FORM 10-K
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _________ to
_________.
Commission File number 0-15755
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FJS PROPERTIES FUND I, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 13-3252067
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Airport Road, Lakewood, NJ 08701
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 732-363-0666
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Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
NONE N/A
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Securities registered pursuant to Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
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(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. N/A No public market exists.
Documents Incorporated by Reference
Prospectus of Registrant, dated June 10, 1985, as supplemented by Supplement
dated November 7, 1985, filed pursuant to Rule 424 under the Securities Act of
1933. Annual Report on Form 10-K of Registrant for the fiscal years ended
December 31, 1986 through December 31, 2000, filed pursuant to section 13 or
15(d) of the Securities Exchange Act of 1934, but each only to the extent
expressly incorporated by reference in Parts I, II and III.
PART I
Item 1. Business
Registrant is a Delaware limited partnership formed as of October 5,
1984. FJS Properties, Inc., a Delaware corporation and an affiliate of First
Jersey Securities, Inc. ("First Jersey" or the "Underwriter"), is the general
partner ("General Partner") of the Registrant.
Reference is made to the Prospectus (the "Prospectus") of Registrant
dated June 10, 1985, as supplemented by a Supplement (the "Supplement"), dated
November 7, 1985, which have been filed pursuant to rule 424 under the
Securities Act of 1933, as amended, each of which is incorporated herein by
reference. The Prospectus was filed as part of Registrant's Registration
Statement on Form S-11, pursuant to which 100,000 Units of Limited Partnership
Interest (the "Units") were registered. On May 1, 1986, the sole closing of the
Units, the Registrant received $8,391,500 in Gross Proceeds from the sale of
16,783 Units to investors. Registrant paid $671,320 in underwriting commissions
to First Jersey and a total of $419,575 in organization and offering expenses to
the General Partner.
Registrant owns and operates one 312 unit garden apartment complex,
the Pavilion Apartments ("Pavilion"), located in West Palm Beach, Florida. The
description of the acquisition is set forth in the Prospectus under "Property
Acquisitions" and is incorporated herein by reference. Registrant will not
invest in or acquire any other properties.
For the years ended December 31, 2001, 2000 and 1999, revenues from
Pavilion accounted for approximately 99.8%, 99.6% and 99.4% respectively of
Registrant's gross revenues.
Competition
The real estate business is highly competitive and Pavilion has
active competition from similar properties in the vicinity. Registrant will also
experience competition for potential buyers at such time as it seeks to sell
Pavilion.
Employees
Services are performed by Registrant's employees at Pavilion by nine
full-time and one part-time on site personnel. The personnel are under the
direct supervision of a local unaffiliated management company which in turn is
supervised by the General Partner. Salaries for such on-site personnel are paid
by Registrant or by the local unaffiliated management company from fees received
from Registrant. The General Partner also provides certain supervisory property
management services to Registrant under a management agreement.
Page 1
Tax Legislation
The Tax Reform Act of 1986 (the "1986 Act"), which was enacted on
October 22, 1986, requires that losses from "passive activities" (which includes
any rental activity) may only offset income from "passive activities" Passive
losses in excess of passive income are suspended and are carried over to future
years when they may be deducted against passive income generated by the
Partnership in such year (including gain recognized on the sale of the
Partnership's assets) or against passive income derived by Unitholders from
other sources.
The Revenue Act of 1987 (the "1987 Act") was enacted on December 22,
1987 and provides certain adverse tax consequences for "publicly traded
partnerships." A "publicly traded partnership" is defined as a partnership whose
interests are traded on an established securities market or readily tradable on
a secondary market (or the substantial equivalent thereof). Such a partnership
will be taxed as a corporation (unless at least 90% of its gross income is
derived from certain passive sources, such as real property rents, dividends or
interest) and each tax-exempt entity acquiring an interest in any such
partnership after December 17, 1987 will have all of its share of the
partnership's income attributable to interests acquired after such date treated
as unrelated business income. In addition, the income from such a partnership
would be treated as other than passive income, and losses from any such
partnership could only be offset by income from the same partnership.
The Revenue Act of 1987 adopted provisions which have an adverse
impact on investors in a "publicly traded partnership." A "publicly traded
partnership" is a partnership whose interests are traded on an established
securities market or readily tradable on a secondary market (or the substantial
equivalent thereof). If the Partnership were classified as such, (i) it may be
taxed as a corporation, (ii) qualified plans and other entities exempt from
taxation acquiring interests in the Partnership after December 17, 1987 would
have to treat income derived from the Partnership as unrelated business income,
with the result that the limited partnership interests would be less attractive
to tax-exempt investors (and therefore could be less marketable) or (iii) income
derived from an investment in the Partnership would be treated as other than
passive income, in which case losses from the Partnership could only be offset
by income from the same partnership. The IRS has established alternative safe
harbors that allow interests in a partnership to be transferred or redeemed in
certain circumstances without causing the partnership to be characterized a
"publicly traded partnership." Interests in the Partnership are not listed or
quoted for trading on an established securities exchange. However, it is
possible that transfers of interests could occur in a secondary market in
sufficient amount and frequency to cause the Partnership to be treated as a
"publicly traded partnership." The Partnership has adopted a policy of
prohibiting transfers in secondary market transactions unless, notwithstanding
such transfers, the Partnership will satisfy at least one of the safe harbors.
Such a restriction could impair the ability of an investor to liquidate its
investment quickly. It is anticipated that such policy will remain in effect
until such time, if ever, as further clarification of the Revenue Act of 1987
permits the Partnership to lessen the scope of these restrictions. The General
Partner, if so authorized, will take such steps as are necessary, if any, to
prevent the reclassification of the Partnership as a "publicly traded
partnership."
Page 2
Item 2. Properties
The sole property owned and operated by Registrant is the Pavilion
Apartments (the "Project"), a 312 Unit garden apartment complex located at 401
Executive Center Drive, West Palm Beach, Florida. Registrant will not acquire or
invest in any other properties. Registrant acquired a 50% interest in the
Pavilion on December 31, 1984, and the remaining 50% on January 1, 1985. It owns
Pavilion in fee ownership, subject to a first mortgage.
Pavilion, constructed in 1972, is located on a 15 acre tract and
consists of 312 apartment units containing 286,500 square feet of rentable area
in 11 low-rise buildings. Rental units are available in one, two and three
bedroom plans. There are 108 one-bedroom apartments, 44 two- bedroom apartments
with one bath, 116 two-bedroom apartments with two baths, and 44 three- bedroom
apartments. Ground amenities include a heated swimming pool, lighted tennis
courts, basketball and shuffle-board courts, and a clubhouse with game room,
saunas, lounge and outdoor barbecues. An equipped children's playground is also
provided.
The apartments in the Project are available for rent to residential
tenants, generally under one year leases. No tenant occupies more than one
apartment in the Pavilion except for the West Palm Beach Recovery Center which
occupies 5 Units. Each of such units was leased at the then current market
rents. With substantially all tenants occupying their apartments under one year
leases, it is anticipated that leases for all apartments will expire each year.
The current rent schedule for leases is as follows:
Unit Size1 Monthly Rent2
1 BR/1B $589/$609
2 BR/1B $689/$709
2 BR/2B $709/$729
3 BR/2B $809/$829
In the opinion of the management of Registrant, the Project is
adequately covered by insurance.
First Mortgage: The existing first mortgage affecting the Project is held
of record by Greenwich Capital Financial Products, Inc., and serviced by
Washington Mutual FSB, Houston, Texas. As of December 31, 2001, the mortgage had
an unpaid principal balance of approximately $4,465,788. This mortgage was
closed on March 31, 1994, and refinanced the former first mortgage held by The
Bank of Tokyo. At that time, a new loan secured by a first mortgage on the
project was obtained from the Long Beach Bank, FSB, Orange, California, in the
amount of $5,000,000. This loan provides for a term of ten (10) years with an
interest rate of 9.75% per annum. The loan is
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1BR = Bedroom; B = Bathroom
2Range of rents/unit's rent varies depending on location of unit in the Project.
Page 3
repayable in equal monthly installments of $44,556.87 for principal and
interest, with a balloon payment due in March 2004. At maturity a balance of
approximately $4,215,000 will be due. The loan requires deposits with the lender
for real estate taxes, insurance premiums, a debt service reserve of one month's
payment, as well as deposits for replacement reserves for the project. These
deposits are held in interest bearing accounts for the benefit of Registrant.
The loan was not prepayable during the first five years of its term, and
thereafter is prepayable with payment of a penalty based upon a "rate
protection" formula for the lender. The loan requires consent of the holder to
the transfer or sale of the Pavilion Apartments and to certain transfers of
ownership interests in Registrant. For the complete terms and provisions of this
loan see Exhibits 10(m) through 10(s).
The following table sets forth the components of the Pavilion
Apartments upon which depreciation, for Federal Tax purposes, is taken:
Item Tax Basis Rate Method Life
Building $6,897,424 4% - 5% ACRS 18 yrs
Improvements $528,798 Fully SL 10 yrs
Depreciated
Improvements $717,772 3.6% MACRS 27.5 yrs
Improvements $86,492 1.6% - 2.8% MACRS 27.5 yrs
Improvements $60,815 0.2% - 1.3% MACRS 27.5 yrs
Furniture/Fixtures $1,048,378 Fully ACRS 5 yrs
Depreciated
Furniture/Fixtures $8,644 Fully MACRS 7 yrs
Depreciated
Furniture/Fixtures $8,896 4.46% MACRS 7 yrs
Furniture/Fixtures $10,336 8.93% MACRS 7 yrs
Furniture/Fixtures $183,398 11.52% MACRS 5 yrs
Furniture/Fixtures $140,786 19.2% MACRS 5 yrs
Furniture/Fixtures $171,376 32.0% MACRS 5 yrs
Furniture/Fixtures $151,818 20.0% MACRS 5 yrs
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Page 4
Ad Valorem Real Estate taxes for the 2001 calendar year were in the
amount of $175,303.10 which was based upon an assessed valuation of $7,000,000
and the following millage rates:
Taxing Authority: Millage
rate:
County 4.5500
School State 5.9350
School Local 2.6120
City of West Palm Beach 7.9500
So Fl Water Management Dist. 0.2840
So Fl Water Mgmt - Okee Basin 0.3130
Children's Services Council 0.5703
F.I.N.D. 0.0385
PBC Health Care District 1.1500
Everglades Construction Project 0.1000
County - Debt 0.3851
School - Debt 0.4010
City of West Palm Beach - Debt 0.7544
Total: 25.0433
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In addition a non-advalorem assessment of $16,765.46 was levied by
the Solid Waste Authority against the Pavilion. The aggregate tax of $192,068.56
was paid in the discounted amount of $184,385.82 in November 2001.
Item 3. Legal Proceedings
In July 2001, Mario Raymond, as plaintiff, filed a lawsuit (the
"Raymond Lawsuit") in the Circuit Court of the Seventeenth Judicial Circuit,
Broward County Florida, Case No:01011644 12. Named defendants in the action
were: (a) Registrant, (b) FJS Properties, Inc., the general partner of
Registrant, and (c) MSL Property Management, Inc., the onsite managing agent of
the Pavilion Apartments. Plaintiff alleged that he was a tenant at the Pavilion
Apartments in September 1997, and that "a burner of the kitchen stove supplied
by defendants turned on by itself, overheating and boiling hot oil on said
burner creating a fire." Plaintiff alleged that "as a result, he became severely
burned over 23% of his body." Plaintiff further alleged that "the defendants had
previously been notified that the kitchen stove had a propensity to turn on by
itself and asked that it be replaced." Plaintiff claims defendants breached
their duty to maintain the apartment in a safe and careful manner causing injury
to Plaintiff. Plaintiff seeks damages "in excess of Fifteen Thousand
($15,000.00) Dollars" for injuries, pain and suffering, lost wages, medical
expenses, and other items both presently and in the future. There is no limit on
the damages claimed or which could be awarded.
Page 5
At the time of this alleged incident the Pavilion Apartments was
insured under a $1,000,000 primary, general liability policy issued by Reliance
Insurance Company of Illinois, and under an umbrella liability policy issued by
Twin City Fire Insurance Company providing excess liability coverage of Twenty
Million Dollars. The excess coverage policy only covers liability over and above
the underlying One Million Dollars of coverage, and does not provide any
coverage for the first One Million Dollars of any potential judgement.
In June 2001, Reliance Group Holdings Inc. ("Reliance"), the former
parent of Reliance Insurance Company of Illinois, filed for bankruptcy-court
protection, and in October 2001, the Commonwealth Court of Pennsylvania ordered
the liquidation of the Reliance which included Reliance Insurance Company of
Illinois which had been consolidated into the Reliance Group Holdings Inc.
Upon the insolvency of Reliance the Florida Insurance Guaranty
Association, Inc. ("FIGA") was notified of the Raymond Lawsuit and it assumed
the obligations of Reliance up to the Florida statutory limit of $300,000 per
claim. On February 19, 2002, FIGA advised that the Raymond Lawsuit "claim does
not fall within the scope of the 'Florida Insurance Guaranty Association Act'",
in that the "policy was written with Reliance Insurance Company of Illinois.
This company was not admitted and was not a member insurer as defined by the
Florida Insurance Guaranty Association Statute." As an "out-of-state" insurer,
its obligations would not be covered by the FIGA, and sole recourse is in a
claim against the Receiver for Reliance in the Pennsylvania Liquidation
proceeding.
Registrant and MSL Property Management, Inc. have engaged an
attorney to represent the defendants in the Raymond Lawsuit. Registrant is
unable at this time to predict the outcome of the lawsuit or to quantify the
potential liability of Registrant in this action. In addition, Registrant is
unable to evaluate how the existence of this lawsuit could affect Registrant's
ability to sell or refinance the Pavilion Apartments or to make distributions of
cash to limited partners.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of security holders during the
2001 calendar year.
PART II
Item 5. Market for Registrant's Securities and Related Security Holder Matters
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Units of the Registrant are not publicly traded nor is it
anticipated that a public trading market will develop for the Units. On and as
of December 31, 2001, beneficial interests in an aggregate of 2,437 Units were
acquired from the unaffiliated holders thereof, by three third parties (one of
which was a prior limited partner of Registrant) at a price of $105 per Unit,
pursuant to a tender offer filed with the Securities and Exchange Commission. As
of March 15, 2002, there were approximately 542 holders owning an aggregate of
16,788 Units. The General Partner has established a policy of limiting transfers
of Units in secondary market transactions unless,
Page 6
notwithstanding such transfers, the Partnership will satisfy one or more
applicable safe harbors prescribed by the Internal Revenue Service to avoid
having the Partnership classified as a publicly traded partnership which could
have adverse tax effects on limited partners. In order to comply with the safe
harbor provisions, the transfer of Units may be restricted.
There were no distributions per Unit of Registrant during the 1985
fiscal year. The Registrant distributed $3.01 per Unit for the 1986 fiscal year,
$4.63 per Unit for 1987, $6.59 per Unit for 1988, $14.72 per Unit for 1989,
$7.75 per Unit for 1990, and $1.97 per Unit for the first quarter of 1991. There
were no distributions made for the second, third or fourth quarters of 1991, for
1992, or for 1993. Distributions aggregating $5.19 and $5.64 per Unit were made
for 1994 and 1995 respectively, and a distribution of $1.54 was made for the
first quarter of 1996. No distributions were made for the remaining quarters of
1996. The reduction in distributions in the years from 1989 through 1991,
resulted from decreasing interest rates and the reduced occupancy levels that
the Pavilion Apartments experienced. When there was cash flow available for
distribution during 1992 and 1993, no distributions were made to retain
available cash that might be required for use in connection with the refinancing
of the existing first mortgage. During the last three quarters of 1996 all
available cash flow was utilized for work being done on the Pavilion Apartments.
Distributions of aggregating $5.53 per Unit were made for the first three
quarters of 1997, and no distribution was made for the fourth quarter of 1997 as
all available cash flow was utilized for capital improvements at the Pavilion
Apartments. Aggregate distributions of $8.42 per Unit were made for 1998
(including a distribution of $2.19 for the fourth quarter of 1998 which was made
in February 1999). A distribution of $2.29 per Unit was disbursed in May 1999,
for the first quarter of 1999. No distributions were made for the subsequent
quarters of 1999 or during 2000 or 2001, as all available cash flow was utilized
for operations and capital improvements at the Pavilion Apartments.
There are no material legal restrictions set forth in Registrant's
Limited Partnership Agreement, annexed to the Prospectus as Exhibit A thereto
("Partnership Agreement"), upon Registrant's present or future ability to make
distributions.
Page 7
Item 6. Selected Financial Information
The information set forth below presents selected financial data of
Registrant. Additional financial information is set forth in the audited
financial statements and footnotes contained herein.
Years Ended
December 31,
2001 2000 1999 1998 1997
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Total Assets $6,573,581 $6,799,123 $6,910,861$7,076,729 $7,258,818
Mortgage Note Payable $4,465,788 $4,560,070 $4,644,938$4,722,579 $4,793,033
Rental Revenue $2,369,558 $2,382,348 $2,189,322$2,081,901 $2,040,543
Interest Expense -
Mortgages $ 439,634 $ 449,120 $ 456,410 $ 463,687 $ 470,769
Net Profit [Loss] $ (104,522)$ (48,593) $ (50,566)$ 34,952 $ (50,582)
Net Cash Provided by
Operating Activities $ 282,332 $ 437,538 $ 335,890 $ 233,979 $ 280,140
Net Cash [Used] in
Investing Activities -
Capital Expenditures $ (299,125)$(382,454) $(423,155)$ (134,645) $ (80,481)
Net Cash [Used] in
Financing Activities $ (94,282)$ (84,868) $(153,611)$ (176,098) $(157,710)
Profit (Loss) Per
Limited Partnership
Unit $ (6.16)$ (2.87) $ (2.98)$ 2.06 $ (2.98)
Distributions Per
Limited Partnership
Unit $ 0.00 $ 0.00 $ 4.48 $ 6.23 $ 5.53
Weighted Average
Number of Limited
Partnership Units
Outstanding 16,788 16,788 16,788 16,788 16,788
Page 8
Item 7. Management's Discussion and Analysis of Financial Conditions and
Results of Operations
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Liquidity and Capital Resources
As of the present date, Registrant owns one Property, the Pavilion
Apartments, and does not intend to acquire any other property.
As of May 1, 1986, Registrant admitted as Limited Partners purchasers of
16,783 Units. Total capital raised was $8,391,500. In addition, Registrant
received accrued interest on the escrow account in the amount of $82,471. Thus
proceeds from the admission of Limited Partners aggregated $8,473,971.
The Pavilion Apartments are owned by Registrant subject to a first
mortgage loan in the original principal amount of $5,000,000. This loan was
obtained from Long Beach Bank in March 1994, to refinance the previous first
mortgage affecting the property. (See "First Mortgage" above for a description
of the terms of this loan).
Registrant anticipates that cash flow from Pavilion should be sufficient
to permit the Partnership to make the monthly payments on the first mortgage due
prior to maturity and to meet Registrant's monthly operating expenses, however,
should there be a significant decrease in Pavilion's occupancy or rental rates,
or should there be a significant increase in capital repair/replacement
requirements that can be funded from available cash flow and current reserves,
there can be no assurance that Registrant would be able to obtain sufficient
funds to make such payments.
During 2001, the holder of the first mortgage on the Pavilion Apartments
agreed to the withdrawal of $60,000 from an escrow account held by the first
mortgagee. These funds were intended to be utilized for capital improvements at
the Pavilion Apartments, in particular, among other items, for roof repairs
needed at the property. $60,000 was disbursed from the escrow account to the
Partnership on June 13, 2001. The Partnership will replenish the escrow account
with payments of $5,000 per month which commenced in June 2001 and will continue
monthly for twelve months. It is anticipated that cash flow from the Pavilion
Apartments will be sufficient to make such payments. A similar withdrawal of
$59,675 was made by the Partnership on May 22, 2000. The Partnership replenished
this account with payments of $5,000 per month from June 2000, through May 2001.
Registrant distributed $3.01 per Unit for the 1986 fiscal year, $4.63 per
Unit for 1987, $6.59 per Unit for 1988, $14.72 per Unit for 1989, $7.75 per Unit
for 1990, and $1.97 per Unit for the first quarter of 1991. There were no
distributions made for the second, third or fourth quarters of 1991, for 1992,
or for 1993. Distributions aggregating $5.19 and $5.64 per Unit were made for
1994 and 1995 respectively, and a distribution of $1.54 was made for the first
quarter of 1996. No distributions were made for the remaining quarters of 1996.
The reduction in distributions in the years from 1989 through 1991, resulted
from decreasing interest rates and the reduced occupancy levels which the
Pavilion Apartments experienced. When there was cash flow available for
distribution during 1992 and 1993, no distributions were made to retain
available cash which might be required for use in
Page 9
connection with the refinancing of the existing first mortgage. During the last
three quarters of 1996 all available cash flow was utilized for work being done
on the Pavilion Apartments. Distributions of aggregating $5.53 per Unit were
made for the first three quarters of 1997, and no distribution was made for the
fourth quarter of 1997 as all available cash flow was utilized for capital
improvements at the Pavilion Apartments. Aggregate distributions of $8.42 per
Unit were made for 1998 (including a distribution of $2.19 for the fourth
quarter of 1998 which was made in February 1999). A distribution of $2.29 per
Unit was disbursed in May 1999, for the first quarter of 1999. No distributions
were made for the subsequent quarters of 1999 or during 2000 or 2001, as all
cash flow was utilized for operations and capital improvements at the Pavilion
Apartments. (See "Operations" below).
OPERATIONS
Registrant has operated the Pavilion Apartments, located in West Palm
Beach, Florida, since January 1985.
Management Agreement
The Pavilion Apartments are currently managed by MSL Property Management
Inc., an unaffiliated property manager, under a five year agreement as extended
in January 1999. The agreement will also terminate on the earlier sale or
disposition of the Pavilion Apartments.
2001 Fiscal Year
Rental Revenue for the year ended December 31, 2001, was $2,369,558 as
compared with $2,382,348 for the 2000 calendar year. The slight decrease in
income in 2001 reflected increased vacancies and a slight increase in rental
allowances which more than offset increased rental rates for apartments at the
project. Occupancy rates at the project held in the low to mid 90% range for the
2001 year. As of February 25, 2002, the Pavilion Apartments had no apartments
available for rent. At such time there were 15 vacant apartments, with 3
apartments rented for occupancy in February 2002, 11 rented for occupancy by
March 5, 2001, while the remaining vacant unit is the model apartment. The
fifteen apartments presently vacant equate to a physical occupancy of 95.2%.
Operating Expenses, consisting mainly of real estate taxes, repairs and
maintenance and utilities, decreased in 2001 to $726,485 as compared to the 2000
cost of $782,765. This decrease reflected a reduction in amounts spent on
Repairs and Maintenance as increased amounts were expended on capitalized items
during that year.
General and Administrative Expenses for 2001 increased to $888,503 from
$830,650 in 2000. This increase resulted from a substantial increase in the
insurance premium for coverage of the Pavilion Apartments as well as increases
in court costs and eviction expenses, and payroll increases
Page 10
at the property. In addition, there was an increase in management fees for
supervision of capital improvement projects at the property.
Capital Improvements, Repairs and Maintenance, and Replacements
During 2001, in addition to items which were expensed under Cost of Rental
Income, substantial sums were spent on capital improvements, upgrades and
replacements at the Pavilion Apartments. Among these items were the following:
Capitalized Improvements
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Aggregate
Item Expenditures
Furniture & Fixtures
Carpeting $100,983
Security Lighting $2,424
Window Treatments $8,370
Stoves/Refrigerators/Dishwashers $40,041
Total: $151,818
Building Improvements
Bathroom Tile Replacements $12,931
Counter Tops $29,480
Dumpster Gates $11,698
AirConditioner Replacements $17,758
Miscellaneous Interior $26,759
Improvements
Roof Repairs $48,681
Total: $147,307
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Aggregate 2001 Capital Expenditures $299,125
- ----------------------------------------------------- ==============
During 2001, carpeting was replaced in 136 apartments; stoves in 36
apartments; refrigerators in 45 apartments; and dishwashers in 35 apartments.
Funds for these expenditures were provided from Cash Flow from the
Pavilion Apartments and from cash reserves on hand.
Future Capital Improvement and Replacements
It is anticipated that substantial additional funds will be expended for
capital improvements during 2002 and subsequent years in order to keep the
Pavilion Apartments competitive in the rental market. Funds for such items may
be provided from sources such as Partnership cash reserves and
Page 11
cash flow from the Pavilion Apartments. To the extent these sources are
insufficient to complete work which may be required, the Partnership may be
forced to explore outside sources of financing. There can be no assurance that
sufficient financing can be obtained to complete such work, and the Pavilion
Apartments' ability to compete in the rental market may be adversely affected.
As of March 1, 2002, carpeting in 88 apartments in the Pavilion Apartments
is over 3 years old, 171 hot water heaters are over 6 years old; 101
dishwashers, 130 refrigerators and 167 stoves are over 8 years old. The managing
agent has projected a cost of approximately $261,170 over the next three years
for replacements of dishwashers, refrigerators, stoves, air conditioners, and
hot water heater replacements. In addition, the Pavilion's managing agent has
prepared a schedule of anticipated major capital expenditures which the managing
agent feels are necessary to be completed during the next few years to
rehabilitate and upgrade the Pavilion to enable it to compete in the West Palm
Beach rental market. These items include but may not be limited to the following
items as scheduled by the managing agent:
Estimated
Potential
Project Costs
Roof Replacements - 10 buildings $528,910
Balcony, flat & mansard repairs $47,250
Asphalt Overlay for parking Lots $110,470
Shower Tile & Pan Replacements $113,850
Cabinet and Counter Top Replacements $240,000
Sprinkler System Replacement $53,900
Landscape Upgrades $70,790
Replace Iron Fence at Front of Property $36,300
Exterior Pressure Cleaning and Painting $102,850
Repair and Replace Gutters $12,480
Pool and Amenity Renovations $63,510
Remodel Club House $90,150
Remodel Laundry Room & Pool Baths $59,590
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2000 Fiscal Year
Rental Revenue for the year ended December 31, 2000, was $2,382,348
as compared with $2,189,322 for the 1999 calendar year. The increase in income
in 2000 reflected increased rental rates for apartments at the project as well
as reduced vacancies and rental allowances, which while in a reduced amount,
were still being utilized to attract tenants to the Pavilion. Occupancy rates at
the project held in the low to mid 90% range for the 2000 year. As of February
12, 2000, the Pavilion Apartments had 5 apartments out of 312 available for
rent. These 5 apartments are included in twenty-two presently vacant apartments,
with 16 apartments rented for occupancy in February
Page 12
2000, while the remaining vacant unit is the model apartment. The twenty-two
apartments presently vacant equate to a physical occupancy of 92.9%.
Operating Expenses, consisting mainly of real estate taxes, repairs
and maintenance and utilities, increased in 2000 to $782,764 as compared to the
1999 cost of $716,919. This increase reflected increases in amounts spent on
Repairs and Maintenance, as well as increased costs for Water and Sewer and
Sanitation. In addition, there was an increase in Real Estate Taxes as a result
of increased tax rates on the project. These were offset to some extent by a
decrease in Electric expense at the Pavilion as a result of greater occupancy at
the property, with apartment electric being paid for by tenants, and by reducing
the amount of electricity used in vacant apartments.
General and Administrative Expenses for 2000 increased to $830,650
from $752,824 in 1999. This increase resulted from increases in court costs and
eviction expenses, and increased costs for security services. In addition, there
was an increase in professional fees resulting from increased accruals in
anticipation of increased costs for the 2000 annual audit, preparation of tax
returns and tax reporting to limited partners.
Capital Improvements, Repairs and Maintenance, and Replacements
Page 13
During 2000, in addition to items which were expensed under Cost of
Rental Income, substantial sums were spent on capital improvements, upgrades and
replacements at the Pavilion Apartments. Among these items were the following:
Capitalized Improvements
Aggregate
Item Expenditures
Furniture & Fixtures
Carpeting $80,488
Carpet Machine $2,327
Fitness Center Equipment $2,438
Security Lighting $1,473
Stoves/Refrigerators/Dishwashers $84,649
Total: $171,375
Building Improvements
Bathroom Tile Replacements $88,878
Counter Tops $2,660
Dumpster Gates $2,245
Entrance Gates $7,378
Fire Alarm Box Replacements $5,317
Miscellaneous Interior $1,416
Improvements
Office Remodel $2,760
Roof Repairs $64,203
Sewer Replacement $10,238
Sprinkler System Replacements $25,984
Total: $211,079
Aggregate 2000 Capital Expenditures $382,454
- --------------------- ==============
During 2000, carpeting was replaced in 91 apartments; stoves in 89
apartments; refrigerators in 84 apartments; and dishwashers in 57 apartments.
Funds for these expenditures were provided from Cash Flow from the
Pavilion Apartments and from cash reserves on hand.
Future Capital Improvement and Replacements
Page 14
It is anticipated that substantial additional funds will be expended
for capital improvements during 2001 and subsequent years in order to keep the
Pavilion Apartments competitive in the rental market. Funds for such items may
be provided from sources such as Partnership cash reserves and cash flow from
the Pavilion Apartments. To the extent these sources are insufficient to
complete work which may be required, the Partnership may be forced to explore
outside sources of financing. There can be no assurance that sufficient
financing can be obtained to complete such work, and the Pavilion Apartments'
ability to compete in the rental market may be adversely affected.
As of March 1, 2001, carpeting in 109 apartments in the Pavilion
Apartments is over 3 years old, 171 hot water heaters are over 6 years old; 136
dishwashers, 105 refrigerators and 103 stoves are over 8 years old. In addition
to regular ongoing replacements of such items, other major capital items which
may be required to be completed during the next few years, include but may not
be limited to the following:
Estimated
Potential
Project Costs
Roof Replacements - all buildings $500,000
Asphalt Overlay for parking Lots $105,000
Shower Tile & Pan Replacements $145,000
Sprinkler System Replacement $55,000
- ------------------------------------- ------------
Replacement of the roof on Building F (containing 24 residential units) is
expected to commence during March 2001, at an anticipated cost of approximately
$34,500.
INFLATION
As of the present date, inflation has not had a major impact on the
operations of the Partnership. It is anticipated that future increases in
operating expenses will be offset if not exceeded by corresponding increases in
operating income.
Page 15
Item 8. Financial Statements and Supplementary Data
FJS Properties Fund I, L.P.
Financial Statements
INDEX
Page
Number
Report of Independent Certified Public Accountants........................17
Financial statements
Balance Sheets as of December 31, 2001 and 2000........................18
Statements of Operations for the years ended
December 31, 2001, 2000 and 1999.................................19
Statements of Partners' Capital [Deficit] for the years ended
December 31, 2001, 2000 and 1999.................................20
Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999.................................21
Notes To Financial Statements .........................................22-26
Supplementary Financial Information
Report of Independent Certified Public Accountants
on Supplementary Financial Information...........................27
Real Estate and Accumulated Depreciation...............................28
Page 16
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of FJS Properties Fund I, L.P.
We have audited the accompanying balance sheets of FJS Properties Fund I, LP as
of December 31, 2001 and 2000, and the related statements of operations,
partners' capital (deficit), and cash flows for each of the three years in the
period ended December 31, 2001. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FJS Properties Fund I, LP as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.
As more fully described in Note 9, a lawsuit was filed against the Partnership
for injuries sustained by a tenant. The ultimate resolution of this matter is
not presently determinable and, accordingly, no provision for any outcome that
may result has been made in these financial statements.
BUCHBINDER TUNICK & COMPANY LLP
Boca Raton, Florida February 11, 2002 (except for Note 9 as to which the date is
February 19, 2002)
Page 17
FJS PROPERTIES FUND I, L.P.
Balance Sheets
December 31, 2001 and 2000
2001 2000
ASSETS
Current assets:
Cash and cash equivalents $ 77,047 $ 188,122
Cash - escrow 51,588 64,184
Cash - security deposits 146,375 125,015
Tenant receivables 10,384 13,215
Other current assets 24,682 21,446
---------- ----------
Total current assets 310,076 411,982
---------- ----------
Property investment:
Land 2,296,804 2,296,804
Buildings 6,569,125 6,569,125
Furniture, fixtures and improvements 3,057,744 2,758,619
---------- ----------
Totals - at cost 11,923,673 11,624,548
Less: accumulated depreciation (5,827,021)(5,427,009)
----------------------
Property investment - net 6,096,652 6,197,539
---------- ----------
Other assets 166,853 189,602
---------- ----------
Total assets $6,573,581 $6,799,123
========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Current liabilities:
Accounts payable $ 101,503 $ 117,747
Accrued interest 36,279 37,045
Other accrued expenses 6,768 7,093
Due to related party 16,623 16,704
Tenant security deposits payable 146,375 125,015
Prepaid rent 4,058 27,597
Mortgage payable - current portion 104,586 94,971
Deferred income - current portion 7,143 7,143
---------- ----------
Total current liabilities 423,335 433,315
---------- ----------
Long-term liabilities:
Mortgage payable - non-current portion 4,361,202 4,465,099
Deferred income - non-current portion 3,571 10,714
---------- ----------
Total long-term liabilities 4,364,773 4,475,813
---------- ----------
Total liabilities 4,788,108 4,909,128
---------- ----------
Contingency
Partners' capital (deficit):
General partner (1,218,004)(1,216,959)
Limited partners 3,003,477 3,106,954
---------- ----------
Total partners' capital (deficit) 1,785,473 1,889,995
---------- ----------
Total liabilities and partners' capital (deficit) $6,573,581 $6,799,123
========== ==========
See notes to financial statements.
Page 18
FJS PROPERTIES FUND I, L.P.
Statements of Operations
For the years ended December 31, 2001, 2000, and 1999
2001 2000 1999
Revenue:
Rental $2,369,558 $2,382,348 $2,189,322
Interest 4,961 9,261 12,324
---------- ---------- ----------
Total Revenue 2,374,519 2,391,609 2,201,646
---------- ---------- ----------
Expenses:
Operating 726,485 782,764 716,919
General and administrative 888,503 830,650 752,824
Interest 439,634 449,120 456,410
Depreciation and amortization 424,419 377,668 326,059
---------- ---------- ----------
Total expenses 2,479,041 2,440,202 2,252,212
---------- ---------- ----------
Net (loss) $ (104,522)$ (48,593) $ (50,566)
====================== ===========
(Loss) per limited partnership unit $ (6.16)$ (2.87) $ (2.98)
====================== ===========
Distributions per limited partnership unit $ 0.00 $ 0.00 $ 4.48
========== ========== ==========
Weighted average number of limited
partnership units outstanding 16,788 16,788 16,788
========== ========== ==========
See notes to financial statements.
Page 19
FJS PROPERTIES FUND I, L.P.
Statements of Partners' Capital (Deficit)
For the years ended December 31, 2001, 2000 and 1999
General Limited
Partner Partners Total
Partners' capital (deficit)
- January 1, 1999 $ (1,215,207) $3,280,331 $2,065,124
Net (loss) for the year ended
December 31, 1999 (506) (50,060) (50,566)
Distributions to Partners (760) (75,210) (75,970)
------------- ---------- ----------
Partners' capital (deficit)
- December 31, 1999 $ (1,216,473) $3,155,061 $1,938,588
Net (loss) for the year ended
December 31, 2000 (486) (48,107) (48,593)
------------- ---------- ----------
Partners' capital (deficit)
- December 31, 2000 $ (1,216,959) $3,106,954 $1,889,995
Net (loss) for the year ended
December 31, 2001 (1,045) (103,477) (104,522)
------------- ---------- ----------
Partners' capital (deficit)
- December 31, 2001 $ (1,218,004) $3,003,477 $1,785,473
============= ========== ==========
See notes to financial statements.
Page 20
FJS PROPERTIES FUND I, L.P.
Statements of Cash Flows
For the years ended December 31, 2001, 2000 and 1999
2001 2000 1999
Operating activities:
Net (loss) $ (104,522)$ (48,593) $ (50,566)
Adjustments to reconcile net (loss)
to net cash provided by operating activities:
Depreciation 400,012 353,260 301,652
Amortization 24,407 24,407 24,407
Deferred income (7,143) (7,143) (7,143)
Changes in assets and liabilities:
Decrease in escrow 12,596 55,195 29,238
Decrease (increase) in security deposits (21,360) 7,733 (7,351)
Decrease (increase) in tenant receivables 2,831 (13,215) -
(Increase) decrease in other current assets(3,236) 822 3,484
(Increase) decrease in other assets (1,658) 36,206 (3,283)
(Decrease) increase in accounts payable
and accrued expenses (17,335) 8,987 41,119
(Decrease) increase in due to related party (81) 15 (3,018)
Increase (Decrease) in tenant security
deposits payable 21,360 (7,733) 7,351
Increase in prepaid rent (23,539) 27,597 -
--------------------- ----------
Net cash provided by operating activities282,332 437,538 335,890
------- ---------- ----------
Investing activities:
Capital expenditures (299,125) (382,454) (423,155)
---------------------- -----------
Net cash (used in) investing activities (299,125) (382,454) (423,155)
--------------------- -----------
Financing activities:
Principal payments on mortgages (94,282) (84,868) (77,641)
Cash distributions to Partners - - (75,970)
---------- ---------- -----------
Net cash (used in) financing activities (94,282) (84,868) (153,611)
--------------------- -----------
Net (decrease) in cash
and cash equivalents (111,075) (29,784) (240,876)
Cash and cash equivalents - beginning of year 188,122 217,906 458,782
--------- ---------- ----------
Cash and cash equivalents - end of year $ 77,047 $ 188,122 $ 217,906
========== ========== ==========
Supplemental disclosure of cash flow information:
Interest paid $ 440,400 $ 449,815 $ 457,043
========== ========== ==========
See notes to financial statements.
Page 21
FJS PROPERTIES FUND I, L.P.
Notes to Financial Statements (Continued)
December 31, 2001, 2000 and 1999
Note 1 - Organization
FJS Properties Fund 1, LP (the "Partnership") was formed under the Delaware
Revised Uniform Limited Partnership Act on October 5,1984. The Partnership
owns and operates the Pavilion, a 312 unit garden apartment complex in West
Palm Beach, Florida. The Partnership operates under one reportable segment.
Note 2 - Significant Accounting Policies
Loan Acquisition Fees
The Partnership amortizes fees incurred in connection with mortgage
refinancings utilizing the straight-line method over the term of the
related mortgage, which is currently ten years.
Income Taxes
The Partnership is treated as a partnership for federal income tax
purposes. The Partnership will make no provision for income taxes because
all income and losses will be allocated to the Partners for inclusion in
their respective tax returns.
Property Investment and Depreciation
Property, improvements, furniture, and equipment are carried at cost and
depreciated over their estimated useful lives. The cost of maintenance and
repairs are expensed as incurred, whereas significant betterments and
renewals are capitalized. The Partnership depreciates buildings using the
straight-line method over 30 years. Furniture and fixtures and
improvements are depreciated using the straight-line method over periods
from 3 to 10 years.
Depreciation expense for the years ended December 31, 2001, 2000 and 1999
was $400,012, $353,260, and $301,652 respectively.
For tax purposes, the Partnership depreciates residential real property
using the 18 year accelerated depreciation method for property placed in
service prior to May 8, 1985. In accordance with ongoing changes in the
Internal Revenue Code, the Partnership will utilize the depreciation
method, which, in the opinion of the Managing General Partner, will be the
most beneficial to the Partnership.
Revenue Recognition
Rental and interest income are recorded on the accrual method of
accounting.
Cash Equivalents
The Partnership considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Page 22
FJS PROPERTIES FUND I, L.P.
Notes to Financial Statements (Continued)
December 31, 2001, 2000 and 1999
Concentration of Credit Risk
Financial instruments that subject the Partnership to concentrations of
credit risk include cash. The Partnership had amounts on deposit with
financial institutions which are approximately $33,000, $95,000, and
$270,000 in excess of the amounts insured for December 31, 2001, 2000 and
1999, respectively. The Partnership does not require collateral for
financial instruments.
Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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.
Advertising
The Partnership expenses advertising cost as incurred. Advertising expense
for the years ended December 31, 2001, 2000 and 1999 was $26,438, $37,323,
and $36,321, respectively.
Impairment
Certain long-term assets of the Partnership, including property and
furniture and fixtures, are reviewed at least annually as to whether their
carrying value has become impaired, pursuant to guidance established in
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." Management considers assets to be impaired if the carrying
value exceeds the future projected cash flows from the related operations
(undiscounted and without interest charges). If impairment is deemed to
exist, the assets will be written down to fair value or projected
discounted cash flows from related operations. Management also reevaluates
the periods of amortization to determine whether subsequent events and
circumstances warrant revised estimates of useful lives.
Note 3 - Partnership Agreement
Pursuant to the terms of the Partnership Agreement, which expires December
31, 2009, the General Partner is liable for all general obligations of the
Partnership to the extent not paid by the Partnership. The Limited
Partners are not liable for expenses, liabilities, or obligations of the
Partnership beyond the amount of their contributed capital. In addition,
adjusted cash from operations is allocated, after payment of the
Partnership Management Fee to the Managing General Partner, 99% to the
Limited Partners, and 1% to the General Partner.
Taxable income and loss are allocated 99% to the Limited Partners and 1%
to the General Partner subsequent to the release of the Limited Partners'
funds to the Partnership, which occurred on May 1, 1986. Prior to the
release of funds, taxable income and loss were allocated 99% to the
General Partner and 1% to the Original Limited Partner.
Page 23
FJS PROPERTIES FUND I, L.P.
Notes to Financial Statements (Continued)
December 31, 2001, 2000 and 1999
Allocations of net income or loss among the Partners in the accrual basis
financial statements will be in conformity with the allocations of taxable
income or loss from operations.
Note 4 - Other Assets
A summary of other assets is as follows:
2001 2000
-------- ------
Cash in escrow - replacement reserves $ 90,931 $ 89,273
Loan acquisition fees - net of amortization
of $188,663 and $164,256 at December
31, 2001 and 2000, respectively 55,432 79,839
Deposits 20,490 20,490
-----------
$ 166,853 $ 189,602
========== ==========
- ------------------------------------ --------------- -------------
Note 5 - Mortgage Payable
The Partnership has a loan of $5,000,000 that is serviced by Washington
Mutual FSB that is collateralized by a first mortgage lien on the property
and all personal property and income from the project. This loan is for a
term of ten years with an interest rate of 9.75% per annum. The loan is
repayable in equal monthly installments of $44,557 for principal and
interest with a balloon payment due in ten years. The loan requires
deposits with the lender for real estate taxes, insurance premiums, a debt
service reserve of one month's payment, as well as deposits for
replacement reserves for the project. These amounts are included in cash
escrow and other assets on the balance sheet.
At December 31, 2001 maturities of the mortgage payable are as follows:
2002 104,586
2003 114,492
2004 4,246,710
----------
Total mortgage payable $4,465,788
==========
- ----------------------------------- -------------------
The fair value of the Partnership's mortgage payable, which is determined
by discounting expected cash flows based on the Partnership's projected
current incremental borrowing rate, is approximately equal to the current
obligation.
Note 6 - Related Party Transactions
The Managing General Partner, pursuant to the Partnership Agreement, has
earned Property Management Fees of $117,233, $118,518, and $107,540 for
the years ended December 31, 2001, 2000, and 1999, respectively, of which,
$94,110, $94,242, and $86,032, respectively, was paid to an unaffiliated
Florida based management company. These fees are based on a percentage of
gross rental income as defined in the agreement.
Also pursuant to the Partnership Agreement the Managing General Partner
has earned Partnership Management Fees of $0, $0, and $3,172, for the
years ended December 31, 2001,
Page 24
FJS PROPERTIES FUND I, L.P.
Notes to Financial Statements (Continued)
December 31, 2001, 2000 and 1999
2000, and 1999, respectively, which represents 4% of adjusted cash flow as
defined in the agreement.
Additionally, in accordance with provisions of the Partnership Agreement,
the Partnership has agreed to pay to the Managing General Partner,
administrative service fees. These fees amounted to $30,000 for the year
ended December 31, 2001, $24,000 for the year ended December 31, 2000, and
$27,000 for the year ended December 31, 1999.
The Managing General Partner received distributions from cash flows of $0,
$0, and $760, during the years ended December 31, 2001, 2000, and 1999,
respectively.
Note 7 - Income Taxes
The reconciliation of net (loss) as reported in the statements of
operations and as would be reported for tax purposes for the years ended
December 31, 2001, 2000, and 1999, are as follows:
December 31,
- -------------------------------- ------------------------------------
2001 2000 1999
------ ------ -----
Net (loss) -
statement of operations $ (104,522) $ (48,593) $ (50,566)
Tax depreciation in excess
of book depreciation (40,496) (57,797) (67,099)
----------- ----------- ----------
Net (loss) for tax purposes $ (145,018) $ (106,390) $ (117,665)
=========== =========== ===========
- -------------------------------- ------------ ------------ -------------
Note 8 - Tender Offer
On and as of December 31, 2001, beneficial interests in an aggregate of
2,437 units were acquired from unaffiliated holders by three parties at a
price of $105 per unit, pursuant to a tender offer filed with the
Securities and Exchange Commission.
Note 9 - Contingency
In 2001, a lawsuit was filed against the Partnership seeking damages in
excess of $15,000 for injuries sustained by a tenant of the property. At
the time of this alleged incident the Partnership was insured under a
$1,000,000 primary, general liability policy issued by Reliance Insurance
Company of Illinois and under an excess liability policy issued by Twin
City Fire Insurance Company providing excess liability coverage of $20
million. The excess coverage policy only covers liability over and above
the underlying $1,000,000 of coverage, and does not provide any coverage
of the first $1,000,000 of any potential judgment.
In June 2001, Reliance filed for bankruptcy-court protection and was
liquidated in October 2001.
The ultimate resolution of this matter is not presently determinable and,
accordingly, no provision for any outcome that may result has been made in
these financial statements.
Page 25
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SUPPLEMENTARY FINANCIAL INFORMATION
To the Partners of
FJS Properties Fund I, LP
We have audited the financial statements of FJS Properties Fund I, LP as of
December 31, 2001 and 2000, and for each of the three years in the period ended
December 31, 2001, and have issued our report thereon dated February 11, 2002.
Our audits also included the financial statement Schedule III of FJS Properties
Fund I. LP. This financial statement schedule is the responsibility of the
Partnership's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
BUCHBINDER TUNICK & COMPANY LLP
Boca Raton, Florida
February 11, 2002
Page 26
Initial Cost to Partnership
Costs
Buildings, Capitalized
Furniture, Subsequent
Fixtures, to Acquisition
and
Description Encumbrances Land Improvements Improvements
Pavilion Apartments
West Palm Beach,
Florida $ 4,465,788 $ 2,296,804 $ 7,196,789 $ 2,430,080
=========== =========== =========== ===========
- ------------------- -------------- ------------ -------------- --------------
Gross Amount at Which
Carried at Close of Period
- ------------------ ----------------------------- ----------- --------- --------- -----------
Life on
Which
Depreciatio
Buildings, Year n in Latest
Furniture, of Income
Fixtures, and (1) (2) Accumulated Construc- Date Statement is
Description Land Improvements Total Depreciation tion Acquired Computed
Pavilion Apartments
West Palm Beach,
Florida $2,296,804 $9,626,869 $11,923,673 $5,827,021 1972 1/85 3-30 yrs
========== ==========
- ------------------ ---------- ------------ ---------- ---------- --------- --------- -----------
(1) The aggregate cost for federal income tax purposes is $10,014,932.
(2) A reconciliation of the carrying amount of land, buildings and improvements
as of December 31, 2001 and 2000 is as follows:
Cost as of December 31,
- ---------------------- ----------------------
2001 2000
Balance at beginning of year $ 11,624,548 $ 11,242,094
Improvements 299,125 382,454
------------- -------------
Balance at end of year $11,923,673 $11,624,548
=========== ===========
- ------------------------- ---------------- --------------
(3) A reconciliation of accumulated depreciation for the years ended December
31, 2001, and 2000 is as follows:
Cost as of December 31,
- --------------------------- ---------------------------
2001 2000
Balance at beginning of year $ 5,427,009 $ 5,073,749
Expense 400,012 353,260
------------
Balance at end of year $ 5,827,021 $ 5,427,009
=========== ===========
- --------------------------- -------------- -------------
See independent accountant's report on supplementary financial information.
Page 27
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
----------------------------------------------------------------
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Registrant has no officers or directors. FJS Properties, Inc., the General
Partner, manages and controls the Registrant's affairs and has general
responsibility and ultimate authority in all matters affecting its business. The
names and ages of, as well as the positions held by, the officers and directors
of the General Partner are as follows:
NAME AGE OFFICES HELD SERVED AS AN
OFFICER AND/OR
DIRECTOR SINCE
A Andrew C. Alson 56 President and Director 1/85
Lawrence E. Bathgate II 62 Director 10/84
- ----------------------- ---------- ------------------------- -------------------
There are no family relationships between any executive officer or
director and any other executive officer or director of the General Partner.
Andrew C. Alson is a director and President of the General Partner.
Until May, 1995, Mr. Alson was a Director of and until January 1, 1993, was
President and Chief Executive Officer of PriMedex Health Systems, Inc. ("PMDX"),
a public company which is principally engaged through its wholly-owned
subsidiary, RadNet Management, Inc. in the healthcare services industry. Until
June 16, 1994, Mr. Alson, as a designee of PMDX, also served as a director of
ImmunoTherapeutics, Inc. ("IMNO"). IMNO is a publicly owned development stage
Minnesota based company which is engaged in the research and development of
immunotherapeutic drugs, primarily for the treatment of cancer. Mr. Alson is an
attorney admitted to the bar of the State of New York, and is a graduate of the
University of Pennsylvania and the Fordham University School of Law.
Lawrence E. Bathgate, II is a director of the General Partner. Mr.
Bathgate is the senior partner of Bathgate, Wegener & Wolf, P.A., a law firm in
Lakewood, New Jersey. Mr. Bathgate is a graduate of Villanova University,
Villanova, Pennsylvania and Rutgers Law School, Newark, New Jersey. Mr. Bathgate
also engages in extensive real estate and other investment activities. Mr.
Bathgate owns 20% of the common stock of the General Partner. Mr. Bathgate is a
director of Carson, Inc., a publicly held company listed on the New York Stock
Exchange.
All of the directors will hold office until the next annual meeting
of the stockholders of the General Partner and until their successors are
elected and qualified.
Other controlling individuals:
On August 7, 1995, Robert E. Brennan, the owner of 80% of the common
stock of the General Partner filed a voluntary petition for relief in the United
States Bankruptcy Court for the District of New Jersey under Chapter 11 of the
Bankruptcy Code.
On June 10, 1997, United States Bankruptcy Judge Kathryn C. Ferguson
appointed Donald F. Conway, C.P.A. as the Trustee in the Chapter 11 Bankruptcy
Proceeding involving Robert E. Brennan as Debtor, pending in the United States
Bankruptcy Court for the District of New Jersey (Case No 95-35502).
By virtue of his appointment as Trustee, Mr. Conway is empowered to
vote (and with the approval of the Court), to sell Mr. Brennan's Common Stock
and to direct the disposition of the sale proceeds. As a result Mr. Conway, in
his capacity as Trustee, may be deemed the beneficial owner of such shares and a
controlling person of FJS Properties, Inc. and Registrant.
Page 28
Mr. Conway, age 61, is currently and since 1995 has been a principal
of Druker, Rahl & Fein, Business Consultants and Certified Public Accountants,
with offices in Princeton, New Jersey. From 1988 until 1995, Mr. Conway was the
Senior Manager of the Insolvency and Reorganization and Sports and Entertainment
practice of Withum, Smith & Brown, a Princeton, New Jersey certified public
accounting firm.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 (17 CFR 249.103 and
249.104) and any amendments thereto furnished to Registrant under Rule 16a-3(d)
(17 CFR 240.16a-3(e) or written representations received by Registrant that no
Forms 5 were required, Registrant believes that other than as hereinafter noted
there were no officers, directors or beneficial owners of more than 10% of any
class of equity securities of Registrant registered pursuant to Section 12, that
failed to file on a timely basis any reports required by Section 16(a) during
the most recent fiscal years. As noted above, as of June 10, 1997, Donald F.
Conway may be deemed a beneficial owner of 80% of the general partner of
Registrant and a controlling person of FJS Properties, Inc. and Registrant. Mr.
Conway has advised that no filings were required for a one year period after
such appointment, and it would appear that a filing was required to have been
made in June 1998. Registrant has not been advised of any filings by Mr. Conway
as of March 15, 2002.
Item 11. Executive Compensation
The Registrant is not required to pay and did not pay any
remuneration to the officers and directors of the General Partner. See Item 12,
"Certain Relationships and Related Transactions."
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
The Family Trust, a New Jersey trust, which was established by
Robert Brennan, but as to which Mr. Brennan is neither a Trustee nor a
Beneficiary, owns 1,558 Units (9.28%). The following schedule lists all persons
known by Registrant to own beneficially more than 5% of the outstanding Units of
Registrant. No directors, officers or partners of the General Partner own Units
of Registrant except for the five Units owned by Mr. Bathgate, as the initial
limited partner.
Ownership of more than 5% of Registrant:
(1) Title of Class (2) Name and Address of (3) Amount and (4) Percent of Class
Beneficial Owner nature of
Beneficial
Ownership
Units of Limited The Family Trust 1,558 Units - 9.28%
Partnership 340 North Avenue legal and
Cranford, NJ 07016 beneficial
owner
Units of Limited MP Value Fund 4, LP 1,179 Units - 7.02%
Partnership 1640 School Street legal owner
Moraga, CA 94556
Units of Limited MP Value Fund 7, LLC 966 Units - 5.75%
Partnership 1640 School Street legal owner
Moraga, CA 94556
Units of Limited MP Dewaay Fund LLC 966 Units - 5.56%
Partnership 1640 School Street legal owner
Moraga, CA 94556
- ----------------- ----------------------- --------------- ------------------
As of March 1, 2001, Robert E. Brennan, Chapter 11 Debtor and
Lawrence E. Bathgate, II were the sole shareholders of the common stock of the
General Partner, owning 80% and 20% respectively. As described above under Item
10, Donald F. Conway, CPA, has been appointed as Trustee in the Chapter 11
Bankruptcy Proceeding involving Robert E. Brennan as Debtor. Mr. Conway is
empowered to vote (and with the approval of the Court), to sell Mr.
Page 29
Brennan's Common Stock and to direct the disposition of the sale proceeds. As a
result Mr. Conway, in his capacity as Trustee, may be deemed a beneficial owner
of such shares and a controlling person of FJS Properties, Inc. and Registrant.
Item 13. Certain Relationships and Related Transactions
During Registrant's fiscal years ended December 31, 2001, 2000, and
1999 the General Partner and certain affiliated entities have earned or received
compensation or payments for services from Registrant or its General Partner as
follows:
Reimbursement/Compensation
Name of Recipient Capacity in Which served or
-----------------
Payment Received 2001 2000 1999
------------------------
FJS Properties, Inc. General Partner3 $0 $0 $760
Partnership Management Fee $0 $0 $3,172
Property Management Fee4
$23,123 $24,276 $21,508
Administrative Expenses5 $24,000 $24,000 $27,000
Tender Offer Administrative
Fees6 $6,000 $0 $0
- ----------------------- ----------------------------- --------- --------- ---------
Lawrence E. Bathgate II Initial Limited Partner7 $0 $0 $22
Other Officers/Directors of
General Partner Officer/Director of General
Partner $0 $0 $0
- ----------------------- ----------------------------- --------- --------- ---------
In addition, certain officers and directors of the General Partner
receive compensation from the General Partner and/or its affiliates (but not
from Registrant) for services performed for various affiliated entities, which
may include services performed for Registrant.
- --------
3 Represents the General Partner's interest in Adjusted Cash From Operations.
Under Registrant's Partnership Agreement 99% of the Net Income and Net Loss of
Registrant was allocated to the Limited Partners and 1% was allocated to the
General Partner. Pursuant thereto, for the years ended December 31, 2001, 2000,
and 1999, ($1,450), ($1,064), and ($1,177) of the Registrant's taxable income
(loss) was allocated to FJS Properties, Inc. For further information, reference
is made to the material contained in the Prospectus under the heading
"MANAGEMENT COMPENSATION."
4 The following property management fees were applicable to the years 2001,
2000, and 1999:
YEAR Aggregate ManagementRetained by General Paid to local
Fee Partner unaffiliated
management company
2001 $117,233 $23,123 $94,110
2000 $118,518 $24,276 $94,242
1999 $107,540 $21,508 $86,032
- --------- ------------------- ----------------- ------------------
In addition, the local unaffiliated management company received construction
supervision fees of $8,019 during 2001 and $8,068 during 1999, for supervision
of outside construction work at the Pavilion Apartments.
5 Represents administrative fees for the respective years for preparation of the
annual Forms 10K, quarterly Forms 10Q, and the Form 8-K of December, 1999, for
Registrant for filing with the Securities and Exchange Commission. Such charges
are in accordance with and pursuant to ss.10.1.3(b) of the Partnership Agreement
of Registrant and do not exceed 90% of the amount Registrant would be required
to pay to independent parties for comparable administrative services in the same
geographic location.
6 Represents administrative fees for review of tender offer filings,
preparation, filing and mailings of required responsive Securities and Exchange
Commission Filings and materials for mailings to Limited Partners. As provided
in the Partnership Agreement of Registrant such fees do not exceed 90% of the
amount Registrant would be required to pay to independent parties for comparable
administrative services in the same geographic location.
7 Represents distribution of Adjusted Cash From Operations attributable to the
five Units Owned by Mr. Bathgate. For the years ended December 31, 2001, 2000,
and 1999, ($42.76), ($31.57), and ($34.69) of the Registrant's taxable (loss)
was allocated to his Units.
Page 30
PART IV
Item 14. Exhibits Financial Statement Schedules, and Reports On Form 8-K
---------------------------------------------------------------
(a) 1&2 Financial Statements: See Index to Financial Statements in
Item 8.
(a) 3 Exhibits:
3.4 (a) Agreement of Limited Partnership, dated as of April 30,
1985, incorporated by reference to Exhibit A to the Prospectus
of Registrant dated June 10, 1985 included in Registrant's
Registration Statement on Form S-11 (Reg. No. 2-93980).
(b) Amendment to Agreement of Limited Partnership dated as
of October 22, 1985 incorporated by reference to Exhibit 3A.1
to Registrant's Registration Statement on Form S-11 (Reg. No.
2-93980).
(c) Amendment to Agreement of Limited Partnership dated
as of October 22, 1985, incorporated by reference to
Exhibit 3.4(c) to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1986 (File
No 2-93980).
(d) Amendment to Agreement of Limited Partnership, dated
as of March 24, 1987, incorporated by reference to
Exhibit 3.4(d) to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1987 (File
No 2-93980).
(e) Amendment No. 1 to Amended and Restated Certificate
of Limited Partnership, dated as of August 17, 1987,
incorporated by reference to Exhibit 3.4(e) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987 (File No 2-93980).
10. (a) Acquisition and Disposition Agreement dated as of May
2, 1986 between Registrant and FJS Properties, Inc.,
incorporated by reference to Exhibit 10A to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1986 (File No. 2- 93980).
(b) Management Services Agreement dated as of May 2,
1986 between Registrant and FJS Properties, Inc.,
incorporated by reference to Exhibit 10B to Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1986 (File No. 2- 93980).
(c) Contract for Sale and Purchase dated December 17, 1984,
between Rockwell Investments, Ltd. and Registrant,
incorporated by reference to Exhibit 10D to Registrant's
Registration Statement on Form S-11 (Reg. No. 2-93980.)
(d) Contract for Sale and Purchase dated December 17, 1984,
between Vinsteve Investments Inc., Jimstein Investments, Ltd.,
Barwell Corporation, N.W. and Registrant, incorporated by
reference to Exhibit 10E to Registrant's Registration Statement
on Form S-11 (Reg. No. 2-93980.)
Page 31
(e) Mortgage and Security Agreement dated September 9,
1987, by FJS Properties Fund I, L.P., as mortgagor, and
The Bank of Tokyo, Ltd., Miami Agency, as mortgagee,
incorporated by reference to Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987 (File No 2-93980).
(f) Mortgage Note, dated September 9, 1987, by FJS
Properties Fund I, L.P. as maker to The Bank of Tokyo,
Ltd., Miami Agency, as payee in the principal amount of
$5,000,000, incorporated by reference to Exhibit 10(h)
to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1987 (File No 2-93980).
(g) Modification of Note, Mortgage and Assignment
Agreement, dated as of September 9, 1992, between FJS
Properties Fund I, L.P. as Mortgagor, and The Bank Of
Tokyo, Ltd., Miami Agency, as Mortgagee incorporated by
reference to Exhibit 10(g) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987
(File No 0-15755).
(h) Modification of Note, Mortgage and Assignment
Agreement, dated as of November 10, 1992, between FJS
Properties Fund I, L.P. as Mortgagor, and The Bank Of
Tokyo, Ltd., Miami Agency, as Mortgagee incorporated by
reference to Exhibit 10(h) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987
(File No 0-15755).
(i) Modification of Note, Mortgage and Assignment
Agreement, dated as of March 31, 1993, between FJS
Properties Fund I, L.P. as Mortgagor, and The Bank of
Tokyo, Ltd., Miami Agency, as Mortgagee incorporated by
reference to Exhibit 10(i) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987
(File No 0-15755).
(j) Renewal Note, dated March 31, 1993, made by FJS
Properties Fund I, L.P. to the Bank of Tokyo, Ltd
incorporated by reference to Exhibit 10(j) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987 (File No 0-15755).
(k) Property Management Agreement made as of December
1993, between FJS Properties Fund I, L.P., Owner, and
M.L. Property Management, Inc., Managing Agent,
incorporated by reference to Exhibit 10(k) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (File No 0-15755).
(l) Third Modification of Note, Mortgage and Assignment
Agreement dated as of February 28, 1994, between FJS
Properties Fund I, L.P. and The Bank of Tokyo, Ltd.,
incorporated by reference to Exhibit 10(l) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (File No 0-15755).
(m) Multifamily Note, dated March 29, 1994, made by FJS
Properties Fund I, L.P. to Long Beach Bank, FSB, in the
principal amount of $5,000,000, incorporated by reference to
Page 32
Exhibit 10(m) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 (File No
0-15755).
(n) Multifamily Mortgage, Assignment of Rents and
Security Agreement and Fixture Filing, dated March 29,
1994, made by FJS Properties Fund I, L.P. to Long Beach
Bank, FSB, incorporated by reference to Exhibit 10(n) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (File No 0-15755).
(o) Assignment of Leases, dated March 29, 1994, made by
FJS Properties Fund I, L.P. to Long Beach Bank, FSB,
incorporated by reference to Exhibit 10(o) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (File No 0-15755).
(p) Operations and Maintenance Agreement dated March 29,
1994, between FJS Properties Fund I, L.P. and Long Beach
Bank, FSB, incorporated by reference to Exhibit 10(p) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993 (File No 0-15755).
(q) Debt Service Reserve Fund Security Agreement, dated
March 29, 1994, between FJS Properties Fund I, L.P. and
Long Beach Bank, FSB, incorporated by reference to
Exhibit 10(q) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 (File No
0-15755).
(r) Replacement Reserve and Security Agreement, dated
March 29, 1994, between FJS Properties Fund I, L.P. and
Long Beach Bank, FSB, incorporated by reference to
Exhibit 10(r) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 (File No
0-15755).
(s) Completion/Repair and Security Agreement, dated
March 29, 1994, between FJS Properties Fund I, L.P. and
Long Beach Bank, FSB, incorporated by reference to
Exhibit 10(s) to Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 (File No
0-15755).
(t) Extension of Property Management Agreement dated as
of January 1, 1999, by and between FJS Properties Fund
I, L.P. and ML Property Management Inc., incorporated by
reference to Exhibit 10(t) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998
(File No 0-15755).
(b) Reports on Form 8-K filed during the last quarter of the fiscal
year:
None
Financial Statement Schedules Filed Pursuant to Item 13(B)
See Index to Financial Statements in Item 8.
Page 33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FJS PROPERTIES FUND I, L.P.
FJS PROPERTIES, INC.
General Partner
Dated: March 15, 2002 By: Andrew C. Alson
---------------------------------
Andrew C. Alson, President
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partner) and on
the dates indicated.
Dated: March 14, 2002 By: Lawrence E. Bathgate, II
-------------------------------
Lawrence E. Bathgate, II
Director of the General
Partner
Dated: March 15, 2002 By: Andrew C. Alson
-------------------------------
Andrew C. Alson, President
and Director of the General
Partner (Principal Executive
Officer and Principal
Financial Officer)
Page S-1