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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2004 Commission file number 0-11578
AMERICAN REPUBLIC REALTY FUND I
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1421936
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification
Number)
2800 N. Dallas Pkwy Suite 100
Plano, Texas 75093-5994
(Address of principal executive offices)
Registrant's telephone number, including area code: (972)836-8000.
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: Y No:
REGISTRANT IS A LIMITED PARTNERSHIP
TABLE OF CONTENTS
Item 1. Financial Statements
The following Unaudited financial statements are filed herewith:
Consolidated Balance Sheet as of September 30, 2004 and
December 31, 2003 Page 3
Consolidated Statements of Operations for the Three
And Nine Months Ended September 30, 2004 and 2003 Page 4
Consolidated Statements of Cash Flows for the Nine
Ended September 30, 2004 and 2003 Page 5
Item 2. Results of Operations and Management Discussion and
Analysis of
Financial Condition Page 6
Liquidity and Capital Resources Page 9
Other Information Page 10
Signatures Page 12
The statements, insofar as they relate to the period subsequent
to December 31, 2003, are Unaudited.
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN REPUBLIC REALTY FUND I
Condensed Consolidated Balance Sheets
ASSETS
Real Estate assets, at cost
Land $1,822,718 $1,822,718
Buildings and improvements 16,099,903 16,099,903
17,922,621 17,922,621
Less: Accumulated depreciation (13,592,432) (13,097,432)
Real Estate, net 4,330,189 4,825,189
Cash including cash investments 418,566 435,304
Escrow deposits 406,791 427,384
Prepaid Expenses 92,025 43,377
Deferred Financing Fees 63,093 80,300
TOTAL ASSETS $5,310,664 $5,811,554
LIABILITIES AND PARTNERS' EQUITY:
LIABILITIES
Mortgage and notes payable $9,957,791 $10,070,686
Amounts due affiliates 77 2,452
Real estate taxes payable 223,047 0
Security deposits 67,401 71,944
Accounts payable & accrued expenses 125,658 319,414
Total liabilities 10,373,974 10,464,496
PARTNERS CAPITAL (DEFICIT)
Limited Partners (5,096,965) (4,690,701)
General Partner 33,655 37,759
Total Partners Capital (Deficit) (5,063,310) (4,652,942)
TOTAL LIABILITIES AND PARTNER DEFICIT $5,310,664 $5,811,554
AMERICAN REPUBLIC REALTY FUND I
Condensed Consolidated Statement of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
REVENUES 2004 2003 2004 2003
Rental income 593,423 647,493 1,806,424 1,975,407
Other property 24,092 16,648 56,135 48,161
Total revenues 617,515 664,141 1,862,559 2,023,568
EXPENSES
Salaries & wages 96,724 98,811 257,213 276,294
Maintenance & repairs 72,463 59,158 167,450 172,069
Utilities 57,549 49,903 161,466 158,179
Real estate taxes 72,549 75,249 223,047 225,747
General administrative 34,813 30,167 83,722 84,175
Contract services 26,412 29,119 82,483 83,589
Insurance 35,338 31,921 100,703 83,356
Interest 196,564 199,227 591,508 599,751
Depreciation and amortization 170,735 180,736 512,207 542,208
Property management fees (a) 30,876 33,292 93,128 101,247
Total expenses 794,023 787,583 2,272,927 2,326,615
Net Income ($176,508 ($123,442) ($410,368) ($303,047)
NET INCOME PER UNIT $(16.05) $(11.22) $(37.31) $(27.55)
See Notes to Condensed Consolidated Financial Statements
AMERICAN REPUBLIC REALTY FUND I
Condensed Consolidated Statement of Cash Flows
See Notes to Condensed Consolidated Financial Statements
Unaudited
Nine Months Ended
September 30,
2004 2003
CASH FLOWS FROM OPERATING ACTIVITY
Net income (loss) ($410,368) ($303,047)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 495,000 525,000
Net Effect of changes in operating accounts
Escrow deposits 20,593 (98,267)
Prepaid expenses (48,648) (51,707)
Accrued real estate taxes 223,047 225,747
Security deposits (4,543) (36)
Accounts payable (193,756) (144,879)
Other assets 17,207 17,206
Net cash provided by (used for) operating activities 98,532 170,017
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of mortgage notes payable (112,895) (116,354)
Proceeds from amounts due affiliates (2,375) (279)
Net cash used for investing activities (115,270) (116,633)
NET INCREASE (DECREASE) IN CASH AND CASH (16,738) 53,384
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 435,304 214,237
CASH AND CASH EQUIVALENTS, END OF PERIOD $418,566 $267,621
Basis of Presentation:
The accompanying unaudited condensed consolidated
financial statements have been prepared by American Republic
Realty Fund I (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. The
financial statements reflect all adjustments that are, in
the opinion of management, necessary to fairly present such
information. All such adjustments are of a normal recurring
nature. Although the Company believes that the disclosures
are adequate to make the information presented not
misleading, certain information and footnote disclosures,
including a description of significant accounting policies
normally included in financial statements prepared in
accordance with accounting principles generally accepted in
the United States of America, have been condensed or omitted
pursuant to such rules and regulations.
These financial statements should be read in conjunction
with the financial statements and notes thereto included in
the Company's 2003 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. The results of
operations for interim periods are not necessarily
indicative of the results for any subsequent quarter or the
entire fiscal year ending December 31, 2004.
Item 2. RESULTS OF OPERATIONS AND MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
THIRD QUARTER 2004 COMPARED TO THIRD QUARTER 2003
At September 30, 2004 the Partnership owned two properties with
approximately 416,623 net rentable square feet. Both properties
are apartment communities. The portfolio had an average
occupancy of 84.3% for the third quarter of 2004, as compared to
90.9% for the third quarter of 2003.
Revenue from property operations decreased $46,626, or 7.02%, for
the third quarter of 2004, as compared to the 2003-third quarter.
The decrease in rental income of $54,070 or 8.35% is primarily
due to an increase in vacancy. The increase in other income of
$7,444 or 44.71% is primarily due to an increase in Late and
other fee collections from the properties. The following table
illustrates the components:
Increase Percent
(Decrease) Change
Rental income (54,070) 8.35%
Other property 7,444 44.71%
Net Increase (46,626) 7.02%
(Decrease)
Property operating expenses increased $6,440 or 0.82%, for the
third quarter of 2004, as compared to the same period in 2003.
Maintenance & repairs increased $13,305 or 22.49% due to exterior
painting being performed. Utilities increased $7,646 or 15.32%
due to higher gas prices. General and administrative increased
$4,646 or 15.40% due to real estate tax appeal costs. Insurance
increased $3,417 or 10.70% in connection with the annual policy
renewal. The following table illustrates the components by
category:
Increase Percent
(Decrease) Change
Salaries & wages (2,087) 2.11%
Maintenance & repairs 13,305 22.49%
Utilities 7,646 15.32%
Real estate taxes (2,700) 3.59%
General administrative 4,646 15.40%
Contract services (2,707) 9.30%
Insurance 3,417 10.70%
Interest (2,663) 1.34%
Depreciation and amortization (10,001) 5.53%
Property management fees (a) (2,416) 7.26%
Net Increase 6,440 0.82%
(Decrease)
NINE MONTHS ENDED SEPTEMBER 2004 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 2003
Revenue from property operations decreased $161,009, or 7.96%,
for the nine months ended September 2004, as compared to the nine
months ended September 2003. The decrease in rental income of
$168,983 or 8.55% is primarily due to an increase in vacancy.
The increase in other income of $7,974 or 16.56% is primarily due
to an increase in Late and other fee collections from the
properties. The following table illustrates the components:
Increase Percent
(Decrease) Change
Rental income (168,983) 8.55%
Other property 7,974 16.56%
Net Increase (161,009) 7.96%
(Decrease)
Property operating expenses decreased $53,688 or 2.31%, for the
nine months ended September 2004, as compared to the same period
in 2003. Insurance increased $17,347 or 20.81% in connection with
the annual policy renewal. Salaries and wages decreased $19,081
or 6.91% due to lower worker compensation expense. The following
table illustrates the components by category:
Increase
(Decrease)
Salaries & wages (19,081) 6.91%
Maintenance & repairs (4,619) 2.68%
Utilities 3,287 2.08%
Real estate taxes (2,700) 1.20%
General administrative (453) 0.54%
Contract services (1,106) 1.32%
Insurance 17,347 20.81%
Interest (8,243) 1.37%
Depreciation and amortization (30,001) 5.53%
Property management fees (a) (8,119) 8.02%
Net Increase (53,688) 2.31%
(Decrease)
THIRD QUARTER 2003 COMPARED TO THIRD QUARTER 2002
At September 30, 2003 the Partnership owned two properties with
approximately 416,623 net rentable square feet. Both properties
are apartment communities. The portfolio had an average
occupancy of 90.9% for the third quarter of 2003, as compared to
88.3% for the third quarter of 2002.
Revenue from property operations decreased $26,423, or 3.83%, for
the third quarter of 2003, as compared to the 2002 third quarter.
The decrease in rental income of $25,818 or 3.83% is primarily
due to a decrease in rental rates. The decrease in other income
of $605 or 3.51% is primarily due to an decrease in Late and
other fee collections from the properties. The following table
illustrates the components:
Three
Month
Increase Percent
(Decrease) Change
Rental income (25,818) 3.83%
Other property (605) 3.51%
Net Increase (26,423) 3.83%
(Decrease)
Property operating expenses decreased $19,737 or 2.44%, for the
third quarter of 2003, as compared to the same period in 2002.
Maintenance & repairs decreased $31,904 or 35.04% due to reduced
property exterior construction projects. Insurance increased
$8,230 or 34.74% in connection with the annual policy renewal.
The increase in general & administrative is due to increased
professional fees and banks charges. The following table
illustrates the components by category:
Increase Percent
(Decrease) Change
Salaries & wages 2,725 2.84%
Maintenance & repairs (31,904) 35.04%
Utilities (2,267) 4.35%
Real estate taxes (666) 0.88%
General administrative 4,929 19.53%
Contract services 3,141 12.09%
Insurance 8,230 34.74%
Interest (2,696) 1.34%
Depreciation and amortization 1 0.00%
Property management fees (a) (1,230) 3.56%
Net Increase (19,737) 2.44%
(Decrease)
NINE MONTHS ENDED SEPTEMBER 2003 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 2002
Revenue from property operations decreased $31,491, or 1.53%, for
the nine months ended September 2003, as compared to the same
period in 2002. The decrease in rental income of $29,037 or
1.45% is primarily due to a decrease in rental rates. The
decrease in other income of $2,454 or 4.85% is primarily due to
an decrease in Late and other fee collections from the
properties. The following table illustrates the components:
Increase Percent
(Decrease) Change
Rental income (29,037) 1.45%
Other property (2,454) 4.85%
Net Increase (Decrease) (31,491) 1.53%
Property operating expenses increased $1,119 or 0.05%, for the
nine months ended September 2003, as compared to the same period
in 2002. Maintenance & repairs decreased $34,039 or 16.52% due to
reduced property exterior construction projects. Insurance
increased $20,979 or 33.63% in connection with the annual policy
renewal. Salaries and wages increased $15,788 or 6.06% due to an
increase in workers compensation insurance. The following table
illustrates the components by category:
Increase
(Decrease)
Salaries & wages 15,788 6.06%
Maintenance & repairs (34,039) 16.52%
Utilities 4,458 2.90%
Real estate taxes (2,664) 1.17%
General administrative 1,908 2.32%
Contract services 3,999 5.02%
Insurance 20,979 33.63%
Interest (7,931) 1.31%
Depreciation and amortization 1 0.00%
Property management fees (a) (1,380) 1.34%
Net Increase (Decrease) 1,119 0.05%
LIQUIDITY AND CAPITAL RESOURCES
While it is the General Partners 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
this asset should be considered for disposal. At this time, there
is no plan to dispose of either property.
As of September 30, 2004, the Partnership had $418,566 in
cash and cash equivalents as compared to $435,304 as of December
31, 2003. The net decrease in cash of $16,738 is principally due
to cash flow from operations.
On September 30, 2002 the partnership distributed $25.00 per
limited partnership unit to units of record September 30, 2002.
This distribution was made from excess cash on hand from cash
flow from operations.
Each asset of the fund refinanced its debt during July 1997.
The fund retired debt with a face value of $6,500,000 and
replaced with debt of $10,800,000. The new mortgages in the
amounts of $4,000,000, $6,800,000 carry interest rates of 7.8%
and 7.92% respectively. The notes come due August 2007. The
Partnerships required principal payments due under the stated
terms of the Partnerships mortgage notes payable are $152,028,
$164,442 and $177,870 for each of the next three years.
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 future Partnership acquisitions and balloon mortgage
payments will be proceeds from the sale, financing or
refinancing of the Properties.
Item 3 - Quantitative and Qualitative Disclosure about 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 it's 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.
Item 4 - Controls and Procedures
Based on their most recent evaluation, which was completed
within 90 days of the filing of this Form 10-Q, our Acting
Principal Executive Officer and Chief Financial Officer, believe
our disclosure controls and procedures (as defined in Exchange
Act Rules 13a-14 and 15d-14) are effective. There were not any
significant changes in internal controls or in other factors that
could significantly affect these controls subsequent to the date
of their evaluation, and there has not been any corrective action
with regard to significant deficiencies and material weaknesses.
Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibit and Reports on Form 8-K
(A)The following documents are filed herewith or
incorporated herein by reference as indicated as
Exhibits:
Exhibit Designation Document Description
2 Certificate of Limited partnership, as
amended, incorporated by reference to
Registration Statement No.2-81074
effective May 2, 1983.
Limited Partnership Agreement,
incorporated by reference to
Registration Statement No.2-81074
effective May 2,1983.
11 Not Applicable
15 Not Applicable
18 Not Applicable
19 Not Applicable
20 Not Applicable
23 Not Applicable
24 Not Applicable
25 Power of Attorney, incorporated by
reference to Registration Statement
No. 2-81074 effective May 2,
1983.
28 None
31.1 Certification Pursuant to
Rules 13a-14 and 15d-14 Under
the Securities Exchange Act of
1934, as Adopted Pursuant to
Section 302 of the Sarbanes-
Oxley Act of 2002, filed
herewith.
32.1 Certification Pursuant to 18
U.S.C. Section 1350, as
Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act
of 2002, filed herewith.
(B) Reports on Form 8-K for the quarter ended September 30, 2004.
1 None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
AMERICAN REPUBLIC REALTY FUND I
a Wisconsin limited partnership
By: /s/ Robert J. Werra
Robert J. Werra,
General Partner
Date: July 29, 2004
Exhibit 31.1
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I Robert J. Werra, Acting Principal Executive Officer and Chief
Financial Officer of American Republic Realty Fund I ("the
Company"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the
Company;
2. Based on my knowledge, this quarterly report does not
contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
made, in light of the circumstances under which such
statements were made, not misleading with respect to the
period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and
other financial information included in this quarterly
report, fairly present in all material respects the
financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented
in this quarterly report;
4. I am responsible for establishing and maintaining
disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the Company and
have:
a. designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be
designed under my supervision, to ensure that material
information relating to the company and its consolidated
subsidiaries is made known to me by others within those
entities, particularly for the periods presented in this
quarterly report;
b. designed such internal control over financial reporting,
or caused such internal control over financial reporting
to be designed under my supervision, to provide
reasonable assurance regarding the reliability of
financial reporting and the preparation of financial
statements for external purposes in accordance with
generally accepted accounting principles.
c. evaluated the effectiveness of the Companys disclosure
controls and procedures and presented in this report my
conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - continued
d. disclosed in this report any change in the Companys
internal control over financial reporting that occurred
during the Companys most recent fiscal quarter that has
materially affected, or is reasonably likely to
materially affect, the Companys internal control over
financial reporting; and
5. I have disclosed based on my most recent evaluation of
internal control over financial reporting, to the
Companys auditors and Audit Committee of the Board of
Directors (or persons fulfilling the equivalent
function):
a. all significant deficiencies and material weaknesses in
the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the Companys ability to record,
process, summarize, and report financial data; and
b. any fraud, whether or not material, that involves
management or other employees who have a significant
role in the Companys internal control over financial
reporting.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial
Officer
October 30, 2004
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of American Republic
Realty Fund I ("the Company") on Form 10-Q for the period
ending September 30, 2004 as filed with the Securities and
Exchange Commission on the date hereof ("the Report"), I,
Robert J. Werra, Acting Principal Executive Officer and Chief
Financial Officer of the Company, certify, pursuant to 18
U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and results
of operations of the Company.
/s/ Robert J. Werra
Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
October 30, 2004