10-Q 1 fjs0310q.txt UNITED STATES 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 quarter ended March 31, 2002 Commission File Number 0-15755 -------------- ------- FJS PROPERTIES FUND I, L.P. --------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3252067 -------- ---------- (State or other jurisdiction of (I.R.S. Employer - incorporation or organization) Identification No.) One Airport Road Lakewood, NJ 08701 ------------ ----- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (732) 363-0666 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 of 15(d) of the Securities and 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 ----- ------ Authorized 100,000 limited partnership interests of which 16,788 have been sold as of May 5, 2002. FJS PROPERTIES FUND I, L.P. ------------------------------------------------------------------------------ INDEX ------------------------------------------------------------------------------ Part I: FINANCIAL INFORMATION Item 1: Financial Statements Balance sheets as of March 31, 2002 [Unaudited] and December 31, 2001.................................... 1 Statement of Operations for the three months ended March 31, 2002 and 2001 [Unaudited]...................... 2 Statement of Partners' Capital for the three months ended March 31, 2002 [Unaudited]......................... 3 Statements of Cash Flows for the three months ended March 31, 2002 and 2001 [Unaudited]...................... 4 Notes to Financial Statements [Unaudited]................ 5 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations................................ 6 Part II: OTHER INFORMATION Item 1: Legal Proceedings........................................ 8 Item 5: Other Information........................................ 9 Item 6: Exhibits and Reports on Form 8-K......................... 9 Signature......................................................... 10 PART I - FINANCIAL INFORMATION Item 1. Financial Statements FJS PROPERTIES FUND I, L.P. ------------------------------------------------------------------------------ BALANCE SHEETS ------------------------------------------------------------------------------ March 31, December 31, --------- ------------ 2 0 0 2 2 0 0 1 ------- ------- [Unaudited] Assets: Current Assets: Cash and Cash Equivalents $ 77,352 $ 77,047 Cash - Escrow 125,204 51,588 Cash - Security Deposits 151,203 146,375 Tenant Receivables 9,042 10,384 Other Current Assets 2,244 24,682 ----------- ---------- Total Current Assets 365,045 310,076 ----------- ---------- Property: Land 2,296,804 2,296,804 Buildings 6,569,125 6,569,125 Furniture, Fixtures and Improvements 3,121,559 3,057,744 ----------- ---------- Totals - At Cost 11,987,488 11,923,673 Less: Accumulated Depreciation (5,933,710) (5,827,021) ------------ ----------- Property - Net 6,053,778 6,096,652 ----------- ---------- Other Assets 175,922 166,853 ----------- ---------- Total Assets $ 6,594,745 $6,573,581 =========== ========== Liabilities and Partners' Capital: Current Liabilities: Accounts Payable $ 79,053 $ 101,503 Accrued Interest 36,076 36,279 Other Accrued Expenses 39,928 6,768 Due to Related Party 19,734 16,623 Tenant Security Deposits Payable 151,203 146,375 Prepaid Rent 4,881 4,058 Mortgage Payable - Current Portion 107,139 104,586 Deferred Income - Current Portion 7,143 7,143 ----------- ---------- Total Current Liabilities 445,157 423,335 ----------- ---------- Long-Term Liabilities: Mortgage Payable - Non-Current Portion 4,333,613 4,361,202 Deferred Income - Non-Current Portion 1,785 3,571 ----------- ---------- Total Long-Term Liabilities 4,335,398 4,364,773 ----------- ---------- Contingency Partners' Capital: General Partner (1,217,717) (1,218,004) Limited Partners 3,031,907 3,003,477 ----------- ---------- Total Partners' Capital 1,814,190 1,785,473 ----------- ---------- Total Liabilities and Partners' Capital $ 6,594,745 $6,573,581 =========== ========== See Accompanying Notes to These Financial Statements. 1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements FJS PROPERTIES FUND I, L.P. ------------------------------------------------------------------------------ STATEMENTS OF OPERATIONS [UNAUDITED] ------------------------------------------------------------------------------ Three months ended March 31, 2 0 0 2 2 0 0 1 ------- ------- Revenue: Rental $ 614,153 $ 583,458 Tender Offer Income 13,600 0 Interest 300 1,996 ---------- ---------- Total Revenue 628,053 585,454 ---------- ---------- Expenses: Operating 185,190 144,899 General and administrative 189,840 198,930 Interest 111,515 110,767 Depreciation and amortization 112,791 102,196 ---------- ---------- Total expenses 599,336 556,792 ---------- ---------- Net income $ 28,717 $ 28,662 ========== ========== Income per limited partnership unit $ 1.69 $ 1.69 ========== ========== Distributions per limited partnership unit. $ 0.00 $ 0.00 ========== ========== Weighted average number of limited partnership units outstanding 16,788 16,788 ========== ========== See Accompanying Notes to These Financial Statements. 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements FJS PROPERTIES FUND I, L.P. ------------------------------------------------------------------------------ STATEMENT OF PARTNERS' CAPITAL [UNAUDITED] ------------------------------------------------------------------------------ Total General Limited Partners' Partner Partners Capital Partners' Capital - December 31, 2001 $(1,218,004) $ 3,003,477 $1,785,473 Net Income for the three months ended March 31, 2002 287 28,430 28,717 ---------- ----------- ---------- Partners' Capital - March 31, 2002 [Unaudited] $(1,217,717) $ 3,031,907 $1,814,190 ============ =========== ========== See Accompanying Notes to These Financial Statements. 3 PART I - FINANCIAL INFORMATION Item 1. Financial Statements FJS PROPERTIES FUND I, L.P. ------------------------------------------------------------------------------ STATEMENTS OF CASH FLOWS [UNAUDITED] ------------------------------------------------------------------------------ Three months ended March 31, 2 0 0 2 2 0 0 1 ------- ------- Operating activities: Net income $ 28,717 $ 28,662 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 106,689 96,095 Amortization 6,102 6,101 Deferred Income (1,786) (1,786) Changes in Assets and Liabilities: (Increase) in escrow (73,616) (62,457) (Increase) in security deposits (4,828) (15,418) Decrease in tenant receivables 1,342 7,745 Decrease in other current assets 22,438 15,260 (Increase) in other assets (15,171) (15,586) Increase in accounts payable and accrued expenses 10,507 751 Increase (Decrease) in prepaid rents 823 (9,005) Increase (Decrease) in due to related party 3,111 (12,039) Increase in tenant security deposits 4,828 15,418 ---------- ---------- Net Cash Provided by Operating Activities 89,156 53,741 ---------- ---------- Investing Activities: Capital Expenditures (63,815) (81,915) ----------- ----------- Net Cash (used in) Investing Activities (63,815) (81,915) ----------- ----------- Financing Activities: Principal Payments on Mortgages (25,036) (22,719) ----------- ----------- Net cash (used in) Financing Activities (25,036) (22,719) ----------- ----------- Net increase (decrease) in cash and cash equivalents 305 (50,893) Cash and Cash Equivalents - Beginning of Period 77,047 188,122 ---------- ---------- Cash and Cash Equivalents - End of Period $ 77,352 $ 137,229 ========== ========== Supplemental disclosure of cash flow information: Interest paid $ 111,718 $ 111,134 ========== ========== For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. See Accompanying Notes to These Financial Statements. 4 FJS PROPERTIES FUND I, L.P. NOTES TO FINANCIAL STATEMENTS [UNAUDITED] ------------------------------------------------------------------------------ [A] Significant Accounting Policies Significant accounting policies of FJS Properties Fund I, L.P. are set forth in the Partnership's Form 10-K for the year ended December 31, 2001, as filed with the Securities and Exchange Commission. [B] Basis of Reporting The balance sheet as of March 31, 2002, the statements of operations for the three months ended March 31, 2002 and 2001, the statement of partners' capital (deficit) for the three months ended March 31, 2002, and the statements of cash flows for the three months ended March 31, 2002 and 2001 have been prepared by the Partnership without audit. The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the managing partner, such statements include all adjustments [consisting only of normal recurring items] which are considered necessary for a fair presentation of the financial position of the Partnership at March 31, 2002, and the results of its operations and cash flows for the three months then ended. It is suggested that these financial statements be read in conjunction with Form S-11 filed with the Securities and Exchange Commission on April 25, 1985 and with the financial statements and notes contained in the Partnership's Form 10-K for the year ended December 31, 2001. [C] Contingency In 2001, a lawsuit was filed against the Partnership seeking damages in excess of $15,000 for injuries sustained by a tenant of the property. At the time of this alleged incident the Partnership was insured under a $1,000,000 primary, general liability policy issued by Reliance Insurance Company of Illinois and under an excess liability policy issued by Twin City Fire Insurance Company providing excess liability coverage of $20 million. The excess coverage policy only covers liability over and above the underlying $1,000,000 of coverage, and does not provide any coverage of the first $1,000,000 of any potential judgment. In June 2001, Reliance filed for bankruptcy-court protection and was liquidated in October 2001. The ultimate resolution of this matter is not presently determinable and, accordingly, no provision for any outcome that may result has been made in these financial statements. 5 FJS PROPERTIES FUND I, L.P. ------------------------------------------------------------------------------ Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------------------------------------ LIQUIDITY AND CAPITAL RESOURCES As of the present date, the Partnership owns and operates one Property, the Pavilion Apartments, and does not intend to acquire any other property. Cash flow from Pavilion should be sufficient to permit the Partnership to make the constant monthly payments due prior to maturity on the first mortgage and to meet its monthly operating expenses. However, should there be a significant decrease in Pavilion's occupancy or rental rates, there can be no assurance that the Partnership would be able to obtain sufficient funds to make such payments. OPERATIONS The Partnership has operated the Pavilion Apartments, located in West Palm Beach, Florida since January 1985. The project operated with occupancies in the mid-90% range for the first quarter of 2002. Physical occupancy stands at 96% as of April 22, 2002. Of the 10 vacant apartments (excluding the one vacant model apartment) 4 are available for rent with the remaining 6 apartments pre leased for May occupancy. Rental revenues for the three month period ended March 31, 2002, increased to $614,153 as compared to $583,458 for the comparable period of the prior year. The increase resulted from an increase in the rent roll for the property together with a decrease in vacancies at the Pavilion Apartments. The $13,600 of tender offer income resulted from transfer fees received in connection with the processing of 136 transfers submitted after the closing of the outside third party tender offer in December 2001. Operating expenses, consisting mainly of real estate taxes, repairs and maintenance and utilities increased to $185,190 from $144,899 for the comparable three month periods of 2002 and 2001 respectively. This increase resulted from increased expenditures for repairs and maintenance as well as increased water and sewer charges at the Pavilion Apartments. During the first quarter of 2002 the following sums were expended on capitalizable replacements. Item Amount spent Stoves/Refrigerators/Dishwashers $ 9,752 Carpeting $ 28,192 Tile Replacement $ 10,588 HVAC Replacement $ 7,994 Security Lighting $ 4,149 Counter Tops $ 3,140 ------------ Total: $ 63,815 ============ General and administrative expenses decreased to $189,840 as compared to $198,930 for the comparable three month period of the prior year. This reflects decreases in court costs and evictions which were partially offset by increases in payroll, insurance and professional fees. 6 FJS PROPERTIES FUND I, L.P. ------------------------------------------------------------------------------ Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ------------------------------------------------------------------------------ Insurance: While the first quarter general and administrative expenses showed an increase of $7,177 in insurance expense as compared to 2001, the Partnership has received notice that the renewal premium for the period from April 1, 2002 through March 31, 2003, has increased substantially from $118,770 to $219,634. This increase is a result of overall increases in property insurance costs in the country as well as the withdrawal of a number of insurance companies from the Florida insurance market. In addition to the increase in premium for this coverage, certain limitations have also been added on the coverage itself. The wind/hail deductable has been increased from 3% to 5% and a minimum wind/hail damage claim of $250,000 per occurrence has been added. Finally, the insurance brokers attempting to place this coverage were unable to obtain a quotation solely from insurance carriers admitted to issue coverage in the state of Florida. Consequently, although companies (both admitted and non- admitted) sharing this coverage are all rated by A.M. Best as Excellent/Secure or better, in the event of insolvency of such company, any potential liability not covered by the non-admitted insurance companies would not be covered by the Florida Insurance Guaranty Association. Each of the seven insurance companies participating in the coverage are assigned a financial size category by A.M. Best of $250 Million dollars or greater. Because the insurance premium has increased substantially over last year's premium, the insurance escrow held by the first mortgagee has insufficient funds available to pay the renewal premium. The Partnership has reached an agreement with the mortgagee of the Pavilion Apartments for the use of various escrow funds held by the mortgagee for the payment of this premium, and for the financing of the balance of the premium with the insurance agent for the property. An aggregate of approximately $181,405 will be utilized from the real estate tax escrow, insurance escrow and replacement reserve escrow towards the premium payment. The balance of approximately $38,300 will be paid without interest over a nine month period. The monthly escrow deposits required by the first mortgage will be adjusted to reestablish the respective escrows to their required balances over the next year. It is anticipated that the cash flow from the Pavilion Apartments will be sufficient to make the required increased escrow deposits, however this will result in a decrease in the funds available for repairs and replacements and capitalizable items which would otherwise be performed at the property. This may adversely affect the ability of the Pavilion Apartments to compete in the local real estate market. INFLATION As of the present date, inflation has not had a major impact on the operations of the Partnership. 7 FJS PROPERTIES FUND I, L.P. ------------------------------------------------------------------------------ PART II - OTHER INFORMATION ------------------------------------------------------------------------------ Item 1. Legal Proceedings In July 2001, Mario Raymond, as plaintiff, filed a lawsuit (the "Raymond Lawsuit"), Case No:0101164412, in the Circuit Court of the Seventeenth Judicial Circuit, Broward County Florida. Named defendants in the action were: (a) the Partnership, (b) FJS Properties, Inc., the general partner of the Partnership, and (c) MSL Property Management, Inc., the onsite managing agent of the Pavilion Apartments. Plaintiff alleged that he was a tenant at the Pavilion Apartments in September 1997, and that "a burner of the kitchen stove supplied by defendants turned on by itself, overheating and boiling hot oil on said burner creating a fire." Plaintiff alleged that "as a result, he became severely burned over 23% of his body." Plaintiff further alleged that "the defendants had previously been notified that the kitchen stove had a propensity to turn on by itself and asked that it be replaced." Plaintiff claims defendants breached their duty to maintain the apartment in a safe and careful manner causing injury to Plaintiff. Plaintiff seeks damages "in excess of Fifteen Thousand ($15,000.00) Dollars" for injuries, pain and suffering, lost wages, medical expenses, and other items both presently and in the future. There is no limit on the damages claimed or which could be awarded. At the time of this alleged incident the Pavilion Apartments was insured under a $1,000,000 primary, general liability policy issued by Reliance Insurance Company of Illinois, and under an umbrella liability policy issued by Twin City Fire Insurance Company providing excess liability coverage of Twenty Million Dollars. The excess coverage policy only covers liability over and above the underlying One Million Dollars of coverage, and does not provide any coverage for the first One Million Dollars of any potential judgement. In June 2001, Reliance Group Holdings Inc. ("Reliance"), the former parent of Reliance Insurance Company of Illinois, filed for bankruptcy-court protection, and in October 2001, the Commonwealth Court of Pennsylvania ordered the liquidation of the Reliance which included Reliance Insurance Company of Illinois which had been consolidated into the Reliance Group Holdings Inc. Upon the insolvency of Reliance the Florida Insurance Guaranty Association, Inc. ("FIGA") was notified of the Raymond Lawsuit and it assumed the obligations of Reliance up to the Florida statutory limit of $300,000 per claim. On February 19, 2002, FIGA advised that the Raymond Lawsuit "claim does not fall within the scope of the 'Florida Insurance Guaranty Association Act'", in that the "policy was written with Reliance Insurance Company of Illinois. This company was not admitted and was not a member insurer as defined by the Florida Insurance Guaranty Association Statute." As an "out-of-state" insurer, its obligations would not be covered by the FIGA, and sole recourse is in a claim against the Receiver for Reliance in the Pennsylvania Liquidation proceeding. The Partnership and MSL Property Management, Inc. have engaged an attorney to represent the defendants in the Raymond Lawsuit. The Partnership is unable at this time to predict the outcome of the lawsuit or to quantify the potential liability of the Partnership in this action. 8 FJS PROPERTIES FUND I, L.P. ------------------------------------------------------------------------------ PART II - OTHER INFORMATION ------------------------------------------------------------------------------ Item 5. Other Information Registrant has been advised that Donald F. Conway, C.P.A. as the Trustee in the Chapter 11 Bankruptcy Proceeding involving Robert E. Brennan as Debtor, pending in the United States Bankruptcy Court for the District of New Jersey (Case No 95-35502) has entered into a contract for the sale of the trustee's 80% interest in the common stock of the general partner of Registrant to Pavilion Apartments LLC, a Florida limited liability company. On April 22, 2002, an order was entered by the Bankruptcy Court approving the sale. If a closing under this contract were to occur as contemplated by the contract and order, this would constitute a change of control Registrant to Pavilion Apartments LLC. The principals of Pavilion Apartments LLC are Murray and Sheldon Liebowitz, who for more than the past five years have been the principal owners and operators of MSL Property Management Inc., the onsite managing agent for the Pavilion Apartments. Item 6. Exhibits and Reports on Form 8-K [a] Exhibits as required by Item 601 of Regulation S-K: None Required [b] Reports on Form 8-K: None filed during the quarter for which this report is submitted. 9 FJS PROPERTIES FUND I, L.P. ------------------------------------------------------------------------------ SIGNATURE ------------------------------------------------------------------------------ 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. FJS PROPERTIES FUND I, L.P. Date: May 5, 2002 By: /s/ Andrew C. Alson ---------------------------------- Andrew C. Alson (President and Chief Financial Officer) FJS Properties, Inc. General Partner 10