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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, 1998
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 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,
1998, the Partnership consisted of an individual general partner,
Mr. Robert J. Werra, (the "General Partner") and 926 limited
partners owning 11,000 limited partnership interests at $1,000 per
interest. The distribution of limited partnership interests
commenced May 2, 1983 and ended April 17, 1984, pursuant to a
Registration Statement on Form S-11 under the Securities Act of
1933 (Registration #0-11578) as amended.
The Partnership was organized to acquire a diversified portfolio of
income-producing real properties, primarily apartments, as well as
office buildings, industrial buildings, and other similar
properties.
During 1983 and 1984, the Partnership acquired four properties:
Kenwood Gardens Apartments, a 104 unit apartment community located
in Fort Myers, Florida (acquired on September 1, 1983, subsequently
disposed of by sale during 1988), Jupiter Plaza Office/Showroom, a
131,440 rentable square foot commercial building located in
Garland, Texas (acquired on September 29, 1983, subsequently
disposed of in foreclosure during 1988), Four Winds Apartments, a
154 unit apartment community located in Orange Park, Florida (Phase
I acquired September 12, 1983 and Phase II acquired May 1, 1984)
and Forestwood Apartments (formerly Oak Creek) a 263 unit apartment
community located in Bedford, Texas (acquired December 20, 1983).
No additional properties were purchased by the Partnership and the
Partnership will not acquire additional properties in the future.
The properties remaining are described more fully in this report at
"Item 2. Properties".
Univesco, Inc.("Univesco"), a Texas corporation, eighty three
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 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, 1998 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 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
1994 1995 1996 1997 1998
Four Winds I & II 93.1% 93.6% 93.3% 92.0% 95.0%
Forestwood 96.9% 97.8% 96.6% 97.0% 96.5%
The Properties are encumbered by non-recourse mortgages payable.
For information regarding the encumbrances to which the properties
are subject and the status of the related mortgage loans, see
"Management's Discussion and Analysis of Financial Condition and
Results of Operating - Liquidity and Capital Resources" contained
in Item 7 hereof and Note B to the Financial Statements contained
in Item 8.
Item 3. 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 1998.
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, 1998 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.
Although a public market for trading Interests has not developed,
MP Value Fund 5, LLC acquired 539.5 units, approximately 4.9%, of
the outstanding Interests of the partnership in January, 1999. MP
Value Fund 5 has also tendered offers to other owners, although no
additional Interests have been sold. The registrant knows of no
other activity involving the sale or acquisition of Interest.
The General Partner continues to review the Partnership's ability
to make distributions on a quarter by quarter basis, however, no
such distributions have been made and none are anticipated in the
immediate future due to the debt service requirements of the
Partnership.
An analysis of taxable income or (loss) allocated, and cash
distributed to Investors per $1,000 unit is as follows:
YEARS INCOME GAIN LOSS CASH
DISTRIBUTED
1984 $0 $0 $342 $0
1985 0 0 $291 0
1986 0 0 $271 0
1987 0 0 $279 0
1988 0 $43 $63 0
1989 0 $38 $127 0
1990 0 0 $126 0
1991 0 0 $122 0
1992 $121 0 0 0
1993 $2 $1,071 0 0
1994 $17 0 0 0
1995 0 a 0 0 0
1996 $45 0 0 0
1997 $0 0 $70 0
1998 $0 0 $48 0
(a) For Federal Income Tax purposes income only was reallocated in
accordance with the regulations promulgated thereunder of the
Internal Revenue code of 1986 as amended.
Item 6: 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)
1998 1997 1996 1995 1994
Limited Partner Units Outstanding 11,000 11,000 11,000 11,000 11,000
Statement of Operations
Total Revenues $2,675 $2,534 $2,458 $2,409 $2,311
Net Income (Loss) before
extraordinary items (195) (112) 258 248 233
Extraordinary Item-gain on
extinguishment of debt 0 252 0 0 0
Net Income (Loss) (195) 140 258 248 233
Limited Partner Net Income
(Loss) per Unit - Basic (17.53) 12.60 23.22 22.31 20.93
Cash Distributions to Limited
Partners per Unit - Basic 0 0 0 0 0
Balance Sheet:
Real Estate, net $7,639 $8,134 $8,420 $8,954 $9,522
Total Assets 8,426 9,092 8,645 9,099 9,795
Mortgages Payable 10,675 10,770 7,240 7,998 8,757
Notes Payable to Affiliate 399 760 2,935 3,108 3,444
Partner's Deficit (3,030) (2,835) (2,975) (3,233) (3,481)
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: 1998 VERSUS 1997 -
Revenue from Property Operations increased $141,574 or 5.59% as
compared to 1997. This increase is primarily attributed to a
$134,934 increase in rental revenues which was principally due to
an increase in rents and by an increase in average occupancy.
Interest income decreased $8,385 due to an decrease in available
funds for investment during 1998. The increase in other operating
revenues of $15,025 were principally caused by a increase in fees
from tenants and vending revenues. The following table illustrates
the increases:
Increase
(Decrease)
Rental income $134,934
Interest (8,385)
Other 15,025
Net Increase $141,574
Property operating expenses for 1998 increased $224,472 or 8.48%.
Interest expense on mortgage payable increased $363,003 due
primarily to refinancing completed in 1997. Depreciation and
amortization increased primarily due to additional costs
associated with the new mortgage loans. Interest expense on Note
payable to affiliates decreased due to the repayment of a
substantial portion of the amount owed to affiliates with excess
proceeds from the refinancing of the mortgages payable.
Maintenance and repairs decreased $25,556 or 7.79% due primarily to
the completion of deferred maintenance items required by the new
mortgage lenders. Property management fees are paid to an
affiliated entity and represent approximately 5% of gross revenues
(see Note C to the Financial Statements and Schedule Index
contained in Item 8). The following table illustrates the increases
or (decreases):
Increase
(Decrease)
Interest Expense on N/P Affiliate $(140,851)
Interest Expense on Mortgages pay 363,003
General administrative (9)
Maintenance & repairs (25,556)
Utilities (3,545)
Real estate taxes (11,869)
Advertising and Marketing (553)
Depreciation and amortization 37,023
Property management fees 6,829
Administrative Service Fee 0
Net Increase $224,472
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 higher legal and accounting fees in 1995 relating to
debt restructuring in that year. 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 C to the Financial Statements and Schedule Index
contained in Item 8). The following table illustrates the increase
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.
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, 1998, the Partnership had $146,358 in cash and
cash equivalents as compared to $16,900 as of December 31, 1997.
See Note C to the Financial Statements contained in Item 8 for
information regarding related party transactions.
The properties are encumbered by two non-recourse mortgage notes as
of December 31, 1998. These mortgages payable have a carrying
value of $10,675,051 at December 31, 1998. 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
31,1998 totaling $399,392 which accrue interest at rates ranging
from prime plus 2%; to 8.25% 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 $102,678, $111,063, $519,524, $129,941
and $140,551 for each of the next five years.
Year 2000
The Partnership and Management Company have replaced all data
processing systems on the last three years with year 2000 compliant
software and hardware. The Partnership and Management Company have
completed testing of its data processing systems. While compliance
can not be assured, the systems tested to date are compliant.
Surveys of financial institutions and vendors used by the Partnership and
Management Company also indicate compliance testing to date these surveys
will be completed by June 1999. The Partnership and Management
Company have prepared contingency plans. These include redundant
back-ups and paper copies of all system reports through 1999.
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.
Item 7a - Quantitative and Qualitative Disclosure about Market Risk
Market Risk
The Partnership is exposed to interest rate changes primarily as a
result of its real estate mortgages. The Partnerships interest
rate risk management objective is to limit the impact of interest
rate changes on earnings and cash flows and to lower its overall
borrowing costs. To achieve its objectives, the partnership
borrows primarily at fixed rates. The partnership does not enter
into derivative or interest rate transactions for any purpose.
The Partnerships' activities do not contain material risk due to
changes in general market conditions. The partnership invests only
in fully insured bank certificates of deposits, and mutual funds
investing in United States treasury obligations.
Risk Associated with Forward-Looking Statements Included in
this Form 10-K this Form 10-K contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934,
which are intended to be covered by the safe harbors created
thereby. These statements include the plans and objectives of
management for future operations, including plans and objectives
relating to capital expenditures and rehabilitation costs on the
Properties. The forward-looking statements included herein are
based on current expectations that involve numerous risks and
uncertainties. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions,
all of which are difficult or impossible to predict accurately and
many of which are beyond the control of the Company. Although the
Company believes that the assumptions underlying the forward-
looking statements are reasonable, any of the assumptions could be
inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this Form 10-K will prove to
be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of
such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the
Company will be achieved.
AMERICAN REPUBLIC REALTY FUND I
COMBINED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORTS
December 31, 1998, 1997 and 1996
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Reports 1
Combined Financial Statements
Balance Sheets as of December 31, 1998 and 1997 3
Statements of Operations for the years ended
December 31, 1998, 1997 and 1996 4
Statements of Partners' Equity (Deficit) for the years ended
December 31, 1998, 1997, and 1996 5
Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 6
Notes to Financial Statements 7
Schedule III - Real Estate and Accumulated Depreciation 14
All other schedules have been omitted because they are not
applicable, not required or the information has been supplied
in the financial statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partners of
Amrecorp Realty Fund I
We have audited the accompanying combined balance sheet of
Amrecorp Realty Fund I, a Wisconsin limited partnership (the
"Partnership") as of December 31, 1998, and the related combined
statements of operations, partners' equity (deficit), and cash
flows for the year then ended. These financial statements are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of
Amrecorp Realty Fund I as of December 31, 1997, were audited by
other auditors whose report dated February 23, 1998, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the December 31, 1998 financial statements
referred to above present fairly, in all material respects, the
financial position of Amrecorp Realty Fund I as of December 31,
1998, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. Schedule III is
presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not a required part of the
basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly states, in all
material respects, the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
FARMER, FUQUA, HUNT & MUNSELLE, P.C.
February 12, 1999
Dallas, Texas
INDEPENDENT AUDITORS' REPORT
To the General Partner
and Limited Partners of
American Republic Realty Fund I
Dallas, Texas
We have audited the accompanying combined balance sheet of
American Republic Realty Fund I and subsidiary (A Wisconsin
limited partnership) (the "Partnership") as of December 31, 1997
and the related combined statements of operations, partners'
equity (deficit) and cash flows for the years ended December 31,
1997 and 1996. The combined financial statements are the
responsibility of the Partnership's management. Our
responsibility is to express an opinion on the combined financial
statements based on our 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 the results of their
operations and their cash flows for the years ended December 31,
1997 and 1996, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
February 23, 1998
AMERICAN REPUBLIC REALTY FUND I
COMBINED BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
Investments in real estate at cost
Land $1,822,718 $1,822,718
Buildings,improvements and furniture and fixtures 15,519,676 15,348,507
17,342,394 17,171,225
Accumulated depreciation (9,702,703) (9,037,393)
7,639,691 8,133,832
Cash and cash equivalents 146,358 16,900
Escrow deposits 430,820 702,955
Deferred financing costs, net of accumulated
amortization of $34,414 and $11,472, respectively 195,016 217,958
Prepaid expenses 14,421 20,686
TOTAL ASSETS $8,426,306 $9,092,331
LIABILITIES AND PARTNERS' DEFICIT
Mortgages payable $10,675,051 $10,769,977
Notes payable to affiliates 399,392 759,788
Amounts due affiliates 46,853 45,235
Accounts payable and accrued expenses 278,099 306,030
Security deposits 56,924 46,591
TOTAL LIABILITIES 11,456,319 11,927,621
PARTNERS'DEFICIT (3,030,013) (2,835,290)
TOTAL LIABILITIES AND PARTNERS'DEFICIT $8,426,306 $9,092,331
AMERICAN REPUBLIC REALTY FUND I
COMBINED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
INCOME
Rentals $2,614,696 $2,479,762 $2,419,780
Other 56,717 41,692 34,595
Interest 3,958 12,343 4,077
Total income 2,675,371 2,533,797 2,458,452
OPERATING EXPENSES
Interest expense on
mortgages payable 845,225 482,222 ---
Depreciation and amortization 688,253 651,230 603,813
General and administrative 388,758 388,767 383,202
Maintenance and repairs 302,596 328,152 302,043
Real estate taxes 245,033 256,902 254,531
Utilities 177,896 181,441 181,972
Property management fee
to affiliate 133,659 126,830 122,879
Advertising and marketing 40,493 41,046 39,353
Interest expense on notes payable
to affiliates 38,173 179,024 302,703
Administrative service fee
to general partner 10,008 10,008 10,008
Total operating expenses 2,870,094 2,645,622 2,200,504
NET INCOME (LOSS) BEFORE
EXTRAORDINARY GAIN (194,723) (111,825) 257,948
Extraordinary gain - gain on early
extinguishment of debt --- 251,785 ---
NET INCOME (LOSS) $(194,723) $139,960 $257,948
NET INCOME PER LIMITED PARTNERSHIP
UNIT - BASIC
Net income (loss) before extraordinary gain $(17.53) (10.06) $23.22
Extraordinary gain-gain on early
extinguishment of debt --- 22.66 ---
Net income per unit - basic $(17.53) $12.60 $ 23.22
LIMITED PARTNERSHIP UNITS
OUTSTANDING - BASIC 11,000 11,000 11,000
AMERICAN REPUBLIC REALTY FUND I
COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1998, 1997 and 1996
General Limited
Partner Partners Total
Balance,January 1,1996 $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)
Net loss (1,947) (192,776) (194,723)
Balance, December 31,1998 $55,395 $(3,085,408) $(3,030,013)
AMERICAN REPUBLIC REALTY FUND I
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1998, 1997 and 1996
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(194,723) $139,960 $257,948
Adjustments to reconcile net income
(loss) to net cash provided by operations:
Extraordinary gain on early extinguishment
of debt --- (251,785) ---
Depreciation and amortization 688,252 651,230 603,813
Change in assets and liabilities:
Prepaid expenses 6,265 (1,072) 3,982
Escrow Deposits 295,249 (91,894) (80,458)
Accounts payable and accrued expenses (27,931) 188,828 62,940
Security deposits 10,333 845 (5,672)
Net cash provided by operating activities 777,445 636,112 842,553
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in real estate (171,169) (353,998) (69,345)
Net payments to reserve for replacement (23,114) (428,095) ---
Net cash used for investing activities (194,283) (782,093) (69,345)
CASH FLOWS FROM FINANCING ACTIVITIES
Additions to mortgages payable --- 10,800,000 ---
Deferred financing costs --- (229,430) ---
Payments on mortgages payable (94,926) (7,017,917) (758,646)
Payments on notes payable
to affiliates (360,396) (2,175,522) (172,771)
Proceeds (payments) on amounts
due affiliates 1,618 (1,237,461) 162,373
Net cash provided by (used for)
financing activities (453,704) 139,670 (769,044)
Net increase (decrease) in cash
and cash equivalents 129,458 (6,311) 4,164
Cash and cash equivalents at
beginning of period 16,900 23,211 19,047
Cash and cash equivalents at
end of period $146,358 $16,900 $23,211
Supplemental disclosure of
cash flow information:
Cash paid during the year
for interest $856,672 $1,775,590 $302,703
Extraordinary gain on early
extinguishment of debt $--- $(251,785) $---
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
American Republic Realty Fund I (the "Partnership"), a
Wisconsin limited partnership, was formed on December 22,
1982, under the laws of the state of Wisconsin, for the
purpose of acquiring, maintaining, developing, operating,
and selling buildings and improvements. The Partnership
operates rental apartments in Texas and Florida. The
Partnership will be terminated by December 31, 2012,
although this date can be extended if certain events occur.
The general partner is Mr. Robert J. Werra.
An aggregate of 20,000 units is authorized, of which 11,000
were outstanding for each of the three years ended December
31, 1998. Under the terms of the offering, no additional
units will be offered.
Allocation of Net Income (Loss) and Cash
Net income and net operating cash flow, as defined in the
limited partnership agreement, are allocated first to the
limited partners in an amount equal to a variable
distribution preference on capital contributions from the
first day of the month following their capital contribution
and, thereafter, 10% to the general partner and 90% to the
limited partners. Net loss is allocated 1% to the general
partner and 99% to the limited partners.
Net income from the sale of property is allocated first, to
the extent there are cumulative net losses, 1% to the
general partner and 99% to the limited partners; second, to
the limited partners in an amount equal to their
distribution preference; and, thereafter, 15% to the general
partner and 85% to the limited partners.
Cash proceeds from the sale of property or refinancing are
allocated first to the limited partners to the extent of
their capital contributions and their distribution
preference and, thereafter, 15% to the general partner and
85% to the limited partners.
Basis of Accounting
The Partnership maintains its books on the basis of
accounting used for federal income tax reporting purposes.
Memorandum entries have been made to present the
accompanying financial statements in accordance with
generally accepted accounting principles.
Investments in Real Estate and Depreciation
Buildings, improvements, and furniture and fixtures are
recorded at cost and depreciated using the straight-line
method over the estimated useful lives of the assets ranging
from 5 to 27.5 years.
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income Taxes
No provision for income taxes has been made since the
partners report their respective share of the results of
operations on their individual income tax return.
Revenue Recognition
The Partnership has leased substantially all of its
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
The Partnership considers all highly liquid instruments with
a maturity of three months or less to be cash equivalents.
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.
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during that reporting period. Actual results
could differ from those estimates.
Environmental Remediation Costs
The Partnership accrues for losses associated with
environmental remediation obligations when such losses are
probable and reasonably estimable. Accruals for estimated
losses from environmental remediation obligations generally
are recognized no later than completion of the remedial
feasibility study. Such accruals are adjusted as further
information develops or circumstances change. Costs of
future expenditures for environmental remediation
obligations are not discounted to their present value.
Recoveries of environmental remediation costs from other
parties are recorded as assets when their receipt is deemed
probable. Project management is not aware of any
environmental remediation obligations that would materially
affect the operations, financial position or cash flows of
the Project.
Comprehensive Income
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, (SFAS 130), requires that
total comprehensive income be reported in the financial
statements. For the years ended December 31, 1998, December
31, 1997, and December 31, 1996, the Partnership's
comprehensive income (loss) was equal to its net income
(loss) and the Partnership does not have income meeting the
definition of other comprehensive income.
Segment Information
The Partnership is in one business segment, the real estate
investments business, and follows the requirements of FAS
131, "Disclosures about Segments of an Enterprise and
Related Information."
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE B - MORTGAGES PAYABLE
Mortgages payable at December 31, 1998 and 1997, consisted
of the following:
1998 1997
Mortgage note, original face value of
$6,800,000, payable in monthly
installments of principal and interest
of $49,517, bears interest at a rate of
7.92% and matures August 1, 2007, at
which time a lump-sum payment of
approximately $5,945,187 is due. This
mortgage note is secured by real estate $6,722,015 $6,781,266
assets with a net book value of
approximately $4,861,495
Mortgage note, original face value of
$4,000,000, payable in monthly
installments of principal and interest
of $28,795 bears interest at a rate of
7.8% and matures August 1, 2007, at
which time a lump-sum payment of
approximately $3,488,279 is due. This
mortgage note is secured by real estate 3,953,035 3,988,711
assets with a net book value of
approximately $2,778,197
$10,675,050 $10,769,977
At December 31, 1998, required principal payments due under
the stated terms of the Partnership's mortgage notes payable
and notes payable to affiliates are as follows
1999 $ 102,678
2000 111,063
2001 519,524
2002 129,941
2003 140,551
Thereafter 10,070,686
$11,074,443
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE C - RELATED PARTY TRANSACTIONS
The Partnership agreement specifies that certain fees be
paid to the general partner or his designee. An affiliate
of the general partner receives a property management fee
that is 5% of the Partnership's gross receipts.
Additionally, the Partnership reimburses the affiliate for
administrative expenditures. The following fees and
reimbursements earned by an affiliate of the general partner
in 1998, 1997 and 1996:
1998 1997 1996
Property management fee $133,659 $126,830 $122,879
Administrative service fee 10,008 10,008 10,008
The general partner held a $1,300,000 promissory note of the
Partnership, bearing interest at a rate of 10%, which was
scheduled to mature on June 30, 2001. This note was paid
off in July 1997 with excess funds from the refinancing of
mortgage notes payable. Interest expense incurred on this
note was $65,000 and $130,000 for the years ended December
31, 1997 and 1996.
During 1996, the Partnership received advances from the
general partner under a note agreement bearing interest at
prime plus 2%. These advances of $208,866, including
accrued interest of $30,768, were paid off with excess funds
from refinancing of mortgage notes payable in July 1997.
Notes payable to affiliates at December 31, 1998 and 1997,
consisted of the following:
1998 1997
Note payable to an affiliate of the
general partner, bearing interest at
8.25%, principal and accrued interest
are due and payable on or before
February 16, 2001. Interest expense of
$24,788, $31,904 and $35,000 was
incurred on the note for each of the
years ended December 31, 1998, 1997 and
1996, respectively. Accrued interest of $300,461 $300,461
$43,567 and $18,779 at December 31, 1998
and 1997, respectively, is included in
amounts due affiliates.
Note payable to the general partner,
bearing interest of prime plus 2%,
principal and accrued interest are
payable on June 30, 2001 or upon demand.
Interest expense of $29,604, $66,996 and
$116,950 was incurred on the note for
each of the years ended December 31,
1998, 1997 and 1996, respectively.
There is no accrued interest payable at 98,931 459,327
December 31, 1998 and 1997.
$399,392 $759,788
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE D - COMMITMENTS
The Partnership will pay a real estate commission to the
general partner or his affiliates in an amount not exceeding
the lessor of 50% of the amounts customarily charged by
others rendering similar services or 3% of the gross sales
price of a property sold by the Partnership, provided that
the limited partners have received their original capital
plus preferential interest, as defined.
NOTE E - RECONCILIATION OF BOOK TO TAX LOSS (UNAUDITED)
If the accompanying financial statements had been prepared
in accordance with the accrual income tax basis of
accounting rather than generally accepted accounting
principals ("GAAP"), the excess of expenses over revenues
for 1998 would have been as follows:
Net loss per accompanying financial statements $(194,723)
Add - book basis depreciation using 665,310
straight-line method
Deduct - income tax basis depreciation expense
using ACRS method. (641,335)
Deduct - net difference in revenue and
expense recognized by GAAP (104,254)
Excess of expenses over revenues,
accrual income tax basis $(275,002)
NOTE F - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been
determined using available market information or other
appropriate valuation methodologies that require
considerable judgement in interpreting market data and
developing estimates. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that
the Partnership could realize in a current market exchange.
The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated
fair value amounts.
The fair value of financial instruments that are short-term
or reprice frequently and have a history of negligible
credit losses is considered to approximate their carrying
value. These include cash and cash equivalents, accounts
payable and other liabilities.
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE F - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
(CONTINUED)
Management has reviewed the carrying values of its mortgages
payable and notes payable to related parties in connection
with interest rates currently available to the Partnership
for borrowings with similar characteristics and maturities
and has determined that their estimated fair value would
approximate their carrying value as of December 31, 1998 and
1997.
The fair value information presented herein is based on
pertinent information available to management. Although
management is not aware of any factors that would
significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes
of these financial statements since that date, and
therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
AMERICAN REPUBLIC REALTY FUND I
Schedule III - Real Estate and Accumulated Depreciation
December 31, 1998
Initial Cost
to Partnership
Description Encumbrances Land building Total Cost
and Subsequent to
improvements Acquisition
26 two-story apartment
buildings of concrete
block construction with
stucco and cedar exterior
and gabled roofs lacated
in Jacksonville,Florida (b) $583,000 $5,686,771 $259,827
37 Two-story apartment buildings
of concrete block construction
with brick veneer, stucco and
wood siding exterior, and
composition, shingled roofs (b) 1,239,718 8,679,421 893,657
located in Bedford, Texas
$1,822,718 $14,366,192 $1,822,718
Gross Amounts at Which
Carried at Close of Year
Buildings
and Accumulated
Land Improvements Total Depreciation
(c)(d) (c)
$583,000 $5,946,598 $6,529,598 $3,751,402
1,239,718 9,573,078 $10,812,796 5,951,301
$1,822,718 $15,519,676 $17,342,394 9,702,703
Life on Which
Date of Construction Date Depreciation
Acquired Is Computed
Phase I Complete at
date acquired; 9/12/83 (a)
Phase II Complete at
date acquired 5/01/84 (a)
Complete at
date acquired 12/20/83 (a)
See notes to Schedule III.
AMERICAN REPUBLIC REALTY FUND I
Schedule III - Real Estate and Accumulated Depreciation (Continued)
December 31, 1998
NOTES TO SCHEDULE III:
(a) See Note A to financial statements outlining depreciation methods
and lives.
(b) See description of mortgages and notes payable in Note B to the
financial statements.
(c) The reconciliation of investments in real estate and accumulated
depreciation for the years ended December 31, 1998, 1997 and 1996 is
as follows:
Investments in Accumulated
Real Estate Depreciation
Balance, January 1, 1996 $16,747,882 $7,793,822
Acquisitions 69,345 ---
Depreciation expense --- 603,813
Balance, December 31, 1996 16,817,227 8,397,635
Acquisitions 353,998 ---
Depreciation expense --- 639,758
Balance, December 31, 1997 17,171,225 9,037,393
Acquisitions 171,169 ---
Depreciation expense --- 665,310
Balance, December 31, 1998 $17,342,394 $9,702,703
(d) Aggregate cost for federal income tax purposes is $17,224,694.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
On November 6, 1998, an 8-K was filed to disclose the change in
auditors. No financial statements were issued in conjunction
with this filing. The Registrant has not been involved in any
disagreements on accounting and financial disclosure.
PART III
Item 10. Directors and Executive Officer of the Partnership
The Partnership itself has no officers or directors. Robert J.
Werra is the General Partner of the Partnership.
Robert J. Werra, 60, the General Partner, Mr. Werra joined Loewi &
Co., Incorporated ("Loewi") in 1967 as a Registered Representative.
In 1971, he formed the Loewi real estate department, and was
responsible for its first sales of privately placed real estate
programs. Loewi Realty was incorporated in 1974, as a wholly owned
subsidiary of Loewi & Co., with Mr. Werra as President. In 1980, Mr.
Werra, along with three other individuals, formed Amrecorp Inc. to
purchase the stock of Loewi Real Estate Inc., and Loewi Realty. In
1991 Univesco, Inc. became the management agent for the Partnership.
Limited Partners have no right to participate in management of the
Partnership.
Item 11. Management Remuneration and Transactions
As stated above, the Partnership has no officers or directors.
Pursuant to the terms of the Limited Partnership Agreement, the
General Partner receives 1% of Partnership income and loss and up to
15% of Net Proceeds received from sale or refinancing of
Partnership properties (after return of Limited Partner capital
contributions and payment of a 6% Current Distribution Preference
thereon).
Univesco, Inc., an affiliate of the General Partner, is entitled
to receive a management fee with respect to properties actually
managed of 5% of the actual gross receipts from a property or an
amount competitive in price or terms for comparable services available
from non-affiliated persons. The Partnership is also permitted to
engage in various transactions involving affiliates of the General
Partner as described under the caption "Compensation and Fees" at
pages 6-8, "Management" at page 17 and "Allocation of Net Income and
Losses and Cash Distributions" at pages 34-36 of the Prospectus as
supplemented, incorporated in the Form S-11 Registration Statement
which was filed with the Securities and Exchange Commission and made
effective on May 2, 1983.
For the years ended December 31, 1998, 1997 and 1996, property
management fees earned totaled $133,659,126,830, and $122,879
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, 1998, 1997 and 1996 respectively.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) No one except as listed in item (b) below, owns of
record, and the General Partner knows of no one who owns beneficially,
more than five percent of the Interests in the Partnership, the only
class of securities outstanding.
(b) By virtue of its organization as a limited partnership,
the Partnership has no officers or directors. Persons performing
functions similar to those of officers and directors of the
Partnership, beneficially own, the following Units of the Partnership
as of March 1, 1999.
Amount and Nature
Title Name of of Beneficial Percent
of Class Beneficial Owner Ownership of Interest
Limited Robert J. Werra 566 5.14%
Partnership
Interests
No Selling Commissions were paid in connection with the purchase of
these Units.
(c) There is no arrangement, known to the Partnership, which may,
at a subsequent date, result in a change in control of the
Partnership.
Item 13. Certain Relationships and Related Transactions
None other than discussed in Item 11 and Note C to the financial
statements at Item 8 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, 1998.
November 6, 1998, an 8-K was filed to disclose the change
in auditors. No financial statements were issued in conjunction
with this filing.
(C) Exhibits
3. Certificate of Limited Partnership, incorporated by reference
to Registration Statement No. 0-11578 effective May 2, 1983.
4. Limited Partnership Agreement, incorporated by reference
to Registration Statement No. 0-11578 effective May 2, 1983.
9. Not Applicable
1O. Not Applicable
11. Not Applicable
12. Not Applicable
13. Reports to security holders, incorporated by reference from
Registrant's Quarterly Reports on Form 1O-Q, dated
September 30, 1998.
18. Not Applicable
19. Not Applicable
22. Not Applicable
23. Not Applicable
24. Not Applicable
25. Power of Attorney, incorporated by reference to
Registration Statement No. 0-11578 effective May 2, 1983.
28. None
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN REPUBLIC REALTY FUND I
ROBERT J. WERRA, GENERAL PARTNER
/s/ Robert J. Werra
March 29, 1999