-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UQ5lTrQ+E8n9oGAmqJhD+x3rMqCf5lP0QjngfjSL/mqH026A0ccP7HGo0+go+0v8 ibOuA0rq9DTYWtotLVCIyA== 0000711512-97-000006.txt : 19970428 0000711512-97-000006.hdr.sgml : 19970428 ACCESSION NUMBER: 0000711512-97-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970425 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN REPUBLIC REALTY FUND I CENTRAL INDEX KEY: 0000711512 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 391421936 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11578 FILM NUMBER: 97586868 BUSINESS ADDRESS: STREET 1: 6210 CAMPBELL RD STREET 2: STE 140 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 2143808000 MAIL ADDRESS: STREET 1: 6210 CAMPBELL RD STREET 2: STE 140 CITY: DALLAS STATE: TX ZIP: 75248 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington D. C. 20549 FORM 10-K ANNUAL REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal year ended December 31, 1996 Commission file number 0-11578 [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) AMERICAN REPUBLIC REALTY FUND I --------------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-1421936 --------- ---------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 6210 Campbell Road, Suite 140, Dallas, Texas 75248 -------------------------------------------- ----- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including area code (972) 380-8000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on which Registered None None Securities registered pursuant to Section 12 (g) of the Act: Limited Partnership Interests ----------------------------- (Title of Class) ---------------- Indicated by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No ___. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained, to the best of Registrant's knowledge in definitive proxy on information to statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. Documents Incorporated by Reference ----------------------------------- The Definitive Prospectus of American Republic Realty Fund I dated May 2, 1983 filed pursuant to Rule 424(b) is incorporated by reference as is the Supplement to that Prospectus filed pursuant to Rule 424(b) on May 25,1984. PART I Item 1. Business - ------------------ The Registrant, American Republic Realty Fund I, (the "Partnership"), is a limited partnership organized under the Wisconsin Uniform Limited Partnership Act pursuant to a Certificate of Limited Partnership dated December 22, 1982. As of December 31, 1996, the Partnership consisted of an individual general partner, Mr. Robert J. Werra, (the "General Partner") and 929 limited partners owning 11,OOO limited partnership interests at $1,OOO per interest. The distribution of limited partnership interests commenced May 2, 1983 and ended April 17, 1984, pursuant to a Registration Statement on Form S-11 under the Securities Act of 1933 (Registration #0-11578) as amended. The Partnership was organized to acquire a diversified portfolio of income-producing real properties, primarily apartments, as well as office buildings, industrial buildings, and other similar properties. During 1983 and 1984, the Partnership acquired four properties: Kenwood Gardens Apartments, a 1O4 unit apartment community located in Fort Myers, Florida (acquired on September 1, 1983, subsequently disposed of by sale during 1988), Jupiter Plaza Office/Showroom, a 131,44O rentable square foot commercial building located in Garland, Texas (acquired on September 29, 1983, subsequently disposed of in foreclosure during 1988), Four Winds Apartments, a 154 unit apartment community located in Orange Park, Florida (Phase I acquired September 12, 1983 and Phase II acquired May 1, 1984) and Forestwood Apartments (formerly Oak Creek) a 263 unit apartment community located in Bedford, Texas (acquired December 2O, 1983). No additional properties were purchased by the Partnership and the Partnership will not acquire additional properties in the future. The properties remaining are described more fully in this report at "Item 2. Properties". - --------------------- Univesco, Inc.("Univesco"), a Texas corporation, eighty four percent owned by Robert J. Werra manages the affairs of the Partnership. Univesco acts as the managing agent with respect to the Partnership's properties. Univesco may also engage other on-site property managers and other agents to the extent the management considers appropriate. The General Partner has ultimate authority regarding property management decisions. The Partnership competes in the residential rental markets. Univesco prepares marketing analyses for all property areas. These areas contain other like properties which are considered competitive on the basis of location, amenities and rental rates. It is realistic to assume that additional properties similar to the foregoing will be constructed within their various market areas. No material expenditure has been made or is anticipated for either Partnership-sponsored or consumer research and development activities relating to the development or improvement of facilities or services provided by the Partnership. There neither has been, nor are any anticipated, material expenditures required to comply with any federal, state, or local environmental provisions which would materially affect the earnings or competitive position of the Partnership. The Partnership is engaged solely in the business of real estate investments. Its business is believed by management to fall entirely within a single industry segment. Management does not anticipate that there will be any material seasonal effects upon the operation of the Partnership Competition and Other Factors - ----------------------------- The majority of the Properties' leases are six to twelve month terms. Accordingly, operating income is highly susceptible to changing market conditions. Occupancy and local market rents are driven by general market conditions which include job creation, new construction of single and multi-family projects, and demolition and other reduction in net supply of apartment units. Rents have generally been increasing in recent years due to the generally positive relationship between apartment unit supply and demand in the Partnership's markets. However, the properties are subject to substantial competition from similar and often newer properties in the vicinity in which they are located. In addition, operating expenses and capitalized expenditures have increased as units are updated and made more competitive in the market place. (See Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.) Item 2. Properties - ------------------- At December 31, 1996 the Partnership owned two properties with approximately 416,623 net rentable square feet. Both properties are apartment communities. Name and Location General Description of the Property - ----------------- ----------------------------------- Forestwood Apartments A fee simple interest in a 263 unit apartment community located in Bedford Texas, purchased in 1983 containing 244,407 net rentable square feet on approximately 14 acres of land. Four Winds Apartments Phase I A fee simple interest in an 100 unit community, located in Orange Park Florida, purchased in 1983,containing approximately 110,716 net rentable square feet on 10 acres of land. Four Winds Apartments Phase II A fee simple interest in a 54 unit apartment community located in Orange Park Florida, adjacent to four Winds Apartments I, purchased in 1984 and containing approximately 61,500 net rentable square feet on 3.73 acres of land. Occupancy Rates --------------- Per Cent -------- 1992 1993 1994 1995 1996 Four Winds I & II 92.20% 91.40% 93.10% 93.60% 93.3% Forestwood 87.50% 96.90% 96.90% 97.80% 96.6% The Properties are encumbered by non-recourse mortgages payable. For information regarding the encumbrances to which the properties are subject and the status of the related mortgage loans, see "Management's Discussion and Analysis of Financial Condition and Results of Operating - Liquidity and Capital Resources" contained in Item 7 hereof and Note 2 to Consolidated Financial Statements contained in Item 8. Item 3. Legal Proceedings - -------------------------- None. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ No matters were submitted to a vote of the unit holders of the Partnership during the fourth quarter of 1996. PART II Item 5.Market for the Partnership's Securities and Related Unit Holder Matters - ------------------------------------------------------------------------------ The Partnership's outstanding securities are in the form of Limited Partnership Interests ("Interests"). The distribution period for the sale of the Interests began May 2, 1983,and closed April 17, 1984. As of December 31, 1996 there were approximately 929 limited partners owning 11,000 limited partnership interests at $1,000 per interest. A public market for trading Interests has not developed and none is expected to develop. In addition, transfer of an Interest is restricted pursuant to the Limited Partnership Agreement. The General Partner continues to review the Partnership's ability to make distributions on a quarter by quarter basis, however, no such distributions have been made and none are anticipated in the immediate future due to the debt service requirements of the Partnership. An analysis of taxable income or (loss) allocated, and cash distributed to Investors per $1,000 unit is as follows: YEARS INCOME GAIN LOSS CASH DISTRIBUTED - ---------------------------------------------- 1984 $0 $0 $342 $0 1985 $0 $0 $291 $0 1986 $0 $0 $271 $0 1987 $0 $0 $279 &0 1988 $0 $43 $63 $0 1989 $0 $38 $127 $0 1990 $0 $0 $126 $0 1991 $0 $0 $122 $0 1992 $121 $0 $0 $0 1993 $2 $1,071 $0 $0 1994 $17 $0 $0 $0 1995 $0 (a) $0 $0 $0 1996 $45 $0 $0 $0 (a) For Federal Income Tax purposes only income was reallocated in accordance with 704(b) and the regulations promulgated thereunder of the Internal Revenue code of 1986 as amended. Item 6: Selected Financial Data - --------------------------------- The following table sets forth selected financial data regarding the Partnership's results of operations and financial position as of the dates indicated. This information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Item 7 hereof and Consolidated financial Statements and notes thereto contained in Item 8. Year Ended December 31. (in thousands except unit amounts) 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Limited Partner Units Outstanding 11,000 11,000 11,000 11,000 11,000 ------ ------ ------ ------ ------ Statement of Operations Total Revenues $2,458 $2,409 $2,311 2,315 $1,986 Net Income (Loss) before extraordinary items 258 248 233 353 (728) Extraordinary Item-gain on extinguishment of debt 0 0 0 451 1,359 Net Income (Loss) 258 248 233 804 631 Limited Partner Net Income (Loss) per Unit 23 22 21 72 57 Cash Distributions to Limited Partners per Unit 0 0 0 0 0 Balance Sheet: Real Estate, net 8,420 8,954 9,522 10,062 10,473 Total Assets 8,645 9,099 9,795 10,268 10,746 Mortgages Payable 7,240 7,998 8,757 9,516 9,832 Notes Payable to Affiliate 2,935 3,108 3,444 3,392 1,650 Partner's Equity (Deficit) (2,975) (3,233) (3,481) (3,713) (2,775) Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations - --------------------------------------------------------------------------- This discussion should be read in conjunction with Item 6- Selected Financial Data and Item 8 - Financial Statements and Supplemental Information . Results of Operations: 1996 VERSUS 1995 - Revenue from Property Operations increased $49,187 or 2.04% as compared to 1995. This increase is primarily attributed to a $59,184 increase in rental revenues which was principally due to an increase in rents partially offset by a slight decrease in average occupancy. Interest income decreased $2,464 due to a decrease in available funds for investment during 1996. The decrease in other operating revenues of $7,533 were principally caused by a decrease in fees from tenants and vending revenues. The following table illustrates the increases or (decreases): Increase (Decrease) ---------- Rental income $59,184 Interest (2,464) Other (7,533) ------- Net Increase (Decrease) $49,187 ======= Property operating expenses for 1996 increased $39,127 or 1.81% Interest expense decreased due primarily to reduction in long term debt as a result of normal amortization of the loan balance. The increase in Real Estate taxes is due to increases in valuation of properties and increases in property tax rates. General and administrative expenses increased due primarily to incresaed professional fees and payroll expenses. Maintenance and repairs increased 65,596 or 27.74% due primarily to exterior painting, parking lot and roof repairs. Property management fees ar paid to an affiliated enitiy and represent approximately 5% of gross revenues (see note 3 to Consolidated Financial Statements and Schedule Index contained in item 8.) The following table illustrates the increases or (decreases): Increase (Decrease) ---------- Interest Expense on N/P $(38,896) General administrative 12,775 Maintenance & repairs 65,596 Utilities (12,813) Real estate taxes 22,387 Advertising and Marketing 2,514 Depreciation and amortization (14,865) Property management fees 2,429 Administrative Service Fee 0 -------- Net Increase (Decrease) $39,127 ======== Results of Operations: 1995 VERSUS 1994 - Revenue from Property Operations increased $98,243 or 4.25% as compared to 1994. This increase is primarily attributed to a $108,462 increase in rental revenues which was principally due to an increase in rents and occupancy resulting from improvements in the apartment rental markets. Additionally, interest income increased $1,901 due to an increase in available funds during 1995. These increases were offset by a $12,147 decrease in other operating revenues, principally caused by a decrease in fees from tenants and vending revenues The following table illustrates the increases or (decreases): Increase (Decrease) ---------- Rental income $108,462 Interest 1,928 Other (12,147) ----------- Net Increase (Decrease) $98,243 ============= Property operating expenses for 1995 increased $82,934 or 3.99% Interest expense increases were primarily the result of advances to the Partnership by related parties. The increase in Real Estate taxes is due to increases in valuation of properties and anticipated increases in property tax rates. General and administrative expenses increased due primarily to higher legal and accounting fees in 1995 relating to debt restructuring in that year. increased professional fees and payroll expenses. Depreciation and Amortization increased due primarily to property additions. Property management fees are paid to an affiliated entity and represent approximately 5% of gross revenues (see Note 3 to Consolidated Financial Statements and Schedule Index contained in Item 8.) The following table illustrates the increases or (decreases): Increase (Decrease) ---------- Interest Expense on N/P $9,344 General administrative 23,163 Maintenance & repairs 1,364 Utilities 2,752 Real estate taxes 19,827 Advertising and Marketing (5,747) Depreciation and amortization 27,340 Property management fees 4,900 Administrative Service Fee (9) ---------- Net Increase (Decrease) $82,934 =========== Liquidity and Capital Resources - -------------------------------- While it is the General Partners primary intention to operate and manage the existing real estate investments, the General Partner also continually evaluates this investment in light of current economic conditions and trends to determine if this assets should be considered for disposal. At this time, there is no plan to dispose of either Property. As of December 31, 1996, the Partnership had $23,211 in cash and cash equivalents as compared to $19,047 as of December 31, 1995. The net increase in cash of $4,164 is principally due to an increase in net income and a reduction in repayments on notes payable to affiliates. See Note 3 to Consolidated Financial Statements contained in Item 8 for information regarding related party transactions. The properties are encumbered by two non-recourse mortgage notes as of December 31, 1996. These mortgages payable have a carrying value of $7,239,679 at December 31, 1996. The mortgage notes were entered into during 1993 and 1992 to refinance certain mortgage notes which were in default. The Partnership accounted for these transactions as troubled debt restructuring, and accordingly, are being carried at the total future cash outflows for principal and interest. Accordingly, no interest expense was or will be recorded on these notes. Additionally, the general partner has provided funding to the Partnership in the form of notes payable with balances at December 31,1996 totaling $2,35,310 which accrue interest at prime plus 2% and are due on June 30, 2001, or upon demand. Additional funds have been provided by the general partner in the form of advances which totaled $1,282,696 at December 31, 1996. The general partner is not obligated to provide additional funding to the Partnership. For the foreseeable future, the Partnership anticipates that mortgage principal payments (excluding any balloon mortgage payments), improvements and capital expenditures will be funded by net cash from operations. The primary source of capital to fund future Partnership acquisitions and balloon mortgage payments will be proceeds from the sale, financing or refinancing of the Properties. The Partnership's required principal payments due under the stated terms of the Partnership's mortgage notes payable and notes payable to affiliates are $2,580,216, $4,021,625 and $0 for each of the next three years. The Partnership has significant lump-sum payments due in 1997 and 1998 and the Partnership is not generating sufficient cash flows to meet these obligations. Management believes it will be able to refinance these debt obligations; however, at this time, there can be no assurance this refinancing will occur. RISK ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-K This Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1993 and section 21E of the Securities Act of 1934, which are intended to be covered by the safe harbors created thereby. These statements include the plans and objectives of management for future operations, including plans and objectives relating to capital expenditures and rehabilitation costs on the Properties. The foward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyondthe control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any fo the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in thes Form 10-K will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information whould not ve regarded as a representation by the Comapny or any other person that the objectives and plans of the Company will be achieved. (A WISCONSIN LIMITED PARTNERSHIP) ITEM 8 - FINANCIAL STATEMENTS AND SCHEDULE INDEX - ------------------------------------------------ Page INDEPENDENT AUDITORS' REPORT 10 COMBINED BALANCE SHEETS 11 COMBINED STATEMENTS OF INCOME 12 COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) 13 COMBINED STATEMENTS OF CASH FLOWS 14 NOTES TO COMBINED FINANCIAL STATEMENTS 15-20 SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION 21-22 INDEPENDENT AUDITORS' REPORT To the General Partner and Limited Partners of American Republic Realty Fund I Dallas, Texas We have audited the accompanying combined balance sheets of American Republic Realty Fund I and subsidiary (a Wisconsin limited partnership) (the "Partnership") as of December 31,1996 and 1995, and the related combined statements of income, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1996. Our audits also included the financial statement schedule listed in the index at Item 14(a)(2). The combined financial statements and combined financial statement schedule are the responsibility ofthe Partnership's management. Our responsibility is to express an opinion on the combined financial statements and combined financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such combined financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Also, in our opinion, such combined financial statement schedule, when considered in relation to the basic combined financial statements taken as a whole, presents fairly in all material respects the information set forth therein. The accompanying combined financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 6 to the combined financial statements, conditions exist which raise substantial doubt about the Partnership's ability to continue as a going concern due to the fact the Partnership has significant lump-sum payments due in 1997 and 1998, and the Partnership is not generating sufficient cash flows to meet these obligations. Management's plans in regard to these matters are also described in Note 6. The combined financial statements do not include any adjustments that might result from the outcome of this uncertainty. DELOITTE & TOUCHE LLP Dallas, Texas February 17, 1997 AMERICAN REPUBLIC REALTY FUND I (A Wisconsin Limited Partnership) COMBINED BALANCE SHEETS DECEMBER 31, 1996 AND 1995 - ---------------------------------------------------------------------------- ASSETS 1996 1995 INVESTMENTS IN REAL ESTATE AT COST (Note 2): Land $ 1,822,718 $1,822,718 Buildings, improvements and furniture and fixtures 14,994,509 14,925,164 ---------- ----------- 16,817,227 16,747,882 Less accumulated depreciation (8,397,635) (7,793,822) 8,419,592 8,954,060 CASH AND CASH EQUIVALENTS 23,211 19,047 ESCROW DEPOSITS 182,966 102,508 PREPAID EXPENSES 19,614 23,596 ---------- ------------ TOTAL $ 8,645,383 $ 9,099,211 ========== ============ LIABILITIES AND PARTNERS' DEFICIT MORTGAGES AND NOTES PAYABLE (Note 2) $ 7,239,679 $7,998,325 NOTES PAYABLE TO AFFILIATES (Note 3) 2,935,310 3,108,081 AMOUNTS DUE AFFILIATES (Note 3) 1,282,696 1,120,323 ACCOUNTS PAYABLE AND ACCRUED EXPENSES 117,202 54,262 SECURITY DEPOSITS 45,746 51,418 ---------- ---------- 11,620,633 12,332,409 COMMITMENTS AND CONTINGENCIES (Notes 4 and 6) PARTNERS' DEFICIT (2,975,250) (3,233,198) ----------- ---------- TOTAL $ 8,645,383 $9,099,211 ============ =========== See notes to combined financial statements. AMERICAN REPUBLIC REALTY FUND I (A Wisconsin Limited Partnership) COMBINED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - ----------------------------------------------------------------------------- 1996 1995 1994 INCOME: Rentals $2,419,780 $2,360,596 2,252,134 Interest 4,077 6,541 4,613 Other 34,595 42,128 54,275 ---------- ---------- --------- Total income 2,458,452 2,409,265 2,311,022 OPERATING EXPENSES: Interest expense on note payable to affiliates 302,703 341,599 332,255 General and administrative 383,202 370,427 347,264 Maintenance and repairs 302,043 236,447 235,083 Utilities 181,972 194,785 192,033 Real estate taxes 254,531 232,144 212,317 Advertising and marketing 39,353 36,839 42,586 Depreciation and amortization 603,813 618,678 591,338 Property management fee to affiliate (Note 3) 122,879 120,450 115,550 Administrative service fee to General partner (Note 3) 10,008 10,008 10,017 --------- --------- --------- Total operating expenses 2,200,504 2,161,377 2,078,443 NET INCOME (Note 5) $ 257,948 $247,888 232,579 ========= ========== ========= NET INCOME PER LIMITED PARTNERSHIP UNIT $ 23.22 22.31 20.93 ========= ========== ========= LIMITED PARTNERSHIP UNITS OUTSTANDING 11,000 11,000 11,000 ========= ========== ========= See notes to combined financial statements. AMERICAN REPUBLIC REALTY FUND I (A Wisconsin Limited Partnership) COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT) YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - --------------------------------------------------------------------------- General Limited Partner Partners Total BALANCE, JANUARY 1, 1994 $48,558 $(3,762,223) (3,713,665) Net income 2,326 230,253 232,579 ------- ------------ -------- BALANCE, DECEMBER 31, 1994 50,884 (3,531,970) (3,481,086) Net income 2,479 245,409 247,888 -------- ------------ --------- BALANCE, DECEMBER 31, 1995 53,363 (3,286,561) (3,233,198) Net income 2,579 255,369 257,948 -------- ------------ --------- BALANCE, DECEMBER 31, 1996 $55,942 $(3,031,192) $(2,975,250) ======== ============ =========== See notes to combined financial statements. AMERICAN REPUBLIC REALTY FUND I (A Wisconsin Limited Partnership) COMBINED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - ---------------------------------------------------------------------------- 1996 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 257,948 $ 247,888 $ 232,579 Adjustments to reconcile net income to cash provided by operations: Depreciation and amortization 603,813 618,678 591,338 Change in assets and liabilities: Escrow deposits (80,458) 43,557 29,841 Security deposits (5,672) (5,122) (62) (62) Accounts payable and accrued expenses 62,940 (10,845) (5,996) Prepaid expenses 3,982 (3,837) (3,225) ------- -------- -------- 584,605 642,431 611,896 ------- -------- -------- Net cash provided by operating activities 842,553 890,319 844,475 ------- ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Investments in real estate (69,345) (50,396) (51,611) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments on mortgages and notes payable (758,646) (758,647) (758,645) Payments on notes payable to affiliates (172,771) (336,412) (103,203) Proceeds from affiliates 162,373 166,894 162,868 --------- --------- --------- Net cash used in financing activities (769,044) (928,165) (698,980) --------- --------- --------- NET INCREASE (DECREASE) IN CASH 4,164 (88,242) 93,884 CASH, BEGINNING OF YEAR 19,047 107,289 13,405 ------- -------- -------- CASH, END OF YEAR $ 23,211 $ 19,047 $ 107,289 ======== ======== ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest $ 302,703 $330,968 $ - ========= ======== ========= See notes to combined financial statements. AMERICAN REPUBLIC REALTY FUND I (A WISCONSIN LIMITED PARTNERSHIP) NOTES TO COMBINED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 - ---------------------------------------------------------------------------- 1. SUMMARY OF ACCOUNTING POLICIES General - American Republic Realty Fund I (the "Partnership"), a Wisconsin limited partnership, was formed on December 22, 1982, under the laws of the state of Wisconsin, for the purpose of acquiring, maintaining, developing, operating, and selling buildings and improvements. The Partnership operates rental apartments in Florida and Texas. The Partnership will be terminated by December 31, 2012, although this date can be extended if certain events occur. The general partner is Mr. Robert J.Werra. An aggregate of 20,000 units valued at $1,000 per unit is authorized, of which 11,000 were outstanding for each of the three years ended December 31, 1996. Under the terms of the offering, no additional units will be offered. Allocation of Net Income (Loss) and Cash - Net income and net operating cash flow, as defined in the limited partnership agreement, are allocated first to the limited partners in an amount equal to a variable distribution preference on capital contributions from the first day of the month following their capital contribution and,thereafter, generally 10% to the general partner and 90% to the limited partners. Net loss is allocated 1% to the general partner and 99% to the limited partners. Net income from the sale of property is allocated first, to the extent there are cumulative net losses, 1% to the general partner and 99% to the limited partners; second, to the limited partners in an amount equal to their distribution preference; and, thereafter, 15% to the general partner and 85% to the limited partners. Cash proceeds from the sale of property or refinancing are allocated first to the limited partners to the extent of their capital contributions and their distribution preference and, thereafter, 15% to the general partner and 85% to the limited partners. Basis of Accounting - The Partnership maintains its books and prepares its income tax returns using the accrual income tax basis of accounting. Memo adjustments have been made in preparing the accompanying financial statements in accordance with generally accepted accounting principles (see Note 5). The financial statements include only those assets, liabilities and results of operations which relate to the business of the Partnership. The financial statements do not include any assets, liabilities, revenues or expenses attributable to the partners' individual activities. Property and Equipment - Buildings, improvements, furniture and fixtures are depreciated for financial statement purposes using the straight-line method over the estimated useful lives of the assets, which are five years for improvements and furniture and fixtures and 25 years for buildings. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," Partnership management routinely reviews its investments for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Income Taxes - No provision has been made for income taxes since these taxes are the personal responsibility of the individual partners. For tax purposes, the basis of the Partnership assets is $4,151,846 at December 31, 1996. For the year ended December 31, 1996, the Partnership experienced minimum gain limitations for income tax purposes. Accordingly, the allocation of losses to the limited partners is subject to this limitation. Revenue Recognition - The Partnership has leased substantially all of its investments in real estate under operating leases for periods generally less than one year. Combination - The financial statements include the accounts of the Partnership and a wholly owned entity. All intercompany amounts have been eliminated. Cash and Cash Equivalents - For purposes of the statement of cash flows, the Partnership considers all highly liquid instruments with an original maturity at the date of purchase of three months or less to be cash equivalents. Univesco, Inc. ("Univesco"), an affiliate of the general partner, Robert J. Werra, and the management agent, maintains a single controlled disbursement account for all properties managed by Univesco. Funds are transferred at the time of cash disbursements from the project's operating account to the controlled disbursement account to reimburse checks issued. Environmental Remediation Costs - The Partnership accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. Partnership management is not aware of any environmental remediation obligations which would materially affect the operations, financial position or cash flows of the Partnership. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of certain assets, liabilities, revenues and expenses as of and for the reporting periods. Actual results may differ from such estimates. 2. MORTGAGES AND NOTES PAYABLE Mortgages and notes payable at December 31, 1996 and 1995, consist of the following: 1996 1995 9.125% mortgage note, original face value $4,300,000, payable in monthly principal and interest payments of $36,454 through February 1, 1998, at which time a lump-sum payment of approximately $4,010,000 is due. As a result of a previous-year troubled debt restructuring, the mortgage note is carried at a value equal to total future cash outflows for principal and interest, less total payments made. All principal and interest payments will directly reduce the carrying value of the debt, and no interest expense will be recognized over the life of the note. This mortgage note is secured by real estate assets with a net book value of approximately $5,291,000 $4,571,566 $5,009,017 1996 1995 10.125% mortgage note, original face value $2,750,000, payable in monthly principal and interest payments of $26,766 through July 1997, at which time a lump-sum payment of approximately $2,473,000 is due. As a result of previous-year troubled debt restructuring, the mortgage note is carried at a value equal to total future cash outflows for principal and interest, less total payments made. All principal and interest payments will directly reduce the carrying value of the debt, and no interest expense will be recognized over the life of the note. This mortgage note is secured by real estate assets with a net book value of approximately $3,128,000 $2,668,113 $2,989,308 ---------- ---------- $7,239,679 $7,998,325 ========== ========== The mortgage notes payable are collateralized by their related investments in real estate. The following sets forth the required principal payments due under the stated terms of the Partnership's mortgage notes payable and notes payable to affiliates. 1997 $ 2,580,216 1998 $ 4,021,625 1999 $ - 2000 $ - 2001 $ 2,935,310 Thereafter $ - 3. RELATED PARTY TRANSACTIONS The partnership agreement specifies certain fees to be paid to the general partner or his designee. The following fees and reimbursement of Partnership administrative expenditures were earned by an affiliate of the general partner in 1996, 1995 and 1994: 1996 1995 1994 Property management fee $122,879 $120,450 $115,550 Administrative service fee 10,008 10,008 10,017 An affiliate of the general partner is to receive an ongoing property management fee generally payable at 5% of the Partnership's gross receipts. The general partner holds a $1,300,000 promissory note of the Partnership. For each of the three years ended December 31, 1996, the note bore interest at a rate of 10% This note is scheduled to mature on June 30, 2001. No payments of principal and interest are required until maturity. At December 31, 1996 and 1995, the payable balance of $1,300,000 is included in notes payable to affiliates. Accrued interest of $987,750 and $857,750 at December 31, 1996 and 1995, respectively, is included in amounts due to affiliates. For each of the three years ended December 31, 1996, 1995 and 1994, interest expense incurred on the note was $130,000. At December 31, 1996 and 1995, a $350,000 note was owed to an affiliate of the general partner. For each of the three years ended December 31, 1996, the note bore interest at a rate of 10% . The note is scheduled to mature on June 30, 2001. No payments of principal and interest are paid until maturity. For each of the years ended December 31, 1996, 1995 and 1994, interest expense incurred on the note was $35,000. At December 31, 1996 and 1995, the payable balance of $350,000 is included in notes payable to affiliates. Accrued interest of $292,336 and $257,336 at December 31, 1996 and 1995, respectively, is included in amounts due to affiliates. At December 31, 1996 and 1995, a note payable bearing interest at prime plus 2% was owed to the general partner. The payable balance of $1,076,444 is included in notes payable to affiliates. Unpaid principal and interest is due on June 30, 2001, or upon demand. There is no accrued interest payable at December 31, 1996. For the years ended December 31, 1996, 1995 and 1994, interest expense incurred on the note was $116,950, $157,429 and $152,268, respectively. The general partner has made advances under a note agreement to the Partnership which bears interest at prime plus 2%. At December 31, 1996, the total advances under this note were $208,866. No payments of principal and interest are required until June 30, 2001, at which time total principal and accrued interest are due. 4. COMMITMENTS The Partnership will pay a real estate commission to the general partner or his affiliates in an amount not exceeding the lesser of 50% of the amounts customarily charged by others rendering similar services or 3% of the gross sales price of a property sold by the Partnership, provided that the limited partners have received their original capital plus preferential interest, as defined. 5. RECONCILIATION OF BOOK TO TAX LOSS (UNAUDITED) If the accompanying financial statements had been prepared in accordance with the accrual income tax basis of accounting rather than generally accepted accounting principles ("GAAP"), the excess of expenses over revenues for 1996 would have been as follows: Net income per accompanying financial statements $ 257,948 Add - book basis depreciation and amortization expense using straight-line method 603,813 Deduct - revenues and expenses recognized by GAAP (75,846) Deduct - income tax basis depreciation expense using ACRS method (733,228) Deduct - difference in income tax basis interest expense (634,070) ---------- Excess of expenses over revenues, accrual income tax basis $(581,383) ========== 6. CONTINGENCIES As discussed in Note 2, the Partnership has significant lump-sum payments due in 1997 and 1998, and the Partnership is not generating sufficient cash flows to meet these obligations. Management believes it will be able to refinance these debt instruments; however, at this time, there is no assurance this refinancing will occur. 7. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments,"requires disclosure of the estimated fair values of certain financial instruments. The estimated fair value amounts have been determined using available market information or other appropriate valuation methodologies that require considerable judgment in interpreting market data and developing estimates. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Partnership could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The fair value of financial instruments that are short-term or reprice frequently and have a history of negligible credit losses is considered to approximate their carrying value. These include cash and cash equivalents, short-term receivables, accounts payable and other liabilities.Real estate and other assets consist of nonfinancial instruments, which are excluded from the scope of SFAS No. 107. Management has reviewed the carrying values of its mortgages and notes payable and its notes payable to related parties in connection with interest rates currently available to the Partnership for borrowings with similar characteristics and maturities and has determined that their estimated fair value would approximate their carrying value as of December 31, 1996. As of December 31, 1996, the fair value information presented herein is based on pertinent information available to management. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented herein. AMERICAN REPUBLIC REALTY FUND I (A Wisconsin Limited Partnership) SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 - ------------------------------------------------------------------------------ Initial Cost to Partnership ----------------------- Total Costs Buildings Subsequent Encum - And to Description bances Land Improvements Acquisition 26 two-story apartment buildings of concrete block construction with stucco and cedar exterior and gabled roofs located in Jacksonville, Florida (b) $583,000 $5,686,771 $137,531 37 two-story apartment buildings of concrete block construction with brick veneer, stucco and wood siding exterior, and composition, shingled roofs located in Bedford, Texas (b) 1,239,718 8,679,421 490,786 ---------- ----------- ------------ $1,822,718 $14,366,192 $628,317 ========== ============= =========== Gross Amounts at Which Carried at Close of Year --------------------------- Buildings and Accumulated Descriptions Land Improvements Total Depreciation (c) (d) (c) 26 two-story apartment buildings of concrete block construction with stucco and cedar exterior and gabled roofs lacated in Jacksonville, Florida $583,000 $5824,302 $6,407,302 $3,279,146 37- two-story apartment buildings of concrete block connstruction with brick veneer, stucco and wood siding exterior, and composition, shingled roofs located in Bedford, Texas 1,239,718 9,170,207 10,409,925 5,118,489 ---------- ---------- ---------- --------- $1,822,718 $14,994,509 $16,817,227 $8,397,635 ========== =========== =========== ========== 26 two-story apartment... Life on Which Date of Date Depriciation Contruction Acquired is Computed Phasse i complete at date acquired; 9/12/83 (a) Phase II complete at date acquired 5/1/84 (a) 37 two-story apartment... Complete at date acquired 12/20/83 (a) See notes to Schedule III. AMERICAN REPUBLIC REALTY FUND I (A WISCONSIN LIMITED PARTNERSHIP) SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION (Continued) DECEMBER 31, 1996 - ---------------------------------------------------------------------------- NOTES TO SCHEDULE III: (a)See Note 1 to financial statements outlining depreciation methods and lives. (b)See description of mortgages and notes payable in Note 2 to the financial statements. (c)The reconciliation of investments in real estate and accumulated depreciation for the years ended December 31, 1996, 1995 and 1994, is as follows: Investments Accumulated in Real Estate Depreciation BALANCE, JANUARY 1, 1994 $16,645,875 $6,583,806 Additions 51,611 - Depreciation expense - -------- - ---------- 591,338 BALANCE, DECEMBER 31, 1994 16,697,486 7,175,144 Additions 50,396 - Depreciation expense - 618,678 ---------- --------- BALANCE, DECEMBER 31, 1995 16,747,882 7,793,822 Additions 69,345 - Depreciation expense - 603,813 ---------- --------- BALANCE, DECEMBER 31, 1996 $16,817,227 $8,397,635 =========== ========== (d)Aggregate cost for federal income tax purposes is $16,389,338. Item 9. Disagreements on Accounting and Financial Disclosure -------------------------------------------------------------- The Registrant has not been involved in any disagreements on accounting and financial disclosure. PART III Item 1O. Directors and Executive Officer of the Partnership The Partnership itself has no officers or directors. Robert J. Werra is the General Partner of the Partnership. Robert J. Werra, 57, the General Partner, Mr. Werra joined Loewi & Co., Incorporated ("Loewi") in 1967 as a Registered Representative. In 1971, he formed the Loewi real estate department, and was responsible for its first sales of privately placed real estate programs. Loewi Realty was incorporated in 1974, as a wholly owned subsidiary of Loewi & Co., with Mr. Werra as President. In 198O, Mr. Werra, along with three other individuals, formed Amrecorp Inc. to purchase the stock of Loewi Real Estate Inc., and Loewi Realty. In 1991 Univesco, Inc. became the management agent for the Partnership. Limited Partners have no right to participate in management of the Partnership. Item 11. Management Remuneration and Transactions -------------------------------------------------- As stated above, the Partnership has no officers or directors. Pursuant to the terms of the Limited Partnership Agreement, the General Partner receives 1% of Partnership income and loss and up to 15% of Net Proceeds received from sale or refinancing of Partnership properties (after return of Limited Partner capital contributions and payment of a 6% Current Distribution Preference thereon). Univesco, Inc., an affiliate of the General Partner, is entitled to receive a management fee with respect to properties actually managed of 5% of the actual gross receipts from a property or an amount competitive in price or terms for comparable services available from non-affiliated persons. The Partnership is also permitted to engage in various transactions involving affiliates of the General Partner as described under the caption "Compensation and Fees" at pages 6-8, "Management" at page 17 and "Allocation of Net Income and Losses and Cash Distributions" at pages 34-36 of the Prospectus as supplemented, incorporated in the Form S-11 Registration Statement which was filed with the Securities and Exchange Commission and made effective on May 2, 1983. For the Fiscal year ended December 31, 1996, 1995 and 1994, property management fees earned totaled $122,879, $120,450, and $115,550, respectively. An additional administration service fee was paid to the general partner of $3,696 $10,008, and $10,017 for the years ended December 31, 1996, 1995 and 1994 respectively. Item 12. Security Ownership of Certain Beneficial Owners --------------------------------------------------------- and Management -------------- (a) No one owns of record, and the General Partner knows of no one who owns beneficially, more than five percent of the Interests in the Partnership, the only class of securities outstanding. (b) By virtue of its organization as a limited partnership, the Partnership has no officers or directors. Persons performing functions similar to those of officers and directors of the Partnership, beneficially own, the following Units of the Partnership as of March 1, 1997. Amount and Nature Title Name of of Beneficial Percent of Class Beneficial Owner Ownership of Interest --------- ------------- ----------- ----------- Limited Robert J. Werra 491 4.46% Partnership Interests No Selling Commissions were paid in connection with the purchase of these Units. (c) There is no arrangement, known to the Partnership, which may, at a subsequent date, result in a change in control of the Partnership. Item 13. Certain Relationships and Related Transactions None other than discussed in Item 11 and notes 3 to the financial statements at Item 8 elsewhere in this 10-K. PART IV Item 14. Exhibits, Financial Statements, Schedules and Reports - --------------------------------------------------------------- on Form 8-K - ----------- (A) 1. See accompanying Financial Statements Index 2. Additional financial information required to be furnished: Schedule III - Real Estate and Accumulate Depreciation. 3. Exhibits None. (B) Reports on Form 8-K for the quarter ended December 31, 1995. None. (C) Exhibits 3. Certificate of Limited Partnership, incorporated by reference to Registration Statement No. 0-11578 effective May 2, 1983. 4. Limited Partnership Agreement, incorporated by reference to Registration Statement No. 0-11578 effective May 2, 1983. 9. Not Applicable 1O. Not Applicable 11. Not Applicable 12. Not Applicable 13. Reports to security holders, incorporated by reference from Registrant's Quarterly Reports on Form 1O-Q, dated September 3O, 1996 18. Not Applicable 19. Not Applicable 22. Not Applicable 23. Not Applicable 24. Not Applicable 25. Power of Attorney, incorporated by reference to Registration Statement No. 0-11578 effective May 2, 1983. 28. None Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMERICAN REPUBLIC REALTY FUND I ROBERT J. WERRA, GENERAL PARTNER /s/ Robert J. Werra April 10, 1997 EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH THE DECEMBER 31, 1996 BALANCE SHEET AND STATEMENT OF INCOME AND EXPENSES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000711512 AMERICAN REPUBLIC REALTY FUND I 12-MOS DEC-31-1996 DEC-31-1996 23,211 0 0 0 0 0 16,817,227 8,397,635 8,645,383 0 7,239,679 0 0 0 (2,975,250) 8,645,383 0 2,419,780 0 0 1,897,801 0 302,703 0 0 0 0 0 0 257,948 23.22 0
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