to the limited
partners during the nine months ended September 30, 1996.
The General Partner, West Coast Realty Advisors, had deferred collection of
fees and made cash advances to the Partnership, in order to allow the
Partnership to continue operating the Building, even though the combination
of low rental rates and high occupancy, was making it difficult for the
Partnership to meet its obligations under the mortgage obligation to
Guardian, and remain solvent. In the General Partner's opinion, the
long-term outlook for the property was not positive enough to justify the
continued advance of funds to the Partnership. The General Partner does
not expect to collect the majority of the deferred fees and cash advances
made, in prior periods. A decision on the disposition of those deferred
fees will be made at a later date.
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 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 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 Partnership's remaining property (10% interest
in the San Marcos property).
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-NINE MONTHS ENDED SEPTEMBER 30, 1996
Operations for the nine months ended September 30, 1996 and 1995 reflect
eight months of rental activities for the ParkCenter property and nine months
for the 10% interest in the San Marcos property. For the nine months
ended September 30, 1996, the return on funds invested in property
was -2.4% vs. -.2% in the nine months ended September 30, 1995.
Rental revenue decreased $6,582 (3.8%) for the nine months ending
September 30, 1996 vs. September 30, 1995, as a result of only eight
months of rental operations being recognized for calendar year 1996 on
the ParkCenter property, compared to nine months of operating
activities for calendar year 1995. Interest expense increased $30,767
(27%) due additional interest and penalties being accrued for during the
nine months ended September 30, 1996 plus the September 1995 mortgage
payment on the ParkCenter property being deferred. Operating expenses
increased $17,941 (22.1%) due to increased maintenance expenses
incurred in order to improve the appearance of the Santa Ana Building.
The cash basis loss for the nine months ended September 30, 1996 was
$31,011 (net income plus depreciation expense less gain on repossession)
vs. a cash basis loss of $69,033 for the nine months ended
September 30, 1995. This $38,022 decrease in cash basis loss from
September 30, 1995 to September 30, 1996 is primarily attributable to
interest expense of $85,145 waived by the lender of the ParkCenter
property less $30,767 in additional interest expense paid during the nine
months ended September 30, 1996 compared to the nine months ended
September 30, 1995.
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-NINE MONTHS ENDED SEPTEMBER 30, 1996 (CONT.)
During the nine months ended September 30, 1996, $691,377 in cash was provided
by operating activities. This resulted primarily from a $686,628 gain on
the repossession of the ParkCenter Office property plus a $51,033
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 $8,672 increase in accounts payable (due
primarily to the general partner deferring operating costs and property
management fees), offset by a cash basis loss of $31,011 from operations
(net income plus depreciation expense less gain on repossession), and a
$23,945 decrease in security deposits and prepaid rent, (due to a security
deposit refund paid to a vacating tenant during the nine months ending
September 30, 1996). In contrast, during the nine months ending
September 30, 1995, $8,260 was used in operating activities. This resulted
primarily cash basis loss of $69,033, plus a $10,304 increase in other assets
(primarily due to an increase in prepaid expense balances), offset by
a $62,016 increase in accounts payable (due to amounts due to
third-party vendors and affiliates which were postponed until later
periods) and a $9,061 increase in security deposits and prepaid rents.
During the nine months ending September 30, 1996, $988,290 was provided by
investing activities, due to the disposition of the ParkCenter Office
Building in August 1996. In contrast, there were no investing activities
during the nine months ending September 30, 1995. For the nine months
ending September 30, 1996, financing activities used $1,676,385 in cash
resources. This resulted primarily from $1,674,918 in the forgiveness of
debt on the ParkCenter Office Building, plus $1,467 in debt payments on
the Santa Ana Building. In contrast, $18,329 was provided by financing
activities for the nine months ended September 30, 1995 in connection with
debt payments on the Santa Ana Building. Cash increased a net $3,282 as a
result of the net cash provided by operating activities for the nine months
ended September 30, 1996.
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 statement
(b) Reports on Form 8-K
- Filed 8-K Report dated November 11, 1996
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)
November 13, 1996 By: WEST COAST REALTY ADVISORS, INC.
A California Corporation,
A General Partner
Neal E. Nakagiri
Vice President/Secretary
November 13, 1996 Michael G. Clark
Vice President/Treasurer