Item 1 - Business.
The Registrant is a limited partnership formed under the laws of the state of North Carolina on January 16, 1987. The General Partners of the Registrant are Marion Bass Real Estate Group, Inc. (the Managing General Partner), a North Carolina corporation, and Marion F. Bass (the Individual General Partner), president, chief executive officer, and sole shareholder of the Managing General Partner (collectively, the General Partners).
The Registrant commenced on May 6, 1987 an offering of two classes of depositary units at a price of $100 per unit (the Units) representing the beneficial assignment of income limited partnership interests (the Income Units) and growth limited partnership interests (the Growth Units). The offering was for a minimum of 43,520 Units up to a maximum of 309,750 Units, with the Income Units representing 60% and the Growth Units representing 40% of the offering. A minimum purchase of 50 Units (30 Income Units and 20 Growth Units) was required, except for certain individual retirement account purchases, and additional purchases were required to be in multiples of 50 Units.
The Registrant's initial investment objectives were (1) to preserve and protect the capital of the holders of Income Units, (2) to provide cash distributions to the holders of Income Units, (3) to return the full amount of the capital contributions of the Unitholders with respect to Income Units from the proceeds of mortgage financing on the properties to be acquired by the Registrant within four to seven years from the commencement of the offering, and (4) to obtain capital appreciation on the capital contributions of the Unitholders with respect to Growth Units. In December 1989, cash distributions were made to holders of the Income Units in the full amount of the capital contributions for those Units and the Income Units were redeemed. Since that distribution to holders of Income Units, the distributions by the Registrant have been made to the holders of the Growth Units.
On August 7, 1987, the Registrant acquired from the Managing General Partner 6.2 acres of undeveloped land zoned for 80 multifamily units located on Arrowood Road in southern Mecklenburg County, North Carolina (the Arrowood Property) for a purchase price of $375,102. The Registrant entered into a construction contract with Marion Bass Construction Company, a corporation wholly owned by the Individual General Partner, (Bass Construction) for the construction of an 80 unit residential apartment complex, consisting of 32 one bedroom units, 40 two bedroom units and 8 three bedroom units. The cost of construction of $2,880,000 was financed by the proceeds of the offering derived from the initial closing which occurred on August 7, 1987. At that closing, the Registrant received $3,829,760 in net proceeds after deduction of
$435,200 in sales commissions and offering supervisory fees paid to Marion Bass Securities Corporation (MBSC) and of $87,040 paid to Marion Bass Equity Group (MBEG) in reimbursement for syndication and offering expenses.
On January 26, 1988, the Registrant acquired from the Managing General Partner 12 acres of undeveloped land zoned for multifamily use located on Dickerson Boulevard in Union County, North Carolina near Monroe, North Carolina (the Monroe Property) for a purchase price of $364,964, the appraised value plus certain carrying charges incurred by the Managing General Partner. The Registrant entered into a construction contract with Bass Construction for the construction of an 120 unit residential apartment complex, consisting of 40 one-bedroom units, 64 two-bedroom units and 16 three-bedroom units. The costs of acquisition and construction of $4,014,000 were financed by the proceeds of the offering derived from the second closing which occurred on January 26, 1988. At that closing, the Registrant received $5,174,400 in net proceeds after deduction of $588,000 paid to MBSC for sales commissions and offering supervisory fees and of $117,600 paid to MBEG in reimbursement for syndication and offering expenses.
On May 5, 1988, the offering was amended to disclose the Registrant's decision not to construct the Mallard Creek Project, to divide the Sabal Park project into two separate phases, and to extend the offering beyond May 6, 1988. The Registrant extended the offering period beyond the original expiration date of May 6, 1988 to December 31, 1988 to permit MBSC additional time to soli- cit subscriptions for the amount of the offering necessary to fund the construction of Phase I and Phase II of Sabal Park. At the original expiration date, the Registrant had subscriptions for an additional 3642 Income Units and 2428 Growth Units, representing $607,000 in capital contributions, but said amount was refunded to subscribers because confirmations to subscribe to the offering as extended were not received prior to the original expiration date.
On October 6, 1988, the Registrant acquired from an affiliate of the Managing General Partner 9 acres of undeveloped land located on U. S. Highway 521 in southern Mecklenburg County, North Carolina (formerly, the Sabal Park I property, now known as Sabal Point II) for a cost of $462,992. The Sabal Point II property is adjacent to a luxury apartment community owned by Bass Real Estate Fund-II and known as Sabal Point I. The Registrant entered into a construction contract with Bass Construction for the construction of an 88 unit residential apartment complex, consisting of 48 two bedroom units and 40 three bedroom units. The costs of acquisition and construction totalling $3,470,339 was financed by the proceeds of the offering derived from the third closing which occurred on October 6, 1988. At the closing, the Registrant received $4,620,000 in net proceeds after deduction of $525,000 paid to MBSC for sales commissions and offering supervisory fees and of $105,000 paid to MBEG in reimbursement for syndication and offering
expenses. In August of 1989, the Registrant entered into a construction contract with Bass Construction for the construction of a swimming pool and clubhouse. The construction of the clubhouse and pool was completed in April, 1990, for $275,000.
On December 31, 1988, the offering expired without sufficient subscriptions to fund the acquisition and development of the fourth designated property. Aggregate subscriptions held in escrow since the third closing of $88,000 were refunded and the offering was terminated.
Approximately 13% ($2,119,320) of the aggregate capital contributions of the Unitholders were placed in a reserve maintained by the Registrant to meet costs and expenses of operations and to pay the preferential return to Unitholders with respect to their Income Units to the extent that operating revenues less operating expenses was insufficient to pay the return. As of December 28, 1989, $610,606 had been used to make preferential returns to Unitholders with respect to Income Units combined with $1,502,078 of cash provided from operations.
On December 27, 1989, The Variable Annuity Life Insurance Company of Houston, Texas made permanent loans to the Registrant collateralized by the Registrant's properties as follows:
Arrowood Crossing Apartments $2,625,000 The Chase Apartments $3,100,000 Sabal Point II Apartments $3,565,000 ---------- $9,290,000
The permanent loans have ten-year terms with interest accruing at 9.5% per annum. Accrued interest is payable monthly, and installments of principal payable monthly commenced March 1, 1992 based upon a thirty-year amortization schedule. The remaining principal and all unpaid and accrued interest will be due and payable on January 1, 2000. After closing costs relating to the permanent loans, $9,206,007 was paid to the Registrant. The Registrant used the financing proceeds together with reserves to return the full amount of the capital contributions of the Unitholders with respect to Income Units totalling $9,289,200. A 12.5% preferential return on the Income Units from July 1, 1989 through the redemption date of December 28, 1989 was paid concurrently.
Upon the sale of any property by the Registrant, the proceeds of the sale will be distributed to the partners. Therefore, it is intended that the Registrant will be self-liquidating. The General Partners currently intend to dispose of all properties purchased within twelve to fifteen years of the purchase.
Competition among owners of apartment complexes of the type and in the areas that the Registrant owns apartment complexes generally is high. Competition is based generally on price and features offered. Many of the Registrant's competitors have greater assets and more experience than the Registrant and the General Partners.
One or both of the General Partners serve as a general partner in eight private partnerships which own various income-producing, multi-family residential property. None of the private partnerships sponsored by the General Partners currently contemplates the acquisition of additional properties. The General Partners sponsored three public real estate partnerships, Bass Real Estate Fund-84, Bass Real Estate Fund-II and Bass Real Estate Fund-III, with similar investment objectives as the Registrant. Conflicts could develop between the Registrant and other existing or future partnerships which the General Partners may manage. The General Partners intend to devote only such time to the business of the Registrant as in their judgment is reasonably required. The General Partners are engaged in other similar activities which also require their time and attention.
Two of the Registrant's properties, Arrowood Crossing and Sabal Point II, adjoin apartment complexes owned by Bass Real Estate Fund-III and Bass Real Estate Fund-II. In order to achieve greater economies of scale, Marion Bass Properties, Inc., the property manager for the Registrant and the other owners, has combined the management and leasing operations for all of the adjoining complexes. Under this arrangement, the expenses are allocated on a per unit basis except for those costs that can be directly attributed to a single complex. When leasing units, the property manager shows available units in different complexes and the tenant chooses the unit that he desires. The occupancy on December 31, 1996 for Arrowood Crossing was 92% and the adjoining complex was 97%. The occupancy on December 31, 1996 for Sabal Point II was 98% and the adjoining complexes were 95% and 91%.
As of December 31, 1996, the Registrant did not directly employ any persons in a full-time position. Certain employees of the Managing General Partner and affiliates performed services for the Registrant during the year.
Item 2
Item 2 - Properties.
Arrowood Property.
As described above, the Registrant acquired and constructed an 80 unit residential apartment community known as Arrowood Crossing. Arrowood Crossing consists of 8 buildings together with clubhouse and year-round swimming pool. All buildings are slab on grade,
woodframe and vinyl siding. Construction was completed in October, 1988 with rental of the premises beginning in August, 1988. At December 31, 1996, 92% of the apartment units were occupied. The types of units and monthly rentals are:
Monroe Property.
As described above, the Registrant acquired and constructed an 120 unit residential apartment community known as The Chase. The Chase consists of 11 buildings together with clubhouse. All buildings are slab on grade, woodframe and vinyl siding. Construction was completed in October, 1988 with rental of the premises beginning in August, 1988. At December 31, 1996, 99% of the apartment units were occupied. The types of units and monthly rentals are:
Sabal Point II Property.
As described above, the Registrant acquired and constructed an 88 unit residential apartment community formerly known as Sabal Park Phase I, now known as Sabal Point II. Sabal Point II consists of 4 buildings together with clubhouse. All buildings are slab on grade woodframe and vinyl siding. Construction was completed in July, 1989 with occupancy of the premises beginning in May, 1989. Construction of a swimming pool and clubhouse was completed in April, 1990. At December 31, 1996, 98% of the apartment units were occupied. The types of units and expected monthly rentals are:
Item 3
Item 3 - Legal Proceedings.
No legal proceedings were initiated or terminated during the fiscal year covered by this report.
Item 4
Item 4 - Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the holders of Units during the fourth quarter of the fiscal year ended December 31, 1996.
Item 5
Item 5 - Market for Registrant's Units of Limited Partnership and Related Matters.
Transfer of limited partnership interests of the Registrant is subject to certain restrictions in the limited partnership agreement of the Registrant. Depositary receipts for the Units have been issued in registered form. Beginning May 1, 1989, the depositary receipts became freely transferable subject to applicable federal or state securities laws, unless the Managing General Partner imposes transfer restrictions in order to preserve the status of the Registrant as a partnership for federal income tax purposes or to ensure that Unitholders will be treated as limited partners of the Registrant for federal income tax purposes. Transfers of depositary receipts are effective on the first day of the month following receipt by the Registrant of all necessary documentation for the transfer, provided such documents are received at least 5 business days prior to the beginning of such month. Since May 1, 1989, 600 Income Units and 440 Growth Units have been sold by 3 Unitholders at a price of $97 per Income Unit and $97 per Growth Unit.
On December 28, 1989, the Registrant redeemed the Income Units and returned the full amount of the capital contributions of the Unitholders with respect to Income Units from the proceeds of mortgage financing on the properties.
As of December 31, 1996, 61,928 Growth Units were outstanding, held of record by 1,106 persons.
The limited partnership agreement of the Registrant requires that operating revenue less operating expenses (Cash Flow) be distributed on at least a semi-annual basis within 30 days of June 30 and December 31 of each year. Cash Flow is to be distributed pro rata among the Unitholders in accordance with their percentage interest as follows:
(a) First, 100% to Unitholders who hold Income Units until such Unitholders have received an amount equal to the preferential return on Income Units;
(b) Then, 100% to Unitholders who hold Income Units until such Unitholders have received an amount equal to their adjusted capital contributions with respect to their Income Units; and
(c) Then, any remaining Cash Flow shall be distributed to Unitholders holding Growth Units.
Since the Income Units were redeemed on December 28, 1989, future distributions will be made to Unitholders holding Growth Units. The Registrant made the following distributions to Unitholders who held Units on the record date for such distribution:
The distribution to Growth Unitholders as of December 31, 1995 was declared by the General Partners in February, 1996 was paid primarily from cash reserves in April, 1996. Future distributions may include amounts held as reserves, that amounted to approximately $654,810 as of December 31, 1996. However, once those reserves are distributed to limited partners, future distributions will be made only out of net cash flow.
Item 6
Item 6 - Selected Financial Data.
Item 7
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations.
General.
The Registrant was organized on January 16, 1987 for the purpose of developing, operating, holding and disposing of one to four specified multi-family residential properties. In August, 1987, the Registrant purchased 6.2 acres of undeveloped land for development of 80 multi-family units for a price of $375,102. The capitalized cost of construction amounted to $2,895,303. In January, 1988 the Registrant purchased 12 acres of undeveloped land for development of 120 multi-family units for a price of $367,906. The capitalized cost of construction amounted to $4,035,851. In October, 1988 the Registrant purchased 9 acres of undeveloped land for development of 88 multi-family units for a price of $462,992. The capitalized cost of construction amounted to $3,470,339.
The Registrant was capitalized with Limited Partner contributions of $9,289,200 representing Income Units and $6,192,800 representing Growth Units and General Partner contributions of $1,200. During the capital formation and construction periods, the Registrant temporarily invested funds in short-term commercial paper, government securities, repurchase agreements and bank money market funds. On December 28, 1989 the full amount of capital contributions representing Income Units was redeemed with the proceeds of mortgage financing on the Registrant's properties. The loans represent approximately 80% leverage on the aggregate capitalized cost of $11,557,173.
Liquidity and Capital Resources.
At December 31, 1996, partners' equity was $378,543 or 4% of total assets and liquid assets amounted to $654,810. The decrease in cash of $72,350 was due to a net cash flow from operations of $474,084 less capital replacements of $62,761, mortgage debt reduction of $83,673 and a distribution to partners of $400,000. The Registrant had accrued liabilities of $26,052 which consisted of management fees due to an affiliate of $8,852, trade account payables of $16,321 and tenant prepaid rent of $879.
Net cash flow from operations before property additions, payments on mortgage principal, and distributions to partners totaled $474,084 in 1996, $384,168 in 1995, and $233,130 in 1994. The Registrant had three 9.5% amortizing mortgage notes in the amount of $8,940,661 outstanding at December 31, 1996. Principal payments of $83,673, $76,119 and $74,726 were made in 1996, 1995 and 1994, respectively.
During 1996 the Charlotte market continued to witness increased activity in the construction of multi-family residential apartment complexes. With the addition of these new units, some properties have begun offering rental concessions or other discounts to obtain tenants. Should this trend affect the Registrant's operations during 1997, then certain marketing strategies will be implemented in order to minimize any potential reduction in occupancy.
The 1997 operating plan and budget projects cash flow from operations of $42,000 at Arrowood Crossing, $220,000 at The Chase and $135,000 at Sabal Point II. The budget assumes that the Registrant will achieve occupancy rates equivalent to 95% at Arrowood Crossing, 98% at The Chase and 95% at Sabal Point II. Rents have been increased 3% over rates charged in 1996 to offset normal increases in operating expenses. Capital replacements of $74,000, $30,000 and $32,000 are budgeted for Arrowood Crossing, The Chase and Sabal Point II, respectively. Based upon these estimates, the Registrant believes that each cash flow from operations will be sufficient to meet cash requirements and provide distributions to limited partners.
Results of Operations.
The results from operations for the year 1996 reflect an increase in total revenues of $119,633 due to maintaining a combined average occupancy of 98% and increasing rents an average of 3% to 5%. Rental income was $2,076,656 in 1996 compared to $1,970,005 in 1995, a difference of $106,651. Other operating income was $90,466 in 1996 compared to $95,444, in 1995, reflecting a decrease of $4,978. Operating expenses (excluding depreciation and amortization) increased $48,275. The increase of $13,019 in fees and expenses to affiliates was due to management fees based on total revenues collected and higher costs associated with on-site personnel. Property taxes and insurance were higher in 1996 by $5,522 due to rate increases. Utilities increased $7,615 due to higher utility rates and resident usage. Repairs and maintenance increased $25,946 due to the scheduled replacement of carpeting and appliances and painting the exterior of The Chase Apartments. Advertising was higher by $4,075 and included the purchase of brochures, magazine ads and tenant concessions. Other expenses decreased $7,902 which included general administrative costs and tenant bad debts.
After interest expense of $853,731 and other nonoperating expenses of $52,207 the Registrant realized net income of $45,505. This is compared to net losses of $25,183 and $164,732 in 1995 and 1994, respectively. Before recognizing the expense of depreciation and amortization, the 1996 operating plan and budget had forecasted and combined net income of $410,000. This is compared to an actual net income before depreciation and amortization of $488,403.
Item 8
Item 8 - Financial Statements and Supplementary Data.
See Appendix A to this Form 10-K.
Item 9
Item 9 - Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 10
Item 10 - Directors and Executive Officers of the Registrant.
The Registrant has no directors or executive officers. Information as to the directors and executive officers of the Managing General Partner is as follows:
Information about Directors Name and Executive Officers
Marion F. Bass Director, President, Chief Executive Officer, and Treasurer of the Managing General Partner since 1977. He is 57 years old.
Robert J. Brietz Executive Vice President of the Managing General Partner since October, 1988. Director and Secretary of the Managing General Partner since March, 1989. Executive Vice President of Marion Bass Securities Corporation since November, 1986. Senior Vice President with Interstate Securities Corporation for the period from 1978 to October, 1986. He is 53 years old.
The directors and executive officers of the Managing General Partner were elected to their current positions on March 27, 1989. Each officer and director holds office until his death, resignation, retirement, removal, disqualification, or his successor is elected and qualified.
All of the executive officers and directors of the Managing General Partner serve in the same capacities with Marion Bass Securities Corporation, Marion Bass Construction Company, Marion Bass Properties, Inc., Bass Capital Management Corporation, Marion Bass Investment Group, Inc. Marion F. Bass is the sole shareholder of Marion Bass Investment Group, Inc. which is the sole shareholder of the other corporations in the Marion Bass Group.
Item 11
Item 11 - Executive Compensation.
During the fiscal year ended December 31, 1996, the Registrant paid no compensation to the executive officers or directors of the Managing General Partner or to either of the General Partners. See Item 13 "Certain Relationships and Related Transactions" for a discussion of amounts paid or which may be paid to the General Partners and certain affiliates of the General Partners after December 31, 1996.
Item 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management.
As of March 15, 1997, no persons known to the Registrant have beneficial ownership of more than 5% of the Units.
None of the directors and officers of the Managing General Partner owned any Units of the Registrant at March 15, 1997.
Item 13
Item 13 - Certain Relationships and Related Transactions.
The Registrant has and will engage in transactions with various corporations within the Marion Bass Companies. The General Partners and their affiliates received fees and expenses as follows:
PART IV
Item 14
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial statements and schedules. See Index to Financial Statements included in Appendix A to this Form 10-K. All other schedules are omitted because they are not applicable, not required or because the requested information is included in the Financial Statements or notes thereto.
(b) Exhibits. 3(a) Copy of Limited Partnership Agreement dated as of August 6, 1987, filed as Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
3(b) Copy of Certificate of Limited Partnership dated as of January 5, 1987, filed as Exhibit 3(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
4(a) Specimen Certificate for Growth Units, filed as Exhibit 4(a) of Amendment No. 1 to Registrant's Registration Statement on Form S-11 (No. 33-11797), filed with the Securities and Exchange Commission on April 23, 1987, which is incorporated by reference to such Form S-11.
4(b) Specimen Certificate for Income Units, filed as Exhibit 4(b) of Amendment No. 1 to Registrant's Registration Statement on Form S-11 (No. 33-11797), filed with the Securities and Exchange Commission on April 23, 1987, which is incorporated by reference to such Form S-11.
10(a) Copy of Construction Agreement for the Arrowood Property dated as of February 27, 1987, filed as Exhibit 10(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
10(b) Copy of Construction Agreement for the Monroe Property, dated as of February 27, 1988, filed as Exhibit 10(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
10(c) Copy of Construction Agreement for Sabal Park I dated as of April 18, 1988, filed as Exhibit 10(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1988, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
10(d) Copy of permanent loan documents for Sabal Park I, dated as of December 27, 1989, filed as Exhibit 10(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, filed with the Securities and Exchange Commission, which is incorporated herein by reference.
(c) Reports on Form 8-K. No reports on Form 8-K were filed during the last quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned thereunto duly authorized on March 27, 1997.
BASS INCOME PLUS FUND
By: MARION BASS REAL ESTATE GROUP, INC., as Managing General Partner
By: Marion F. Bass, President
By: MARION F. BASS, as Individual General Partner
By: Marion F. Bass
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated:
Signature Title Date
Director, President and March 27, 1997 Marion F. Bass Treasurer of Marion Bass Real Estate Group, Inc. (Principal Executive Officer)
Director, Executive Vice March 27, 1997 Robert J. Brietz President and Secretary of Marion Bass Real Estate Group, Inc. (Principal Financial and Accounting Officer)
APPENDIX A
BASS INCOME PLUS FUND LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AND SCHEDULES
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
C O N T E N T S
Page
FINANCIAL STATEMENTS:
Report of Independent Public Accountants 1
Balance Sheets - December 31, 1996 and 1995 2
Statements of Operations - For the Years ended December 31, 1996, 1995 and 1994 3 Statements of Changes in Partners' Equity (Deficit) - For the Years ended December 31, 1996, 1995 and 1994 4
Statements of Cash Flows - For the Years ended December 31, 1996, 1995 and 1994 5
Notes to Financial Statements 6-9
FINANCIAL STATEMENT SCHEDULES:
Schedule III-Real Estate and Accumulated Depreciation - December 31, 1996 10
BASS INCOME PLUS FUND LIMITED PARTNERSHIP
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996, 1995 AND 1994 TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bass Income Plus Fund Limited Partnership:
We have audited the accompanying balance sheets of Bass Income Plus Fund Limited Partnership (a North Carolina limited partnership) as of December 31, 1996 and 1995, and the related statements of operations, changes in partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1996. These financial statements and the schedule referred to below are the responsibility of the managing general partner (see Note 4). Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. 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 the managing general partner, 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 Bass Income Plus Fund Limited Partnership as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in Appendix A is presented for purposes of complying with the Securities and Exchange Commission's rules and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
Arthur Andersen & Co. SC
Charlotte, North Carolina, February 21, 1997.
BASS INCOME PLUS FUND LIMITED PARTNERSHIP
BALANCE SHEETS -- DECEMBER 31, 1996 AND 1995
The accompanying notes to financial statements are an integral part of these balance sheets.
BASS INCOME PLUS FUND LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The accompanying notes to financial statements are an integral part of these statements.
BASS INCOME PLUS FUND LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The accompanying notes to financial statements are an integral part of these statements.
BASS INCOME PLUS FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The accompanying notes to financial statements are an integral part of these statements.
BASS INCOME PLUS FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Bass Income Plus Fund Limited Partnership (the Partnership) was organized to engage in the acquisition of specified parcels of undeveloped real estate and to construct, develop, operate, hold and dispose of income-producing, multifamily residential apartment complexes. At formation, the limited partnership interests consisted of two classes of units, income units and growth units. Each investment in limited partnership interests consisted of 60% income units and 40% growth units. Limited partnership interests were sold at $100 per unit for a total of $15,482,000. During December 1989, the Partnership obtained mortgage financing (see Note 2) on the rental properties. The proceeds from the mortgage financing were used to return the full amount of the capital contributions of the income unit holders for a total distribution of $9,289,200.
Under the terms of the partnership agreement, net income (loss) is to be allocated 99% to the limited partners and 1% to the general partners. Cash distributions from operations are to be distributed 100% to the limited partners. Upon the sale or refinance of the partnership properties, the partnership agreement specifies certain allocations of net proceeds and taxable gain or loss from the transaction.
CASH INVESTMENTS
For purposes of the statements of cash flows, the Partnership considers all unrestricted, highly liquid investments purchased with an original maturity of three months or less to be cash investments.
DEFERRED COSTS
Expenses incurred in connection with the organization of the Partnership and obtaining financing have been capitalized as deferred costs. Deferred financing costs are being amortized over the terms of the loans. Organization costs were amortized using the straight-line method over five years. Amortization of organization costs and deferred financing costs is included in depreciation and amortization expense on the accompanying statements of operations.
DEPRECIATION
The cost of rental properties is depreciated using the straight-line method over the following estimated useful lives:
Buildings 30 years Furnishings and fixtures 8 years
RENTAL PROPERTIES
Rental properties are carried at cost, which includes the initial land price as well as development costs (see Note 3).
INCOME TAXES
Under current income tax laws, income or loss of partnerships is included in the income tax returns of the partners. Accordingly, no provision has been made for federal or state income taxes in the accompanying financial statements.
The tax returns of the Partnership are subject to examination by federal and state taxing authorities. If such examinations occur and result in changes with respect to the partnership qualification or in changes to partnership income or loss, the tax liability of the partners would be changed accordingly.
Adjustments are required to reflect the Partnership's accounts on the basis of accounting utilized for federal income tax reporting purposes. The significant items giving rise to the adjustments are differing lives and methods of depreciation and costs incurred in connection with raising of capital (syndication costs).
The reconciliation of net income for the years ended December 31, 1996, 1995 and 1994, from a financial reporting to a tax basis are as follows:
PER UNIT AMOUNTS
Net income per limited partnership unit was determined based on the weighted average number of units outstanding during the period. The weighted average units outstanding was 61,928 for 1996, 1995 and 1994.
NEW ACCOUNTING PRONOUNCEMENT
During 1996, the Partnership adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement establishes accounting standards for the impairment of long-lived assets. Under the provisions of SFAS No. 121, recoverability of long-lived assets is to be determined based on expected future net cash flows resulting from the use of the asset. The adoption of this new accounting pronouncement did not have an impact on the Partnership's financial position or the results of its operations.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements. These estimates and assumptions also affect the reported amounts of revenues and expenses during the period reported. Actual results could differ from those estimates.
2. MORTGAGE LOANS PAYABLE:
The Partnership has three mortgage loans payable to a financial institution secured by three rental properties. Principal and interest are due monthly in payments totaling $78,117, with the remaining principal and any accrued interest due upon maturity in January 2000. Under the mortgage agreement, the Partnership is required to fund certain reserves for insurance, property taxes and capital improvement expenditures. These reserves are included in other assets on the accompanying balance sheets.
Future principal payments due on the mortgage loans are as follows:
1997 $ 83,977 1998 100,311 1999 110,267 2000 8,646,106
Cash paid for interest was $853,730 in 1996, $861,285 in 1995 and $940,794 in 1994.
3. RENTAL PROPERTIES:
The rental properties consist of three residential apartment complexes; Arrowood Crossing, The Chase and Sabal Point II. All were constructed by an affiliate of the general partners and contain 80, 120 and 88 rental units, respectively. The Chase, Sabal Point II and Arrowood Crossing are located on three plots of land purchased in 1988 from the managing general partner or an affiliate of the general partners.
Affiliates of the general partners own residential apartment complexes adjacent to Arrowood Crossing and Sabal Point II. These complexes are sharing expenses related to grounds, maintenance, leasing, management and other related costs. The managing general partner believes that the allocation of expenses to each partnership has been made on a reasonable basis.
4. GENERAL PARTNERS AND RELATED-PARTY TRANSACTIONS:
The Partnership's general partners are Marion F. Bass and Marion Bass Real Estate Group, Inc. (the managing general partner). The rental properties are managed by Marion Bass Properties, Inc. Both Marion Bass Real Estate Group, Inc. and Marion Bass Properties, Inc. are wholly owned by Marion F. Bass.
Under the terms of the partnership agreement, the general partners or their affiliates charged certain fees and expenses during 1996, 1995 and 1994 as follows:
The Partnership receives from an affiliated partnership an agreed-upon amount each year for the use of its pool and clubhouse located on the Partnership's property at Sabal Point II. The Partnership has recorded as other operating income $13,630 in 1996, $12,740 in 1995 and $11,850 in 1994, under the terms of this agreement.
The general partners and certain of their affiliates also perform, without cost to the Partnership, day-to-day investment, management and administration functions of the Partnership.
APPENDIX A
BASS INCOME PLUS FUND LIMITED PARTNERSHIP (A LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION FOR THE YEAR ENDED DECEMBER 31, 1996
Note 1:
Note 2: Depreciation was computed using the following estimated useful lives- Buildings 30 years Furnishings and fixtures 8 years
Note 3: Buildings and improvements include costs of furnishings and fixtures.
Note 4: Aggregate cost for federal income tax purposes, net of accumulated tax depreciation, was $8,141,760 at December 31, 1996.