10-Q 1 f1q0203.txt 10Q 3RD QTR FUND 1 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, 2002 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 75093-4707 (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, 2002 and December 31, 2001 Page 3 Consolidated Statements of Operations for the Six Months Ended September 30, 2002 and 2001 Page 4 Consolidated Statements of Cash Flows for the Six months Ended September 30, 2002 and 2001 Page 5 Item 2. Results of Operations and Managements Discussion and Analysis of Financial Condition Page 6 Liquidity and Capital Resources Page 7 Other Information Page 8 Signatures Page 9 The statements, insofar as they relate to the period subsequent to December 31, 2001, are Unaudited. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements AMERICAN REPUBLIC REALTY FUND I Condensed Consolidated Balance Sheets September 30, December 31, 2002 2001 (Unaudited) ASSETS Real Estate assets, at cost Land $1,822,718 $1,822,718 Buildings and improvements 15,886,583 15,886,583 17,709,301 17,709,301 Less: Accumulated (12,290,922) (11,765,922) depreciation Real Estate, net 5,418,379 5,943,379 Cash including cash 187,696 294,437 investments Escrow deposits 559,833 552,994 Prepaid Expenses 64,425 24,039 Deferred Financing Fees 108,978 126,186 TOTAL ASSETS $6,339,311 $6,941,035 LIABILITIES AND PARTNERS' EQUITY: LIABILITIES Mortgage and notes $10,233,609 $10,341,178 payable Amounts due affiliates 2,802 1,911 Real estate taxes payable 228,411 0 Security deposits 80,028 79,501 Accounts payable & 163,974 342,521 accrued expenses Total iabilities 10,708,824 10,765,111 PARTNERS CAPITAL (DEFICIT) Limited Partners (4,410,107) (3,867,374) General Partner 40,594 43,298 Total Partners Capital (Deficit) (4,369,513) (3,824,076) TOTAL LIABILITIES AND PARTNER DEFICIT $6,339,311 $6,941,035 AMERICAN REPUBLIC REALTY FUND I Condensed Consolidated Statement of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, REVENUES 2002 2001 2002 2001 Rental income 673,311 707,029 2,004,444 2,101,502 Other property 17,253 22,183 50,615 65,757 Total revenues 690,564 729,212 2,055,059 2,167,259 EXPENSES Salaries & wages 96,086 86,152 260,506 235,947 Maintenance & repairs 91,062 60,063 206,108 199,582 Utilities 52,170 55,739 153,721 170,227 Real estate taxes 75,915 71,250 228,411 213,750 General administrative 25,238 26,986 82,267 83,415 Contract services 25,978 26,408 79,590 81,835 Insurance 23,691 15,091 62,377 41,176 Interest 201,923 204,417 607,682 615,015 Depreciation and amortization 180,735 185,736 542,207 557,208 Property management fees (a) 34,522 36,243 102,627 107,429 Total expenses 807,320 768,085 2,325,496 2,305,584 Net Income ($116,756) ($38,8737) ($270,425) ($138,325) NET INCOME PER UNIT $(10.61) $(3.53) $(24.59) $(12.58) 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, 2002 2001 CASH FLOWS FROM OPERATING ACTIVITY Net income (loss) ($270,437) ($138,325) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 525,000 540,000 Net Effect of changes in operating accounts Escrow deposits (6,839) (42,425) Prepaid expenses (40,386) (27,811) Accrued real estate taxes 228,411 213,750 Security deposits 527 9,352 Accounts payable (178,547) (128,233) Other assets 17,208 17,207 Net cash provided by (used for) 274,937 443,515 CASH FLOWS FROM INVESTING ACTIVITIES Repayment of mortgage notes payable (107,569) (99,449) Proceeds from amounts due affiliates 891 0 Distributions to limited partners -275,000 0 Net cash used for investing activities (381,678) (99,449) NET INCREASE (DECREASE) IN CASH (106,741) 344,066 AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, 294,437 442,739 BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS, END OF PERIOD $187,696 $786,805 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 2002 COMPARED TO THIRD QUARTER 2001 At September 30, 2002 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 88.3% for the third quarter of 2002, as compared to 96.5% for the third quarter of 2001. Revenue from property operations decreased $38,648, or 5.30%, for the third quarter of 2002, as compared to the 2001 third quarter. The decrease in rental income of $33,718 or 4.77% is primarily due to an increase in vacancy. The decrease in other income of $4,930 or 22.22% is primarily due to an decrease in Late and other fee collections from the properties. The following table illustrates the components: Increase Percent (Decrease) Change Rental income (33,718) 4.77% Other property (4,930) 22.22% Net Increase (Decrease) (38,648) 5.30% Property operating expenses increased $39,235 or 5.11%, for the third quarter of 2002, as compared to the same period in 2001, primarily due to increases in maintenance & repair expense. The increase in maintenance & repairs expense of $30,999 or 51.61% is associated with turnover and other make ready costs. Insurance increased $8,600 or 56.99% in connection with the annual policy renewal. Salaries increased $9,934 or 11.53% primarily due to increased on site maintenance. The following table illustrates the components by category: Increase Percent (Decrease) Change Salaries & wages 9,934 11.53% Maintenance & repairs 30,999 51.61% Utilities (3,569) 6.40% Real estate taxes 4,665 6.55% General administrative (1,748) 6.48% Contract services (430) 1.63% Insurance 8,600 56.99% Interest (2,494) 1.22% Depreciation and amortization (5,001) 2.69% Property management fees (a) (1,721) 4.75% Net Increase (Decrease) 39,235 5.11% 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 (Decrease) 25,607 3.64% 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% 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, 2002, the Partnership had $187,696 in cash and cash equivalents as compared to $294,437 as of December 31, 2001. The net decrease in cash of $106,741 is principally due to a distribution made September 30, 2002. On September 30, 2002 the partnership distributed $25.00 per limited partnership unit to units of record September 30, 2002. This distribution was made from excess cash on hand from cash flow from operations. During the first quarter of 2000 ending March 31, 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 carry 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, 2002. 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, 2002 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of American Republic Realty Fund (the Company) on Form 10-Q for the period ending September 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert J Werra, Principal Executive Officer and Paul M. Ivanoff Treasurer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, that: (1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert J. Werra /s/ Paul M. Ivanoff Robert J. Werra Paul M. Ivanoff CEO Univesco, Inc. Treasurer Univesco, Inc. Management Agent Management Agent November 1, 2002