-----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, SN+Ww4uhqpNsiGWNqTAVlKFbW6aRqYrHZEI1FnM0rlSTBltuiyDPUaRhbuiU8GkC vUTsp83PEEH5eagm99XeKw== 0000711512-99-000004.txt : 19990402 0000711512-99-000004.hdr.sgml : 19990402 ACCESSION NUMBER: 0000711512-99-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 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: SEC FILE NUMBER: 000-11578 FILM NUMBER: 99580950 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 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 EX-27 2
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BOTH THE DECEMBER 31, 1998 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-31-1998 DEC-31-1998 146,358 0 0 0 0 0 17,342,394 9,702,703 8,426,306 0 10,675,051 0 0 0 (3,030,013) 8,426,306 0 2,614,696 0 0 2,024,869 0 845,225 0 0 0 0 0 0 (194,723) (17.53) 0
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