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SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-K
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Fiscal year ended December 31, 1996
Commission file number 0-11578
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No Fee Required)
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
AMERICAN REPUBLIC REALTY FUND I
---------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1421936
--------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
6210 Campbell Road, Suite 140, Dallas, Texas 75248
-------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including area code (972) 380-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
None None
Securities registered pursuant to Section 12 (g) of the Act:
Limited Partnership Interests
-----------------------------
(Title of Class)
----------------
Indicated by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X . No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained, to the best of Registrant's knowledge
in definitive proxy on information to statements incorporated by reference in
Part III of the Form 10-K or any amendment to this Form 10-K.
Documents Incorporated by Reference
-----------------------------------
The Definitive Prospectus of American Republic Realty Fund I dated May 2, 1983
filed pursuant to Rule 424(b) is incorporated by reference as is the
Supplement to that Prospectus filed pursuant to Rule 424(b) on May 25,1984.
PART I
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, 1996, the Partnership consisted of an
individual general partner, Mr. Robert J. Werra, (the "General Partner") and
929 limited partners owning 11,OOO limited partnership interests at $1,OOO
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 1O4 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 131,44O 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 2O, 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. Properties".
- ---------------------
Univesco, Inc.("Univesco"), a Texas corporation, eighty four percent
owned by Robert J. Werra manages the affairs of the Partnership. Univesco
acts as the managing agent with respect to the Partnership's properties.
Univesco may also engage other on-site property managers and other agents to
the extent the management considers appropriate. The General Partner has
ultimate authority regarding property management decisions.
The Partnership competes in the residential rental markets. Univesco
prepares marketing analyses for all property areas. These areas contain other
like properties which are considered competitive on the basis of location,
amenities and rental rates. It is realistic to assume that additional
properties similar to the foregoing will be constructed within their various
market areas.
No material expenditure has been made or is anticipated for either
Partnership-sponsored or consumer research and development activities
relating to the development or improvement of facilities or services provided
by the Partnership. There neither has been, nor are any anticipated, material
expenditures required to comply with any federal, state, or local
environmental provisions which would materially affect the earnings or
competitive position of the Partnership.
The Partnership is engaged solely in the business of real estate
investments. Its business is believed by management to fall entirely within
a single industry segment. Management does not anticipate that there will be
any material seasonal effects upon the operation of the Partnership
Competition and Other Factors
- -----------------------------
The majority of the Properties' leases are six to twelve month terms.
Accordingly, operating income is highly susceptible to changing market
conditions. Occupancy and local market rents are driven by general market
conditions which include job creation, new construction of single and
multi-family projects, and demolition and other reduction in net supply of
apartment units.
Rents have generally been increasing in recent years due to the generally
positive relationship between apartment unit supply and demand in the
Partnership's markets. However, the properties are subject to substantial
competition from similar and often newer properties in the vicinity in which
they are located. In addition, operating expenses and capitalized expenditures
have increased as units are updated and made more competitive in the market
place. (See Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations.)
Item 2. Properties
- -------------------
At December 31, 1996 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 Apartments A fee simple interest in a 263 unit 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 Phase I A fee simple interest in an 100 unit 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 Phase II A fee simple interest in a 54 unit 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
--------
1992 1993 1994 1995 1996
Four Winds I & II 92.20% 91.40% 93.10% 93.60% 93.3%
Forestwood 87.50% 96.90% 96.90% 97.80% 96.6%
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 2 to Consolidated
Financial Statements contained in Item 8.
Item 3. Legal Proceedings
- --------------------------
None.
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 1996.
PART II
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,
1996 there were approximately 929 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.
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
(a) For Federal Income Tax purposes only income was reallocated in accordance
with 704(b) and the regulations promulgated thereunder of the Internal
Revenue code of 1986 as amended.
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 hereof and Consolidated financial Statements and notes
thereto contained in Item 8.
Year Ended December 31.
(in thousands except unit amounts)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Limited Partner Units Outstanding 11,000 11,000 11,000 11,000 11,000
------ ------ ------ ------ ------
Statement of Operations
Total Revenues $2,458 $2,409 $2,311 2,315 $1,986
Net Income (Loss) before
extraordinary items 258 248 233 353 (728)
Extraordinary Item-gain on
extinguishment of debt 0 0 0 451 1,359
Net Income (Loss) 258 248 233 804 631
Limited Partner Net Income
(Loss) per Unit 23 22 21 72 57
Cash Distributions to Limited
Partners per Unit 0 0 0 0 0
Balance Sheet:
Real Estate, net 8,420 8,954 9,522 10,062 10,473
Total Assets 8,645 9,099 9,795 10,268 10,746
Mortgages Payable 7,240 7,998 8,757 9,516 9,832
Notes Payable to Affiliate 2,935 3,108 3,444 3,392 1,650
Partner's Equity (Deficit) (2,975) (3,233) (3,481) (3,713) (2,775)
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: 1996 VERSUS 1995 -
Revenue from Property Operations increased $49,187 or 2.04% as compared to
1995. This increase is primarily attributed to a $59,184 increase in rental
revenues which was principally due to an increase in rents partially offset
by a slight decrease in average occupancy. Interest income decreased $2,464
due to a decrease in available funds for investment during 1996. The decrease
in other operating revenues of $7,533 were principally caused by a decrease
in fees from tenants and vending revenues. The following table illustrates
the increases or (decreases):
Increase
(Decrease)
----------
Rental income $59,184
Interest (2,464)
Other (7,533)
-------
Net Increase (Decrease) $49,187
=======
Property operating expenses for 1996 increased $39,127 or 1.81% Interest
expense decreased due primarily to reduction in long term debt as a result of
normal amortization of the loan balance. The increase in Real Estate taxes is
due to increases in valuation of properties and increases in property tax
rates. General and administrative expenses increased due primarily to
incresaed professional fees and payroll expenses. Maintenance and repairs
increased 65,596 or 27.74% due primarily to exterior painting, parking lot
and roof repairs. Property management fees ar paid to an affiliated enitiy
and represent approximately 5% of gross revenues (see note 3 to Consolidated
Financial Statements and Schedule Index contained in item 8.) The following
table illustrates the increases or (decreases):
Increase
(Decrease)
----------
Interest Expense on N/P $(38,896)
General administrative 12,775
Maintenance & repairs 65,596
Utilities (12,813)
Real estate taxes 22,387
Advertising and Marketing 2,514
Depreciation and amortization (14,865)
Property management fees 2,429
Administrative Service Fee 0
--------
Net Increase (Decrease) $39,127
========
Results of Operations: 1995 VERSUS 1994 -
Revenue from Property Operations increased $98,243 or 4.25% as compared to
1994. This increase is primarily attributed to a $108,462 increase in rental
revenues which was principally due to an increase in rents and occupancy
resulting from improvements in the apartment rental markets. Additionally,
interest income increased $1,901 due to an increase in available funds during
1995. These increases were offset by a $12,147 decrease in other operating
revenues, principally caused by a decrease in fees from tenants and vending
revenues The following table illustrates the increases or (decreases):
Increase
(Decrease)
----------
Rental income $108,462
Interest 1,928
Other (12,147)
-----------
Net Increase (Decrease) $98,243
=============
Property operating expenses for 1995 increased $82,934 or 3.99% Interest
expense increases were primarily the result of advances to the Partnership
by related parties. The increase in Real Estate taxes is due to increases in
valuation of properties and anticipated increases in property tax rates.
General and administrative expenses increased due primarily to higher legal
and accounting fees in 1995 relating to debt restructuring in that year.
increased professional fees and payroll expenses. Depreciation and
Amortization increased due primarily to property additions. Property
management fees are paid to an affiliated entity and represent approximately
5% of gross revenues (see Note 3 to Consolidated Financial Statements and
Schedule Index contained in Item 8.) The following table illustrates the
increases or (decreases):
Increase
(Decrease)
----------
Interest Expense on N/P $9,344
General administrative 23,163
Maintenance & repairs 1,364
Utilities 2,752
Real estate taxes 19,827
Advertising and Marketing (5,747)
Depreciation and amortization 27,340
Property management fees 4,900
Administrative Service Fee (9)
----------
Net Increase (Decrease) $82,934
===========
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 assets should be considered for disposal. At this time,
there is no plan to dispose of either Property.
As of December 31, 1996, the Partnership had $23,211 in cash and cash
equivalents as compared to $19,047 as of December 31, 1995. The net increase
in cash of $4,164 is principally due to an increase in net income and a
reduction in repayments on notes payable to affiliates. See Note 3 to
Consolidated 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, 1996. These mortgages payable have a carrying value of
$7,239,679 at December 31, 1996. The mortgage notes were entered into during
1993 and 1992 to refinance certain mortgage notes which were in default. The
Partnership accounted for these transactions as troubled debt restructuring,
and accordingly, are being carried at the total future cash outflows for
principal and interest. Accordingly, no interest expense was or will be
recorded on these notes.
Additionally, the general partner has provided funding to the Partnership in
the form of notes payable with balances at December 31,1996 totaling
$2,35,310 which accrue interest at prime plus 2% and are due on June 30, 2001,
or upon demand. Additional funds have been provided by the general partner
in the form of advances which totaled $1,282,696 at December 31, 1996.
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 future Partnership acquisitions and
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
$2,580,216, $4,021,625 and $0 for each of the next three years.
The Partnership has significant lump-sum payments due in 1997 and 1998 and
the Partnership is not generating sufficient cash flows to meet these
obligations. Management believes it will be able to refinance these debt
obligations; however, at this time, there can be no assurance this
refinancing will occur.
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 1993 and section 21E of the
Securities 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
foward-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 beyondthe control of the Company. Although the Company believes
that the assumptions underlying the forward-looking statements are reasonable,
any fo the assumptions could be inaccurate and, therefore, there can be no
assurance that the forward-looking statements included in thes 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 whould not ve regarded as a representation by the Comapny or any
other person that the objectives and plans of the Company will be achieved.
(A WISCONSIN LIMITED PARTNERSHIP)
ITEM 8 - FINANCIAL STATEMENTS AND SCHEDULE INDEX
- ------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT 10
COMBINED BALANCE SHEETS 11
COMBINED STATEMENTS OF INCOME 12
COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 13
COMBINED STATEMENTS OF CASH FLOWS 14
NOTES TO COMBINED FINANCIAL STATEMENTS 15-20
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 21-22
INDEPENDENT AUDITORS' REPORT
To the General Partner
and Limited Partners of
American Republic Realty Fund I
Dallas, Texas
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 31,1996 and 1995, and the related combined
statements of income, partners' equity (deficit) and cash flows for each of
the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedule listed in the index at Item
14(a)(2). The combined financial statements and combined financial statement
schedule are the responsibility ofthe Partnership's management. Our
responsibility is to express an opinion on the combined financial statements
and combined financial statement 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 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 audits provide a reasonable basis for our opinion.
In our opinion, such combined financial statements present fairly, in all
material respects, the financial position of the Partnership as of
December 31, 1996 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles. Also, in our
opinion, such combined financial statement schedule, when considered in
relation to the basic combined financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
The accompanying combined financial statements have been prepared assuming
that the Partnership will continue as a going concern. As discussed in
Note 6 to the combined financial statements, conditions exist which raise
substantial doubt about the Partnership's ability to continue as a going
concern due to the fact the Partnership has significant lump-sum payments due
in 1997 and 1998, and the Partnership is not generating sufficient cash flows
to meet these obligations. Management's plans in regard to these matters are
also described in Note 6. The combined financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
DELOITTE & TOUCHE LLP
Dallas, Texas
February 17, 1997
AMERICAN REPUBLIC REALTY FUND I
(A Wisconsin Limited Partnership)
COMBINED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- ----------------------------------------------------------------------------
ASSETS 1996 1995
INVESTMENTS IN REAL ESTATE AT COST (Note 2):
Land $ 1,822,718 $1,822,718
Buildings, improvements and furniture and fixtures 14,994,509 14,925,164
---------- -----------
16,817,227 16,747,882
Less accumulated depreciation (8,397,635) (7,793,822)
8,419,592 8,954,060
CASH AND CASH EQUIVALENTS 23,211 19,047
ESCROW DEPOSITS 182,966 102,508
PREPAID EXPENSES 19,614 23,596
---------- ------------
TOTAL $ 8,645,383 $ 9,099,211
========== ============
LIABILITIES AND PARTNERS' DEFICIT
MORTGAGES AND NOTES PAYABLE (Note 2) $ 7,239,679 $7,998,325
NOTES PAYABLE TO AFFILIATES (Note 3) 2,935,310 3,108,081
AMOUNTS DUE AFFILIATES (Note 3) 1,282,696 1,120,323
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 117,202 54,262
SECURITY DEPOSITS 45,746 51,418
---------- ----------
11,620,633 12,332,409
COMMITMENTS AND CONTINGENCIES (Notes 4 and 6)
PARTNERS' DEFICIT (2,975,250) (3,233,198)
----------- ----------
TOTAL $ 8,645,383 $9,099,211
============ ===========
See notes to combined financial statements.
AMERICAN REPUBLIC REALTY FUND I
(A Wisconsin Limited Partnership)
COMBINED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -----------------------------------------------------------------------------
1996 1995 1994
INCOME:
Rentals $2,419,780 $2,360,596 2,252,134
Interest 4,077 6,541 4,613
Other 34,595 42,128 54,275
---------- ---------- ---------
Total income 2,458,452 2,409,265 2,311,022
OPERATING EXPENSES:
Interest expense on note payable
to affiliates 302,703 341,599 332,255
General and administrative 383,202 370,427 347,264
Maintenance and repairs 302,043 236,447 235,083
Utilities 181,972 194,785 192,033
Real estate taxes 254,531 232,144 212,317
Advertising and marketing 39,353 36,839 42,586
Depreciation and amortization 603,813 618,678 591,338
Property management fee to affiliate
(Note 3) 122,879 120,450 115,550
Administrative service fee to
General partner (Note 3) 10,008 10,008 10,017
--------- --------- ---------
Total operating expenses 2,200,504 2,161,377 2,078,443
NET INCOME (Note 5) $ 257,948 $247,888 232,579
========= ========== =========
NET INCOME PER LIMITED PARTNERSHIP
UNIT $ 23.22 22.31 20.93
========= ========== =========
LIMITED PARTNERSHIP UNITS OUTSTANDING 11,000 11,000 11,000
========= ========== =========
See notes to combined financial statements.
AMERICAN REPUBLIC REALTY FUND I
(A Wisconsin Limited Partnership)
COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ---------------------------------------------------------------------------
General Limited
Partner Partners Total
BALANCE, JANUARY 1, 1994 $48,558 $(3,762,223) (3,713,665)
Net income 2,326 230,253 232,579
------- ------------ --------
BALANCE, DECEMBER 31, 1994 50,884 (3,531,970) (3,481,086)
Net income 2,479 245,409 247,888
-------- ------------ ---------
BALANCE, DECEMBER 31, 1995 53,363 (3,286,561) (3,233,198)
Net income 2,579 255,369 257,948
-------- ------------ ---------
BALANCE, DECEMBER 31, 1996 $55,942 $(3,031,192) $(2,975,250)
======== ============ ===========
See notes to combined financial statements.
AMERICAN REPUBLIC REALTY FUND I
(A Wisconsin Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ----------------------------------------------------------------------------
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 257,948 $ 247,888 $ 232,579
Adjustments to reconcile net income
to cash provided by operations:
Depreciation and amortization 603,813 618,678 591,338
Change in assets and liabilities:
Escrow deposits (80,458) 43,557 29,841
Security deposits (5,672) (5,122) (62)
(62)
Accounts payable and accrued
expenses 62,940 (10,845) (5,996)
Prepaid expenses 3,982 (3,837) (3,225)
------- -------- --------
584,605 642,431 611,896
------- -------- --------
Net cash provided by
operating activities 842,553 890,319 844,475
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate (69,345) (50,396) (51,611)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on mortgages and notes payable (758,646) (758,647) (758,645)
Payments on notes payable
to affiliates (172,771) (336,412) (103,203)
Proceeds from affiliates 162,373 166,894 162,868
--------- --------- ---------
Net cash used in financing activities (769,044) (928,165) (698,980)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 4,164 (88,242) 93,884
CASH, BEGINNING OF YEAR 19,047 107,289 13,405
------- -------- --------
CASH, END OF YEAR $ 23,211 $ 19,047 $ 107,289
======== ======== =========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for interest $ 302,703 $330,968 $ -
========= ======== =========
See notes to combined financial statements.
AMERICAN REPUBLIC REALTY FUND I
(A WISCONSIN LIMITED PARTNERSHIP)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ----------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
General - 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 Florida and Texas. 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 valued at $1,000 per unit is authorized, of
which 11,000 were outstanding for each of the three years ended
December 31, 1996. 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, generally
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 and prepares its
income tax returns using the accrual income tax basis of accounting. Memo
adjustments have been made in preparing the accompanying financial
statements in accordance with generally accepted accounting principles
(see Note 5). The financial statements include only those assets,
liabilities and results of operations which relate to the business of the
Partnership. The financial statements do not include any assets,
liabilities, revenues or expenses attributable to the partners' individual
activities.
Property and Equipment - Buildings, improvements, furniture and fixtures
are depreciated for financial statement purposes using the straight-line
method over the estimated useful lives of the assets, which are five years
for improvements and furniture and fixtures and 25 years for buildings.
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," Partnership management routinely
reviews its investments for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
Income Taxes - No provision has been made for income taxes since these
taxes are the personal responsibility of the individual partners.
For tax purposes, the basis of the Partnership assets is $4,151,846
at December 31, 1996.
For the year ended December 31, 1996, the Partnership experienced minimum
gain limitations for income tax purposes. Accordingly, the allocation of
losses to the limited partners is subject to this limitation.
Revenue Recognition - The Partnership has leased substantially all of its
investments in real estate under operating leases for periods generally
less than one year.
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 - For purposes of the statement of cash flows,
the Partnership considers all highly liquid instruments with an original
maturity at the date of purchase of three months or less to be cash
equivalents. Univesco, Inc. ("Univesco"), an affiliate of the general
partner, Robert J. Werra, and the management agent, maintains a single
controlled disbursement account for all properties managed by Univesco.
Funds are transferred at the time of cash disbursements from the project's
operating account to the controlled disbursement account to reimburse
checks issued.
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. Partnership management is not aware of any environmental
remediation obligations which would materially affect the operations,
financial position or cash flows of the Partnership.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of certain assets,
liabilities, revenues and expenses as of and for the reporting periods.
Actual results may differ from such estimates.
2. MORTGAGES AND NOTES PAYABLE
Mortgages and notes payable at December 31, 1996 and 1995,
consist of the following:
1996 1995
9.125% mortgage note, original face value $4,300,000,
payable in monthly principal and interest payments of
$36,454 through February 1, 1998, at which time a lump-sum
payment of approximately $4,010,000 is due. As a result
of a previous-year troubled debt restructuring, the mortgage
note is carried at a value equal to total future cash outflows for
principal and interest, less total payments made. All principal and
interest payments will directly reduce the carrying value of the
debt, and no interest expense will be recognized over the life
of the note. This mortgage note is secured by real estate assets
with a net book value of
approximately $5,291,000 $4,571,566 $5,009,017
1996 1995
10.125% mortgage note, original face value $2,750,000,
payable in monthly principal and interest payments of $26,766
through July 1997, at which time a lump-sum payment of approximately
$2,473,000 is due. As a result of previous-year troubled
debt restructuring, the mortgage note is carried at a value
equal to total future cash outflows for principal and interest, less
total payments made. All principal and interest payments will directly
reduce the carrying value of the debt, and no interest expense will
be recognized over the life of the note. This mortgage note
is secured by real estate assets with a net book value of
approximately $3,128,000 $2,668,113 $2,989,308
---------- ----------
$7,239,679 $7,998,325
========== ==========
The mortgage notes payable are collateralized by their
related investments in real estate.
The following sets forth the required principal payments due under the
stated terms of the Partnership's mortgage notes payable and notes payable
to affiliates.
1997 $ 2,580,216
1998 $ 4,021,625
1999 $ -
2000 $ -
2001 $ 2,935,310
Thereafter $ -
3. RELATED PARTY TRANSACTIONS
The partnership agreement specifies certain fees to be paid to the general
partner or his designee. The following fees and reimbursement of
Partnership administrative expenditures were earned by an affiliate of the
general partner in 1996, 1995 and 1994:
1996 1995 1994
Property management fee $122,879 $120,450 $115,550
Administrative service fee 10,008 10,008 10,017
An affiliate of the general partner is to receive an ongoing property
management fee generally payable at 5% of the Partnership's gross receipts.
The general partner holds a $1,300,000 promissory note of the Partnership.
For each of the three years ended December 31, 1996, the note bore interest
at a rate of 10% This note is scheduled to mature on June 30, 2001. No
payments of principal and interest are required until maturity. At
December 31, 1996 and 1995, the payable balance of $1,300,000 is included
in notes payable to affiliates. Accrued interest of $987,750 and $857,750
at December 31, 1996 and 1995, respectively, is included in amounts due to
affiliates. For each of the three years ended December 31, 1996, 1995 and
1994, interest expense incurred on the note was $130,000.
At December 31, 1996 and 1995, a $350,000 note was owed to an affiliate of
the general partner. For each of the three years ended December 31, 1996,
the note bore interest at a rate of 10% . The note is scheduled to mature
on June 30, 2001. No payments of principal and interest are paid until
maturity. For each of the years ended December 31, 1996, 1995 and 1994,
interest expense incurred on the note was $35,000. At December 31, 1996
and 1995, the payable balance of $350,000 is included in notes payable to
affiliates. Accrued interest of $292,336 and $257,336 at December 31, 1996
and 1995, respectively, is included in amounts due to affiliates.
At December 31, 1996 and 1995, a note payable bearing interest at prime
plus 2% was owed to the general partner. The payable balance of $1,076,444
is included in notes payable to affiliates. Unpaid principal and interest
is due on June 30, 2001, or upon demand. There is no accrued interest
payable at December 31, 1996. For the years ended December 31, 1996, 1995
and 1994, interest expense incurred on the note was $116,950, $157,429 and
$152,268, respectively.
The general partner has made advances under a note agreement to the
Partnership which bears interest at prime plus 2%. At December 31, 1996,
the total advances under this note were $208,866. No payments of principal
and interest are required until June 30, 2001, at which time total
principal and accrued interest are due.
4. COMMITMENTS
The Partnership will pay a real estate commission to the general partner
or his affiliates in an amount not exceeding the lesser 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.
5. 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 principles ("GAAP"), the excess of expenses over
revenues for 1996 would have been as follows:
Net income per accompanying financial statements $ 257,948
Add - book basis depreciation and amortization
expense using straight-line method 603,813
Deduct - revenues and expenses recognized by GAAP (75,846)
Deduct - income tax basis depreciation
expense using ACRS method (733,228)
Deduct - difference in income tax basis
interest expense (634,070)
----------
Excess of expenses over revenues,
accrual income tax basis $(581,383)
==========
6. CONTINGENCIES
As discussed in Note 2, the Partnership has significant lump-sum payments
due in 1997 and 1998, and the Partnership is not generating sufficient
cash flows to meet these obligations. Management believes it will be able
to refinance these debt instruments; however, at this time, there is no
assurance this refinancing will occur.
7. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments,"requires disclosure of the estimated
fair values of certain financial instruments. The estimated fair value
amounts have been determined using available market information or other
appropriate valuation methodologies that require considerable judgment 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,
short-term receivables, accounts payable and other liabilities.Real estate
and other assets consist of nonfinancial instruments, which are excluded
from the scope of SFAS No. 107.
Management has reviewed the carrying values of its mortgages and notes
payable and its 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, 1996.
As of December 31, 1996, 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
(A Wisconsin Limited Partnership)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
- ------------------------------------------------------------------------------
Initial Cost
to Partnership
-----------------------
Total Costs
Buildings Subsequent
Encum - And to
Description bances Land Improvements Acquisition
26 two-story apartment
buildings of concrete
block construction
with stucco and cedar
exterior and gabled
roofs located in
Jacksonville, Florida (b) $583,000 $5,686,771 $137,531
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 8,679,421 490,786
---------- ----------- ------------
$1,822,718 $14,366,192 $628,317
========== ============= ===========
Gross Amounts at Which
Carried at Close of Year
---------------------------
Buildings
and Accumulated
Descriptions Land Improvements Total Depreciation
(c) (d) (c)
26 two-story apartment
buildings of concrete
block construction
with stucco and cedar
exterior and gabled
roofs lacated in
Jacksonville, Florida $583,000 $5824,302 $6,407,302 $3,279,146
37- two-story apartment
buildings of concrete
block connstruction
with brick veneer,
stucco and wood
siding exterior,
and composition,
shingled roofs located
in Bedford, Texas 1,239,718 9,170,207 10,409,925 5,118,489
---------- ---------- ---------- ---------
$1,822,718 $14,994,509 $16,817,227 $8,397,635
========== =========== =========== ==========
26 two-story apartment... Life on
Which
Date of Date Depriciation
Contruction Acquired is Computed
Phasse i complete
at date acquired; 9/12/83 (a)
Phase II complete
at date acquired 5/1/84 (a)
37 two-story apartment...
Complete at date
acquired 12/20/83 (a)
See notes to Schedule III.
AMERICAN REPUBLIC REALTY FUND I
(A WISCONSIN LIMITED PARTNERSHIP)
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued)
DECEMBER 31, 1996
- ----------------------------------------------------------------------------
NOTES TO SCHEDULE III:
(a)See Note 1 to financial statements outlining depreciation
methods and lives.
(b)See description of mortgages and notes payable in Note 2 to
the financial statements.
(c)The reconciliation of investments in real estate and
accumulated depreciation for the years ended December 31,
1996, 1995 and 1994, is as follows:
Investments Accumulated
in Real Estate Depreciation
BALANCE, JANUARY 1, 1994 $16,645,875 $6,583,806
Additions 51,611 -
Depreciation expense - --------
- ---------- 591,338
BALANCE, DECEMBER 31, 1994 16,697,486 7,175,144
Additions 50,396 -
Depreciation expense - 618,678
---------- ---------
BALANCE, DECEMBER 31, 1995 16,747,882 7,793,822
Additions 69,345 -
Depreciation expense
- 603,813
---------- ---------
BALANCE, DECEMBER 31, 1996 $16,817,227 $8,397,635
=========== ==========
(d)Aggregate cost for federal income tax purposes is $16,389,338.
Item 9. Disagreements on Accounting and Financial Disclosure
--------------------------------------------------------------
The Registrant has not been involved in any disagreements on
accounting and financial disclosure.
PART III
Item 1O. 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, 57, 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 198O, 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 Fiscal year ended December 31, 1996, 1995 and 1994,
property management fees earned totaled $122,879, $120,450, and
$115,550, respectively. An additional administration service
fee was paid to the general partner of $3,696 $10,008, and
$10,017 for the years ended December 31, 1996, 1995 and 1994
respectively.
Item 12. Security Ownership of Certain Beneficial Owners
---------------------------------------------------------
and Management
--------------
(a) No one 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.
(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, 1997.
Amount and Nature
Title Name of of Beneficial Percent
of Class Beneficial Owner Ownership of Interest
--------- ------------- ----------- -----------
Limited Robert J. Werra 491 4.46%
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 notes 3 to the
financial statements at Item 8 elsewhere in this 10-K.
PART IV
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, 1995.
None.
(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 3O, 1996
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
April 10, 1997