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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Fiscal year ended December 31, 1997
Commission file number 0-11578
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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 Office (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,
1997, the Partnership consisted of an individual general partner,
Mr. Robert J. Werra, (the "General Partner") and 926 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 ("Univesco") 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 and commercial rental
markets. Univesco prepared marketing analyses for all property
areas and determined that 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, 1997 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
1993 1994 1995 1996 1997
Four Winds I&II 91.40% 93.10% 93.60% 93.3% 92.0%
Forestwood 96.90% 96.90% 97.80% 96.6% 97.0%
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 the 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 1997.
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. 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, 1997 there were approximately 926 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
1997 $0 0 $70 0
(a) For Federal Income Tax purposes income only 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 Financial
Statements and notes thereto contained in Item 8.
Year Ended December 31.
(in thousands except unit and per
unit amounts)
1997 1996 1995 1994 1993
Limited Partner Units Outstanding 11,000 11,000 11,000 11,000 11,000
Statement of Operations
Total Revenues $2,534 $2,458 $2,409 $2,311 $2,315
Net Income (Loss) before (112) 258 248 233 353
extraordinary items
Extraordinary Item-gain on 252 0 0 0 0
extinguishment of debt
Extraordinary Item - gain on 0 0 0 0 451
forgiveness of debt
Net Income 140 258 248 233 804
Limited Partner Net Income per 12.60 23.22 22.31 20.93 72.35
Unit - Basic
Cash Distributions to Limited 0 0 0 0 0
Partners per Unit - Basic
Balance Sheet:
Real Estate, net $8,134 $8,420 $8,954 $9,522 $10,062
Total Assets 9,092 8,645 9,099 9,795 10,268
Mortgages Payable 10,770 7,240 7,998 8,757 9,516
Notes Payable to Affiliate 760 2,935 3,108 3,444 3,392
Partner's Deficit (2,835)(2,975)(3,233)(3,481) (3,713)
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: 1997 VERSUS 1996 -
Revenue from Property Operations increased $75,345 or 3.06% as
compared to 1996. This increase is primarily attributed to a
$59,982 increase in rental revenues which was principally due to an
increase in rents partially offset by a slight decrease in average
occupancy. Interest income increased $8,266 due to an increase in
available funds for investment during 1997. The increase in other
operating revenues of $7,097 were principally caused by a increase
in fees from tenants and vending revenues. The following table
illustrates the increases:
Increase
Rental income $59,982
Interest 8,266
Other 7,097
Net Increase $75,345
Property operating expenses for 1997 increased $445,118 or 20.23%.
Interest expense on mortgage payable increased $482,222 due
primarily to refinancing of both properties mortgages. (See
discussion below - Gain on Early Estingushment of Debt). 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 mportgages
payable. General and administrative expenses increased due
primarily to increased professional fees and
payroll expenses. Maintenance and repairs increased $26,109 or
8.64% due primarily to 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 3 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 $(123,679)
Interest Expense on Mortgages Pay 482,222
General administrative 5,565
Maintenance & repairs 26,109
Utilities (531)
Real estate taxes 2,371
Advertising and Marketing 1,693
Depreciation and amortization 47,417
Property management fees 3,951
Administrative Service fee 0
Net Increase $445,118
Extraordinary Item - Gain on Early Extinguishment of Debt
Until their repayment in July 1997 with proceeds obtained through
the issuance of new mortgage notes, the then existing mortgage
notes, as a result of a previous year troubled debt restructuring,
were carried at a value equal to to future cash outflows for
principal and interest less total payments made. All principal and
interest payments directly reduced the carrying value of the debt,
and no interest expense was recognized. As a result of the early
extinguishment of these debt instruments, a non-cash gain of
$251,785 was recorded during 1997.
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 49,187
Property operating expenses for 1996 increased $39,127 or 1.81%.
Interest expense on note payable to affiliates 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 anticipated
increases in property tax rates. General and administrative
expenses increased due primarily to increased 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 are paid to an affiliated entity
and represent approximately 5% of gross revenues (see Note 3 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 Affiliates (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 39,127
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, 1997, the Partnership had $16,900 in cash and
cash equivalents as compared to $23,211 as of December 31, 1996.
See Note 3 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, 1997. These mortgages payable have a carrying
value of $10,769,977 at December 31, 1997. 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
31,1997 totaling $759,788 which accrue interest at rates ranging
from prime plus 2% to 10% and are due on June 30, 2001, or upon
demand 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 $94,927, $102,678, $111,063, $879,919 and
$129,941 for each of the next five years.
Year 2000
The partnership anticipates that it will not incur any costs
associated with its computers and building operating systems as it
relates to the conversion to the year 2000.
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
(A WISCONSIN LIMITED PARTNERSHIP)
ITEM 8 - FINANCIAL STATEMENTS AND SCHEDULE INDEX
Page
INDEPENDENT AUDITORS' REPORT 1
COMBINED BALANCE SHEETS 2
COMBINED STATEMENTS OF INCOME 3
COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 4
COMBINED STATEMENTS OF CASH FLOWS 5
NOTES TO COMBINED FINANCIAL STATEMENTS 6-11
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 12-13
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,
1997 and 1996, 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, 1997. 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 of
the 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, 1997 and 1996, and the results
of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, 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.
DELOITTE & TOUCHE LLP
/S/DELOITTE & TOUCHE LLP
Dallas, Texas
February 23, 1998
AMERICAN REPUBLIC REALTY FUND I
(A Wisconsin Limited Partnership)
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS 1997 1996
INVESTMENTS IN REAL ESTATE AT COST:
Land $1,822,718 $1,822,718
Buildings, improvements and furniture and fixtures 15,348,507 14,994,509
17,171,225 16,817,227
Less accumulated depreciation (9,037,393) (8,397,635)
8,133,832 8,419,592
CASH AND CASH EQUIVALENTS 16,900 23,211
ESCROW DEPOSITS 702,955 182,966
DEFERRED FINANCING COSTS, Net of accumulated amortization
of $11,472 at December 31, 1997 217,958 -
PREPAID EXPENSES 20,686 19,614
TOTAL $9,092,331 $8,645,383
LIABILITIES AND PARTNERS' DEFICIT
MORTGAGES PAYABLE $10,769,977 $7,239,679
NOTES PAYABLE TO AFFILIATES 759,788 2,935,310
AMOUNTS DUE AFFILIATES 45,235 1,282,696
ACCOUNTS PAYABLE AND ACCRUED EXPENSES 306,030 117,202
SECURITY DEPOSITS 46,591 45,746
11,927,621 11,620,633
COMMITMENTS AND CONTINGENCIES
PARTNERS' DEFICIT (2,835,290) (2,975,250)
TOTAL $9,092,331 $8,645,383
See notes to combined financial statements.
AMERICAN REPUBLIC REALTY FUND I
(A Wisconsin Limited Partnership)
COMBINED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
INCOME:
Rentals $2,479,762 $2,419,780 $2,360,596
Interest 12,343 4,077 6,541
Other 41,692 34,595 42,128
Total income 2,533,797 2,458,452 2,409,265
OPERATING EXPENSES:
Interest expense on note payable to affiliates 179,024 302,703 341,599
Interest expense on mortgages payable 482,222 - -
General and administrative 388,767 383,202 370,427
Maintenance and repairs 328,152 302,043 236,447
Utilities 181,441 181,972 194,785
Real estate taxes 256,902 254,531 232,144
Advertising and marketing 41,046 39,353 36,839
Depreciation and amortization 651,230 603,813 618,678
Property management fee to affiliate 126,830 122,879 120,450
Administrative service fee to general partner 10,008 10,008 10,008
Total operating expenses 2,645,622 2,200,504 2,161,377
NET INCOME (LOSS) BEFORE
EXTRAORDINARY GAIN (111,825) 257,948 247,888
EXTRAORDINARY GAIN - Gain on early
extinguishment of debt 251,785 - -
NET INCOME $139,960 $257,948 $247,888
NET INCOME PER LIMITED PARTNERSHIP
UNIT - BASIC:
Net income (loss) before extraordinary gain $(10.06) $23.22 $22.31
Extraordinary gain - Gain on early
extinguishment of debt 22.66 - -
Net income - Basic $12.60 $23.22 $22.31
LIMITED PARTNERSHIP UNITS
OUTSTANDING - BASIC 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, 1997, 1996 AND 1995
General Limited
Partner Partners Total
BALANCE, JANUARY 1, 1995 $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)
Net income 1,400 138,560 139,960
BALANCE, DECEMBER 31, 1997 $57,342 $(2,892,632) $(2,835,290)
See notes to combined financial statements.
AMERICAN REPUBLIC REALTY FUND I
(A Wisconsin Limited Partnership)
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $139,960 $257,948 $247,888
Adjustments to reconcile net income to
cash provided by operations:
Extraordinary gain on early extinguishment of debt (251,785) - -
Depreciation and amortization 651,230 603,813 618,678
Change in assets and liabilities:
Escrow deposits (91,894) (80,458) 43,557
Security deposits 845 (5,672)(5,122)
Accounts payable and accrued expenses 188,828 62,940(10,845)
Prepaid expenses (1,072) 3,982 (3,837)
496,152 584,605 642,431
Net cash provided by operating activities 636,112 842,553 890,319
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate (353,998) (69,345) (50,396)
Net payments to reserve for replacement (428,095) - -
Net cash used in investing activities (782,093) (69,345) (50,396)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to mortgages payable 10,800,000 - -
Deferred financing costs (229,430) - -
Payments on mortgages payable (7,017,917) (758,646) (758,647)
Payments on notes payable to affiliates (2,175,522) (172,771) (336,412)
(Payments) proceeds on amounts due affiliates (1,237,461) 162,373 166,894
Net cash provided by (used in) financing activities 139,670 (769,044)(928,165)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,311) 4,164 (88,242)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 23,211 19,047 107,289
CASH AND CASH EQUIVALENTS, END OF YEAR $16,900 $23,211 $19,047
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $1,775,590 $302,703 $330,968
Extraordinary gain on early extinguishment of debt $(251,785) $ - $-
See notes to combined financial statements.
AMERICAN REPUBLIC REALTY FUND I
(A WISCONSIN LIMITED PARTNERSHIP)
NOTES TO COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
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, 1997. 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, and 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. 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 $4,471,554 at December 31, 1997.
Revenue Recognition - The Partnership has leased substantially
all of its investments in real estate under operating leases for
periods generally less than one year.
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 - 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.
Computation of Earnings Per Unit - The Partnership has adopted
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." Comparative earnings per unit data have
been restated to conform to the adoption of this new standard.
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.
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.
Other - SFAS No. 130, "Reporting on Comprehensive Income," was
issued in June 1997 and established standards for reporting and
presenting comprehensive income in financial statements. It is
effective for periods beginning after December 15, 1997, and
will be adopted by the Partnership effective January 1, 1998.
The Partnership anticipates the adoption of SFAS No. 130 will
not have any impact on its current disclosures.
Also issued in June 1997 was SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which
redefines how operating segments are determined and requires
disclosure of certain financial and descriptive information
about a company's operating segments. SFAS No. 131 may require
additional disclosure by the Partnership and will be effective
for the Partnership beginning January 1, 1998.
SFAS No. 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits," was issued in February 1998 and
revises disclosures about pension and other postretirement
benefit plans. It is effective for periods beginning after
December 15, 1997, and will be adopted by the Partnership
effective January 1, 1998. As the Partnership does not have any
such benefit plans, the adoption will not have any impact on its
current disclosures.
2. MORTGAGES PAYABLE
Mortgages payable at December 31, 1997 and 1996, consisted of
the following:
1997 1996
7.92% mortgage note, original face value $6,800,000, payable in
monthly principal and interest payments of $49,517 through
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 $5,184,350. $6,781,266 $ -
7.8% mortgage note, original face value $4,000,000, payable
in monthly principal and interest payments of $28,795 through
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 $2,949,482. 3,988,711 -
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 was due. As a result of a
previous-year troubled debt restructuring, the mortgage note
was
carried at a value equal to total future cash outflows for
principal
and interest, less total payments made. All principal and
interest
payments directly reduced the carrying value of the debt,
and no interest expense was recognized over the life of the
note. The mortgage note was repaid with proceeds from the
refinancing that occurred in July 1997. - 4,571,566
1997 1996
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 was due. As a result of previous-year troubled debt
restructuring, the mortgage note was carried at a value equal
to total
future cash outflows for principal and interest, less total
payments
made. All principal and interest payments directly reduced the
carrying value of the debt, and no interest expense was
recognized over the life of the note. The mortgage note was
repaid with proceeds from the refinancing that occurred
in July 1997. $ - $2,668,113
$10,769,977 $7,239,679
The mortgages 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.
1998 $ 94,927
1999 102,678
2000 111,063
2001 879,919
2002 129,941
Thereafter 10,211,237
3. RELATED PARTY TRANSACTIONS
The partnership agreement specifies certain fees to be paid to
the general partner or his designee. An affiliate of the
general partner receives an ongoing property management fee
generally payable at 5% of the Partnership's gross receipts.
The following fees and reimbursement of Partnership
administrative expenditures were earned by an affiliate of the
general partner in 1997, 1996 and 1995:
1997 1996 1995
Property management fee $126,830 $122,879 $120,450
Administrative service fee 10,008 10,008 10,008
The general partner held a $1,300,000 promissory note of the
Partnership for each of the two years ended December 31, 1996,
which bore interest at a rate of 10%. This note was scheduled
to mature on June 30, 2001; however, in July 1997, the note was
paid off with excess funds from the mortgage refinancings. At
December 31, 1996, the payable balance of $1,300,000 is included
in notes payable to affiliates. Accrued interest of $987,750 at
December 31, 1996, is included in amounts due to affiliates.
For each of the three years ended December 31, 1997, 1996 and
1995, interest expense incurred on the note was $65,000,
$130,000 and $130,000, respectively.
At December 31, 1997 and 1996, a note payable bearing interest
at a rate of 10% was owed to an affiliate of the general
partner. The note balance, which is included in notes payable
to affiliates, was $300,461 and $350,000 at December 31, 1997
and 1996, respectively. The note is scheduled to mature on
June 30, 2001. No payments of principal and interest were
scheduled to be paid until maturity; however, a payment of
$355,000 was made with excess funds from the refinancing in
July 1997, including a $305,461 payment for accrued interest.
For each of the years ended December 31, 1997, 1996 and 1995,
interest expense incurred on the note was $31,904, $35,000 and
$35,000, respectively. Accrued interest of $18,779 and $292,336
at December 31, 1997 and 1996, respectively, is included in
amounts due to affiliates.
At December 31, 1997 and 1996, a note payable bearing interest
at prime plus 2% was owed to the general partner. The note
balance, which is included in notes payable to affiliates, was
$459,327 and $1,076,444 at December 31 1997 and 1996,
respectively. Unpaid principal and interest is due on June 30,
2001, or upon demand. There is no accrued interest payable at
December 31, 1997 and 1996. For the years ended December 31,
1997, 1996 and 1995, interest expense incurred on the note was
$66,996, $116,950 and $157,429, respectively.
The general partner had made advances under a note agreement to
the Partnership which bore interest at prime plus 2%. At
December 31, 1996, the total advances under this note were
$208,866, including accrued interest of $20,279; however, the
advances, plus accrued interest of $30,768, were paid off with
excess funds from the refinancing in July 1997.
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 1997 would have been as
follows:
Net income per accompanying financial statements $139,960
Add - book basis depreciation and amortization expense using
straight-line method 651,230
Deduct - revenues and expenses recognized by GAAP (282,086)
Deduct - income tax basis depreciation and amortization expense
using ACRS method (755,401)
Deduct - difference in income tax basis interest expense (513,675)
Excess of expenses over revenues, accrual income tax basis $(759,972)
6. 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 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.
Management has reviewed the carrying values of its mortgages
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, 1997 and 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, 1997
Initial Cost
to Partnership
Buildings Total
Description Encum- and Subsequent to
brances 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 $189,677
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 $792,638
@1,822,718 $14,366,192 $982,315
Gross Amounts at Which
Carried at Close of Year
Buildings
Description and Accumulated
Land Iprovements Total Depreciation
26 two story apartment
buildings of concrete
block construction
with stucco and cedar
exterior and gabled
roofs located in
Jacksonville, Florida $583,000 $5,876,448 $6,459,448 $3,509,966
37 two story apartment
buildings of concrete
block construction
with brick vaneer
stucco and wood
siding exterior
and composition
shingled roofs located
in Bedford, Texas 1,239,718 9,472,059 10,711,777 5,527,427
$1,822,718 $15,348,507 $17,171,225 $9,037,393
Life on Which
Date of Date Depreciation
Description Construction Acquired Is Computed
26 two-story apartment Phase I comp-
buildings of concrete lete at date
block of construction acquired; 9/12/83 (a)
with stucco and cedar Phase II com-
exterior and gabled plete at date
roofs located in acquired 5/1/84 (a)
Jacksonville, Florida
37 two-story apartment
buildings of concrete
block construction
with brick veneer
stucco and wood
siding exterior
and composition
shingled roofs located Complete at
in Bedford, Texas date acquired 12/20/83 (a)
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, 1997, 1996 and 1995,
is as follows:
Investments Accumulated
in Real Estate Depreciation
BALANCE, JANUARY 1, 1995 $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
Additions 353,998 -
Depreciation expense - 639,758
BALANCE, DECEMBER 31, 1997 $17,171,225 $9,037,393
(d) Aggregate cost for federal income tax purposes is $16,743,336.
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, 59, 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 years ended December 31, 1997, 1996 and 1995, property
management fees earned totaled $126,830, $122,879 and $120,450,
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, 1997, 1996 and 1995 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, 1998.
Amount and Nature
Title Name of of Beneficial Percent
of Class Beneficial Owner Ownership of Interest
Limited Robert J. Werra 526 4.80%
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, 1997.
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 30,
1997.
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 30, 1998