10-Q 1 fund10103.txt FUND 1 3RD QTR SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) Of the Securities Exchange Act of 1934 For Quarter Ended September 30, 2001 Commission file number 0-11578 AMERICAN REPUBLIC REALTY FUND I (Exact name of registrant as specified in its charter) WISCONSIN 39-1421936 (State or other jurisdiction of (IRS Employer Incorporation or organization Identification Number) 2800 N. Dallas Pkwy Suite 100 Plano, Texas 75093 (Address of principal executive offices) Registrant's telephone number, including area code: (972)836-8000. Indicate 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: Y No: REGISTRANT IS A LIMITED PARTNERSHIP TABLE OF CONTENTS Item 1. Financial Statements The following Unaudited financial statements are filed herewith: Consolidated Balance Sheet as of September 30, 2001 and December 31, 2000 Page 3 Consolidated Statements of Operations for the Three and Six Months Ended September 30, 2001 and 2000 Page 4 Consolidated Statements of Cash Flows for the Nine months ended September 30, 2001 and 2000 Page 5 Item 2. Results of Operations and Management's Discussion and Analysis of Financial Condition Page 6 Liquidity and Capital Resources Page 7 Other Information Page 8 Signatures Page 10 The statements, insofar as they relate to the period subsequent to December 31, 2000, are Unaudited. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements AMERICAN REPUBLIC REALTY FUND I Condensed Consolidated Balance Sheets September 30 December 31, 2001 2000 (Unaudited) ASSETS Real Estate assets, at cost Land $1,822,718 $1,822,718 Buildings and 15,757,931 15,757,931 improvements 17,580,649 17,580,649 Less: Accumulated (11,621,467) (11,081,467) depreciation Real Estate, net 5,959,182 6,499,182 Cash including cash 786,805 442,739 investments Escrow deposits 547,627 505,202 Prepaid Expenses 44,646 16,835 Deferred Financing Fees 131,922 149,129 TOTAL ASSETS $7,470,182 $7,613,087 LIABILITIES AND PARTNERS' EQUITY: LIABILITIES Mortgage and notes $10,361,861 $10,461,310 payable Real estate taxes 213,750 0 payable Security deposits 82,797 73,445 Accounts payable & 182,039 310,272 accrued expenses Total liabilities 10,840,447 10,845,027 PARTNERS CAPITAL (DEFICIT) Limited Partners (3,416,394) (3,279,452) General Partner 46,129 47,512 Total Partners Capital (3,370,265) (3,231,940) (Deficit) TOTAL LIABILITIES AND $7,470,182 $7,613,087 PARTNER DEFICIT AMERICAN REPUBLIC REALTY FUND I Condensed Consolidated Statement of Operations (Unaudited) Three Months Ended Nine Months Ended June 30, September 30, REVENUES 2001 2000 2001 2000 Rental income 707,029 684,484 2,101,502 2,037,604 Other property 22,183 19,121 65,757 51,288 Total revenues 729,212 703,605 2,167,259 2,088,892 EXPENSES Salaries & wages 86,152 78,734 235,947 209,424 Maintenance & repairs 60,063 66,576 199,582 168,387 Utilities 55,739 49,529 170,227 140,152 Real estate taxes 71,250 69,582 213,750 207,078 General administrative 26,986 41,372 83,415 95,018 Contract services 26,408 26,634 81,835 81,452 Insurance 15,091 12,389 41,176 34,115 Interest 204,417 206,720 615,015 623,968 Depreciation and 185,736 175,735 557,208 527,207 amortization Property management 36,243 34,949 107,429 104,180 fees (a) Total expenses 768,085 762,220 2,305,584 2,190,981 Net Income ($38,873) ($58,615) ($138,325) ($102,089) NET INCOME PER UNIT $(3.53) $(5.33) $(12.58) $(9.28) See Notes to Condensed Consolidated Financial Statements AMERICAN REPUBLIC REALTY FUND I Condensed Consolidated Statement of Cash Flows See Notes to Condensed Consolidated Financial Statements Unaudited Nine Months Ended September 30, 2001 2000 CASH FLOWS FROM OPERATING ACTIVITY Net income (loss) ($138,325) ($102,089) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 540,000 510,000 Net Effect of changes in operating accounts Escrow deposits (42,425) 6,255 Prepaid expenses (27,811) (23,440) Accrued real estate taxes 213,750 207,078 Security deposits 9,352 11,021 Accounts payable (128,233) (127,018) Other assets 17,207 17,207 Net cash provided by (used for) operating 443,515 499,014 activities CASH FLOWS FROM INVESTING ACTIVITIES Repayment of mortgage notes payable (99,449) (91,941) Proceeds from amounts due affiliates 0 (165,346) Repayment of amounts due affiliates 0 (4,490) Net cash used for investing activities (99,449) (261,777) NET INCREASE (DECREASE) IN CASH AND CASH 344,066 237,237 EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF 442,739 116,649 PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD $786,805 $353,886 Basis of Presentation: Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Partnership believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Partnership's latest annual report on Form 10-K. Item 2. RESULTS OF OPERATIONS AND MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION THIRD QUARTER 2001 COMPARED TO THIRD QUARTER 2000 At September 30, 2001 the Partnership owned two properties with approximately 416,623 net rentable square feet. Both properties are apartment communities. The portfolio had an average occupancy of 96.5% for the third quarter of 2001, as compared to 96.4% for the third quarter of 2000. Revenue from property operations increased $25,607, or 3.64%, for the third quarter of 2001, as compared to the 2000-third quarter. The increase in rental income of $22,545 or 3.29% is primarily due to an increase in rental rates. The increase in other income of $3,062 or 16.01% is primarily due to an increase in Late and other fee collections from the properties. The following table illustrates the components: Increase Percent (Decrease) Change Rental income 22,545 3.29% Other property 3,062 16.01% Net Increase 25,607 3.64% (Decrease) Property operating expenses increased $5,865, or 0.77%, for the third quarter of 2001, as compared to the same period in 2000, primarily due to increases in utilities expense. Insurance increased $2,702 or 21.81% in connection with the annual policy renewal. The increase in utilities expense is due to significantly higher gas bills. General & Administrative decreased $14,386 or 34.77% due to decreased legal fees. Maintenance and repairs decreased $6,513 or 9.78% primarily due to exterior building maintenance. Salaries & Wages increased $7,418 or 9.42%due to higher salaries. The following table illustrates the components by category: Increase Percent (Decrease) Change Salaries & wages 7,418 9.42% Maintenance & repairs (6,513) 9.78% Utilities 6,210 12.54% Real estate taxes 1,668 2.40% General administrative (14,386) 34.77% Contract services (226) 0.85% Insurance 2,702 21.81% Interest (2,303) 1.11% Depreciation and amortization 10,001 5.69% Property management fees (a) 1,294 3.70% Net Increase (Decrease) 5,865 0.77% THIRD QUARTER 2000 COMPARED TO THIRD QUARTER 1999 At September 30, 2000 the Partnership owned two properties with approximately 416,623 net rentable square feet. Both properties are apartment communities. The portfolio had an average occupancy of 96.4% for the third quarter of 2000, as compared to 96.2% for the third quarter of 1999. Revenue from property operations increased $20,294, or 2.97%, for the third quarter of 2000, as compared to the 1999 third quarter. The increase in rental income of $15,537 or 2.32% is primarily due to an increase in rental rates. The increase in other income of $4,757 or 33.12% is primarily due to an increase in Late and other fee collections from the properties. The following table illustrates the components: Increase Percent (Decrease) Change Rental income 15,537 2.32% Other property 4,757 33.12% Net Increase 20,294 2.97% (Decrease) Property operating expenses increased $27,169, or 3.70%, for the third quarter of 2000, as compared to the same period in 1999, primarily due to increases in general and administrative expense. The increase in general and administrative expense is due to legal expenses incurred with regard to a tender offer on the fund. Salaries and wages increased $7,537 or 10.59% primarily due to increased staffing. Utilities increased $6,471 or 15.03% primarily due to increased consumption. Insurance increased $2,037 or 19.68% in connection with the annual policy renewal. The following table illustrates the components by category: Increase Percent (Decrease) Change Salaries & wages 7,537 10.59% Maintenance & repairs 5,131 8.35% Utilities 6,471 15.03% Real estate taxes 1,666 2.45% General administrative 11,410 38.08% Contract services (1,666) 5.89% Insurance 2,037 19.68% Interest (2,130) 1.02% Depreciation and amortization (4,136) 2.30% Property management fees 849 2.49% Net Increase 27,169 3.70% (Decrease) 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 asset should be considered for disposal. At this time, there is no plan to dispose of either property. As of September 30, 2001, the Partnership had $786,805 in cash and cash equivalents as compared to $442,739 as of December 31, 2000. The net increase in cash of $344,066 is principally due to cash flow from operations. During the first quarter of 2000 ending September 30, the partnership paid off the remaining balance owned to the general partner of $165,346. The payment was made with operating cash flow from the partnership. Each asset of the fund refinanced its debt during July 1997. The fund retired debt with a face value of $6,500,000 and replaced with debt of $10,800,000. The new mortgages in the amounts of $4,000,000, $6,800,000 carries interest rates of 7.8% and 7.92% respectively. The notes come due August 2007. The Partnerships required principal payments due under the stated terms of the Partnerships mortgage notes payable and notes payable to affiliates are $120,132 $129,941, and $140,551 for each of the next three years. Net proceeds from the refinancing were used to reduce the notes payable to affiliates. During July 1997 payments of $3,500,000 were made to reduce the debt to affiliates. A gain on retirement of debt arose with the note refinancing being triggered by the early retirement of the debt. The recognized gain of $348,836 was the difference between the carrying value of the debt and the funds necessary to retire the debt. 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. Other Information Item 1. Legal Proceedings Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibit and Reports on Form 8-K (A)The following documents are filed herewith or incorporated herein by reference as indicated as exhibits: Exhibit Designation Document Description 2 Certificate of Limited partnership, as Amended, incorporated by reference to Registration Statement No.2-81074 Effective May 2, 1983. Limited Partnership Agreement, Incorporated by reference to Registration Statement No.2-81074 effective May 2,1983. 11 Not Applicable 15 Not Applicable 18 Not Applicable 19 Not Applicable 20 Not Applicable 23 Not Applicable 24 Not Applicable 25 Power of Attorney, incorporated by Reference to Registration Statement No. 2-81074 effective May 2, 1983. 28 None (B) Reports on Form 8-K for the quarter ended September 30, 2001. 1 None SIGNATURES Pursuant to the requirements 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 A Wisconsin limited partnership By: /s/ Robert J. Werra Robert J. Werra, General Partner Date: November 1, 2001