10-Q 1 f1q0303.txt 10Q FUND 1 TXT 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, 2003 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 75093-5994 (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, 2003 and December 31, 2002 Page 3 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2003 and 2002 Page 4 Consolidated Statements of Cash Flows for the Three and Nine months Ended September 30, 2003 and 2002 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 10 The statements, insofar as they relate to the period subsequent to December 31, 2002, are Unaudited. PART 1. FINANCIAL INFORMATION Item 1. Financial Statements AMERICAN REPUBLIC REALTY FUND I Condensed Consolidated Balance Sheets September 30, December 31, 2003 2002 (Unaudited) ASSETS Real Estate assets, at cost Land $1,822,718 $1,822,718 Buildings and improvements 16,006,007 16,006,007 17,828,725 17,828,725 Less: Accumulated depreciation (12,971,239) (12,446,239) Real Estate, net 4,857,486 5,382,486 Cash including cash investments 267,621 214,237 Escrow deposits 670,868 572,601 Prepaid Expenses 83,901 32,194 Deferred Financing Fees 86,036 103,242 TOTAL ASSETS $5,965,912 $6,304,760 LIABILITIES AND PARTNERS' EQUITY: LIABILITIES Mortgage and notes payable $10,094,884 $10,211,238 Amounts due affiliates 1,446 1,725 Real estate taxes payable 225,747 0 Security deposits 74,992 75,028 Accounts payable & accrued expenses 188,121 333,000 Total liabilities 10,585,190 10,620,991 PARTNERS CAPITAL (DEFICIT) Limited Partners (4,657,374) (4,357,357) General Partner 38,096 41,126 Total Partners Capital (Deficit) (4,619,278) (4,316,231) TOTAL LIABILITIES AND PARTNER DEFICIT $5,965,912 $6,304,760 AMERICAN REPUBLIC REALTY FUND I Condensed Consolidated Statement of Operations (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, REVENUES 2003 2002 2003 2002 Rental income 647,493 673,311 1,975,407 2,004,444 Other property 16,648 17,253 48,161 50,615 Total revenues 664,141 690,564 2,023,568 2,055,059 EXPENSES Salaries & wages 98,811 96,086 276,294 260,506 Maintenance & repairs 59,158 91,062 172,069 206,108 Utilities 49,903 52,170 158,179 153,721 Real estate taxes 75,249 75,915 225,747 228,411 General administrative 30,167 25,238 84,175 82,267 Contract services 29,119 25,978 83,589 79,590 Insurance 31,921 23,691 83,356 62,377 Interest 199,227 201,923 599,751 607,682 Depreciation and amortization 180,736 180,735 542,208 542,207 Property management fees (a) 33,292 34,522 101,247 102,627 Total expenses 787,583 807,320 2,326,615 2,325,496 Net Income ($123,442) ($116,756) ($303,047) ($270,437) NET INCOME PER UNIT $(11.22) $(10.61) $(27.55) $(24.59) 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, 2003 2002 CASH FLOWS FROM OPERATING ACTIVITY Net income (loss) ($303,047) ($270,437) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 525,000 525,000 Net Effect of changes in operating accounts Escrow deposits (98,267) (6,839) Prepaid expenses (51,707) (40,386) Accrued real estate taxes 225,747 228,411 Security deposits (36) 527 Accounts payable (144,879) (178,547) Other assets 17,206 17,208 Net cash provided by (used for) operating activities 170,017 274,937 CASH FLOWS FROM INVESTING ACTIVITIES Repayment of mortgage notes payable (116,354) (107,569) Distributions to limited partners 0 (275,000) Proceeds from amounts due affiliates (279) 891 Net cash used for investing activities (116,633) (381,678) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 53,384 (106,741) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 214,237 294,437 CASH AND CASH EQUIVALENTS, END OF PERIOD $267,621 $187,696 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 2003 COMPARED TO THIRD QUARTER 2002 At September 30, 2003 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 90.9% for the third quarter of 2003, as compared to 88.3% for the third quarter of 2002. Revenue from property operations decreased $26,423, or 3.83%, for the third quarter of 2003, as compared to the 2002 third quarter. The decrease in rental income of $25,818 or 3.83% is primarily due to a decrease in rental rates. The decrease in other income of $605 or 3.51% is primarily due to an decrease in Late and other fee collections from the properties. The following table illustrates the components: Three Month Increase Percent (Decrease) Change Rental income (25,818) 3.83% Other property (605) 3.51% Net Increase (26,423) 3.83% (Decrease) Property operating expenses decreased $19,737 or 2.44%, for the third quarter of 2003, as compared to the same period in 2002. Maintenance & repairs decreased $31,904 or 35.04% due to reduced property exterior construction projects. Insurance increased $8,230 or 34.74% in connection with the annual policy renewal. The increase in general & administrative is due to increased professional fees and banks charges. The following table illustrates the components by category: Increase Percent (Decrease) Change Salaries & wages 2,725 2.84% Maintenance & repairs (31,904) 35.04% Utilities (2,267) 4.35% Real estate taxes (666) 0.88% General administrative 4,929 19.53% Contract services 3,141 12.09% Insurance 8,230 34.74% Interest (2,696) 1.34% Depreciation and amortization 1 0.00% Property management fees (a) (1,230) 3.56% Net Increase (19,737) 2.44% (Decrease) 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 (38,648) 5.30% (Decrease) 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 39,235 5.11% (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, 2003, the Partnership had $267,621 in cash and cash equivalents as compared to $214,237 as of December 31, 2002. The net increase in cash of $53,384 is principally due to cash flow from operations. 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. 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 are $140,551 $152,028, and $164,442 for each of the next three years. 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 31.1 Certification Pursuant to Rules 13a-14 and 15d-14 Under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002, filed herewith. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith. (B) Reports on Form 8-K for the quarter ended September 30, 2003. 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: October 31, 2003 Exhibit 31.1 CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I Robert J. Werra, Acting Principal Executive Officer and Chief Financial Officer of American Republic Realty Fund I ("the Company"), certify that: 1. I have reviewed this quarterly report on Form 10-Q of the Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the company and its consolidated subsidiaries is made known to me by others within those entities, particularly for the periods presented in this quarterly report; b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. c. evaluated the effectiveness of the Companys disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and CERTIFICATION PURSUANT TO RULES 13a-14 AND 15d-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 - continued d. disclosed in this report any change in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting; and 5. I have disclosed based on my most recent evaluation of internal control over financial reporting, to the Companys auditors and Audit Committee of the Board of Directors (or persons fulfilling the equivalent function): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Companys ability to record, process, summarize, and report financial data; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the Companys internal control over financial reporting. /s/ Robert J. Werra Robert J. Werra Acting Principal Executive Officer and Chief Financial Officer October 31, 2003 Exhibit 32.1 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 I ("the Company") on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof ("the Report"), I, Robert J. Werra, Acting Principal Executive Officer and Chief Financial Officer 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 Robert J. Werra Acting Principal Executive Officer and Chief Financial Officer October 31, 2003