-----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, OqMlTQrIHYLLBbt8tpJT2OxqcAJ8csOBRfrdtd0ln0d+MML30+yAMgBw7jXatA4S LJaMVR/V8UOi4Wenc9AYuA== 0000913906-99-000023.txt : 19990331 0000913906-99-000023.hdr.sgml : 19990331 ACCESSION NUMBER: 0000913906-99-000023 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FJS PROPERTIES FUND I LP CENTRAL INDEX KEY: 0000756435 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 133252067 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-15755 FILM NUMBER: 99577659 BUSINESS ADDRESS: STREET 1: 264 ROUTE 537 EAST CITY: COLTSNECK STATE: NJ ZIP: 07722 BUSINESS PHONE: 9085429209 10-K 1 10 - K FORM 10-K U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 |X| ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________. Commission File number 0-15755 FJS PROPERTIES FUND I, L.P. (Exact name of registrant as specified in its charter) Delaware 13-3252067 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 264 Route 537 East, Colts Neck, NJ 07722 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 732-542-9209 Securities registered pursuant to Section 12(b) of the Exchange Act: Title of each class Name of each exchange on which registered NONE N/A Securities registered pursuant to Section 12(g) of the Exchange Act: Units of Limited Partnership Interest (Title of Class) 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 X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. N/A No public market exists. Documents Incorporated by Reference Prospectus of Registrant, dated June 10, 1985, as supplemented by Supplement dated November 7, 1985, filed pursuant to Rule 424 under the Securities Act of 1933. Annual Report on Form 10-K of Registrant for the fiscal years ended December 31, 1986 through December 31, 1997, filed pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934, but each only to the extent expressly incorporated by reference in Parts I, II and III. PART I Item 1. Business Registrant is a Delaware limited partnership formed as of October 5, 1984. FJS Properties, Inc., a Delaware corporation and an affiliate of First Jersey Securities, Inc. ("First Jersey" or the "Underwriter"), is the general partner ("General Partner") of the Registrant. Reference is made to the Prospectus (the "Prospectus") of Registrant dated June 10, 1985, as supplemented by a Supplement (the "Supplement"), dated November 7, 1985, which have been filed pursuant to rule 424 under the Securities Act of 1933, as amended, each of which is incorporated herein by reference. The Prospectus was filed as part of Registrant's Registration Statement on Form S-11, pursuant to which 100,000 Units of Limited Partnership Interest (the "Units") were registered. On May 1, 1986, the sole closing of the Units, the Registrant received $8,391,500 in Gross Proceeds from the sale of 16,783 Units to investors. Registrant paid $671,320 in underwriting commissions to First Jersey and a total of $419,575 in organization and offering expenses to the General Partner. Registrant owns and operates one 312 unit garden apartment complex, the Pavilion Apartments ("Pavilion"), located in West Palm Beach, Florida. The description of the acquisition is set forth in the Prospectus under "Property Acquisitions" and is incorporated herein by reference. Registrant will not invest in or acquire any other properties. For the years ended December 31, 1998, 1997 and 1996, revenues from Pavilion accounted for approximately 98.4%, 98.7%, and 98.8% respectively of Registrant's gross revenues. Competition The real estate business is highly competitive and Pavilion has active competition from similar properties in the vicinity. Registrant will also experience competition for potential buyers at such time as it seeks to sell Pavilion. Employees Services are performed by Registrant's employees at Pavilion by nine full-time on site personnel. The personnel are under the direct supervision of a local unaffiliated management company which in turn is supervised by the General Partner. Salaries for such on-site personnel are paid by Registrant or by the local unaffiliated management company from fees received from Registrant. The General Partner also provides certain supervisory property management services to Registrant under a management agreement. Tax Legislation The Tax Reform Act of 1986 (the "1986 Act"), which was enacted on October 22, 1986, requires that losses from "passive activities" (which includes any rental activity) may only offset income from "passive activities" Passive losses in excess of passive income are suspended and are carried over to future years when they may be deducted against passive income generated by the Partnership in such year (including gain recognized on the sale of the Partnership's assets) or against passive income derived by Unitholders from other sources. The Revenue Act of 1987 (the "1987 Act") was enacted on December 22, 1987 and provides certain adverse tax consequences for "publicly traded partnerships." A "publicly traded partnership" is defined as a partnership whose interests are traded on an established securities market or readily tradable on a secondary market (or the substantial equivalent thereof). Such a partnership will be taxed as a corporation (unless at least 90% of its gross income is derived from certain passive sources, such as real property rents, dividends or interest) and each tax-exempt entity acquiring an interest in any such partnership after December 17, 1987 will have all of its share of the partnership's income attributable to interests acquired after such date treated as unrelated business income. In addition, the income from such a partnership would be treated as other than passive income, and losses from any such partnership could only be offset by income from the same partnership. Page 1 The Revenue Act of 1987 adopted provisions which have an adverse impact on investors in a "publicly traded partnership." A "publicly traded partnership" is a partnership whose interests are traded on an established securities market or readily tradable on a secondary market (or the substantial equivalent thereof). If the Partnership were classified as such, (i) it may be taxed as a corporation, (ii) qualified plans and other entities exempt from taxation acquiring interests in the Partnership after December 17, 1987 would have to treat income derived from the Partnership as unrelated business income, with the result that the limited partnership interests would be less attractive to tax-exempt investors (and therefore could be less marketable) or (iii) income derived from an investment in the Partnership would be treated as other than passive income, in which case losses from the Partnership could only be offset by income from the same partnership. The IRS has established alternative safe harbors that allow interests in a partnership to be transferred or redeemed in certain circumstances without causing the partnership to be characterized a "publicly traded partnership." Interests in the Partnership are not listed or quoted for trading on an established securities exchange. However, it is possible that transfers of interests could occur in a secondary market in sufficient amount and frequency to cause the Partnership to be treated as a "publicly traded partnership." The Partnership has adopted a policy of prohibiting transfers in secondary market transactions unless, notwithstanding such transfers, the Partnership will satisfy at least one of the safe harbors. Such a restriction could impair the ability of an investor to liquidate its investment quickly. It is anticipated that such policy will remain in effect until such time, if ever, as further clarification of the Revenue Act of 1987 permits the Partnership to lessen the scope of these restrictions. The General Partner, if so authorized, will take such steps as are necessary, if any, to prevent the reclassification of the Partnership as a "publicly traded partnership." Item 2. Properties The sole property owned and operated by Registrant is the Pavilion Apartments (the "Project"), a 312 Unit garden apartment complex located at 401 Executive Center Drive, West Palm Beach, Florida. Registrant will not acquire or invest in any other properties. Registrant acquired a 50% interest in the Pavilion on December 31, 1984, and the remaining 50% on January 1, 1985. It owns Pavilion in fee ownership, subject to a first mortgage. Pavilion, constructed in 1972, is located on a 15 acre tract and consists of 312 apartment units containing 286,500 square feet of rentable area in 11 low-rise buildings. Rental units are available in one, two and three bedroom plans. There are 108 one-bedroom apartments, 44 two- bedroom apartments with one bath, 116 two-bedroom apartments with two baths, and 44 three-bedroom apartments. Ground amenities include a heated swimming pool, lighted tennis courts, basketball and shuffle-board courts, and a clubhouse with game room, saunas, lounge and outdoor barbecues. An equipped children's playground is also provided. The apartments in the Project are available for rent to residential tenants, generally under one year leases. No tenant occupies more than one apartment in the Pavilion except for the West Palm Beach Recovery Center which occupies 8 Units, and Country Nights which occupies 2 units. Each of such units was leased at the then current market rents. With substantially all tenants occupying their apartments under one year leases, it is anticipated that leases for all apartments will expire each year. The current rent schedule for leases is as follows: Unit Size1 Monthly Rent2 1 BR/1B $519/$549 2 BR/1B $619/$649 2 BR/2B $639/$679 3 BR/2B $759/$799 In the opinion of the management of Registrant, the Project is adequately covered by insurance. - -------- 1BR = Bedroom; B = Bathroom 2Varies depending on location of unit in the Project. Page 2 First Mortgage: The existing first mortgage affecting the Project is held of record by Greenwich Capital Financial Products, Inc., and serviced by Bank United of Texas FSB, Houston, Texas. As of December 31, 1998, the mortgage had an unpaid principal balance of approximately $4,722,579. This mortgage was closed on March 31, 1994, and refinanced the former first mortgage held by The Bank of Tokyo. At that time, a new loan secured by a first mortgage on the project was obtained from the Long Beach Bank, FSB, Orange, California, in the amount of $5,000,000. This loan provides for a term of ten (10) years with an interest rate of 9.75% per annum. The loan is repayable in equal monthly installments of $44,556.87 for principal and interest, with a balloon payment due in March 2004. At maturity a balance of approximately $4,215,000 will be due. The loan requires deposits with the lender for real estate taxes, insurance premiums, a debt service reserve of one month's payment, as well as deposits for replacement reserves for the project. These deposits are held in interest bearing accounts for the benefit of Registrant. The loan is not prepayable during the first five years of its term, and thereafter is prepayable with payment of a penalty based upon a "rate protection" formula for the lender. The loan requires consent of the holder to the transfer or sale of the Pavilion Apartments and to certain transfers of ownership interests in Registrant. For the complete terms and provisions of this loan see Exhibits 10(m) through 10(s). The following table sets forth the components of the Pavilion Apartments upon which depreciation, for Federal Tax purposes, is taken: Item Tax Basis Rate Method Life Building $6,897,424 5% ACRS 18 yrs Improvements $ 207,427 3.6% MACRS 27.5 yrs Improvements $ 528,798 Fully Depreciated SL 10 yrs Furniture/Fixtures $1,048,378 Fully Depreciated ACRS 5 yrs Furniture/Fixtures $ 204,639 Various MACRS 5/7 yrs Furniture/Fixtures $ 6,635 Fully Depreciated MACRS 7 yrs Improvements $ 5,639 1.2% MACRS 27.5 yrs Improvements $ 6,185 2.9% MACRS 27.5 yrs Improvements $ 5,071 .15% MACRS 27.5 yrs Ad Valorem Real Estate taxes for the 1998 calendar year were in the amount of $187,348.66 which was based upon an assessed valuation of $7,300,000 and the following millage rates: Taxing Authority: Millage rate: County 4.6000 School State 6.5470 School Local 2.6320 City of West Palm Beach 8.3129 So Fl Water Management Dist. 0.5970 Children's Services Council 0.4403 F.I.N.D. 0.0470 PBC Health Care District 1.0500 Everglades Construction Project 0.1000 County - Debt 0.2582 School - Debt 0.5030 City of West Palm Beach - Debt 0.5768 Total: 25.6642 Page 3 In addition a non-advalorem assessment of $18,671.82 was levied by the Solid Waste Authority against the Pavilion. The aggregate tax of $206,020.48 was paid in the discounted amount of $197,779.66 in November 1998. Item 3. Legal Proceedings There are no material legal proceedings pending against or involving Registrant or Pavilion. Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the 1998 calendar year. Page 4 PART II Item 5. Market for Registrant's Securities and Related Security Holder Matters Units of the Registrant are not publicly traded nor is it anticipated that a public trading market will develop for the Units. On and as of December 31, 1997, beneficial interests in an aggregate of 1,843 Units were acquired from the unaffiliated holders thereof, by three third parties at a price of $75 per Unit, pursuant to a tender offer filed with the Securities and Exchange Commission. As of March 15, 1999, there were approximately 669 holders owning an aggregate of 16,788 Units. The General Partner has established a policy of limiting transfers of Units in secondary market transactions unless, notwithstanding such transfers, the Partnership will satisfy one or more applicable safe harbors prescribed by the Internal Revenue Service to avoid having the Partnership classified as a publicly traded partnership which could have adverse tax effects on limited partners. In order to comply with the safe harbor provisions, the transfer of Units may be restricted. There were no distributions per Unit of Registrant during the 1985 fiscal year. The Registrant distributed $3.01 per Unit for the 1986 fiscal year, $4.63 per Unit for 1987, $6.59 per Unit for 1988, $14.72 per Unit for 1989, $7.75 per Unit for 1990, and $1.97 per Unit for the first quarter of 1991. There were no distributions made for the second, third or fourth quarters of 1991, for 1992, or for 1993. Distributions aggregating $5.19 and $5.64 per Unit were distributed for 1994 and 1995 respectively, and a distribution of $1.54 was made for the first quarter of 1996. No distributions were made for the remaining quarters of 1996, during which period all available cash flow was utilized for work being done on the Pavilion Apartments. Distributions of $1.30, $2.40 and $1.83 were made for the first three quarters of 1997 respectively. No distribution was made for the fourth quarter of 1997 as all available cash flow was utilized for capital improvements at the Pavilion Apartments. Distributions of $2.70, $2.62, $0.91 and $2.19 (disbursed in February 1999) were made for the respective quarters of 1998. There are no material legal restrictions set forth in Registrant's Limited Partnership Agreement, annexed to the Prospectus as Exhibit A thereto ("Partnership Agreement"), upon Registrant's present or future ability to make distributions. Item 6. Selected Financial Information The information set forth below presents selected financial data of Registrant. Additional financial information is set forth in the audited financial statements and footnotes contained herein. Years Ended December 31, 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- Total Assets $7,076,729 $7,258,818 $7,448,953 $7,756,871 $8,022,290 Mortgage Note Payable $4,722,579 $4,793,033 $4,856,968 $4,914,986 $4,967,636 Revenue $2,081,901 $2,040,543 $1,852,877 $1,841,892 $1,817,308 Interest Expense - Mortgages $ 463,687 $ 470,769 $ 476,199 $ 481,611 $ 438,481 Net Profit [Loss] $ 34,952 $ (50,582) $ (270,996) $ (121,682) $ (241,357) Net Cash Provided by Operating Activities $ 233,981 $ 280,140 $ 51,495 $ 116,822 $ 30,551 Net Cash [Used] in Investing Activities - Capital Expenditures $ (134,645) $ (80,481) $ (10,336) $ (2,687) $ (45,228) Net Cash [Used] in Financing Activities $ (176,100) $ (157,710) $ (89,899) $ (146,425) $ (9,026) Profit (Loss) Per Limited Partnership Unit $ 2.06 $ (2.98) $ (15.98) $ (7.18) $ (14.23) Distributions Per Limited Partnership Unit $ 6.23 $ 5.53 $ 1.88 $ 5.53 $ 4.96 Weighted Average Number of Limited Partnership Units Outstanding 16,788 16,788 16,788 16,788 16,788
Page 5 Item 7. Management's Discussion and Analysis of Financial Conditions and Results of Operations Liquidity and Capital Resources As of the present date, Registrant owns one Property, the Pavilion Apartments, and does not intend to acquire any other property. As of May 1, 1986, Registrant admitted as Limited Partners purchasers of 16,783 Units. Total capital raised was $8,391,500. In addition, Registrant received accrued interest on the escrow account in the amount of $82,471. Thus proceeds from the admission of Limited Partners aggregated $8,473,971. The Pavilion Apartments are owned by Registrant subject to a first mortgage loan in the original principal amount of $5,000,000. This loan was obtained from Long Beach Bank in March 1994, to refinance the previous first mortgage affecting the property. (See "First Mortgage" above for a description of the terms of this loan). Registrant anticipates that cash flow from Pavilion should be sufficient to permit the Partnership to make the monthly payments on the first mortgage due prior to maturity and to meet Registrant's monthly operating expenses, however, should there be a significant decrease in Pavilion's occupancy or rental rates, there can be no assurance that Registrant would be able to obtain sufficient funds to make such payments. Registrant distributed $3.01 per Unit for the 1986 fiscal year, $4.63 per Unit for 1987, $6.59 per Unit for 1988, $14.72 per Unit for 1989, $7.75 per Unit for 1990, and $1.97 per Unit for the first quarter of 1991. There were no distributions made for the second, third or fourth quarters of 1991, for 1992, or for 1993. Distributions aggregating $5.19 and $5.64 per Unit were made for 1994 and 1995 respectively, and a distribution of $1.54 was made for the first quarter of 1996. No distributions were made for the remaining quarters of 1996. The reduction in distributions in the years from 1989 through 1991, resulted from decreasing interest rates and the reduced occupancy levels which the Pavilion Apartments experienced. When there was cash flow available for distribution during 1992 and 1993, no distributions were made to retain available cash which might be required for use in connection with the refinancing of the existing first mortgage. During the last three quarters of 1996 all available cash flow was utilized for work being done on the Pavilion Apartments. Distributions of $1.30, $2.40 and $1.83 were made for the first three quarters of 1997 respectively. No distribution was made for the fourth quarter of 1997 as all available cash flow was utilized for capital improvements at the Pavilion Apartments. (See "Operations - 1997 Fiscal Year" below). Distributions of $2.70, $2.62, $0.91 and $2.19 (disbursed in February 1999) were made for the respective quarters of 1998. OPERATIONS Registrant has operated the Pavilion Apartments, located in West Palm Beach, Florida, since January 1985. Management Agreement The Pavilion Apartments are currently managed by M.L. Property Management Inc., an unaffiliated property manager, under a five year agreement as extended in January 1999. The agreement will also terminate on the earlier sale or disposition of the Pavilion Apartments. 1998 Fiscal Year Rental Income for the year ended December 31, 1998, was $2,081,901 as compared with $2,040,543 for the 1997 calendar year. The increase in income in 1997 reflected increased rental rates for apartments at the project as reduced by slightly increased vacancies at the property. Rental allowances, were still being utilized to attracted tenants to the Pavilion, and were in substantially the same amounts as experienced in the prior year. Occupancy rates at the project held in the low to mid 90% range for the 1998 year. As of March 15, 1999, the Pavilion Apartments had sixteen apartments out of 312 available for rent. These sixteen apartments represent seven of nine presently vacant apartments and nine additional apartments where the tenants have given notice of their intent to vacate. Two of the Page 6 vacant apartments have already been rented. The nine apartments presently vacant equates to a physical occupancy of 97.1%. Cost of Rental Income, consisting mainly of real estate taxes, repairs and maintenance and utilities, decreased in 1998 to $625,402 as compared to the 1997 cost of $665,541. This decrease principally reflected reductions in Real Estate Taxes as a result of a reduced assessed valuation of the project, as well as a reduction in replacements at the Pavilion. Selling, General and Administrative Expenses for 1998 decreased to $689,444 from $711,626 in 1997. This decrease resulted principally from insurance costs which showed a reduction as a result of better rates from a change in the company providing such coverage to the Project. In connection with the Tender Offer made by unaffiliated third parties in December 1997 for Units of Limited Partnership Interests of Registrant, other income of $10,300 for transfer fees was received, and expenses of $13,200 for administrative fees and disbursements in connection with the preparation of required Securities and Exchange Commission filings and subsequent mailings to Limited Partners were incurred. This resulted in the net Other Expenses of $2,900 which appears in 1998. 1997 Fiscal Year Rental Income for the year ended December 31, 1997, was $2,040,543 as compared with $1,852,877 for the 1996 calendar year. The increase in income in 1997 reflected increased rental rates for apartments at the project as well as substantially decreased vacancies at the property. Rental allowances, were still being utilized to attracted tenants to the Pavilion, and were again reduced slightly during 1997. Occupancy rates at the project held in the low to mid 90% range for the 1997 year. As of March 16, 1998, the Pavilion Apartments had sixteen apartments out of 312 available for rent. These 16 apartments represent 8 of 21 presently vacant apartments and 8 of an additional 11 apartments where the tenants have given notice of their intent to vacate. Thirteen of the vacant apartments and three of the apartments scheduled to become vacant have already been rented. In addition three tenants are under eviction notices. The 21 apartments presently vacant equates to a physical occupancy of 93.3%. Cost of Rental Income, consisting mainly of real estate taxes, repairs and maintenance and utilities, decreased in 1997 to $665,541 as compared to the 1996 cost of $749,911. This decrease reflected the significant work completed in 1996, and the resulting reduction in the work required during 1997. This reduction was offset by an increase in water and sewer charges at the Pavilion. Selling, General and Administrative Expenses for 1997 increased to $711,626 from $645,114 in 1996. This increase resulted principally from increases in payroll expenses and real estate commissions. The real estate commissions were paid for tenant referrals from unaffiliated sources which have not been utilized in prior years, and which helped to increase the occupancy levels at the Pavilion Apartments. Insurance costs showed a reduction as a result of better rates from a change in the company providing such coverage to the Project. INFLATION As of the present date, inflation has not had a major impact on the operations of the Partnership. It is anticipated that future increases in operating expenses will be offset if not exceeded by corresponding increases in operating income. YEAR 2000 ISSUES Registrant has reviewed its operations and has concluded that the consequences of Year 2000 issues will not have a material effect on the company's business, results of operations or financial condition. With respect to information technology systems, these are limited to record keeping and servicing, and are not directly related to the furnishing of apartments for rental at the Pavilion Apartments. Registrant has been advised by its vendors that the software packages utilized for property management functions are Year 2000 compliant as upgraded in the normal course of business. Software Page 7 utilized for Registrant's partnership bookkeeping have been reviewed and also appear to be Year 2000 compliant. The Pavilion Apartments do not have any significant embedded technologies in use which would be anticipated to cause significant Year 2000 problems. Registrant does not anticipate the requirement for any extraordinary measures or expenses with respect to operations after January 1, 2000. Naturally, no assurances can be made as to unanticipated Year 2000 problems which may occur. We are unable to comment on Year 2000 readiness of public utility suppliers such as electric, gas, water and telephone, or on possible disruption of public utility service to the Pavilion Apartments or to other similar projects in the area. Page 8 Item 8. Financial Statements and Supplementary Data FJS Properties Fund I, L.P. Financial Statements INDEX Page Number Independent Auditor's Report............................................10 Financial statements Balance Sheets as of December 31, 1998 and 1997.......................11 Statements of Operations for the years ended December 31, 1998, 1997 and 1996..................................12 Statements of Partners' Capital [Deficit] for the years ended December 31, 1998, 1997 and 1996..................................13 Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 ................................14 Notes To Financial Statements ........................................15-18 Independent Auditor's Report on Supplementary Schedules.................19 Real Estate and Accumulated Depreciation................................20 Page 9 INDEPENDENT AUDITOR'S REPORT To the Partners of FJS Properties Fund I, L.P. New York, New York We have audited the accompanying balance sheets of FJS Properties Fund I, L.P. as of December 31, 1998 and 1997, and the related statements of operations, partners' capital, and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of FJS Properties Fund I, L.P. as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. MOORE STEPHENS, P. C. Certified Public Accountants. Cranford, New Jersey February 4, 1999 Page 10 Item 8: Financial Statements FJS PROPERTIES FUND I, L.P. - ------------------------------------------------------------------------------ BALANCE SHEETS - ------------------------------------------------------------------------------ December 31, 1 9 9 8 1 9 9 7 Assets: Current Assets: Cash and Cash Equivalents $ 458,782 $ 535,546 Cash - Escrow 148,617 97,661 Cash - Security Deposits 125,397 121,878 Other Current Assets 25,752 35,971 ---------- ----------- Total Current Assets 758,548 791,056 ---------- ----------- Property Investment: Land 2,296,804 2,296,804 Buildings 6,569,125 6,569,125 Furniture, Fixtures and Building Improvements 1,953,010 1,818,365 ---------- ----------- Totals - At Cost 10,818,939 10,684,294 Less: Accumulated Depreciation (4,772,099) (4,507,327) ---------- ----------- Property Investment - Net 6,046,840 6,176,967 ---------- ----------- Other Assets 271,341 290,795 ---------- ----------- Total Assets $7,076,729 $ 7,258,818 ========== =========== Liabilities and Partners' Capital: Current Liabilities: Accounts Payable $ 66,582 $ 97,300 Accrued Interest 38,371 38,944 Other Accrued Expenses 6,826 6,423 Accounts Payable - Related Party 19,707 26,138 Tenant Security Deposits 125,397 121,878 Mortgage Payable - Current Portion 77,641 70,455 Deferred Income - Current Portion 7,143 7,142 ---------- ----------- Total Current Liabilities 341,667 368,280 ---------- ----------- Long-Term Liabilities: Mortgage Payable - Non-Current Portion 4,644,938 4,722,578 Deferred Income - Non-Current Portion 25,000 32,141 ---------- ----------- Total Long-Term Liabilities 4,669,938 4,754,719 ---------- ----------- Partners' Capital: General Partner (1,215,207) (1,214,501) Limited Partners 3,280,331 3,350,320 ---------- ----------- Total Partners' Capital 2,065,124 2,135,819 ---------- ----------- Total Liabilities and Partners' Capital $7,076,729 $ 7,258,818 ========== =========== The Accompanying Notes are an Integral Part of These Financial Statements. Page 11 FJS PROPERTIES FUND I, L.P. - ------------------------------------------------------------------------------ STATEMENTS OF OPERATIONS - ------------------------------------------------------------------------------ Y e a r s e n d e d D e c e m b e r 3 1, 1 9 9 8 1 9 9 7 1 9 9 6 ------- ------- ------- Rental Income $ 2,081,901 $ 2,040,543 $ 1,852,877 Cost of Rental Income 625,402 665,541 749,911 ----------- ----------- ----------- Gross Profit 1,456,499 1,375,002 1,102,966 ----------- ----------- ----------- Expenses: Selling, General and Administrative Expenses 689,444 711,626 645,114 Depreciation and Amortization 289,180 269,025 275,295 ----------- ----------- ----------- Total Expenses 978,624 980,651 920,409 ----------- ----------- ----------- Operating Income 477,875 394,351 182,557 ----------- ----------- ----------- Other [Income] and Expenses: Interest Income (23,664) (25,836) (22,646) Interest Expense 463,687 470,769 476,199 Other Expense 2,900 -- -- ----------- ----------- ----------- Other Expenses - Net 442,923 444,933 453,553 ----------- ----------- ----------- Net Income [Loss] $ 34,952 $ (50,582)$ (270,996) =========== =========== =========== Income [Loss] Per Limited Partnership Unit $ 2.06 $ (2.98)$ (15.98) =========== =========== =========== Distributions Per Limited Partnership Unit $ 6.23 $ 5.53 $ 1.88 =========== =========== =========== Weighted Average Number of Limited Partnership Units Outstanding 16,788 16,788 16,788 =========== =========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements. Page 12 FJS PROPERTIES FUND I, L.P. - ------------------------------------------------------------------------------ STATEMENTS OF PARTNERS' CAPITAL - ------------------------------------------------------------------------------ General Limited Partner Partners Total Partners' Capital - December 31, 1995 $(1,210,028)$ 3,793,081 $ 2,583,053 Net [Loss] for the year ended December 31, 1996 (2,710) (268,286) (270,996) Distributions to Partners (319) (31,562) (31,881) ----------- ----------- ----------- Partners' Capital - December 31, 1996 (1,213,057) 3,493,233 2,280,176 Net [Loss] for the year ended December 31, 1997 (506) (50,076) (50,582) Distributions to Partners (938) (92,837) (93,775) ----------- ----------- ----------- Partners' Capital - December 31, 1997 (1,214,501) 3,350,320 2,135,819 Net Income for the year ended December 31, 1998 350 34,602 34,952 Distributions to Partners (1,056) (104,591) (105,647) ----------- ----------- ----------- Partners' Capital - December 31, 1998 $(1,215,207)$ 3,280,331 $ 2,065,124 =========== =========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements. Page 13 FJS PROPERTIES FUND I, L.P. - ------------------------------------------------------------------------------ STATEMENTS OF CASH FLOWS - ------------------------------------------------------------------------------ Y e a r s e n d e d D e c e m b e r 3 1, 1 9 9 8 1 9 9 7 1 9 9 6 ------- ------- ------- Operating Activities: Net Income [Loss] $ 34,952 $ (50,582)$ (270,996) ----------- ----------- ----------- Adjustments to Reconcile Net Income [Loss] to Net Cash Provided by Operating Activities: Depreciation 264,772 244,617 250,887 Amortization 24,408 24,408 24,408 Deferred Income (7,142) (7,142) (3,572) Changes in Assets and Liabilities: [Increase] Decrease in: Escrow (50,956) 85,210 (106,591) Security Deposits (3,519) (711) 1,200 Other Current Assets 10,220 (34,541) 99,610 Other Assets (4,955) (6,421) -- Increase [Decrease] in: Accounts Payable and Accrued Expenses (30,886) 16,677 15,074 Accounts Payable - Related Party (6,432) 7,914 (7,325) Tenant Security Deposits 3,519 711 (1,200) Deferred Income -- -- 50,000 ----------- ----------- ----------- Total Adjustments 199,029 330,722 322,491 ----------- ----------- ----------- Net Cash - Operating Activities 233,981 280,140 51,495 ----------- ----------- ----------- Investing Activities: Capital Expenditures (134,645) (80,481) (10,336) ----------- ----------- ----------- Financing Activities: Principal Payments on Mortgages (70,453) (63,935) (58,018) Cash Distributions to Partners (105,647) (93,775) (31,881) ----------- ----------- ----------- Net Cash - Financing Activities (176,100) (157,710) (89,899) ----------- ----------- ----------- Net [Decrease] Increase in Cash and Cash Equivalents (76,764) 41,949 (48,740) Cash and Cash Equivalents - Beginning of Years 535,546 493,597 542,337 ----------- ----------- ----------- Cash and Cash Equivalents - End of Years $ 458,782 $ 535,546 $ 493,597 =========== =========== ===========
Supplemental Disclosure of Cash Flow Information: Cash paid for interest during the years ended December 31, 1998, 1997 and 1996 was $464,260, $470,790 and $476,639, respectively. The Accompanying Notes are an Integral Part of These Financial Statements. Page 14 FJS PROPERTIES FUND I, L.P. NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------ [1] Organization FJS Properties Fund I, L.P. [the "Partnership"] was formed under the Delaware Revised Uniform Limited Partnership Act on October 5, 1984. The Partnership owns and operates the Pavilion apartment complex in West Palm Beach, Florida. The Partnership operates under one reportable segment. [2] Summary of Significant Accounting Policies Loan Acquisition Fees - The Partnership amortizes fees incurred in connection with mortgage refinancings utilizing the straight-line method over the term of the related mortgage, which is currently ten years. Income Taxes - The Partnership is treated as a partnership for federal income tax purposes. The Partnership will make no provision for income taxes because all income and losses will be allocated to the partners for inclusion in their respective tax returns. Property Investment and Depreciation - Property, improvements, furniture and equipment are carried at cost and depreciated over their estimated useful lives. The cost of maintenance and repairs are expensed as incurred, whereas significant betterments and renewals are capitalized. The Partnership depreciates buildings using the straight-line method over 30 years. Furniture and fixtures and building improvements are depreciated using the straight-line method over periods from 3 to 10 years. Depreciation expense for the years ended December 31, 1998, 1997 and 1996 was $264,772, 244,617, and $250,887, respectively. For tax purposes, the Partnership depreciates residential real property using the 18-year accelerated depreciation method for property placed in service prior to May 8, 1985. In accordance with ongoing changes in the Internal Revenue Code, the Partnership will utilize the depreciation method, which, in the opinion of the Managing General Partner, will be the most beneficial to the Partnership. Cash Equivalents - The Partnership considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Financial Instruments - The Partnership had amounts on deposit with financial institutions which are approximately $471,000 and $456,000 in excess of the amounts insured for December 31, 1998 and 1997, respectively. The partnership does not require collateral for financial instruments. 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 the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Advertising - The Company expenses advertising cost as incurred. Advertising expense for the years ended December 31, 1998, 1997 and 1996 was $36,773, $36,036 and $40,279, respectively. Impairment - Certain long-term assets of the Company including property and furniture and fixtures are reviewed at least annually as to whether their carrying value has become impaired, pursuant to guidance established in Statement of Financial Accounting Standards ["SFAS"] No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Management considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations [undiscounted and without interest charges]. If impairment is deemed to exist, the assets will be written down to fair value or projected discounted cash flows from related operations. Management also re-evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. Page 15 FJS PROPERTIES FUND I, L.P. NOTES TO FINANCIAL STATEMENTS, Sheet #2 - ------------------------------------------------------------------------------ [3] Partnership Agreement Pursuant to the terms of the Partnership Agreement, which expires December 31, 2009, the General Partner is liable for all general obligations of the Partnership to the extent not paid by the Partnership. The Limited Partners are not liable for expenses, liabilities or obligations of the Partnership beyond the amount of their contributed capital. Pursuant to the terms of the Partnership Agreement, adjusted cash from operations is allocated, after payment of the Partnership Management Fee to the Managing General Partner, 99% to the Limited Partners and 1% to the General Partner. Pursuant to the terms of the Partnership Agreement, taxable income and loss are allocated 99% to the Limited Partners and 1% to the General Partner subsequent to the release of the Limited Partners' funds to the Partnership, which occurred on May 1, 1986. Prior to the release of funds, taxable income and loss were allocated 99% to the General Partner and 1% to the Original Limited Partner. Pursuant to the terms of the Partnership Agreement, allocations of net income or loss among the partners in the accrual basis financial statements will be in conformity with the allocations of taxable income or loss from operations. [4] Other Assets A summary of other assets is as follows: December 31, 1 9 9 8 1 9 9 7 Cash in Escrow - Replacement Reserves [See Note 5] $ 120,900 $ 117,240 Loan Acquisition Fees - Net of Amortization of $115,439 and $91,031 at December 31, 1998 and 1997, Respectively 128,656 153,065 Deposits 21,785 20,490 ----------- ----------- Totals $ 271,341 $ 290,795 ------ =========== =========== [5] Mortgage Payable On March 31, 1994, the Partnership refinanced the existing first mortgage loan held by the Bank of Tokyo. A new loan in the amount of $5,000,000, collateralized by a first mortgage lien on the project, was obtained from the Long Beach Bank, FSB, Orange, California. This loan is for a term of ten years with an interest rate of 9.75% per annum. The loan is repayable in equal monthly installments of $44,557 for principal and interest with a balloon payment due in ten years. The new loan requires deposits with the lender for real estate taxes, insurance premiums, a debt service reserve of one month's payment, as well as deposits for replacement reserves for the project. These amounts are included in "cash escrow" and "other assets" on the balance sheet. In June 1995, the loan was transferred to Bank United of Texas. Monthly payments and interest rate remained the same. Page 16 FJS PROPERTIES FUND I, L.P. NOTES TO FINANCIAL STATEMENTS, Sheet #3 - ------------------------------------------------------------------------------ [5] Mortgage Payable [Continued] Annual principal maturities under the total existing mortgage for the next five years are as follows: 1999 $ 77,641 2000 85,557 2001 94,282 2002 103,897 2003 114,492 Thereafter 4,246,710 ---------- Total Mortgage Payable $4,722,579 The fair value of the Partnership's mortgage payable, which is determined by discounting expected cash flows based on the Partnership's projected current incremental borrowing rate, is approximately $4,629,000. [6] Related Party Transactions The Managing General Partner, pursuant to the Partnership Agreement, has earned Property Management Fees of $103,806, $101,144 and $95,505 for the years ended December 31, 1998, 1997 and 1996, respectively, of which $83,045, $80,915 and $76,404, respectively, was paid to an unaffiliated Florida based management company. These fees are based on a percentage of net rental income as defined in the agreement. Also pursuant to the Partnership Agreement, the Managing General Partner has earned Partnership Management Fees of $6,673, $3,912 and $1,364 for the years ended December 31, 1998, 1997 and 1996, respectively, which represents 4% of adjusted cash flow. Additionally, in accordance with provisions of the Partnership Agreement, the Partnership is committed to pay to the Managing General Partner, administrative service fees. These fees amounted to $24,000 in each of the years ended December 31, 1998, 1997 and 1996 The Managing General Partner received distributions from cash flow of $1,056, $938 and $319 during the years ended December 31, 1998, 1997 and 1996, respectively. [7] Income Taxes The reconciliation of net losses as reported in the statements of operations and as would be reported for tax purposes for the years ended December 31, 1998, 1997 and 1996 are as follows: D e c e m b e r 3 1, ----------------------------------- 1 9 9 8 1 9 9 7 1 9 9 6 ------- ------- ------- Net Income [Loss] - Statement of Operations $ 34,952 $ (50,582)$ (270,996) Tax depreciation in excess of book depreciation (71,010) (60,049) (111,588) ----------- ---------- ----------- Net Income [Loss] for Tax Purposes $ 36,058 $ (110,631)$ (382,584) ---------------------------------- =========== =========== =========== Page 17 FJS PROPERTIES FUND I, L.P. NOTES TO FINANCIAL STATEMENTS, Sheet #4 - ------------------------------------------------------------------------------ [8] New Authoritative Pronouncements In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which is effective for fiscal years beginning after June 15, 1999. SFAS No. 133 is not expected to have a material impact on the Company. . . . . . . . . . . . . Page 18 INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY SCHEDULE To the Partners of FJS Properties Fund I, L.P. New York, New York Our report on the financial statements of FJS Properties Fund I, L.P. is included on page 10 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement Schedule III. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. MOORE STEPHENS, P.C. Certified Public Accountants. Cranford, New Jersey February 4, 1999 Page 19 FJS PROPERTIES FUND I, L.P. - ------------------------------------------------------------------------------ SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION - ------------------------------------------------------------------------------ Gross Amount at Which Life on Initial Cost to Partnership Carried at Close of Period Which Costs Depreciation Capitalized [3] in Latest Buildings Subsequent to Buildings Accumu- Year Income and Acquisition and lated of Statement Improve- Improve- [1] [2] Depreci- Construc- Date is Description Encumbrances Land ments Improvements Land ments Total ation tion Acquired Computed Pavilion Apartments, West Palm Beach, Florida $4,914,986 $2,296,804 $7,196,789 $1,129,903 $2,296,804 $8,522,135 $10,818,939 $4,772,099 1972 1/85 3-30 yrs. ========== ========== ========== ========== ========== ========== =========== ==========
1) The aggregate cost for federal income tax purposes is $8,910,196. 2) A reconciliation of the carrying amount of land, buildings and improvements as of December 31, 1998, 1997 and 1996 is as follows: C o s t a s o f ---------------------- D e c e m b e r 3 1, ------------------------ 1 9 9 8 1 9 9 7 1 9 9 6 ------- ------- ------- Balance at Beginning of Years $10,684,294 $10,603,813 $10,593,478 Improvements 134,645 80,481 10,335 ----------- ----------- ----------- Balance at End of Years $10,818,939 $10,684,294 $10,603,813 =========== =========== =========== 3) A reconciliation of accumulated depreciation for the years ended December 31, 1998, 1997 and 1996 is as follows: Accumulated Depreciation as of ------------------------------ D e c e m b e r 3 1, --------------- ---- 1 9 9 8 1 9 9 7 1 9 9 6 ------- ------- ------- Balance at Beginning of Years $4,507,327 $4,262,710 $4,011,823 Depreciation Expense 264,772 244,617 250,887 ---------- ---------- ---------- Balance at End of Years $4,772,099 $4,507,327 $4,262,710 ========== ========== ========== Page 20 Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant Registrant has no officers or directors. FJS Properties, Inc., the General Partner, manages and controls the Registrant's affairs and has general responsibility and ultimate authority in all matters affecting its business. The names and ages of, as well as the positions held by, the officers and directors of the General Partner are as follows: NAME AGE OFFICES HELD SERVED AS AN OFFICER AND/OR DIRECTOR SINCE A Andrew C. Alson 53 President and Director 1/85 Roger Barnett 54 Secretary and Treasurer 1/88 Lawrence E. Bathgate II 59 Director 10/84 Robert E. Brennan 55 Director 10/84 There are no family relationships between any executive officer or director and any other executive officer or director of the General Partner. Andrew C. Alson is a director and President of the General Partner. Until May, 1995, Mr. Alson was a Director of and until January 1, 1993, was President and Chief Executive Officer of PriMedex Health Systems, Inc. ("PMDX"), a public company which is principally engaged through its wholly-owned subsidiary, RadNet Management, Inc. in the healthcare services industry. Until June 16, 1994, Mr. Alson, as a designee of PMDX, also served as a director of ImmunoTherapeutics, Inc. ("IMNO"). IMNO is a publicly owned development stage Minnesota based company which is engaged in the research and development of immunotherapeutic drugs, primarily for the treatment of cancer. Mr. Alson is an attorney admitted to the bar of the State of New York, and is a graduate of the University of Pennsylvania and the Fordham University School of Law. Roger Barnett is the Secretary/Treasurer of the General Partner. Mr. Barnett is the president of First Jersey Securities, Inc., a post he assumed in April 1987. For more than five years prior to such date, Mr. Barnett was treasurer and chief financial officer of First Jersey. Until May 1995 Mr. Barnett was a director of, and until May 1994 was Secretary/Treasurer of Primedex Health Systems, Inc. Lawrence E. Bathgate, II is a director of the General Partner. Mr. Bathgate is the senior partner of Bathgate, Wegener & Wolf, P.A., a law firm in Lakewood, New Jersey. Mr. Bathgate is a graduate of Villanova University, Villanova, Pennsylvania and Rutgers Law School, Newark, New Jersey. Mr. Bathgate also engages in extensive real estate and other investment activities. Mr. Bathgate owns 20% of the common stock of the General Partner. Mr. Bathgate is a director of Carson, Inc., a publicly held company listed on the New York Stock Exchange. Robert E. Brennan is a director of the General Partner. Mr. Brennan has been principally engaged for the past five years as the sole stockholder (and until September, 1986, was Chief Executive Officer and Chairman of the Board) of First Jersey. Until June 10, 1997 he was the sole stockholder and a director of First Jersey. (See description of appointment of a Trustee below). He has in the past held several additional corporate positions, including until November 1995, but not presently, director, Chairman of the Board and Chief Executive Officer of International Thoroughbred Breeders, Inc. ("ITB"), a publicly owned commercial breeder of thoroughbred horses and the owner and operator of Garden State Racetrack in Cherry Hill, New Jersey. Mr. Brennan was, but is not presently, a principal stockholder of ITB. Mr. Brennan has served from time to time during the past five years, but not presently, as a member of the Board of Regents of Seton Hall University. Until the appointment of Mr. Conway as Trustee, as described below, Mr. Brennan was controlling stockholder of the General Partner. Page 21 On June 19, 1995, Judge Richard Owen, District Judge of the United States Court for the Southern District of New York issued his opinion and on July 14, 1995 entered a judgment in a lawsuit commenced in 1985 by the Securities and Exchange Commission (the "Commission") against Robert E. Brennan and First Jersey (the "Defendants"). In its opinion and judgment, the court determined that the Defendants, with respect to sales and resales of the securities of five issuers (not those of the Partnership), charged excessive markups and markdowns to First Jersey customers and thereby violated ss.17(a) of the Securities Act of 1933 (the "Securities Act") and ss.10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and violated Rule 10b-5 in that they engaged in fraud in those transactions. As a result, the court permanently enjoined the Defendants from further violations of Securities Act ss.17(a), Exchange Act ss.10(b) and Rule 10b-5. In addition the court ordered that the Defendants disgorge an aggregate $22,288,099 of profits together with $49,251,521 of prejudgment interest (as of December 31, 1994). The court also ordered the appointment of a special agent to examine the records of First Jersey for the period from November 1, 1982 through January 31, 1987 for the purpose of determining whether excessive markups and/or markdowns were charged to First Jersey customers beyond those proved at trial. On appeal to the Federal 2nd Circuit Appeals court, this judgment was upheld with the exception of the appointment of the special agent which was reversed. A petition for rehearing which was filed with the 2nd Circuit was denied. As a result of the judgment, on August 7, 1995, Robert E. Brennan and First Jersey filed voluntary petitions for relief in the United States Bankruptcy Court for the District of New Jersey under Chapter 11 of the Bankruptcy Code. In October 1997, the United States Supreme Court denied Certiorari in this case, ending all appeals available to Robert E. Brennan and First Jersey. On June 10, 1997, United States Bankruptcy Judge Kathryn C. Ferguson appointed 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). By virtue of his appointment as Trustee, Mr. Conway is empowered to vote (and with the approval of the Court), to sell Mr. Brennan's Common Stock and to direct the disposition of the sale proceeds. As a result Mr. Conway, in his capacity as Trustee, may be deemed a beneficial owner of such shares and a controlling person of FJS Properties, Inc. and Registrant. Mr. Conway, age 58, is currently and since 1995 has been a principal of Druker, Rahl & Fein, Business Consultants and Certified Public Accountants, with offices in Princeton, New Jersey. From 1988 until 1995, Mr. Conway was the Senior Manager of the Insolvency and Reorganization and Sports and Entertainment practice of Withum, Smith & Brown, a Princeton, New Jersey certified public accounting firm. On August 9, 1995, the State of New Jersey and the New Jersey Bureau of Securities instituted a civil action against Brennan, Barnett and others alleging, inter alia, securities fraud and racketeering activity. The complaint seeks injunctive relief, restitution and civil monetary penalties. Defendants deny any violations of law and intend to vigorously defend against this action. No assurances can be given as to the outcome of this matter. All of the directors will hold office until the next annual meeting of the stockholders of the General Partner and until their successors are elected and qualified. Compliance with Section 16(a) of the Exchange Act Based solely upon a review of Forms 3 and 4 (17 CFR 249.103 and 249.104) and any amendments thereto furnished to Registrant under Rule 16a-3(d) (17 CFR 240.16a-3(e) or written representations received by Registrant that no Forms 5 were required, Registrant believes that other than as hereinafter noted there were no officers, directors or beneficial owners of more than 10% of any class of equity securities of Registrant registered pursuant to Section 12, that failed to file on a timely basis any reports required by Section 16(a) during the most recent fiscal years. As noted above, as of June 10, 1997, Donald F. Conway may be deemed a beneficial owner of 80% of the general partner of Registrant Page 22 and a controlling person of FJS Properties, Inc. and Registrant. Mr. Conway has advised that no filings were required for a one year period after such appointment, and it would appear that a filing was required to have been made in June 1998. Registrant has not been advised of any filings by Mr. Conway as of February 23, 1999. Item 11. Executive Compensation The Registrant is not required to pay and did not pay any remuneration to the officers and directors of the General Partner. See Item 12, "Certain Relationships and Related Transactions." Item 12. Security Ownership of Certain Beneficial Owners and Management The Family Trust, a New Jersey trust, which was established by Robert Brennan, but as to which Mr. Brennan is neither a Trustee nor a Beneficiary, owns 1,558 Units (9.28%). No other person was known by Registrant to own beneficially more than 5% of the outstanding Units of Registrant. No directors, officers or partners of the General Partner own Units of Registrant except for the five Units owned by Mr. Bathgate, as the initial limited partner. Ownership of more than 5% of Registrant: (2) Name and Address (3) Amount and nature of (4) Percent (1) Title of Class of Beneficial Owner Beneficial Ownership of Class - ------------------ ------------------- -------------------- -------- Units of Limited The Family Trust 1,558 Units - legal and 9.28% Partnership 340 North Avenue beneficial owner Cranford, NJ 07016 As of March 1, 1999, Robert E. Brennan, Chapter 11 Debtor and Lawrence E. Bathgate, II were the sole shareholders of the common stock of the General Partner, owning 80% and 20% respectively. As described above under Item 10, Donald F. Conway, CPA, has been appointed as Trustee in the Chapter 11 Bankruptcy Proceeding involving Robert E. Brennan as Debtor. Mr. Conway is empowered to vote (and with the approval of the Court), to sell Mr. Brennan's Common Stock and to direct the disposition of the sale proceeds. As a result Mr. Conway, in his capacity as Trustee, may be deemed a beneficial owner of such shares and a controlling person of FJS Properties, Inc. and Registrant. Page 23 Item 13. Certain Relationships and Related Transactions During Registrant's fiscal years ended December 31, 1998, 1997 and, 1996, the General Partner and certain affiliated entities have earned or received compensation or payments for services from Registrant or its General Partner as follows: Reimbursement/Compensation Name of Recipient Capacity in Which served or Payment Received 1998 1997 1996 ---- ---- ---- FJS Properties, Inc. General Partner3 $ 1,056 $ 938 $ 319 Partnership Management Fee $ 6,673 $ 3,912 $ 1,364 Property Management Fee4 $20,760 $20,229 $19,101 Administrative Expenses5 $24,000 $24,000 $24,000 Tender Offer Administrative Fees6 $ 9,000 $ 0 $ 0 Lawrence E. Bathgate II Initial Limited Partner7 $ 31 $ 28 $ 9 Other Officers/Directors of General Partner Officer/Director of General Partner $ 0 $ 0 $ 0
In addition, certain officers and directors of the General Partner receive compensation from the General Partner, First Jersey and/or its affiliates (but not from Registrant) for services performed for various affiliated entities, which may include services performed for Registrant. - -------- 3 Represents the General Partner's interest in Adjusted Cash From Operations. Under Registrant's Partnership Agreement 99% of the Net Income and Net Loss of Registrant was allocated to the Limited Partners and 1% was allocated to the General Partner. Pursuant thereto, for the years ended December 31, 1998, 1997, and 1996, $360, ($1,106), and ($3,826) of the Registrant's taxable income (loss) was allocated to FJS Properties, Inc. For further information, reference is made to the material contained in the Prospectus under the heading "MANAGEMENT COMPENSATION." 4 The following property management fees were applicable to the years 1998, 1997 and 1996: YEAR Aggregate Retained by Paid to local Management Fee General Partner unaffiliated management company 1998 $103,805 $20,760 $83,045 1997 $101,144 $20,229 $80,915 1996 $95,505 $19,101 $76,404 In addition, the local unaffiliated management company received construction supervision fees of $19,605 during 1996, for supervision of outside construction work at the Pavilion Apartments. 5 Represents administrative fees for the respective years for preparation of the annual Forms 10K and quarterly Forms 10Q for Registrant for filing with the Securities and Exchange Commission. Such charges are in accordance with and pursuant to ss.10.1.3(b) of the Partnership Agreement of Registrant and do not exceed 90% of the amount Registrant would be required to pay to independent parties for comparable administrative services in the same geographic location. 6 Represents administrative fees for review of tender offer filings, preparation, filing and mailings of required responsive Securities and Exchange Commission Filings and materials for mailings to Limited Partners. As provided in the Partnership Agreement of Registrant such fees do not exceed 90% of the amount Registrant would be required to pay to independent parties for comparable administrative services in the same geographic location. 7 Represents distribution of Adjusted Cash From Operations attributable to the five Units Owned by Mr. Bathgate. For the years ended December 31, 1998, 1997, and 1996, $10.63, ($32.62), and ($112.81) of the Registrant's taxable income (loss) was allocated to his Units. Page 24 PART IV Item 14. Exhibits Financial Statement Schedules, and Reports On Form 8-K (a) 1&2 Financial Statements: See Index to Financial Statements in Item 8. (a) 3 Exhibits: 3.4 (a) Agreement of Limited Partnership, dated as of April 30, 1985, incorporated by reference to Exhibit A to the Prospectus of Registrant dated June 10, 1985 included in Registrant's Registration Statement on Form S-11 (Reg. No. 2-93980). (b) Amendment to Agreement of Limited Partnership dated as of October 22, 1985 incorporated by reference to Exhibit 3A.1 to Registrant's Registration Statement on Form S-11 (Reg. No. 2-93980). (c) Amendment to Agreement of Limited Partnership dated as of October 22, 1985, incorporated by reference to Exhibit 3.4(c) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1986 (File No 2-93980). (d) Amendment to Agreement of Limited Partnership, dated as of March 24, 1987, incorporated by reference to Exhibit 3.4(d) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No 2-93980). (e) Amendment No. 1 to Amended and Restated Certificate of Limited Partnership, dated as of August 17, 1987, incorporated by reference to Exhibit 3.4(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No 2-93980). 10. (a) Acquisition and Disposition Agreement dated as of May 2, 1986 between Registrant and FJS Properties, Inc., incorporated by reference to Exhibit 10A to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1986 (File No. 2- 93980). (b) Management Services Agreement dated as of May 2, 1986 between Registrant and FJS Properties, Inc., incorporated by reference to Exhibit 10B to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1986 (File No. 2-93980). (c) Contract for Sale and Purchase dated December 17, 1984, between Rockwell Investments, Ltd. and Registrant, incorporated by reference to Exhibit 10D to Registrant's Registration Statement on Form S-11 (Reg. No. 2-93980.) (d) Contract for Sale and Purchase dated December 17, 1984, between Vinsteve Investments Inc., Jimstein Investments, Ltd., Barwell Corporation, N.W. and Registrant, incorporated by reference to Exhibit 10E to Registrant's Registration Statement on Form S-11 (Reg. No. 2-93980.) (e) Mortgage and Security Agreement dated September 9, 1987, by FJS Properties Fund I, L.P., as mortgagor, and The Bank of Tokyo, Ltd., Miami Agency, as mortgagee, incorporated by reference to Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No 2-93980). (f) Mortgage Note, dated September 9, 1987, by FJS Properties Fund I, L.P. as maker to The Bank of Tokyo, Ltd., Miami Agency, as payee in the principal amount of $5,000,000, incorporated by reference to Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No 2-93980). Page 25 (g) Modification of Note, Mortgage and Assignment Agreement, dated as of September 9, 1992, between FJS Properties Fund I, L.P. as Mortgagor, and The Bank Of Tokyo, Ltd., Miami Agency, as Mortgagee incorporated by reference to Exhibit 10(g) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No 0-15755). (h) Modification of Note, Mortgage and Assignment Agreement, dated as of November 10, 1992, between FJS Properties Fund I, L.P. as Mortgagor, and The Bank Of Tokyo, Ltd., Miami Agency, as Mortgagee incorporated by reference to Exhibit 10(h) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No 0-15755). (i) Modification of Note, Mortgage and Assignment Agreement, dated as of March 31, 1993, between FJS Properties Fund I, L.P. as Mortgagor, and The Bank of Tokyo, Ltd., Miami Agency, as Mortgagee incorporated by reference to Exhibit 10(i) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No 0-15755). (j) Renewal Note, dated March 31, 1993, made by FJS Properties Fund I, L.P. to the Bank of Tokyo, Ltd incorporated by reference to Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1987 (File No 0-15755). (k) Property Management Agreement made as of December 1993, between FJS Properties Fund I, L.P., Owner, and M.L. Property Management, Inc., Managing Agent, incorporated by reference to Exhibit 10(k) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No 0-15755). (l) Third Modification of Note, Mortgage and Assignment Agreement dated as of February 28, 1994, between FJS Properties Fund I, L.P. and The Bank of Tokyo, Ltd., incorporated by reference to Exhibit 10(l) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No 0-15755). (m) Multifamily Note, dated March 29, 1994, made by FJS Properties Fund I, L.P. to Long Beach Bank, FSB, in the principal amount of $5,000,000, incor porated by reference to Exhibit 10(m) to Registrant's Annual Report on Form 10- K for the fiscal year ended December 31, 1993 (File No 0-15755). (n) Multifamily Mortgage, Assignment of Rents and Security Agreement and Fixture Filing, dated March 29, 1994, made by FJS Properties Fund I, L.P. to Long Beach Bank, FSB, incorporated by reference to Exhibit 10(n) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No 0-15755). (o) Assignment of Leases, dated March 29, 1994, made by FJS Properties Fund I, L.P. to Long Beach Bank, FSB, incorporated by reference to Exhibit 10(o) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No 0-15755). (p) Operations and Maintenance Agreement dated March 29, 1994, between FJS Properties Fund I, L.P. and Long Beach Bank, FSB, incorporated by reference to Exhibit 10(p) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No 0-15755). (q) Debt Service Reserve Fund Security Agreement, dated March 29, 1994, between FJS Properties Fund I, L.P. and Long Beach Bank, FSB, incorporated by reference to Exhibit 10(q) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No 0-15755). Page 26 (r) Replacement Reserve and Security Agreement, dated March 29, 1994, between FJS Properties Fund I, L.P. and Long Beach Bank, FSB, incorporated by reference to Exhibit 10(r) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No 0-15755). (s) Completion/Repair and Security Agreement, dated March 29, 1994, between FJS Properties Fund I, L.P. and Long Beach Bank, FSB, incorporated by reference to Exhibit 10(s) to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (File No 0-15755). (t) Extension of Property Management Agreement dated as of January 1, 1999, by and between FJS Properties Fund I, L.P. and ML Property Management Inc. (b) Reports on Form 8-K filed during the last quarter of the fiscal year: None. Financial Statement Schedules Filed Pursuant to Item 13(B) See Index to Financial Statements in Item 8. Page 27 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. FJS PROPERTIES, INC. General Partner Dated: March 30, 1999 By: Andrew C. Alson --------------------------------------- Andrew C. Alson, President Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities (with respect to the General Partner) and on the dates indicated. Dated: March 30, 1999 By: Robert E. Brennan ------------------------------------ Robert E. Brennan, Director of the General Partner Dated: March 30, 1999 By: Lawrence E. Bathgate, II ----------------------------------- Lawrence E. Bathgate, II, Director of the General Partner Dated: March 30, 1999 By: Andrew C. Alson ------------------------------------ Andrew C. Alson, President and Director of the General Partner (Principal Executive Officer) Dated: March 30, 1999 By: Roger Barnett ------------------------------------ Roger Barnett, Secretary and Treasurer of the General Partner (Principal Financial and Accounting Officer) Page S-1 EX-10 2 EXTENSION OF PROPERTY MANAGEMENT AGREEMENT Item 14 - (a)3 Exhibit 10(t) EXTENSION OF PROPERTY MANAGEMENT AGREEMENT THIS AGREEMENT (The Extension Agreement) made as of this 1st day of January, 1999, by and between FJS PROPERTIES FUND I, L.P., a Delaware Limited Partnership ("Owner"), and M.L. PROPERTY MANAGEMENT, INC., a Florida Corporation ("Management Company"). WHEREAS, Owner and Management Company have previously entered into that certain management agreement (the "Management Agreement") dated as of December 1993, for the property management of the garden apartment complex known as the Pavilion Apartments, West Palm Beach, Florida, and WHEREAS, the Management Agreement by its term originally expired at the end of December 1998, and WHEREAS, the Owner and Management Company desire to further extend the term of the Management Agreement as herein provided, NOW THEREFORE, the parties agree as follows: 1. The Management Agreement shall and hereby is extended for an additional five year period to expire on December 31, 2003, subject to the provisions for termination prior to the expiration of the term as provided in sections 3.3 of the Management Agreement. 2. In securing tenants for the Property, the Management Company shall be authorized to employ on behalf of the Owner, the services of unaffiliated real estate brokers and other similar tenant referral professionals when the Management Company deems it reasonably necessary. Commissions paid to any such brokers or professionals (which shall in no event exceed those reasonably customary for such services in the locality where the Property is located) for tenant referrals shall be at Owner's expense. 3. Except as modified herein, all of the terms and provisions of the Management Agreement shall remain in full force and effect. 4. The mailing address for notices to both Owner and Owner's Representative is: 264 ROUTE 537 EAST, COLTS NECK, NJ 07722. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and seals, or caused these presents to be signed by their proper corporate offices and their proper corporate seal to be affixed hereto, the day and year first above written. OWNER FJS PROPERTIES FUND I, L.P. by: FJS PROPERTIES, INC., general partner by: Andrew C. Alson ----------------------------- Andrew C. Alson, president MANAGEMENT COMPANY: M.L. PROPERTY MANAGEMENT, INC. by: Murray Liebowitz ----------------------------- Murray Liebowitz, President EX-27 3 FDS --
5 This schedule contains summary financial information extracted from the consolidated balance sheet and the consolidated statement of operations and is qualified in its entirety by reference to said statements. YEAR DEC-31-1998 Dec-31-1998 458,782 0 0 0 0 758,548 10,818,939 4,772,099 7,076,729 341,667 0 0 0 0 2,065,124 7,076,729 0 2,081,901 625,402 978,624 20,764 0 463,687 34,952 0 34,952 0 0 0 34,952 2.06 2.06
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