Item 1. Business
The Registrant, American Republic Realty Fund I, (the "Partnership"), is a limited partnership organized under the Wisconsin Uniform Limited Partnership Act pursuant to a Certificate of Limited Partnership dated December 22, 1982. As of December 31, 1999, the Partnership consisted of an individual general partner, Mr. Robert J. Werra, (the "General Partner") and 926 limited partners owning 11,000 limited partnership interests at $1,000 per interest. The distribution of limited partnership interests commenced May 2, 1983 and ended April 17, 1984, pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration #0-11578) as amended.
The Partnership was organized to acquire a diversified portfolio of income-producing real properties, primarily apartments, as well as office buildings, industrial buildings, and other similar properties.
During 1983 and 1984, the Partnership acquired four properties: Kenwood Gardens Apartments, a 104 unit apartment community located in Fort Myers, Florida (acquired on September 1, 1983, subsequently disposed of by sale during 1988), Jupiter Plaza Office/Showroom, a 131,440 rentable square foot commercial building located in Garland, Texas (acquired on September 29, 1983, subsequently disposed of in foreclosure during 1988), Four Winds Apartments, a 154 unit apartment community located in Orange Park, Florida (Phase I acquired September 12, 1983 and Phase II acquired May 1, 1984) and Forestwood Apartments (formerly Oak Creek) a 263 unit apartment community located in Bedford, Texas (acquired December 20, 1983). No additional properties were purchased by the Partnership and the Partnership will not acquire additional properties in the future. The properties remaining are described more fully in this report at "Item 2.
Item 2. Properties
At December 31, 1999 the Partnership owned two properties with approximately 416,623 net rentable square feet. Both properties are apartment communities.
Name and Location General Description of the Property Forestwood A fee simple interest in a 263 unit Apartments apartment community located in Bedford, Texas, purchased in 1983 containing 244,407 net rentable square feet on approximately 14 acres of land.
Four Winds Apartments A fee simple interest in an 100 unit Phase I community, located in Orange Park, Florida, purchased in 1983, containing approximately 110,716 net rentable square feet on 10 acres of land.
Four Winds Apartments A fee simple interest in a 54 unit Phase II apartment community located in Orange Park, Florida, adjacent to four Winds Apartments I, purchased in 1984 and containing approximately 61,500 net rentable square feet on 3.73 acres of land.
Occupancy Rates
Per Cent
1995 1996 1997 1998 1999 Four Winds I & II 93.6% 93.3% 92.0% 95.0% 94.0%
Forestwood 97.8% 96.6% 97.0% 96.5% 96.9%
The Properties are encumbered by non-recourse mortgages payable. For information regarding the encumbrances to which the properties are subject and the status of the related mortgage loans, see "Management's Discussion and Analysis of Financial Condition and Results of Operating - Liquidity and Capital Resources" contained in Item 7 hereof and Note B to the Financial Statements contained in Item 8.
Item 3.
Item 3. Legal Proceedings
None.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the unit holders of the Partnership during the fourth quarter of 1999.
By virtue of its organization as a limited partnership, the Partnership has outstanding no securities possessing traditional voting rights. However, as provided and qualified in the Limited Partnership Agreement, limited partners have voting rights for, among other things, the removal of the General Partner and dissolution of the Partnership.
PART II
Item 5.
Item 5. Market for the Partnership's Securities and Related Unit Holder Matters
The Partnership's outstanding securities are in the form of Limited Partnership Interests ("Interests"). The distribution period for the sale of the Interests began May 2, 1983,and closed April 17, 1984. As of December 31, 1999 there were approximately 981 limited partners owning 11,000 limited partnership interests at $1,000 per interest. A public market for trading Interests has not developed and none is expected to develop. In addition, transfer of an Interest is restricted pursuant to the Limited Partnership Agreement.
Although a public market for trading Interests has not developed, MP Value Fund 5, LLC acquired 1,444.5 units, approximately 13.1%, of the outstanding Interests of the partnership in during, 1999. MP Value Fund 5 has also tendered offers to other owners, although no additional Interests have been sold. The registrant knows of no other activity involving the sale or acquisition of Interest.
The General Partner continues to review the Partnership's ability to make distributions on a quarter by quarter basis, however, no such distributions have been made and none are anticipated in the immediate future due to the debt service requirements of the Partnership.
An analysis of taxable income or (loss) allocated, and cash distributed to Investors per $1,000 unit is as follows:
YEARS INCOME GAIN LOSS CASH DISTRIBUTED 1984 $0 $0 $342 $0 1985 0 0 $291 0 1986 0 0 $271 0 1987 0 0 $279 0 1988 0 $43 $63 0 1989 0 $38 $127 0 1990 0 0 $126 0 1991 0 0 $122 0 1992 $121 0 0 0 1993 $2 $1,071 0 0 1994 $17 0 0 0 1995 0 (a) 0 0 0
1996 $45 0 0 0 1997 $0 0 $70 0 1998 $0 0 $48 0 1999 $0 0 $39 0
(a) For Federal Income Tax purposes income only was reallocated in accordance with the regulations promulgated thereunder of the Internal Revenue code of 1986 as amended.
Item 6:
Item 6: Selected Financial Data
The following table sets forth selected financial data regarding the Partnership's results of operations and financial position as of the dates indicated. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 7
Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations
This discussion should be read in conjunction with Item 6 - "Selected Financial Data" and Item 8 - "Financial Statements and Supplemental Information" .
Results of Operations: 1999 VERSUS 1998 -
Revenue from Property Operations increased $77,626 or 2.90% as compared to 1998. This increase is primarily attributed to a $66,693 increase in rental revenues which was principally due to an increase in rents. Interest income increased $4,388 due to an increase in available funds for investment during 1999. The increase in other operating revenues of $6,545 were principally caused by a increase in fees from tenants and vending revenues. The following table illustrates the increases:
Increase/ (Decrease)
Rental income $66,693 Interest 4,388 Other 6,545 -------- Net Increase $77,626 =========
Property operating expenses for 1999 increased $19,679 or 0.7%. Interest expense on mortgage payable decreased $8,832 due primarily to normal amortization. Depreciation and amortization increased primarilly due to additional costs associated with the new mortgage loans. Interest expense on Note payable to affiliates decreased due to the repayment of a substantial portion of the amount owed to affiliates with cash flow from operations. Maintenance and repairs decreased $15,809 or 5.22% due primarily to the completion of deferred maintenance items required by the new mortgage lenders. Property management fees are paid to an affiliated entity and represent approximately 5% of gross revenues (see Note C to the Financial Statements and Schedule Index contained in Item 8). The following table illustrates the increases or (decreases):
Increase (Decrease)
Interest Expense on N/P Affiliate $(13,552) Interest Expense on Mortgages Pay (8,832) General administartive 22,229 Maintenance & repairs (15,809) Utilities (1,090) Real estate taxes 18,681 Advertising and Marketing (209) Depreciation and amortization 14,545 Property management fees 3,716 Administrative Service Fee 0 --------- Net Increase $19,679 =========
Results of Operations: 1998 VERSUS 1997 -
Revenue from Property Operations increased $141,574 or 5.59% as compared to 1997. This increase is primarily attributed to a $134,934 increase in rental revenues which was principally due to an increase in rents and by an increase in average occupancy. Interest income decreased $8,385 due to an decrease in available funds for investment during 1998. The increase in other operating revenues of $15,025 were principally caused by a increase in fees from tenants and vending revenues. The following table illustrates the increases:
Increase/ (Decrease)
Rental income $134,934 Interest (8,385) Other 15,025 ---------- Net Increase $141,574 ============
Property operating expenses for 1998 increased $224,472 or 8.48%. Interest expense on mortgage payable increased $363,003 due primarily to refinancing completed in 1997. Depreciation and amortization increased primarilly due to additional costs associated with the new mortgage loans. Interest expense on Note payable to affiliates decreased due to the repayment of a substantial portion of the amount owed to affiliates with excess proceeds from the refinancing of the mortgages payable. Maintenance and repairs decreased $25,556 or 7.79% due primarily to the completion of deferred maintenance items required by the new mortgage lenders. Property management fees are paid to an affiliated entity and represent approximately 5% of gross revenues (see Note C to the Financial Statements and Schedule Index contained in Item 8). The following table illustrates the increases or (decreases):
Increase (Decrease)
Interest Expense on N/P Affiliate $(140,851) Interest Expense on Mortgages Pay 363,003 General administrative (9) Maintenance & repairs (25,556) Utilities (3,545) Real estate taxes (11,869) Advertising and Marketing (553) Depreciation and amortization 37,023 Property management fees 6,829 Administrative Service Fee 0 ------------ Net Increase $224,472 ==============
Liquidity and Capital Resources
While it is the General Partner's primary intention to operate and manage the existing real estate investments, the General Partner also continually evaluates this investment in light of current economic conditions and trends to determine if these assets should be considered for disposal. At this time, there is no plan to dispose of either Property.
As of December 31, 1999, the Partnership had $116,649 in cash and cash equivalents as compared to $146,358 as of December 31, 1998. See Note C to the Financial Statements contained in Item 8 for information regarding related party transactions.
The properties are encumbered by two non-recourse mortgage notes as of December 31, 1999. These mortgages payable have a carrying value of $10,572,372 at December 31, 1999. The mortgage notes were entered into during 1997 to refinance certain mortgage notes. (See earlier discussion entitled "Extraordinary Item - Gain on Early Extiguishment of Debt"). The refinancing of these mortgage notes resulted in a gain from early extinguishment of debt.
Additionally, the general partner has provided funding to the Partnership in the form of notes payable with balances at December 31,1999 totaling $165,346 which accrue interest at 8.25% and is due on February 16, 2001. The general partner is not obligated to provide additional funding to the Partnership.
For the foreseeable future, the Partnership anticipates that mortgage principal payments (excluding any balloon mortgage payments), improvements and capital expenditures will be funded by net cash from operations. The primary source of capital to fund balloon mortgage payments will be proceeds from the sale, financing or refinancing of the Properties.
The Partnership's required principal payments due under the stated terms of the Partnership's mortgage notes payable and notes payable to affiliates are $111,063, $285,478, $129,941 $140,551 and $152,028 for each of the next five years. Item 7a
Item 7a - Quantitative and Qualitative Disclosure about Market Risk Market Risk
The Partnership is exposed to interest rate changes primarily as a result of its real estate mortgages. The Partnerships interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows and to lower its overall borrowing costs. To achieve its objectives, the partnership borrows primarily at fixed rates. The partnership does not enter into derivative or interest rate transactions for any purpose.
The Partnerships' activities do not contain material risk due to changes in general market conditions. The partnership invests only in fully insured bank certificates of deposits, and mutual funds investing in United States treasury obligations.
Risk Associated with Forward-Looking Statements Included in this Form 10-K This Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created thereby. These statements include the plans and objectives of management for future operations, including plans and objectives relating to capital expenditures and rehabilitation costs on the Properties. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward- looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.
AMERICAN REPUBLIC REALTY FUND I COMBINED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS' REPORTS
December 31, 1999 and 1998
Page
Independent Auditors' Reports 1
Combined Financial Statements
Balance Sheets as of December 31, 1999 and 1998 3
Statements of Operations for the years ended December 31, 1999, 1998 and 1997 4
Statements of Partners' Equity (Deficit) for the years ended December 31, 1999, 1998, and 1997 5
Statements of Cash Flows for the years ended December 31, 1999, 1998 and 1997 6
Notes to Financial Statements 7
Schedule III - Real Estate and Accumulated Depreciation 14
All other schedules have been omitted because they are not applicable, not required or the information has been supplied in the financial statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partners of American Republic Realty Fund I
We have audited the accompanying combined balance sheets of American Republic Realty Fund I and subsidiary, a Wisconsin limited partnership (the "Partnership") as of December 31, 1999 and 1998, and the related combined statements of operations, partners' equity (deficit), and cash flows for the years then ended. 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 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 management, as well as evaluating the overall presentation of the financial statements. 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 American Republic Realty Fund I as of December 31, 1999 and 1998, and the results of its operations and its cash flows for the years then ended 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. Schedule III for the year ended December 31, 1999 and 1998 is presented for the purpose 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 the 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.
January 21, 2000 Dallas, Texas
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partners of American Republic Realty Fund I Dallas, Texas
We have audited the accompanying combined statements of operations, partners' equity (deficit) and cash flows of American Republic Realty Fund I and subsidiary (a Wisconsin limited partnership) (the "Partnership") for the year ended December 31, 1997. The combined financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on the combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all material respects, the results of operations and cash flows of the Partnership for the year ended December 31, 1997, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Dallas, Texas February 23, 1998
AMERICAN REPUBLIC REALTY FUND I COMBINED BALANCE SHEETS December 31, 1999 and 1998
ASSETS 1999 1998
Investments in real estate at cost Land $1,822,718 $1,822,718 Buildings, improvements and furniture and fixtures 15,656,616 15,519,676 ---------------------------------- 17,479,334 17,342,394 Accumulated depreciation (10,382,557) (9,702,703)
7,096,777 7,639,691
Cash and cash equivalents 116,649 146,358 Escrow deposits 542,074 430,820 Deferred financing costs, net of accumulated amortization of $57,358 and $34,414, respectively 172,072 195,016 Prepaid expenses 14,067 14,421 ----------------------------------- TOTAL ASSET 7,941,639 8,426,306
LIABILITIES AND PARTNERS' DEFICIT
Mortgages payable 10,572,372 10,675,051 Notes payable to affiliates 165,346 399,392 Amounts due affiliates 4,490 46,853 Accounts payable and accrued expenses 297,610 278,099 Security deposits 68,610 56,924 ------------------------------------ TOTAL LIABILITIES 11,108,428 11,456,319
PARTNERS' DEFICIT (3,166,789) (3,030,013) ------------------------------------ TOTAL LIABILITIES AND PARTNERS' DEFICIT $7,941,639 $8,426,306
AMERICAN REPUBLIC REALTY FUND I COMBINED STATEMENTS OF OPERATIONS For the Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997 ---------------------------------------- INCOME Rentals $2,681,389 $2,614,696 $2,479,762 Other 63,262 56,717 41,692 Interest 8,346 3,958 12,343 ---------------------------------------- Total income 2,752,997 2,675,371 2,533,797
OPERATING EXPENSES Interest expense on mortgages payable 836,393 845,225 482,222 Depreciation and amortization 702,798 688,253 651,230 General and administrative 410,987 388,758 388,767 Maintenance and repairs 286,787 302,596 328,152 Real estate taxes 263,714 245,033 256,902 Utilities 176,806 177,896 181,441 Property management fee to affiliate 137,375 133,659 126,830 Advertising and marketing 40,284 40,493 41,046 Interest expense on notes payable to affiliates 24,621 38,173 179,024 Administrative service fee to general partner 10,008 10,008 10,008 ----------------------------------------- Total operating expenses 2,889,773 2,870,094 2,645,622 ----------------------------------------- NET LOSS BEFORE EXTRAORDINARY GAIN (136,776) (194,723) (111,825)
Extraordinary gain - gain on early extinguishment of debt --- --- 251,785 ----------------------------------------- NET INCOME (LOSS) $(136,776) $(194,723) $139,960 ========================================= NET INCOME PER LIMITED PARTNERSHIP UNIT - BASIC
Net loss before extraordinary gain $(12.31) $(17.53) $(10.06) Extraordinary gain - gain on early extinguishment of debt --- --- 22.66 ----------------------------------------- Net income (loss) per unit - basic $(12.31) $(17.53) $12.60 ========================================= LIMITED PARTNERSHIP UNITS OUTSTANDING - BASIC 11,000 11,000 11,000 =========================================
AMERICAN REPUBLIC REALTY FUND I COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) For the Years Ended December 31, 1999, 1998 and 1997
General Limited Partner Partners Total ----------------------------------------- Balance, January 1, 1997 $55,942 $(3,031,192) $(2,975,250)
Net income 1,400 138,560 139,960 ----------------------------------------- Balance, December 31, 1997 57,342 (2,892,632) (2,835,290)
Net loss (1,947) (192,776) (194,723) ----------------------------------------- Balance, December 31, 1998 55,395 (3,085,408) (3,030,013)
Net loss (1,368) (135,408) (136,776) ----------------------------------------- Balance, December 31, 1999 $54,027 $(3,220,816) $(3,166,789) =========================================
AMERICAN REPUBLIC REALTY FUND I COMBINED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997 ------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(136,776) $(194,723) $139,960 Adjustments to reconcile net income (loss) to net cash provided by operations: Extraordinary gain on early extinguishment of debt --- --- (251,785) Depreciation and amortization 702,798 688,252 651,230 Change in assets and liabilities: Prepaid expenses 354 6,265 (1,072) Escrow deposits (46,796) 295,249 (91,894) Accounts payable and accrued expenses 19,511 (27,931) 188,828 Security deposits 11,686 10,333 845 ------------------------------------------- Net cash provided by operating activities 550,777 777,445 636,112
CASH FLOWS FROM INVESTING ACTIVITIES Investments in real estate (136,940) (171,169) (353,998) Net payments to reserve for replacement (64,458) (23,114) (428,095) ------------------------------------------- Net cash used for investing activities (201,398) (194,283) (782,093)
CASH FLOWS FROM FINANCING ACTIVITIES Additions to mortgages payable --- --- 10,800,000 Deferred financing costs --- --- (229,430) Payments on mortgages payable (102,679) (94,926) (7,017,917) Payments on notes payable to affiliates (234,046) (360,396) (2,175,522) Proceeds (payments) on amounts due affiliates (42,363) 1,618 (1,237,461) ------------------------------------------- Net cash provided by (used for) financing activities (379,088) (453,704) 139,670 ------------------------------------------- Net increase (decrease) in cash and cash equivalents (29,709) 129,458 (6,311)
Cash and cash equivalents at beginning of period 146,358 16,900 23,211 ------------------------------------------- Cash and cash equivalents at end of period $116,649 $146,358 $ 16,900 =========================================== Supplemental disclosure of cash flow information: Cash paid during the year for interest $837,067 $856,672 $1,775,590 =========================================== Extraordinary gain on early extinguishment of debt $ --- $ --- $(251,785) ===========================================
AMERICAN REPUBLIC REALTY FUND I NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
American Republic Realty Fund I (the "Partnership"), a Wisconsin limited partnership, was formed on December 22, 1982, under the laws of the state of Wisconsin, for the purpose of acquiring, maintaining, developing, operating, and selling buildings and improvements. The Partnership operates rental apartments in Texas and Florida. The Partnership will be terminated by December 31, 2012, although this date can be extended if certain events occur. The general partner is Mr. Robert J. Werra.
An aggregate of 20,000 units is authorized, of which 11,000 were outstanding for each of the three years ended December 31, 1999. Under the terms of the offering, no additional units will be offered.
Allocation of Net Income (Loss) and Cash
Net income and net operating cash flow, as defined in the limited partnership agreement, are allocated first to the limited partners in an amount equal to a variable distribution preference on capital contributions from the first day of the month following their capital contribution and, thereafter, 10% to the general partner and 90% to the limited partners. Net loss is allocated 1% to the general partner and 99% to the limited partners.
Net income from the sale of property is allocated first, to the extent there are cumulative net losses, 1% to the general partner and 99% to the limited partners; second, to the limited partners in an amount equal to their distribution preference; and, thereafter, 15% to the general partner and 85% to the limited partners.
Cash proceeds from the sale of property or refinancing are allocated first to the limited partners to the extent of their capital contributions and their distribution preference and, thereafter, 15% to the general partner and 85% to the limited partners.
Basis of Accounting
The Partnership maintains its books on the basis of accounting used for federal income tax reporting purposes. Memorandum entries have been made to present the accompanying financial statements in accordance with generally accepted accounting principles.
Investments in Real Estate and Depreciation
Buildings, improvements, and furniture and fixtures are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets ranging from 5 to 27.5 years.
AMERICAN REPUBLIC REALTY FUND I NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income Taxes
No provision for income taxes has been made since the partners report their respective share of the results of operations on their individual income tax return.
Revenue Recognition
The Partnership has leased substantially all of its rental apartments under cancelable leases for periods generally less than one year. Rental revenue is recognized on a monthly basis as earned.
Deferred Financing Costs
Costs incurred to obtain mortgage financing are being amortized over the life of the mortgage using the straight- line method.
Combination
The financial statements include the accounts of the Partnership and a wholly owned entity. All intercompany amounts have been eliminated.
Cash and Cash Equivalents
The Partnership considers all highly liquid instruments with a maturity of three months or less to be cash equivalents.
Long-Lived Assets
In accordance with 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", the Partnership records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS No. 121 also addresses the accounting for long-lived assets that are expected to be disposed of. Based on current estimates, management does not believe impairment of operating properties is present.
AMERICAN REPUBLIC REALTY FUND I NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Computation of Earnings Per Unit
The Partnership has adopted Statement of Financial Accounting Standards ("SFAS") No.128, "Earnings per Share". Basic earnings per unit is computed by dividing net income (loss) attributable to the limited partners' interests by the weighted average number of units outstanding. Earnings per unit assuming dilution would be computed by dividing net income (loss) attributable to the limited partners' interests by the weighted average number of units and equivalent units outstanding. The Partnership has no equivalent units outstanding for any period presented.
	Concentration of Credit Risk
Financial instruments which potentially subject the Partnership to concentrations of credit risk consist primarily of cash. The Partnership places its cash with various financial institutions. The Partnership's exposure to loss should any of these financial institutions fail would be limited to any amount in excess of the amount insured by the Federal Deposit Insurance Corporation. Management does not believe significant credit risk exists at December 31, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during that reporting period. Actual results could differ from those estimates.
Environmental Remediation Costs
The Partnership accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. Project management is not aware of any environmental remediation obligations that would materially affect the operations, financial position or cash flows of the Project.
Comprehensive Income
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, (SFAS 130), requires that total comprehensive income be reported in the financial statements. For the years ended December 31, 1999, December 31, 1998, and December 31, 1997, the Partnership's comprehensive income (loss) was equal to its net income (loss) and the Partnership does not have income meeting the definition of other comprehensive income.
AMERICAN REPUBLIC REALTY FUND I NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1999 and 1998
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Segment Information
The Partnership is in one business segment, the real estate investments business, and follows the requirements of FAS 131, "Disclosures about Segments of an Enterprise and Related Information."
NOTE B - MORTGAGES PAYABLE
Mortgages payable at December 31, 1999 and 1998, consisted of the following:
1999 1998 --------------------------------- Mortgage note, original face value of $6,800,000, payable in monthly installments of principal and interest of $49,517, bears interest at a rate of 7.92% and matures August 1, 2007, at which time a lump-sum payment of approximately $5,945,187 is due. This mortgage note is secured by real estate assets with a net book value of approximately $4,518,218 $6,657,897 $6,722,016
Mortgage note, original face value of $4,000,000, payable in monthly installments of principal and interest of $28,795 bears interest at a rate of 7.8% and matures August 1, 2007, at which time a lump-sum payment of approximately $3,488,279 is due. This mortgage note is secured by real estate assets with a net book value of approximately $2,578,559 3,914,475 3,953,035 --------------------------------- $10,572,372 $10,675,051 =================================
At December 31, 1999, required principal payments due under the stated terms of the Partnership's mortgage notes payable and notes payable to affiliates are as follows
2000 $ 111,063 2001 285,478 2002 129,941 2003 140,551 2004 152,028 Thereafter 9,918,657 ---------- $10,737,718 ==========
AMERICAN REPUBLIC REALTY FUND I NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1999 and 1998
NOTE C - RELATED PARTY TRANSACTIONS
The Partnership agreement specifies that certain fees be paid to the general partner or his designee. An affiliate of the general partner receives a property management fee that is 5% of the Partnership's gross receipts. Additionally, the Partnership reimburses the affiliate for administrative expenditures. The following fees and reimbursements earned by an affiliate of the general partner in 1999, 1998 and 1997:
1999 1998 1997 ----------------------------------------- Property management fee $137,375 $133,659 $126,830 Administrative service fee 10,008 10,008 10,008
The general partner held a $1,300,000 promissory note of the Partnership, bearing interest at a rate of 10%, scheduled to mature on June 30, 2001. This note was paid off in July 1997 with excess funds from the refinancing of mortgage notes payable. Interest expense incurred on this note was $65,000 for the year ended December 31, 1997.
During 1996, the Partnership received advances from the general partner under a note agreement bearing interest at prime plus 2%. These advances of $208,866, including accrued interest of $30,768, were paid off with excess funds from refinancing of mortgage notes payable in July 1997.
Notes payable to affiliates at December 31, 1999 and 1998, consisted of the following:
1999 1998 ----------------------------- Note payable to an affiliate of the general partner, bearing interest at 8.25%, principal and accrued interest due and payable on or before February 16, 2001. Interest expense of $21,690, $24,788 and $31,904 was incurred on the note for each of the years ended December 31, 1999, 1998 and 1997, respectively. Accrued interest of $1,705 and $43,567 at December 31, 1999 and 1998, respectively, is included in amounts due affiliates. $165,346 $300,461
Note payable to the general partner, bearing interest of prime plus 2%, principal and accrued interest due and payable on June 30, 2001 or upon demand. Interest expense of $1,226, $29,604 and $66,996 was incurred on the note for each of the years ended December 31, 1999, 1998 and 1997, respectively. There is no accrued interest payable at December 31, 1999 and 1998. The note was paid in 1999. --- 98,931 ------------------------------ 165,346 399,392 ==============================
AMERICAN REPUBLIC REALTY FUND I NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1999 and 1998
NOTE D - COMMITMENTS
The Partnership will pay a real estate commission to the general partner or his affiliates in an amount not exceeding the lessor of 50% of the amounts customarily charged by others rendering similar services or 3% of the gross sales price of a property sold by the Partnership, provided that the limited partners have received their original capital plus preferential interest, as defined.
NOTE E - RECONCILIATION OF BOOK TO TAX LOSS (UNAUDITED)
If the accompanying financial statements had been prepared in accordance with the accrual income tax basis of accounting rather than generally accepted accounting principals ("GAAP"), the excess of revenues over expenses for 1999 would have been as follows:
Net loss per accompanying financial statements $(136,776)
Add - book basis depreciation using 679,854 straight-line method
Add - difference in expense recognized by GAAP 36,384
Deduct - income tax basis depreciation expense using
ACRS method (146,970)
------------------
Excess of revenues over expenses, accrual income tax basis $432,492 ==================
NOTE F - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been determined using available market information or other appropriate valuation methodologies that require considerable judgement in interpreting market data and developing estimates. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Partnership could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The fair value of financial instruments that are short-term or reprice frequently and have a history of negligible credit losses is considered to approximate their carrying value. These include cash and cash equivalents, accounts payable and other liabilities.
AMERICAN REPUBLIC REALTY FUND I NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1999 and 1998
NOTE F - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Management has reviewed the carrying values of its mortgages payable and notes payable to related parties in connection with interest rates currently available to the Partnership for borrowings with similar characteristics and maturities and has determined that their estimated fair value would approximate their carrying value as of December 31, 1999 and 1998.
The fair value information presented herein is based on pertinent information available to management. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented herein.
AMERICAN REPUBLIC REALTY FUND I Schedule III - Real Estate and Accumulated Depreciation December 31, 1999
Initial Cost to Partnership Description Encumb Land Building Total Subseq rances and Improv quent to ments Acquisition
26 two-story apartment buildings of concrete block construction with stucco and cedar exterior and gabled roofs located in in Jacksonville, Florida (b) $583,000 $5,686,771 $310,767
37 two-story apartment buildings of concrete block construction with brick veneer, stucco and wood siding exterior, and composition, shingled roofs located in Bedford, Texas (b) 1,239,718 8,679,421 979,657 ----------------------------------------------- $1,822,718 $14,366,192 $1,290,424
Gross Amounts at Which Carried at Close of Year ---------------------------------------
Land Buildings and Total Accumulated Date of Date Life on Improvements (c)(d) Depreciation Construc Acquired Which (c) tion Depre ciation is Computed $583,000 $5,997,538 $6,580,538 $4,001,980 Phase I complete at date acquired; 9/12/83 (a) Phase II complete at date acquired 5/01/84 (a)
1,239,718 9,659,078 10,898,796 6,380,577 Complete at date acquired 12/20/83 (a) - ------------------------------------------------------------------------ $1,822,718 $15,656,616 $17,479,334 $10,382,557 ========================================================================
See notes to Schedule III.
AMERICAN REPUBLIC REALTY FUND I Schedule III - Real Estate and Accumulated Depreciation (Continued) December 31, 1999
NOTES TO SCHEDULE III:
(a) See Note A to financial statements outlining depreciation methods and lives.
(b) See description of mortgages and notes payable in Note B to the financial statements.
(c) The reconciliation of investments in real estate and accumulated depreciation for the years ended December 31, 1999, 1998 and 1997 is as follows:
Investments Accumulated in Real Estate Depreciation ------------------------------------------
Balance, January 1, 1997 $16,817,227 $8,397,635
Acquisitions 353,998 --- Depreciation expense --- 639,758 ------------------------------------------ Balance, December 31, 1997 17,171,225 9,037,393
Acquisitions 171,169 --- Depreciation expense --- 665,310 ------------------------------------------ Balance, December 31, 1998 17,342,394 9,702,703
Acquisitions 136,940 --- Depreciation expense --- 679,854 ------------------------------------------ Balance, December 31, 1999 $17,479,334 $10,382,557 ===========================================
(d) Aggregate cost for federal income tax purposes is $17,361,634.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
On November 6, 1998, an 8-K was filed to disclose the change in auditors. No financial statements were issued in conjunction with this filing. The Registrant has not been involved in any disagreements on accounting and financial disclosure.
PART III
Item 10. Directors and Executive Officer of the Partnership
The Partnership itself has no officers or directors. Robert J. Werra is the General Partner of the Partnership.
Robert J. Werra, 60, the General Partner, Mr. Werra joined Loewi & Co., Incorporated ("Loewi") in 1967 as a Registered Representative. In 1971, he formed the Loewi real estate department, and was responsible for its first sales of privately placed real estate programs. Loewi Realty was incorporated in 1974, as a wholly owned subsidiary of Loewi & Co., with Mr. Werra as President. In 1980, Mr. Werra, along with three other individuals, formed Amrecorp Inc. to purchase the stock of Loewi Real Estate Inc., and Loewi Realty. In 1991 Univesco, Inc. became the management agent for the Partnership. Limited Partners have no right to participate in management of the Partnership.
Item 11. Management Remuneration and Transactions
As stated above, the Partnership has no officers or directors. Pursuant to the terms of the Limited Partnership Agreement, the General Partner receives 1% of Partnership income and loss and up to 15% of Net Proceeds received from sale or refinancing of Partnership properties (after return of Limited Partner capital contributions and payment of a 6% Current Distribution Preference thereon).
Univesco, Inc., an affiliate of the General Partner, is entitled to receive a management fee with respect to properties actually managed of 5% of the actual gross receipts from a property or an amount competitive in price or terms for comparable services available from non-affiliated persons. The Partnership is also permitted to engage in various transactions involving affiliates of the General Partner as described under the caption "Compensation and Fees" at pages 6-8, "Management" at page 17 and "Allocation of Net Income and Losses and Cash Distributions" at pages 34-36 of the Prospectus as supplemented, incorporated in the Form S-11 Registration Statement which was filed with the Securities and Exchange Commission and made effective on May 2, 1983.
For the years ended December 31, 1999, 1998, 1997 and, property management fees earned totaled $137,375, $133,659, and 126,830, respectively. An additional administration service fee was paid to the General Partner of $10,008, $10,008 and $10,008 for the years ended December 31, 1999 1998, and 1997 respectively.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) No one except as listed in item (b) below, owns of record, and the General Partner knows of no one who owns beneficially, more than five percent of the Interests in the Partnership, the only class of securities outstanding.
Amount and Nature
Title Name of of Beneficial Percent of Class Beneficial Owner Ownership of Interest
Limited M.P. Valu Fund IV L.L.C. 1,444.5 13.10% Partnership Interests
(b) By virtue of its organization as a limited partnership, the Partnership has no officers or directors. Persons performing functions similar to those of officers and directors of the Partnership, beneficially own, the following Units of the Partnership as of March 1, 1999.
Amount and Nature
Title Name of of Beneficial Percent of Class Beneficial Owner Ownership of Interest
Limited Robert J. Werra 566 5.14% Partnership Interests
No Selling Commissions were paid in connection with the purchase of these Units.
(c) There is no arrangement, known to the Partnership, which may, at a subsequent date, result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
None other than discussed in Item 11 and Note C to the financial statements at Item 8
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(A) 1. See accompanying Financial Statements Index
2. Additional financial information required to be furnished:
Schedule III - Real Estate and Accumulate Depreciation. 3. Exhibits
None.
(B) Reports on Form 8-K for the quarter ended December 31, 1999.
November 6, 1998, an 8-K was filed to disclose the change in auditors. No financial statements were issued in conjunction with this filing.
(C) Exhibits
3. Certificate of Limited Partnership, incorporated by reference to Registration Statement No. 0-11578 effective May 2, 1983.
4. Limited Partnership Agreement, incorporated by reference to Registration Statement No. 0-11578 effective May 2, 1983.
9. Not Applicable
1O. Not Applicable
11. Not Applicable
12. Not Applicable
13. Reports to security holders, incorporated by reference from Registrant's Quarterly Reports on Form 1O-Q, dated September 30, 1998.
18. Not Applicable
19. Not Applicable
22. Not Applicable
23. Not Applicable
24. Not Applicable
25. Power of Attorney, incorporated by reference to Registration Statement No. 0-11578 effective May 2, 1983.
28. None
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.
AMERICAN REPUBLIC REALTY FUND I
ROBERT J. WERRA, GENERAL PARTNER
/s/ Robert J. Werra
March 29, 2000