-----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, WSx6dLOozwxKsk93UwK+Tb+lZ8XorXwme8RFS+wX9ExAcDEZvKI1BvLHb5uqEOeo sDwS/eAWlj6+eo9nSq3kYA== 0000313499-97-000005.txt : 19971111 0000313499-97-000005.hdr.sgml : 19971111 ACCESSION NUMBER: 0000313499-97-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971110 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTORS FIRST STAGED EQUITY L P CENTRAL INDEX KEY: 0000768834 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363310965 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14470 FILM NUMBER: 97711155 BUSINESS ADDRESS: STREET 1: 630 DUNDEE ROAD STREET 2: SUITE 220 CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 FORM 10-QSB.--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 or [ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period.........to......... Commission file number 0-14470 INVESTORS FIRST-STAGED EQUITY L.P. (Exact name of small business issuer as specified in its charter) Delaware 36-3310965 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 630 Dundee Road, Suite 220 Northbrook, Illinois 60062 (Address of principal executive offices) (847) 714-9600 Issuer's telephone number Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED BALANCE SHEET (in thousands, except unit data) (Unaudited) September 30, 1997 Assets Cash and cash equivalents: Unrestricted $ 3,243 Restricted-tenant security deposits 426 Accounts receivable, net of allowance for doubtful accounts of $10 14 Note receivable 87 Escrows for taxes and insurance 302 Restricted escrows 880 Other assets 768 Investment properties: Land $ 8,402 Buildings and related improvements 38,786 47,188 Less accumulated depreciation (23,616) 23,572 $ 29,292 Liabilities and Partners' Deficit Liabilities Accounts payable $ 18 Accrued interest 1,283 Tenant security deposits 380 Accrued taxes 126 Other liabilities 102 Advances from affiliates of the General Partner 319 Mortgage notes payable 46,643 Partners' Deficit General partner $ (377) Limited partners (16,267 units issued and outstanding) (19,202) (19,579) $ 29,292 See Accompanying Notes to Consolidated Financial Statements b) INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Rental income $ 1,804 $ 1,648 $ 5,382 $ 5,180 Other income 134 92 285 220 Total revenues 1,938 1,740 5,667 5,400 Expenses: Operating 531 559 1,574 1,572 General and administrative 50 63 122 211 Maintenance 147 250 549 619 Depreciation 438 478 1,299 1,427 Interest 809 1,090 2,998 2,817 Property taxes 127 117 356 339 Bad debt recovery, net (8) -- (8) -- Total expenses 2,094 2,557 6,890 6,985 Loss before gain on sale of investment property and extraordinary item (156) (817) (1,223) (1,585) Gain on sale of investment property (Note C) -- -- 2,042 -- (Loss) income before extraordinary item (156) (817) 819 (1,585) Extraordinary item - loss on early extinguishment of debt (Note D) -- -- (1,348) -- Net loss $ (156) $ (817) $ (529) $ (1,585) Net loss allocated to general partner (1%) $ (2) $ (8) $ (5) $ (16) Net loss allocated to limited partners (99%) (154) (809) (524) (1,569) Net loss $ (156) $ (817) $ (529) $ (1,585) Per limited partnership unit: (Loss) income before extraordinary item $ (9.47) $ (49.73) $ 49.84 $ (96.45) Extraordinary item -- -- (82.04) -- Net loss $ (9.47) $ (49.73) $ (32.20) $ (96.45) See Accompanying Notes to Consolidated Financial Statements c) INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (in thousands, except unit data) (Unaudited) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 16,267 -- $ 48,802 $ 48,802 Partners' deficit at December 31, 1996 16,267 $ (372) $ (18,678) $ (19,050) Net loss for the nine months ended September 30, 1997 -- (5) (524) (529) Partners' deficit at September 30, 1997 16,267 $ (377) $ (19,202) $ (19,579) See Accompanying Notes to Consolidated Financial Statements d) INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net loss (529) $ (1,585) Adjustments to reconcile net loss to net cash used in operating activities: Gain on sale of investment property (2,042) -- Extraordinary loss on early extinguishment of debt 1,348 -- Depreciation 1,299 1,427 Amortization of loan costs and leasing commissions 97 64 Bad debt recovery, net (8) -- Change in accounts: Restricted cash 21 (103) Accounts receivable 61 87 Escrows for taxes and insurance (66) 256 Other assets (189) (52) Accounts payable (60) (66) Accrued interest (651) (199) Tenant security deposit liabilities (66) 32 Property taxes 126 116 Other liabilities (273) (476) Net cash used in operating activities (932) (499) Cash flows from investing activities: Proceeds from sale of investment property 4,360 -- Property improvements and replacements (268) (140) Withdrawals from restricted escrows 573 3 Deposits to restricted escrows (556) (588) Collections on note receivable 33 29 Net cash provided by (used in) investing activities 4,142 (696) Cash flows from financing activities: Payment of loan costs (350) (368) Payments on mortgage notes payable (347) (507) Repayment of mortgage note payable (11,725) (10,577) Payment of mortgage fee (1,102) -- Proceeds from refinance of mortgage note payable 12,000 12,000 Net cash (used in) provided by financing activities (1,524) 548 Net increase (decrease) in unrestricted cash and cash equivalents 1,686 (647) Unrestricted cash and cash equivalents at beginning of period 1,557 2,807 Unrestricted cash and cash equivalents at end of period $ 3,243 $ 2,160 Supplemental disclosure of cash flow information: Cash paid for interest $ 3,575 $ 2,817 See Accompanying Notes to Consolidated Financial Statements e) INVESTORS FIRST-STAGED EQUITY L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Investors First- Staged Equity L.P. (the "Partnership" or the "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of VMS Realty Investment II (the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1996. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. NOTE B - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all Partnership activities. The General Partner and its affiliates may be reimbursed for direct expenses relating to the Partnership's administration and other costs charged on behalf of the Partnership. Pursuant to an agreement dated July 14, 1994, a transaction is pending in which the current General Partner would be replaced by MAERIL, Inc., an affiliate of Insignia Financial Group, Inc. ("Insignia"). The substitution of MAERIL, Inc. as the General Partner is expected, but there is no assurance that the transaction will be consummated. The Partnership has engaged affiliates of Insignia to provide day-to-day management of the Partnership's properties. These affiliates received approximately $288,000 and $283,000 of such fees for the nine months ended September 30, 1997 and 1996, respectively. An affiliate of Insignia also provided partnership administration and management services for the Partnership. Reimbursements for direct expenses relating to these services totaled approximately $108,000 (includes approximately $4,000 of construction service fees) for the nine months ended September 30, 1997, and $108,000 for the nine months ended September 30, 1996. NOTE C - SALE OF BUILDINGS AND LAND AT SERRAMONTE PLAZA On April 10, 1997, the Partnership sold three buildings and two parcels of land associated with Serramonte Plaza located in Daly City, California, to an unaffiliated party, Daly City Partners, LLC, a California limited liability company. The property was sold in an effort to maximize the Partnership's return on its investment. The sales price for the three buildings and two parcels of land was approximately $4,778,000 and was determined primarily by reference to appraised values. The sale resulted in net proceeds of approximately $4,360,000, after payment of closing costs, and the gain on the sale amounted to approximately $2,042,000. The proceeds from the sale were used to reduce the mortgage debt secured by Serramonte Plaza. NOTE D - REFINANCE OF SERRAMONTE PLAZA On June 28, 1996, the first mortgage note secured by Serramonte Plaza was refinanced with the outstanding principal balance being increased to $12,000,000. The old mortgage note, in the amount of $10,577,000, was repaid from loan proceeds received from the refinancing. The mortgage note was to mature in June 1999, and required monthly interest-only payments. On the maturity date, in addition to all other sums, including all principal, interest and other amounts owed, additional interest equal to $1,680,000 was owed to the lender and would become a part of the indebtedness. This additional interest was being accrued over the term of the loan, and increased the effective interest rate of the new debt to 15.00%. In June 1997, the Partnership refinanced the mortgage indebtedness encumbering Serramonte Plaza. The previous mortgage note of approximately $7,365,000 was repaid from loan proceeds received from the refinancing. The new mortgage debt of $12,000,000 carries a stated interest rate of 8.67%, with a balloon payment due July 1, 2004. An extraordinary loss on early extinguishment of debt of approximately $1,348,000 was realized during the second quarter of 1997 due to the payment of approximately $1,102,000 in early payment mortgage fees and a loss of approximately $246,000 on the write-off of unamortized loan costs. In conjunction with the refinancing, a capital improvement reserve of approximately $500,000 was established and approximately $350,000 in loan costs were incurred. These loan costs are included in "Other assets" on the accompanying balance sheet and will be amortized over the term of the loan. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment properties consist of two apartment complexes and one commercial property. The following table sets forth the average occupancy for these properties for the nine months ended September 30, 1997 and 1996: Average Occupancy 1997 1996 Rivercrest Village Apartments Sacramento, California 91% 89% Richardson Highlands Apartments Marin City, California 98% 98% Serramonte Plaza Daly City, California 87% 88% Occupancy at Rivercrest Village Apartments is low due to efforts by property management to decrease the student population in order to stabilize occupancy with a long term tenant base. Occupancy at Serramonte Plaza is down primarily due to the vacancy of one building which accounted for approximately 8% of the leaseable area of the property. The tenant's lease expired during the third quarter of 1996. This building was sold in April 1997 (see discussion below). The Partnership realized a net loss of approximately $529,000 for the nine months ended September 30, 1997, compared to a net loss of approximately $1,585,000 for the nine months ended September 30, 1996. For the three months ended September 30, 1997, the Partnership realized a net loss of approximately $156,000 compared to a net loss of approximately $817,000 for the corresponding period of 1996. The decreased net loss for the nine months ended September 30, 1997, versus the corresponding period of 1996, resulted from the gain of approximately $2,042,000 realized on the sale of buildings and land at Serramonte Plaza in the second quarter of 1997 (see discussion below). Also contributing to the decreased net loss for the three and nine month periods ended September 30, 1997, was an increase in rental income and decreases in maintenance and depreciation expense. Rental income increased primarily due to rental rate increases at the Richardson Highlands Apartments property. Maintenance expense decreased primarily due to the 1996 completion of an exterior painting project at Richardson Highlands Apartments. Depreciation expense decreased due to the sale of buildings and land at Serramonte Plaza. Partially offsetting the decreased net loss for the three and nine month periods ended September 30, 1997, was an extraordinary loss on early extinguishment of debt of approximately $1,348,000 realized on the refinance of Serramonte Plaza (see discussion below). Also, interest expense increased during the nine months ended September 30, 1997, as a result of the accrual of the additional interest which is related to the 1996 refinancing of the debt secured by Serramonte Plaza. This additional interest was being accrued over the term of the loan beginning in the third quarter of 1996 (see discussion below). This additional interest was discontinued with the June 1997 refinance of this indebtedness (See "Note D"). On April 10, 1997, the Partnership sold three buildings and two parcels of land associated with Serramonte Plaza located in Daly City, California, to an unaffiliated party, Daly City Partners, LLC, a California limited liability company. The property was sold in an effort to maximize the Partnership's return on its investment. The sales price for the three buildings and two parcels of land was approximately $4,778,000 and was determined primarily by reference to appraised values. The sale resulted in net proceeds of approximately $4,360,000, after payment of closing costs, and the gain on the sale amounted to approximately $2,042,000. The proceeds from the sale were used to reduce the mortgage debt secured by Serramonte Plaza. In June 1997, the Partnership refinanced the mortgage indebtedness encumbering Serramonte Plaza. The previous mortgage note of approximately $7,365,000 was repaid from loan proceeds received from the refinancing. The new mortgage debt of $12,000,000 carries a stated interest rate of 8.67%, with a balloon payment due July 1, 2004. An extraordinary loss on early extinguishment of debt of approximately $1,348,000 was realized during the second quarter of 1997 due to the payment of approximately $1,102,000 in early payment mortgage fees and a loss of approximately $246,000 on the write-off of unamortized loan costs. In conjunction with the refinancing, a capital improvement reserve of approximately $500,000 was established and approximately $350,000 in loan costs were incurred. These loan costs are included in "Other assets" on the accompanying balance sheet and will be amortized over the term of the loan. Included in maintenance expense for the nine months ended September, 30, 1997, is approximately $129,000 of major repairs and maintenance comprised primarily of exterior painting, major landscaping and exterior building repairs. For the nine months ended September 30, 1996, approximately $173,000 of exterior building improvements, parking lot repairs, major landscaping and exterior painting are included in maintenance expense. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. The Partnership held unrestricted cash and cash equivalents of approximately $3,243,000 at September 30, 1997, compared to unrestricted cash and cash equivalents of approximately $2,160,000 at September 30, 1996. Net cash used in operating activities increased primarily due to the refinancing of the mortgage debt secured by Serramonte Plaza, which resulted in a reduction in accrued interest. Also, the timing of tax and insurance escrow payments increased net cash used in operating activities. Net cash provided by investing activities increased primarily as a result of the proceeds received from the sale of the buildings and land at Serramonte Plaza and from an increase in withdrawals from restricted escrows. Net cash used in financing activities increased primarily as a result of the payment of the mortgage fee incurred in connection with the refinancing of Serramonte Plaza. This increase was partially offset by a reduction in mortgage note payments as a result of the new mortgage note encumbering Serramonte Plaza. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of approximately $46,643,000, matures from January 2000 until November 2019, with balloon payments due at maturity, at which time the properties will either be refinanced or sold. Future cash distributions will depend on the levels of cash generated from operations, property sales, and the availability of cash reserves. No cash distributions were paid during the nine months ended September 30, 1997, or September 30, 1996. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended September 30, 1997. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INVESTORS FIRST-STAGED EQUITY L.P. (Registrant) By: VMS Realty Investment II, General Partner By: /s/ Joel A. Stone Joel A. Stone President By: /s/ Thomas A. Gatti Thomas A. Gatti, Senior Vice-President and Principal Accounting Officer Date: November 10, 1997 EX-27 2
5 This schedule contains summary financial information extracted from Investors First-Staged Equity L.P. 1997 Third Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000768834 INVESTORS FIRST-STAGED EQUITY L.P. 1,000 9-MOS DEC-31-1997 SEP-30-1997 3,243 0 14 0 0 0 8,402 38,786 29,292 0 46,643 0 0 0 (19,579) 29,292 0 5,667 0 0 6,890 0 2,998 (529) 0 (529) 0 (1,348) 0 (529) 32.20 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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