-----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, CF8dcfQRZF6HYOsOe5wK3ODNm0NBaOYsMA+DBjb3rufw5i+++SCOZmjwfiAuEJeA dgOMdajcI4raKqAPt/7qOA== 0000950148-96-002653.txt : 19961118 0000950148-96-002653.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950148-96-002653 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REAL AMERICAN PROPERTIES CENTRAL INDEX KEY: 0000758479 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 953906164 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20205 FILM NUMBER: 96663031 BUSINESS ADDRESS: STREET 1: 9090 WILSHIRE BLVD STE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3102782191 MAIL ADDRESS: STREET 2: 9090 WILSHIRE BLVD SUITE 201 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 FORMER COMPANY: FORMER CONFORMED NAME: HUTTON REAL AMERICAN PROPERTIES DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended SEPTEMBER 30, 1996 Commission File Number 2-94725 REAL AMERICAN PROPERTIES (A California Limited Partnership) I.R.S. Employer Identification No. 95-3906164 9090 WILSHIRE BLVD., SUITE 201 BEVERLY HILLS, CALIF. 90211 Registrant's Telephone Number, Including Area Code (310) 278-2191 Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ 2 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996 PART I. FINANCIAL INFORMATION Item 1. Financial Statements Balance Sheets, September 30, 1996 and December 31, 1995. . . . . . . . . . . . . . . . . . 1 Statements of Operations, Nine and Three Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . 2 Statement of Partners' Equity (Deficiency), Nine Months Ended September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . 3 Statements of Cash Flows Nine Months Ended September 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . 4 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS SEPTEMBER 30, 1996 AND DECEMBER 31, 1995 ASSETS
1996 1995 (Unaudited) (Audited) -------------- -------------- RENTAL PROPERTY, at cost (Notes 1 and 3) Land $ - $ 2,170,920 Buildings - 12,360,101 Furniture and equipment - 835,000 -------------- -------------- - 15,366,021 Less accumulated depreciation - (4,430,896) -------------- -------------- - 10,935,125 -------------- -------------- CASH AND CASH EQUIVALENTS (Note 1) 1,992,796 442,803 -------------- -------------- RESTRICTED CASH (Note 1) - 5,236,780 -------------- -------------- INVESTMENT IN LIMITED PARTNERSHIP (Note 2) OTHER ASSETS: Due from rental agent, including restricted cash held for security deposits and reserves of $68,163 at December 31, 1995 - 114,728 Other receivables and prepaid expenses (Note 5) 86,735 96,525 -------------- -------------- 86,735 211,253 -------------- -------------- TOTAL ASSETS $ 2,079,531 $ 16,825,961 ============== ============== LIABILITIES AND PARTNERS' EQUITY LIABILITIES: Mortgage notes payable (Note 3) $ - $ 9,649,180 Accounts payable and accrued expenses (Notes 1 and 5) 892 406,383 Accrued interest payable (Note 1) - 1,226,835 Liability for earthquake loss (Note 1) - 5,363,547 Tenant security deposits - 31,028 -------------- -------------- 892 16,676,973 -------------- -------------- COMMITMENTS AND CONTINGENCIES (Notes 5 and 6) PARTNERS' EQUITY 2,078,639 148,988 -------------- -------------- TOTAL LIABILITIES AND PARTNERS' EQUITY $ 2,079,531 $ 16,825,961 ============== ==============
The accompanying notes are an integral part of these financial statements. 1 4 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Unaudited)
Nine months Three months Nine months Three months ended ended ended ended Sept. 30, 1996 Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1995 -------------- -------------- -------------- -------------- RENTAL OPERATIONS: Revenues Rental income $ 246,417 $ - $ 506,300 $ 172,554 Other income 7,050 - 23,360 6,229 -------------- ------------- ------------- ------------- 253,467 - 529,660 178,783 -------------- ------------- ------------- ------------- Expenses Operating expenses 178,621 - 373,972 133,431 Management fees - affiliate in 1995 (Note 5) 8,871 - 24,663 (7,668) Depreciation 34,872 - 104,616 34,872 General and administrative expenses 12,180 - 27,790 8,070 Interest expense (Notes 1 and 3) 360,093 - 256,949 85,383 -------------- ------------- ------------- ------------- 594,637 - 787,990 254,088 -------------- ------------- ------------- ------------- Loss from rental operations (341,170) - (258,330) (75,305) -------------- ------------- ------------- ------------- PARTNERSHIPS OPERATIONS: Interest income ( Note 5 ) 160,123 40,298 15,427 3,997 -------------- ------------- ------------- ------------- Expenses General and administrative expenses 20,696 8,587 34,105 11,475 Professional fees (Note 5) 107,966 8,600 44,613 9,842 -------------- ------------- ------------- ------------- 128,662 17,187 78,718 21,317 -------------- ------------- ------------- ------------- Income (loss) from partnership operations 31,461 23,111 (63,291) (17,320) -------------- ------------- ------------- ------------- GAIN (LOSS) ON SALE OF RENTAL PROPERTIES (Note 1) 2,239,360 (41,623) - - -------------- ------------- ------------- ------------- NET INCOME (LOSS) $ 1,929,651 $ (18,512) $ (321,621) $ (92,625) ============== ============= ============= ============= NET INCOME (LOSS) PER LIMITED PARTNERSHIP INTEREST (Note 5) $ 90 $ (1) $ (16) $ (5) ============== ============= ============= =============
The accompanying notes are an integral part of these financial statements. 2 5 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENT OF PARTNERS' EQUITY (DEFICIENCY) NINE MONTHS ENDED SEPTEMBER 30, 1996 (Unaudited)
General Limited Partners Partners Total ------------ ------------ ------------ PARTNERSHIP INTERESTS, September 30, 1996 1 21,500 21,501 ============ ============ ============ EQUITY (DEFICIENCY), January 1, 1996 $ (184,571) $ 333,559 $ 148,988 Net income for the nine months ended September 30, 1996 19,297 1,910,354 1,929,651 ------------ ------------ ------------ EQUITY (DEFICIENCY), September 30, 1996 $ (165,274) $ 2,243,913 $ 2,078,639 ============ ============ ============
The accompanying notes are an integral part of these financial statements. 3 6 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (Unaudited)
1996 1995 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 1,929,651 $ (321,621) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 34,872 104,616 Gain on sale of rental properties (2,239,360) - Changes in operating assets and liabilities: (Increase) decrease in: Due from affiliated rental agent 114,728 (24,108) Other receivables and prepaid expenses 9,790 1,680 (Decrease) increase in: Accounts payable and accrued expenses (405,491) 80,004 Accrued interest payable (1,226,835) - Tenant security deposit (31,028) - ------------ ------------ Net cash used in operating activities (1,813,673) (159,429) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Decrease (increase) in restricted cash 5,236,780 (79,346) Decrease in liability for earthquake loss (5,363,547) 79,346 Proceeds from sale of rental properties 13,139,613 - ------------ ------------ Net cash provided by investing activities 13,012,846 - ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on mortgage notes payable (9,649,180) (27,411) ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,549,993 (186,840) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 442,803 659,440 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,992,796 $ 472,600 ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for interest $ 360,093 $ 256,949 ============ ============
The accompanying notes are an integral part of these financial statements. 4 7 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The information contained in the following notes to the financial statements is condensed from that which would appear in the annual audited financial statements; accordingly, the financial statements included herein should be reviewed in conjunction with the financial statements and related notes thereto contained in the annual report for the year ended December 31, 1995 of REAL American Properties (the "Partnership"). Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire year. In the opinion of NAPICO, the accompanying unaudited financial statements contain all adjustments (consisting primarily of normal recurring accruals) necessary to present fairly the financial position of the Partnership as of September 30, 1996, and the results of operations for the nine and three months then ended and changes in cash flows for the nine months then ended. ORGANIZATION The Partnership was formed under the California Limited Partnership Act on March 9, 1984. The general partners are National Partnership Investments Corp. ("NAPICO"), a California corporation, and Real Estate Services XIII Inc., a Delaware corporation. Casden Investment Corporation owns 100 percent of NAPICO's stock. LB I Group Inc. owns 100 percent of the stock of Real Estate Services XIII Inc. The Partnership was formed to invest in a diversified portfolio of five residential apartment projects, one of which was foreclosed on by the lender in 1993. Two of the Partnership's properties were contributed to a separate unaffiliated limited partnership in 1992, and were subsequently sold by such limited partnership in 1995 as more particularly described in Note 2. The remaining two apartment complexes were sold in April and May 1996. Accordingly, the Partnership's sole assets as of September 30, 1996 consist of cash, a contingent note receivable from the purchaser of the Partnership's Northridge property, and an interest in a publicly traded real estate investment trust described below. After the interest in the real estate investment trust is converted to cash (Note 2), NAPICO intends to cause the Partnership to dissolve in accordance with the Partnership Agreement. The Partnership offered 45,000 limited partnership interests ("Units") at $1,000 each, of which 21,500 were sold through a public offering. The terms of the Partnership's Amended and Restated Certificate and Agreement of Limited Partnership (the "Partnership Agreement") provide, among other things, for allocation to the partners of profits, losses and any special allocations with respect thereto. Under the terms of the Partnership Agreement, cash available for distribution is allocated 90 percent to the limited partners as a group and 10 percent to the general partners. Net proceeds from sale or refinancing are distributed 100 percent to the limited partners until they have received an amount equal to the aggregate adjusted capital values, as defined, plus a cumulative non-compounded 8 percent annual return. The balance is distributed 85 percent to the limited partners and 15 percent to the general partners. 5 8 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RENTAL PROPERTY AND DEPRECIATION There are no remaining rental properties owned by the Partnership, therefore no rental property cost and accumulated depreciation are included in the September 30, 1996 financial statements. At December 31, 1995, the rental properties were stated at cost. Depreciation was provided on the straight-line method over the estimated useful lives of the buildings and equipment. The buildings and furniture and equipment were depreciated over 30 years and 5 years, respectively. On January 17, 1994, the Partnership's property located in Northridge, California sustained major damage due to the severe earthquake in the Los Angeles area and the entire property was vacated and remained vacant from the time of the earthquake until the time of sale. The casualty insurance policy insuring the Northridge property covered to a limited extent property damage and loss of rental income due to the earthquake. In August 1994, a partial settlement for property damage in the amount of approximately $3,909,000 was allocated to the Partnership under a master umbrella insurance policy, covering earthquake damage for this and other properties managed by an affiliate of NAPICO. In November 1995, the Partnership received a final settlement payment from its insurance company in the amount of $1,368,000 related to the earthquake loss. This amount was held in an escrow account by the Northridge property lender. Pursuant to the terms of the loan documents between the Partnership and the lender, the lender had a security interest in and other rights to the insurance proceeds. All insurance proceeds were included in restricted cash and liability for earthquake loss at December 31, 1995. Unpaid interest of $1,345,000 and property taxes of $354,000 relating to the Northridge property were accrued as of December 31, 1995. On May 15, 1996, the Partnership sold the Northridge property. The Partnership realized a gain of approximately $1,796,000, net of additional costs of $41,623 recognized in the third quarter of 1996. Pursuant to a contingent note received from the purchaser at the closing, the Partnership is entitled to additional proceeds under certain conditions. On April 19, 1996, the Partnership sold West Colonial Apartments for $4,070,000 and realized and a gain of approximately $444,000. 6 9 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Partnership authorized a $1,526,500 distribution to the limited partners, which is expected to be made in November 1996. This distribution represents proceeds received from the sale of West Colonial and Northridge Apartments. NET LOSS PER LIMITED PARTNERSHIP INTEREST Net loss per limited partnership interest was computed by dividing the limited partners' share of net loss by 21,500, the number of limited partnership interests outstanding for the periods presented. AMORTIZATION OF LOAN FEES Loan fees are being amortized on the straight-line method over a fifteen-year period. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash and bank certificates of deposit, with an original maturity of three months or less. NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIP In September 1992, the Partnership completed an exchange transaction involving the Del Coronado I and II properties. The Partnership transferred the Del Coronado properties to an unaffiliated Arizona limited partnership, 843 South Longmore Limited Partnership, in exchange for a subordinated 20 percent limited partnership interest in 843 South Longmore Limited Partnership. In August 1995, the Del Coronado properties were sold by 843 South Longmore Limited Partnership to an affiliate of Equity Residential Properties ("EQR"), a publicly held Real Estate Investment Trust ("REIT"). The net proceeds of $5,682,262 paid to 843 South Longmore Limited Partnership was in the form of limited partnership units in the operating partnership controlled by the REIT. Of the net proceeds, the Partnership received an allocation of 23,524 units, which were converted to REIT stock and sold in November 1996 at prices ranging from $37.875 to $38.125 per share, or approximately $891,000 (excluding brokerage commissions), on the New York Stock Exchange. NOTE 3 - MORTGAGE NOTES PAYABLE The Partnership had three notes payable separately secured by its two remaining properties as of December 31, 1995, as follows: 7 10 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1996 NOTE 3 - MORTGAGE NOTES PAYABLE (CONTINUED) a. The Northridge property was encumbered as of December 31, 1995 by a first deed of trust securing a note in the approximate principal balance of $6,073,000, and a second deed of trust in the approximate principal balance of $410,000. The first note bore interest at 9.25% per annum and was payable in monthly installments of approximately $53,500. The entire balance of the note was due and payable on or before August 1, 1996. The Northridge second note bore interest at 10% per annum and was payable in monthly installments of approximately $3,400. The entire balance of the Northridge second note matured on November 15, 1995. In February 1994, the Partnership ceased making payments to both of the lenders with respect to the Northridge property. Both the first and second notes were repaid upon the sale of the property in May 1996, however, the second note was paid at a discount of approximately $100,000. b. The West Colonial Apartments was encumbered by a first deed of trust securing a note in the approximate principal balance of $3,167,000 as of December 31, 1995. The note bore interest at 10.7% per annum and was payable in monthly installments of approximately $32,000. The entire balance of the note was due and payable on or before July 31, 1996. The loan was repaid upon sale of the property on April 19, 1996. NOTE 4 - INCOME TAXES No provision has been made for income taxes in the accompanying financial statements as such taxes, if any, are the liability of the individual partners. NOTE 5 - RELATED PARTY TRANSACTIONS a. The Partnership had entered into agreements with an affiliate of NAPICO to manage the operations of the West Colonial and Northridge rental properties owned by the Partnership. The agreements changed to a month-to-month basis and provided, among other things, for a management fee equal to 5% of gross revenue for West Colonial through July 23, 1995 and approximately $2,450 per month for the Northridge property through the date of sale. Management fees charged by the NAPICO affiliate under these agreements were approximately $9,800 and $32,000 for the nine months ended September 30, 1996 and 1995, respectively. Included in the management fees is approximately $9,800 with respect to the Northridge property in 1996 which has been included in earthquake costs. On July 24, 1995, management of West Colonial was transferred to an independent property management firm. The management agreement was on a month-to-month basis and provided for a management fee of 3.5% of gross revenue, equal to $8,900 for the nine months ended September 30, 1996. Included in other receivables and prepaid expenses at September 30, 1996 and December 31, 1995, is $86,194 due from the affiliated company of NAPICO that served as the rental agent for a property that was owned by the Partnership. 8 11 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEPTEMBER 30, 1996 NOTE 5 - RELATED PARTY TRANSACTIONS b. The Partnership reimburses NAPICO for certain expenses. The reimbursement to NAPICO was $4,196 and $9,440 for the nine months ended September 30, 1996 and 1995, respectively and is included in the Partnership's operating expenses. c. Under the terms of the Partnership Agreement, the Partnership may be obligated to pay the general partners or their affiliates a liquidation fee equal to 15% of the net proceeds from sale or refinancing of a project. No part of such fee shall be paid unless the limited partners have first received certain amounts as stated in the Partnership Agreement. d. Certain other fees may be payable to the general partners, under certain circumstances, as stated in the Partnership Agreement. e. Pursuant to a Memorandum of Understanding entered into on August 11, 1995, an affiliate of NAPICO that served as the management company for properties owned by the Partnership, paid $66,706 to the Partnership on May 1, 1996. Such amount represents interest on Partnership funds maintained in a master disbursement account by the management company. In addition, on May 1, 1996 the Partnership reimbursed Real Estate Services XIII Inc. $50,000 for professional fees, which were estimated to have been paid on behalf of the Partnership in connection with issues raised in the Memorandum of Understanding. NOTE 6 - CONTINGENCIES NAPICO is a plaintiff in various lawsuits and has also been named as defendant in other lawsuits arising from transactions in the ordinary course of business. In the opinion of NAPICO, the claims will not result in any material liability to the Partnership. NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments. The carrying amount of assets and liabilities reported on the balance sheets that require such disclosure approximates fair value due to their short-term maturity. 9 12 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS CAPITAL RESOURCES AND LIQUIDITY The Partnership received a total of $10,750,000 in subscriptions for units of limited partnership interests (at $1,000 per unit) during the period September 12, 1985 to February 28, 1986, pursuant to a registration statement on Form S-11. $10,750,000 in subscriptions were received pursuant to the exercise of warrants and the sale of additional limited partnership interests from April 1, 1986 to May 31, 1986. The Partnership's primary sources of funds are income from rental operations and interest income on money market funds and certificates of deposit. The Partnership acquired five apartment complexes since its inception, one of which was foreclosed by the lender in 1993. In 1992, two of the Partnership's properties (the Del Coronado Properties) were contributed to 843 South Longmore Limited Partnership, an unaffiliated limited partnership, and such buildings were thereafter sold by said partnership for REIT shares in August of 1995. The Partnership's remaining two apartment complexes of West Colonial and Northridge were sold in April 1996 and May 1996, respectively. In August 1995, the Del Coronado properties were sold by 843 South Longmore Limited Partnership to an affiliate of Equity Residential Properties ("EQR"), a publicly held Real Estate Investment Trust ("REIT"). The net proceeds of $5,682,262 paid to 843 South Longmore Limited Partnership was in the form of limited partnership units in the operating partnership controlled by the REIT. Of the net proceeds, the Partnership received an allocation of 23,524 units, which were converted to REIT stock and sold in November 1996 at prices ranging from $37.875 to $38.125 per share, or approximately $891,000 (excluding brokerage commissions), on the New York Stock Exchange. RESULTS OF OPERATIONS Rental operations consist primarily of rental income and depreciation expense, debt service, and normal operating expenses to maintain the properties. Depreciation is provided on the straight-line method over the estimated useful lives of the buildings and equipment. Substantially all of the rental units in the West Colonial apartment project were leased on a month-to-month basis. The Partnership's statements of operations included rental operations through the day the properties were sold. 10 13 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATION (CONTINUED) On January 17, 1994, the Northridge rental property sustained major damage due to the severe earthquake in the Los Angeles area and the entire property was vacated and remained vacant from the time of the earthquake until the time of sale. The casualty insurance policy insuring the Northridge property covered, to a limited extent, property damage and loss of rentals as a result of the earthquake. In August 1994, a partial settlement for property damage in the amount of approximately $3,909,000 was allocated to the Partnership under a master umbrella insurance policy, covering earthquake damage for this and other properties managed by a related party of NAPICO. In November 1995, the Partnership received a final settlement from its insurance company in the amount of $1,368,000 related to the earthquake loss. This amount was held in an escrow account by the Northridge property lender until the time of sale. Pursuant to the terms of the loan documents between the Partnership and the lender, the lender had a security interest in and other rights to the insurance proceeds. All insurance proceeds were included in restricted cash and liability for earthquake loss at December 31, 1995. Unpaid interest of $1,345,000 and property taxes of $354,000 relating to the Northridge property were accrued as of December 31, 1995. On May 15, 1996, the Partnership sold the Northridge property. The Partnership realized a net gain of approximately $1,796,000, net of additional costs of $41,623 recognized in the third quarter of 1996. The Partnership may be entitled to additional proceeds from property tax refunds and/or a contingent promissory note from the buyer of the Northridge property. On April 19, 1996, the Partnership sold West Colonial Apartments for $4,070,000 and realized a gain of approximately $444,000. Partnership operations consist primarily of interest ficates of deposit and other temporary investment of funds. Included in interest income for the nine months ended September 30, 1996 is $66,706 in interest related to funds maintained in the master disbursement account and received on May 1, 1996. Operating expenses of the Partnership consist substantially of recurring general and administrative expenses and professional fees for services rendered to the Partnership. Included in professional fees in 1996 is $50,000 paid to Real Estate Services XIII Inc. as reimbursement for professional fees paid on behalf of the Partnership in connection with issues raised in the Memorandum of Understanding. The Partnership did not make cash distributions during the first nine months of 1996. 11 14 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1996 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS: As of September 30, 1996, NAPICO was a plaintiff or a defendant in several lawsuits. None of these suits were related to the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) No exhibits are required per the provision of item 601 of regulation S-K 12 15 REAL AMERICAN PROPERTIES (A CALIFORNIA LIMITED PARTNERSHIP) SEPTEMBER 30, 1996 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. REAL AMERICAN PROPERTIES (a California limited partnership) By: National Partnership Investments Corp. a General Partner Date: --------------------------------------- By: -------------------------------------- Bruce Nelson President Date: --------------------------------------- By: -------------------------------------- Shawn Horwitz Executive Vice President and Chief Financial Officer 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 1,992,796 0 0 0 0 2,079,531 0 0 2,079,531 892 0 0 0 0 2,078,639 2,079,531 0 2,652,950 0 0 363,206 0 360,093 1,929,651 0 1,929,651 0 0 0 1,929,651 0 0
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