-----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, LI9/c60XCpB4W75q7QElVR/uxezkJD3FoMswrNoH+Sc1mEHqL8Rwbobfrc6oJMbD Xk9H+4HinRoxfpFYHWnu4A== 0000950148-99-002567.txt : 19991123 0000950148-99-002567.hdr.sgml : 19991123 ACCESSION NUMBER: 0000950148-99-002567 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REAL EQUITY PARTNERS CENTRAL INDEX KEY: 0000717303 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953881219 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-29766 FILM NUMBER: 99762059 BUSINESS ADDRESS: STREET 1: 9090 WILSHIRE BLVD STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3102782191 MAIL ADDRESS: STREET 1: 9090 WILSHIRE BLVD STREET 2: STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended SEPTEMBER 30, 1999 Commission File Number 2-82765 REAL-EQUITY PARTNERS (A California Limited Partnership) I.R.S. Employer Identification No. 95-3784125 9090 WILSHIRE BLVD., SUITE 201 BEVERLY HILLS, CA 90211 Registrant's Telephone Number, Including Area Code (310) 278-2191 Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve 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 [ ] 2 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 PART I. FINANCIAL INFORMATION Item 1. Financial Statements and Notes to Financial Statements Balance Sheets, September 30, 1999 and December 31, 1998............ 1 Statements of Operations, Nine and Three Months Ended September 30, 1999 and 1998 .................................. 2 Statement of Partners' Equity (Deficiency), Nine Months Ended September 30, 1999 ........................................... 3 Statements of Cash Flows, Nine Months Ended September 30, 1999 and 1998 ..................................................... 4 Notes to Financial Statements ...................................... 5 Item 2. Management's Discussion and Analysis of Financial Position and Results of Operations ......................................... 8 Item 1. Legal Proceedings ........................................................ 10 Item 6. Exhibits and Reports on Form 8-K .......................................... 10 Signatures ........................................................................ 11
3 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS SEPTEMBER 30, 1999 AND DECEMBER 31, 1998 ASSETS
1999 (Unaudited) 1998 ------------ ------------ RENTAL PROPERTY, at cost (Note 1) Land $ -- $ 6,553,357 Buildings -- 22,096,723 Furniture and equipment -- 3,720,901 ------------ ------------ -- 32,370,981 Less accumulated depreciation -- (14,578,209) ------------ ------------ -- 17,792,772 ------------ ------------ CASH AND CASH EQUIVALENTS 1,965,420 182,829 ------------ ------------ OTHER ASSETS: Due from affiliated rental agent (Note 3) -- 986,214 Other receivables and prepaid expenses -- 231,390 ------------ ------------ -- 1,217,604 ------------ ------------ TOTAL ASSETS $ 1,965,420 $ 19,193,205 ============ ============ LIABILITIES AND PARTNERS' EQUITY LIABILITIES: Mortgage notes payable (Notes 5) $ -- $ 14,181,382 Accrued fees and expenses due general partner (Notes 3 and 5) -- 777,810 Accrued interest payable -- 57,247 Accounts payable and accrued expenses 50 338,702 Liability for earthquake loss -- 506,016 Tenant security deposits -- 241,928 ------------ ------------ 50 16,103,085 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Notes 3 and 4) PARTNERS' EQUITY 1,965,370 3,090,120 ------------ ------------ TOTAL LIABILITIES AND PARTNERS' EQUITY $ 1,965,420 $ 19,193,205 ============ ============
The accompanying notes are an integral part of these financial statements. 1 4 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (Unaudited)
Nine months Three months Nine months Three months ended ended ended ended Sept 30, 1999 Sept 30, 1999 Sept 30, 1998 Sept 30, 1998 ------------- -------------- ------------- ------------- RENTAL OPERATIONS: Revenues Rental income $ 848,441 $ -- $ 3,716,442 $ 1,273,641 Other income 29,866 -- 146,627 59,021 ------------ ------------ ------------ ------------ 878,307 -- 3,863,069 1,332,662 ------------ ------------ ------------ ------------ Expenses Operating expenses 342,179 -- 2,040,079 698,151 Management fees - affiliate (Note 3) 43,856 -- 191,510 66,294 Depreciation (Note 1) 98,455 -- 553,809 184,603 General and administrative expenses 27,682 -- 168,720 46,874 Interest expense 212,229 -- 1,017,220 337,647 ------------ ------------ ------------ ------------ 724,401 -- 3,971,338 1,333,569 ------------ ------------ ------------ ------------ Income (Loss) from rental operations 153,906 -- (108,269) (907) ------------ ------------ ------------ ------------ PARTNERSHIP OPERATIONS: Interest income 54,133 20,526 36,790 8,606 ------------ ------------ ------------ ------------ Expenses General and administrative expenses (Note 3) 59,043 14,274 211,167 105,922 Professional fees 74,230 21,300 32,985 2,879 Interest expense - general partner (Note 3) 5,540 -- 31,507 10,618 ------------ ------------ ------------ ------------ 138,813 35,574 275,659 119,419 ------------ ------------ ------------ ------------ Loss from partnership operations (84,680) (15,048) (238,869) (110,813) ------------ ------------ ------------ ------------ NET INCOME (LOSS) BEFORE THE SALE OF ASSETS 69,226 (15,048) (347,138) (111,720) GAIN ON SALE OF ASSETS (Note 1) 13,977,577 25,997 -- -- ------------ ------------ ------------ ------------ NET INCOME (LOSS) 14,046,803 10,949 (347,138) (111,720) ============ ============ ============ ============ NET INCOME (LOSS) PER LIMITED PARTNERSHIP INTEREST (Note 1) $ 2 $ (1) $ (12) $ (4) ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 2 5 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (Unaudited)
General Limited Partners Partners Total ------------- ------------- ------------ PARTNERSHIP INTERESTS 30,000 ============ EQUITY (DEFICIENCY), January 1, 1999 $ (1,696,526) $ 4,786,646 $ 3,090,120 Net income for the nine months ended September 30, 1999 140,468 13,906,335 14,046,803 Cash distributions (166,567) (15,004,986) (15,171,553) ------------ ------------ ------------ EQUITY (DEFICIENCY), September 30, 1999 $ (1,722,625) $ 3,687,995 $ 1,965,370 ============ ============ ============
The accompanying notes are an integral part of these financial statements. 3 6 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (Unaudited)
1999 1998 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 14,046,803 $ (347,138) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 98,455 553,809 Changes in operating assets and liabilities: Decrease (increase) in: Due from affiliated rental agent 986,214 (218,021) Other receivables and prepaid expenses 231,390 47,930 (Decrease) increase in: Accrued fees and expenses due general partner (777,810) 31,507 Accounts payable and accrued expenses (338,652) (19,195) ------------ ------------ Net cash provided by operating activities 14,246,400 48,892 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from sale of assets 16,889,126 -- ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to partners (15,171,553) (333,334) Principal payments on mortgage notes payable (14,181,382) (186,277) ------------ ------------ Net cash used in financing activities (29,352,935) (519,611) ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,782,591 (470,719) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 182,829 1,354,289 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,965,420 $ 883,570 ============ ============
The accompanying notes are an integral part of these financial statements. 4 7 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The information contained in the following notes to the financial statements is condensed from that which would appear in the annual audited financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the annual report for the year ended December 31, 1998 filed by Real Equity Partners (the "Partnership"). National Partnership Investments Corp. ("NAPICO") is a general partner of the Partnership. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year. In the opinion of the general partners of the Partnership, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals) necessary to present fairly the financial position of the Partnership as of September 30, 1999, and the results of operations for the nine and three months then ended and changes in cash flows for the nine months then ended. 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RENTAL PROPERTIES AND DEPRECIATION On February 17, 1999, the Partnership sold its properties to JH Real Estate Partners, Inc. for a price of $31,900,000. The sale resulted in cash proceeds to the Partnership of $16,889,126 and a gain of $13,977,577, including an adjustment to the gain of $935,000 and $25,997 during the three months ended June 30, 1999 and September 30, 1999, respectively. The Partnership made cash distributions of $15,004,986 to the limited partners and $166,567 to the general partner during 1999. There are no remaining rental properties owned by the Partnership, therefore no rental property cost and accumulated depreciation are included in the September 30, 1999 financial statements. 5 8 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1999 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NET INCOME PER LIMITED PARTNERSHIP INTEREST Net income per limited partnership interest was computed by dividing the limited partners' share of net income by the number of limited partnership interests outstanding during the year. The number of limited partnership interests was 30,000 for the periods presented. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash and bank certificates of deposit with an original maturity of three months or less. The Partnership has its cash and cash equivalents on deposit primarily with one high credit quality financial institution. Such cash and cash equivalents are in excess of the FDIC insurance limit. IMPAIRMENT OF LONG-LIVED ASSETS The Partnership adopted Statement of Financial Accounting Standards No. 121, Accounting for the Improvement of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of as of January 1, 1996 without a significant effect on its financial statements. The Partnership reviews long-lived assets to determine if there has been any permanent impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the sum of the expected future cash flows is less than the carrying amount of the assets, the Partnership recognizes an impairment loss. NOTE 2 - INCOME TAXES No provision has been made for income taxes in the accompanying financial statements as such taxes, if any, are the liability of the individual partners. NOTE 3 - FEES AND EXPENSES DUE GENERAL PARTNER The Partnership had entered into agreements with an affiliate of NAPICO to manage the operations of the rental properties. The agreements were on a month-to-month basis and provided, among other things, for a management fee equal to 5 percent of gross rentals and other collections plus reimbursement of certain expenses. Management fees charged to operations 6 9 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1999 NOTE 3 - FEES AND EXPENSES DUE GENERAL PARTNER (CONTINUED) under the agreements were approximately $44,000 from January 1, 1999 through February 17, 1999, the date the properties were sold, and $191,000 for the nine months ended September 30, 1999. Under the terms of the Partnership Agreement, the Partnership is obligated to NAPICO for a deferred acquisition fee. This fee is for services rendered in connection with the selection, purchase, acquisition, development, and monitoring the operations of its properties. Distribution of any part of this from net cash from operations was subordinated to receipt by each Limited Partner of an amount equal to a cumulative non-compounded 6 percent annual distribution with respect to the adjusted capital value (as defined in the Partnership Agreement). Using proceeds from the sale of the properties, the deferred acquisition fee of $783,200 was paid to NAPICO in 1999. The Partnership reimburses NAPICO for certain expenses. The reimbursement paid to NAPICO was $0 and $9,451 for the nine months ended September 30, 1999 and 1998, respectively, and is included in general and administrative expenses. NOTE 4 - COMMITMENTS AND CONTINGENCIES The corporate general partner of the Partnership is involved in various lawsuits arising from transactions in the ordinary course of business. In the opinion of management and the corporate general partner, the claims will not result in any material liability to the Partnership. NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments, when it is practicable to estimate that value. One of the mortgage notes payable is insured by HUD and is secured by a rental property. The operations generated by the property are subject to various government rules, regulations and restrictions which make it impracticable to estimate the fair value of this mortgage note payable. The book values of all other debt instruments approximate their fair values because the interest rates of these instruments are comparable to rates currently offered to the Partnership. The carrying amount of other assets and liabilities reported on the balance sheets that require such disclosure approximates fair value due to their short-term maturity. 7 10 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1999 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Partnership was formed to invest in residential rental properties either directly or through investments in joint ventures and other partnerships which will invest in such real estate. The Partnership acquired 6 buildings at various dates during 1984 and 1985. One of the buildings was foreclosed in 1996. On February 17, 1999, the remaining properties were sold to JH Real Estate Partners, Inc. for $31,900,000. The Partnership's primary sources of funds are income from rental operations and interest income earned on cash reserves. Under the terms of the Partnership Agreement, cash available for distribution is to be allocated 90 percent to the limited partners as a group and 10 percent to the general partners. Distributions of net cash from operations were normally intended to be made to the partners of record on a quarterly basis during the months of February, May, August, and November pro rata in proportion to the number of units held. From November 1994 through May 1996, distributions to the partners were not made due to the Partnership setting aside funds for losses incurred by REP as a result of the January 17, 1994 Northridge Earthquake. The Partnership made distributions in the amount of $15,171,553 to the partners during the nine months ended September 30, 1999. RESULTS OF OPERATIONS There are no remaining rental properties owned by the Partnership, therefore no rental property cost and accumulated depreciation are included in the September 30, 1999 financial statements. The Partnership operations consist primarily of rental income and depreciation expense, debt service, and normal operating expenses to maintain the properties until the date of disposition, and interest income earned on certificates of deposit and other temporary investments of funds not required for investment in projects. The amount of interest income varies with market rates available on certificates of deposit and with the amount of funds available for investment. Operating expenses of the Partnership consist substantially of recurring general and administrative expenses and professional fees for services rendered to the Partnership and interest on the deferred acquisition fee due the General Partners. 8 11 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1999 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (CONTINUED) Under the terms of the Partnership Agreement, the Partnership is obligated to NAPICO for a deferred acquisition fee. This fee is for services rendered in connection with the selection, purchase, acquisition, development, and monitoring the operations of its properties. Distribution of any part of this from net cash from operations shall be subordinated to receipt by each Limited Partner of an amount equal to a cumulative non-compounded 6 percent annual distribution with respect to the adjusted capital value (as defined in the Partnership Agreement). Using the proceeds from the sale of the properties, the deferred acquisition fee of $783,200 was paid to NAPICO in 1999. 9 12 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1999 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As of September 30, 1999, the Partnership's corporate general partner is involved in various lawsuits. None of these are related to the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) No exhibits are required per the provision of Item 7 of regulation S-K. 10 13 REAL-EQUITY PARTNERS (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1999 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. REAL-EQUITY PARTNERS (a California limited partnership) By: National Partnership Investments Corp., its General Partner By: /s/ BRUCE NELSON ------------------------------ Bruce Nelson President Date: November 17, 1999 ---------------------------- By: /s/ CHARLES H. BOXENBAUM ------------------------------ Charles H. Boxenbaum Chief Executive Officer Date: November 17, 1999 ---------------------------- 11 EX-27 2 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 1,965,420 0 1,965,420 0 0 1,965,420 0 0 1,965,420 50 0 0 0 0 1,965,370 1,965,420 0 14,910,017 0 0 863,214 0 0 14,046,803 0 14,046,803 0 0 0 14,046,803 0 0
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