10KSB 1 0001.txt YEAR END DECEMBER 31, 2000 FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) FORM 10-KSB (Mark One) [X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the fiscal year ended December 31, 2000 [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from _________to _________ Commission file number 0-14470 INVESTORS FIRST-STAGED EQUITY L.P. (Name of small business issuer in its charter) Delaware 36-3310965 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) Issuer's telephone number (864) 239-1000 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Units of Limited Partnership Interest (Title of class) 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___ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of the registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] State issuer's revenues for its most recent fiscal year. $31,681,000 State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests as of December 31, 2000. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE None PART I Item 1. Description of Business Investors First-Staged Equity L.P. (the "Partnership" or "Registrant") was organized as a limited partnership under the Delaware Revised Uniform Limited Partnership Act in May 1985. Effective January 1, 1986, the General Partner, VMS Realty Investment (formerly known as VMS Realty Partners) assigned its interest in future profits, losses, operating cash flow and liquidation proceeds of the Partnership to VMS Realty Investment II, which subsequently became the General Partner. VMS Realty Investment II is a general partnership formed to be the sole general partner of Investors First-Staged Equity L.P. and has the same constituent partners as VMS Realty Investment, its predecessor. Effective January 1, 1987, VMS Realty Investment II assigned its beneficial interest in the Partnership to VMS Realty Investment. Effective January 2, 1998, the General Partner was replaced by MAERIL, Inc., a wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT"). Effective February 26, 1999 IPT was merged into a subsidiary of Apartment Investment and Management Company ("AIMCO"). Thus, the General Partner is now a subsidiary of AIMCO. See "Transfer of Control" below. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2025, unless terminated prior to such date (see below). The Partnership raised total equity of $48,802,000 from the sale of Limited Partnership Interests (the Units) to the public in 1985 pursuant to a Registration Statement filed with the Securities and Exchange Commission (the SEC). A total of 16,511 units were sold to the public at $3,000 per unit as of the termination date of the offering, December 31, 1985. Limited Partners in the Partnership paid $1,000 per unit upon subscription and executed a non-recourse note for the remaining $2,000 per unit. The non-recourse note provided for the optional payment, without interest, of $1,000 per unit on each of February 15, 1986 and 1987. The Partnership has collected capital contributions totaling $48,802,000; $16,511,000 pertaining to the payments due in 1985; $16,511,000 pertaining to the payments due in 1986 and the remarketed units sold in 1986 and $15,780,000 pertaining to the payments due in 1987 and the remarketed units sold in 1987. As each whole unit represents capital contributions aggregating $3,000, the final number of units sold was 16,267. At December 31, 2000, the Partnership has 16,243.816 Units outstanding. The Limited Partners share in the ownership of the Partnership's real estate property investments according to the number of Limited Partnership Units held. Since the 1987 payments, the Registrant has not received nor are limited partners required to make additional capital contributions. The Registrant is engaged in the business of operating and holding real estate properties for investment. On October 2, 1985, the Partnership acquired interests in six (6) real estate property investments, two of which, Village Green Apartments and Woodland Meadows Apartments, were sold at foreclosure sales to parties unaffiliated with the Partnership in May 1990 and June 1991, respectively. East Bluff Apartments was foreclosed upon by the Federal Deposit Insurance Corporation ("FDIC"), holder of the second mortgage, on May 23, 1994. The Partnership sold its only commercial property, Serramonte Plaza, on December 16, 1999. Richardson Highlands Apartments was sold to an unaffiliated third party on December 27, 2000. As of December 31, 2000, the Registrant owned and operated one (1) residential property as described in "Item 2. Description of Properties". The Partnership sold its remaining property Rivercrest Village on March 16, 2001. As a result of this sale the Partnership expects to be fully liquidated by June 30, 2001. The Registrant has no employees. Management and administrative services are provided by the General Partner and by agents retained by the General Partner. With respect to the Partnership's residential properties these services were provided by affiliates of the General Partner for the years ended December 31, 2000 and 1999. Both the income and expenses of operating the properties owned by the Partnership were subject to factors outside of the Partnership's control, such as changes in the supply and demand for similar properties resulting from various market conditions, increases/decreases in unemployment or population shifts, changes in the availability of permanent mortgage financing, changes in zoning laws, or changes in patterns or needs of users. In addition, there are risks inherent in owning and operating residential properties because such properties are susceptible to the impact of economic and other conditions outside of the control of the Partnership. The real estate business in which the Partnership is engaged is highly competitive. There are other residential properties within the market area of the Registrant's properties. The number and quality of competitive properties, including those which may be managed by an affiliate of the General Partner in such market area could have a material effect on the rental market for the apartments at the Registrant's properties and the rents that may be charged for such apartments. While the General Partner and its affiliates own and/or control a significant number of apartment units in the United States, such units represent an insignificant percentage of total apartment units in the United States and competition for the apartments is local. There have been, and it is possible there may be other, Federal, state and local legislation and regulations enacted relating to the protection of the environment. The Partnership is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the property owned by the Partnership. The Partnership monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. A further description of the Partnership's business is included in "Management's Discussion and Analysis or Plan of Operation" included in "Item 6" of this Form 10-KSB. Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and IPT merged into AIMCO, a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the General Partner. The General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Item 2. Description of Properties: The following table sets forth the Registrant's investment in property: Date of Property Purchase Type of Ownership (1) Use Rivercrest Village Apartments 10/85 Fee ownership subject Apartment - Sacramento, California to first and second 328 units mortgages (1) The property is held by a Limited Partnership in which the Registrant has a 99.99% interest. In addition the property was sold on March 16, 2001. See "Item 7. Financial Statements - Note N" for information about the sale. Schedule of Properties: Set forth below for the Registrant's property is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation, and Federal tax basis.
Gross Carrying Accumulated Federal Property Value Depreciation Rate Method Tax Basis (in thousands) (in thousands) Rivercrest Village Apartments $17,577 (1) (1) (1) $ 3,753
(1) As a result of adopting the liquidation basis of accounting as of December 31, 2000, the gross carrying value of the property was adjusted to its net realizable value and will not be depreciated further. Schedule of Property Indebtedness The following table sets forth certain information relating to the loans encumbering the Registrant's property.
Principal Principal Balance At Stated Balance December 31, Interest Period Maturity Due At Property 2000 Rate Amortized Date (1) Maturity (1) (in thousands) (in thousands) Rivercrest Village Apartments 1st mortgage $11,293 7.348% 30 yrs 01/01/08 $10,053 2nd mortgage 3,152 (2) (2) (2) 3,152 Total $14,445 $13,205
(1) See "Item 7. Financial Statements - Note F" for information with respect to the Registrant's ability to repay these loans. (2) See discussion below for information regarding the second mortgages of Rivercrest Village and also of Richardson Highlands, which was sold on December 27, 2000. In October 1990, the Partnership defaulted on the Richardson Highlands and Rivercrest Village Subordinate notes payable (the second mortgage loans) due to the failure to make the required monthly debt service payments. The Partnership and the lender finalized an agreement on June 22, 1994, retroactive to July 1, 1993, to restructure the debt held on Richardson Highlands and Rivercrest Village. The junior lien mortgages were restructured to mature on January 15, 2000, and provided for a 10% interest rate (with a 7% pay rate), based on the "Agreed Valuation Amount", as defined in the restructure agreement. Interest payments were payable from surplus cash. The second mortgages included a "shadow debt" portion that was payable only in the event that the mortgages were not paid prior to maturity. The shadow debt portion, which is the difference between the Agreed Valuation Amount and the Note Face Amount, for Richardson Highlands and Rivercrest Village was approximately $858,000 and $1,307,000, respectively. The Agreed Valuation Amounts for Richardson Highlands and Rivercrest Village were approximately $7,268,000 and $7,110,000, respectively. The Note Face Amount was $8,126,000 for Richardson Highlands and $8,417,000 for Rivercrest Village. The agreement also allowed the lender to receive fifty percent of any net proceeds from the sale or refinancing of the properties after the payment of all mortgage notes payable and subordinated debt. Prior to the restructuring of the loans, interest accrued under the terms of the original subordinate notes payable. This accrued interest of $1,732,000 for Richardson Highlands and $2,327,000 for Rivercrest Village was added to the carrying amount of the loans at the date of restructure. The debt restructurings were accounted for as a modification of terms in which total future cash payments under the restructured loans exceeded the carrying values of the loans as of the date of restructure. Consequently, the carrying amounts of the loans were not changed and no gains were recognized on the restructurings. Interest accrued at an effective interest rate of 6.14% for Richardson Highlands and 4.37% for Rivercrest Village to equate the present values of the total future cash payments under the new terms with the carrying amounts of the loans at the date of restructure. During the year ended December 31, 2000, no payments of excess cash were required to be made on Richardson Highlands Apartments and Rivercrest Village Apartments second mortgages, respectively. During the year ended December 31, 1999, payments of excess cash of $55,000 and $611,000 were made on Richardson Highlands Apartments and Rivercrest Village Apartments second mortgages, respectively. As of December 31, 2000, Investors First Staged Equity L.P. (the "Partnership" or "Registrant") adopted the liquidation basis of accounting due to the imminent loss of the Partnership's remaining investment property. During the fourth quarter of 1999, the Partnership was notified that it was in default on the Residual Proceeds Agreements relating to Rivercrest Village Apartments and Richardson Highlands Apartments, the two remaining investment properties owned by the Partnership at that time. These agreements require, among other things, that each property be marketed for sale six months prior to January 15, 2000, which was the maturity date of the subordinated notes payable, and that half of certain residual proceeds from the sale be paid to the lender. The Partnership did not market these properties for sale in accordance with the agreements, which also provided that the lender may commence an action for the appointment of a receiver to sell each property. During the third quarter of 2000, the properties were marketed for sale in accordance with the Residual Proceeds Agreements. Based upon current market conditions within the location of the properties, there has been an increase in the value of the properties and accordingly, the liability representing the anticipated amount due to the lender for its fifty percent share of the expected net proceeds from the sale of the properties after the payment of all mortgage notes payable and subordinated debt has been adjusted. The increase of approximately $9,581,000 was recorded during the year ended December 31, 2000 and is included in interest expense. The Partnership sold Richardson Highlands Apartments in December 2000 (see Note D). During the year ended December 31, 2000, the Partnership made a payment of approximately $8,636,000 to the lender from the proceeds resulting from the sale of Richardson Highlands Apartments. As of December 31, 2000 the amount that the lender was entitled to receive is approximately $3,152,000. This amount was paid to the lender upon the sale of Rivercrest Village Apartments on March 16, 2001 (see Note N). Rental Rates and Occupancy: Average annual rental rates and occupancy for 2000 and 1999 for the Registrant's property were as follows: Average Annual Average Rental Rates Occupancy (per unit) Property 2000 1999 2000 1999 Rivercrest Village Apartments $ 8,529 $ 8,050 95% 93% As noted under "Item 1. Description of Business", the real estate industry is highly competitive. The property is subject to competition from other residential apartment complexes in the area. The General Partner believes that the property is adequately insured. The property is an apartment complex which leases units for lease terms of one year or less. As of December 31, 2000, no residential tenant leases 10% or more of the available rental space. The property is in good condition subject to normal depreciation and deterioration as is typical for assets of this type and age. Real Estate Taxes and Rates: Real estate taxes and rates in 2000 for the Registrant's property were as follows: 2000 2000 Billing (1) Rate (in thousands) Rivercrest Village Apartments $ 203 1.33% (1) Fiscal year of taxing authority differs from the fiscal year of the property. Capital Improvements: Rivercrest Village Apartments: The Partnership completed approximately $492,000 in capital expenditures at Rivercrest Village Apartments as of December 31, 2000, consisting primarily of floor covering and appliance replacements, major landscaping, roof replacements, swimming pool improvements, and structural improvements. These improvements were funded from operating cash flow and replacement reserves. The property was sold on March 16, 2001. Richardson Highlands Apartments: The Partnership completed approximately $97,000 in capital expenditures at Richardson Highlands Apartments as of December 31, 2000, consisting primarily of floor covering, cabinet and appliance replacements, and pavement resurfacing. These improvements were funded from operating cash flow and replacement reserves. The property was sold on December 27, 2000. Item 3. Legal Proceedings The Partnership is unaware of any pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Item 4. Submission of Matters to a Vote of Security Holders During the quarter ended December 31, 2000, no matter was submitted to a vote of security holders through the solicitation of proxies or otherwise. PART II Item 5. Market for the Partnership Equity and Related Partner Matters The Partnership, a publicly-held limited partnership, sold 16,267 limited partnership units aggregating $48,802,000. The Partnership currently has 2,547 holders of record owning an aggregate of 16,243.816 units. Affiliates of the General Partner own 2,497.46 units or approximately 15.37% at December 31, 2000. No public trading market has developed for the Units, and it is not anticipated that such a market will develop in the future. In 2000, the number of Limited Partnership Units decreased by 17.336 due to limited partners abandoning these units. In abandoning his or her Limited Partnership Units, a limited partner relinquishes all right, title and interest in the Partnership as of the date of abandonment. However, during the year of abandonment, the limited partner is allocated his or her share of the income or loss for that year. The net income and distributions per limited partnership unit is calculated based on the number of units outstanding at the beginning of the year. The following table sets forth the distributions made by the Partnership for the years ended December 31, 1999 and 2000, and subsequent to December 31, 2000. Distributions Per Limited Aggregate Partnership Unit 01/01/99 - 12/31/99 $ -- $ -- 01/01/00 - 12/31/00 8,529,000 (1) 524.50 Subsequent to 12/31/00 10,137,000 (2) 624.05 (1) Distribution was paid from the sales proceeds of Serramonte Plaza (approximately $7,701,000 or $473.58 per limited partnership unit) all to the limited partners. Also a distribution from operations of approximately $828,000 (approximately $50.92 per limited partnership unit) was paid all to the limited partners. (2) Distribution was made from sales proceeds of Richardson Highlands Apartments (approximately $8,636,000 or $531.65 per limited partnership unit) all to the limited partners. Also a distribution of approximately $1,501,000 from operations (approximately $92.40 per limited partnership unit) was paid all to the limited partners. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 2,497.46 limited partnership units in the Partnership representing 15.37% of the outstanding units. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of their affiliation with the General Partner. Item 6. Management's Discussion and Analysis or Plan of Operation The matters discussed in this Form 10-KSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosure contained in this Form 10-KSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. This item should be read in conjunction with the consolidated financial statements and other items contained elsewhere in this report. Results of Operations As of December 31, 2000, the Partnership adopted the liquidation basis of accounting. Prior to the adopting the liquidation basis of accounting, the Registrant realized net income of approximately $15,792,000 for the year ended December 31, 2000 as compared to net income of approximately $11,977,000 for the year ended December 31, 1999. The increase in income is primarily due to the gain on sale of Richardson Highlands Apartments of approximately $25,375,000. On December 27, 2000, Richardson Highlands Apartments, located in Sausalito, California, was sold to an unaffiliated third party for $34,325,000. After closing expenses and other payments of approximately $729,000 and the assumption by the purchaser of the property's first mortgage of approximately $16,451,000, the net proceeds received by the Partnership were approximately $17,145,000. The Partnership also recorded a loss on early extinguishment of debt of approximately $264,000 due to the write off of unamortized loan costs as a result of this sale. The net income of approximately $11,977,000 for 1999 was primarily attributable to the gain on sale of discontinued operations of approximately $11,735,000 on the sale of Serramonte Plaza. On December 16, 1999, Serramonte Plaza, located in Daly City, California was sold to an unaffiliated third party for $20,089,000. After closing expenses and other payments of approximately $732,000 and the assumption by the purchaser of the property's mortgage of approximately $11,637,000, the net proceeds received by the Partnership were approximately $7,720,000. In connection with the sale, the Partnership recognized an extraordinary loss on early extinguishment of debt of $103,000. Excluding the gain on sale of investment property, extraordinary losses on early extinguishments of debt and the sale of discontinued operations, the Partnership realized a loss of approximately $9,319,000 for the year ended December 31, 2000 as compared to a loss of approximately $106,000 for the year ended December 31, 1999. The increase in loss is due to an increase in total expenses which was slightly offset by an increase in total revenues. Total expenses increased for the year ended December 31, 2000 as a result of an increase in operating and interest expenses which was slightly offset by a decrease in general and administrative expense. Interest expense increased as a result of interest on the Residual Proceeds Agreements encumbering Richardson Highlands Apartments and Rivercrest Village Apartments as discussed below. Operating expense increased as a result of an increase in property and insurance expenses. Property expense increased due to increase in corporate unit expenses, and utility bills and an increase in employee salaries and related employee benefits. Insurance expense increased due to the addition of a flood insurance policy during 2000 at Rivercrest Village Apartments. General and administrative expense increased as a result of an increase in management reimbursements. Included in general and administrative expenses for the year ended December 31, 2000 and 1999 are management reimbursements to the General Partner allowed under the Partnership Agreement. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. Total revenues increased as a result of an increase in rental income and other income. Rental income increased as a result of an increase in average occupancy and the average annual rental rates of the investment properties. The increase in other income was primarily due to higher interest income as a result of an increase in cash balances held in interest bearing accounts. Liquidity and Capital Resources As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its consolidated financial statements at December 31, 2000, to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value (including amounts based upon subsequent actual transactions described below) and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities is based upon the General Partner's estimates as of the date of the consolidated financial statements. Included in liabilities in the statement of net assets in liquidation, as of December 31, 2000, are approximately $17,000 of costs, net of income, that the General Partner estimates will be incurred during the period of liquidation, based on the assumption that the liquidation process will be completed by June 30, 2001. These costs principally include the estimated administrative expenses for the Partnership and the net results of operations from Rivercrest Village Apartments until its sale during March 2001. Because the success in realization of assets and the settlement of liabilities is based on the General Partner's best estimates, the liquidation period may be shorter than projected or it may be extended beyond the projected period. The net adjustment required to convert to the liquidation basis of accounting was an increase in net assets of approximately $12,596,000 which is included in the Statement of Changes in Capital (Deficit)/Net Assets in Liquidation. The adjustments are as follows: Increase (Decrease) in Net Assets (in thousands) Adjustment from book value of property and improvements to estimated net realizable value $ 12,256 Adjustment of other assets (246) Adjustment of disposition fee to General Partner 603 Estimated costs in liquidation, included in accounts payable (17) Net increase in net assets $ 12,596 At December 31, 2000, the Registrant had cash and cash equivalents of approximately $11,440,000 as compared to approximately $9,614,000 at December 31, 1999. Cash and cash equivalents increased approximately $1,826,000 from the prior year end, due to approximately $17,049,000 of cash provided by investing activities and approximately $2,196,000 of cash provided by operating activities which was partially offset by approximately $17,419,000 of cash used in financing activities. Cash provided by investing activities consisted of net proceeds from the sale of Richardson Highlands Apartments and net withdrawals from restricted escrows which was partially offset by cash used for property improvements and replacements. Cash used in financing activities consisted of payments on mortgage notes payable, payment of residual proceeds and distributions to partners. The Registrant invests its working capital reserves in money market accounts. As of December 31, 2000, Investors First Staged Equity L.P. (the "Partnership" or "Registrant") adopted the liquidation basis of accounting due to the imminent loss of the Partnership's remaining investment property. During the fourth quarter of 1999, the Partnership was notified that it was in default on the Residual Proceeds Agreements relating to Rivercrest Village Apartments and Richardson Highlands Apartments, the two remaining investment properties owned by the Partnership at that time. These agreements require, among other things, that each property be marketed for sale six months prior to January 15, 2000, which was the maturity date of the subordinated notes payable, and that half of certain residual proceeds from the sale be paid to the lender. The Partnership did not market these properties for sale in accordance with the agreements, which also provided that the lender may commence an action for the appointment of a receiver to sell each property. During the third quarter of 2000, the properties were marketed for sale in accordance with the Residual Proceeds Agreements. Based upon current market conditions within the location of the properties, there has been an increase in the value of the properties and accordingly, the liability representing the anticipated amount due to the lender for its fifty percent share of the expected net proceeds from the sale of the properties after the payment of all mortgage notes payable and subordinated debt has been adjusted. The increase of approximately $9,581,000 was recorded during the year ended December 31, 2000 and is included in interest expense. The Partnership sold Richardson Highlands Apartments in December 2000 (see Note D). During the year ended December 31, 2000, the Partnership made a payment of approximately $8,636,000 to the lender from the proceeds resulting from the sale of Richardson Highlands Apartments. As of December 31, 2000 the amount that the lender was entitled to receive is approximately $3,152,000. This amount was paid to the lender upon the sale of Rivercrest Village Apartments on March 16, 2001 (see Note N). A distribution of approximately $7,701,000 from the proceeds of the sale of Serramonte Plaza (approximately $473.58 per limited partnership unit) was made all to the limited partners during the year ended December 31, 2000. Also, a distribution of approximately $828,000 ($50.92 per limited partnership unit) was paid from operations all to the limited partners. No cash distributions were paid during the year ended December 31, 1999. Subsequent to December 31, 2000, the Partnership distributed approximately $8,636,000 (approximately $531.65 per limited partnership unit) from sale proceeds from Richardson Highlands Apartments to the limited partners. Also a distribution of approximately $1,501,000 (approximately $92.40 per limited partnership unit) was paid from operations to the limited partners. The Partnership expects to distribute funds from the sale of Rivercrest Village during 2001. Any further distributions will depend on the availability of funds after reserving for costs to liquidate the Partnership during 2001. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 2,497.46 limited partnership units in the Partnership representing 15.37% of the outstanding units. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of their affiliation with the General Partner. Item 7. Financial Statements INVESTORS FIRST-STAGED EQUITY L.P. List of Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors Consolidated Statement of Net Assets in Liquidation - December 31, 2000 Consolidated Statements of Operations - Years ended December 31, 2000 and 1999 Consolidated Statements of Changes in Partners' Capital (Deficit)/Net Assets in Liquidation - Years ended December 31, 2000 and 1999 Consolidated Statements of Cash Flows - Years ended December 31, 2000 and 1999 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Investors First-Staged Equity L.P. We have audited the accompanying consolidated statement of net assets in liquidation of Investors First-Staged Equity L.P. as of December 31, 2000 and the related consolidated statements of operations, changes in partners' capital (deficit)/net assets in liquidation and cash flows for each of the two years in the period ended December 31, 2000. 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 auditing standards generally accepted in the United States. 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 the Partnership's management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As more fully described in Note A, due to the imminent sale of its remaining investment property, the General Partner has decided, effective December 31, 2000, to liquidate the Partnership. As a result, the Partnership changed its basis of accounting as of December 31, 2000 from a going concern basis to a liquidation basis. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated net assets in liquidation of Investors First-Staged Equity L.P. at December 31, 2000 and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States applied on the bases described in the preceding paragraph. /s/ ERNST & YOUNG LLP Greenville, South Carolina March 16, 2001 INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION (in thousands, except unit data) December 31, 2000
Assets Cash $ 11,440 Receivables and deposits 335 Restricted escrows 49 Other assets 47 Investment property 17,577 29,448 Liabilities Accounts payable 255 Tenant security deposit liabilities 124 Accrued interest 261 Other liabilities 26 Advances from affiliates of General Partner 340 Mortgage notes payable (Note F) 14,445 15,451 Net assets in liquidation $ 13,997 See Accompanying Notes to Consolidated Financial Statements
INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended December 31, 2000 1999 Revenues: Rental income $ 5,872 $ 5,561 Other income 434 247 Gain on sale of investment property 25,375 -- Total revenues 31,681 5,808 Expenses: Operating 1,700 1,608 General and administrative 186 168 Depreciation 1,528 1,522 Interest 11,795 2,213 Property taxes 416 403 Total expenses 15,625 5,914 Income (loss) before discontinued operations and extraordinary loss on early extinguishment of debt 16,056 (106) Income from discontinued operations -- 451 Gain on sale of discontinued operations -- 11,735 Income before extraordinary item 16,056 12,080 Extraordinary loss on early extinguishment of debt (264) (103) Net income $15,792 $11,977 Net income allocated to general partner $ 158 $ 239 Net income allocated to limited partners 15,634 11,738 $15,792 $11,977 Per limited partnership unit: Income (loss) before discontinued operations and extraordinary loss on early extinguishment of debt $977.50 $ (6.46) Income from discontinued operations -- 27.49 Gain on sale of discontinued operations -- 707.08 Extraordinary loss on early extinguishment of debt (16.07) (6.27) Net income $961.43 $721.84 Distributions per limited partnership unit $524.50 $ -- See Accompanying Notes to Consolidated Financial Statements INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)/NET ASSETS IN LIQUIDATION (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Partners' deficit at December 31, 1998 16,261.152 $ (360) $(17,479) $(17,839) Net income for the year ended December 31, 1999 -- 239 11,738 11,977 Partners' deficit at December 31, 1999 16,261.152 (121) (5,741) (5,862) Abandonment of units (Note L) (17.336) -- -- -- Distributions to partners -- -- (8,529) (8,529) Net income for the year ended December 31, 2000 -- 158 15,634 15,792 Partners' capital at December 31, 2000 16,243.816 $ 37 $ 1,364 1,401 Adjustment to liquidation basis (Note A) 12,596 Net assets in liquidation at December 31, 2000 $ 13,997 See Accompanying Notes to Consolidated Financial Statements
INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Years Ended December 31, 2000 1999 Cash flows from operating activities: Net income $15,792 $11,977 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,528 1,990 Amortization of loan costs and lease commissions 105 193 Gain on sale of investment property (25,375) -- Gain on sale of discontinued operations -- (11,735) Loss on early extinguishments of debt 264 103 Interest on Residual Proceeds Agreement 9,581 -- Change in accounts: Receivables and deposits 245 158 Other assets 8 (133) Accounts payable 191 (32) Tenant security deposit liabilities (152) 32 Accrued interest 118 (123) Due to affiliates of General Partner -- 14 Other liabilities (109) 25 Net cash provided by operating activities 2,196 2,469 Cash flows from investing activities: Net proceeds from sale of investment property 17,145 7,720 Property improvements and replacements (589) (604) Net withdrawals from (deposits to) restricted escrows 493 (52) Net cash provided by investing activities 17,049 7,064 Cash flows from financing activities: Distributions to partners (8,529) -- Payments on mortgage notes payable (254) (443) Payment of residual proceeds (8,636) (660) Net cash used in financing activities (17,419) (1,103) Net increase in cash and cash equivalents 1,826 8,430 Cash and cash equivalents at beginning of period 9,614 1,184 Cash and cash equivalents at end of period $11,440 $ 9,614 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,993 $ 3,218 Supplemental disclosure of non cash activity: Extinguishment of debt in connection with the sale of investment property and discontinued operations, respectively $16,451 $11,637 See Accompanying Notes to Consolidated Financial Statements
INVESTORS FIRST-STAGED EQUITY L.P. Notes to Consolidated Financial Statements December 31, 2000 Note A - Basis of Presentation As of December 31, 2000, Investors First Staged Equity L.P. (the "Partnership" or "Registrant") adopted the liquidation basis of accounting due to the imminent loss of the Partnership's remaining investment property. During the fourth quarter of 1999, the Partnership was notified that it was in default on the Residual Proceeds Agreements relating to Rivercrest Village Apartments and Richardson Highlands Apartments, the two remaining investment properties owned by the Partnership at that time. These agreements require, among other things, that each property be marketed for sale six months prior to January 15, 2000, which was the maturity date of the subordinated notes payable, and that half of certain residual proceeds from the sale be paid to the lender. The Partnership did not market these properties for sale in accordance with the agreements, which also provided that the lender may commence an action for the appointment of a receiver to sell each property. During the third quarter of 2000, the properties were marketed for sale in accordance with the Residual Proceeds Agreements. Based upon current market conditions within the location of the properties, there has been an increase in the value of the properties and accordingly, the liability representing the anticipated amount due to the lender for its fifty percent share of the expected net proceeds from the sale of the properties after the payment of all mortgage notes payable and subordinated debt has been adjusted. The increase of approximately $9,581,000 was recorded during the year ended December 31, 2000 and is included in interest expense. The Partnership sold Richardson Highlands Apartments in December 2000 (see Note D). During the year ended December 31, 2000, the Partnership made a payment of approximately $8,636,000 to the lender from the proceeds resulting from the sale of Richardson Highlands Apartments. As of December 31, 2000 the amount that the lender was entitled to receive is approximately $3,152,000. This amount was paid to the lender upon the sale of Rivercrest Village Apartments on March 16, 2001 (see Note N). As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its consolidated financial statements at December 31, 2000, to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value (including subsequent actual transactions described below) and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities is based upon the General Partner's estimates as of the date of the consolidated financial statements. Included in liabilities in the statement of net assets in liquidation, as of December 31, 2000, are approximately $17,000 of costs, net of income, that the General Partner estimates will be incurred during the period of liquidation, based on the assumption that the liquidation process will be completed by June 30, 2001. These costs principally include the estimated administrative expenses for the Partnership and the net results of operations from Rivercrest Village Apartments until its sale during March 2001. Because the success in realization of assets and the settlement of liabilities is based on the General Partner's best estimates, the liquidation period may be shorter than projected or it may be extended beyond the projected period. The net adjustment required to convert to the liquidation basis of accounting was an increase in net assets of approximately $12,596,000 which is included in the Statement of Changes in Capital (Deficit)/Net Assets in Liquidation. The adjustments are as follows: Increase (Decrease) in Net Assets (in thousands) Adjustment from book value of property and improvements to estimated net realizable value $ 12,256 Adjustment of other assets (246) Adjustment of disposition fee payable to General Partner 603 Estimated costs in liquidation, included in accounts payable (17) Net increase in net assets $ 12,596 Note B - Summary of Significant Accounting Policies Organization Investors First-Staged Equity L.P. (the "Partnership" or "Registrant") was organized as a limited partnership under the Delaware Revised Uniform Limited Partnership Act in May 1985. Effective January 1, 1986, VMS Realty Investment (formerly known as VMS Realty Partners) assigned its interest in future profits, losses, operating cash flow, and liquidation proceeds of the Partnership to VMS Realty Investment II, which subsequently became the General Partner. VMS Realty Investment II is a general partnership formed to be the sole general partner of Investors First-Staged Equity L.P. and has the same constituent partners as VMS Realty Investment, its predecessor. Effective January 1, 1987, VMS Realty Investment II assigned its beneficial interest in the Partnership to VMS Realty Investment. Effective January 2, 1998, the General Partner was replaced by MAERIL, Inc., a wholly-owned subsidiary of MAE GP Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust ("IPT") a subsidiary of Apartment Investment and Management Company ("AIMCO"). Thus, the General Partner is now a subsidiary of AIMCO. The Partnership commenced operations on October 2, 1985 and completed its acquisition of investment properties in October 1985. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2025 unless terminated prior to such date. At December 31, 2000, the Partnership owned and operated one residential property located in California, which was sold on March 16, 2001. Principles of Consolidation The financial statements include all the accounts of the Partnership and its three 99.99% owned partnerships. The General Partner of the consolidated partnerships is MAERIL, Inc. MAERIL, Inc. may be removed as the general partner of the consolidated partnerships by the Registrant; therefore, the consolidated partnerships are controlled and consolidated by the Registrant. All significant interpartnership balances have been eliminated. Uses of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Allocations of Profits, Gains & Losses Profits, gains, and losses of the Partnership are allocated between general and limited partners in accordance with the provisions of the Partnership Agreement. Profits, not including gains from property dispositions, are allocated as if they were distributions of net cash from operations. All losses, including losses attributable to property dispositions, are allocated 99% to the limited partners and 1% to the general partners. Allocation of Cash Distributions All cash distributions consisting of cash from operations shall be allocated 99% to the Limited Partners and 1% to the General Partner. However the 1% to the General Partner is subordinate to the Limited Partners receiving an annual 10% preferred return on their net invested capital. The net profit of the Partnership from any sale or refinancing of the properties shall be allocated (with ordinary income being allocated first) as follows: (i) first, an amount equal to the aggregate deficit balances of the Partners' capital accounts shall be allocated to each Partner that has a deficit capital account balance in the same ratio as the deficit balance of such Partner's capital account bears to the aggregate of the deficit balance of all Partners' capital accounts; (ii) second, to the Limited Partners in an amount equal to the excess of their adjusted capital contribution over the balance of their respective capital accounts after taking into account the allocation provided for in subparagraph (i) above; (iii) third, to the Limited Partners in an amount equal to any unpaid preferred cumulative return; (iv) fourth, to the General Partner in an amount equal to the excess of its adjusted capital contribution over its capital account balance; and (v) thereafter, 85% to the Limited Partners and 15% to the General Partner. The net loss to the Partnership from any sale or other disposition of the properties shall be allocated as follows: (i) first, in an amount equal to the aggregate positive balances in the partners' capital accounts, to each partner in the same ratio as the positive balance in such partner's capital account bears to the aggregate of all such partners' positive capital accounts; and (ii) thereafter, 99% to the Limited Partners and 1% to the General Partner. In general, net proceeds from any sale or refinancing of the properties will be allocated 85% to the Limited Partners and 15% to the General Partner, after the Limited Partners have received an amount equal to their original capital contributions and a cumulative 6% per annum, noncompounded, return on their adjusted capital contributions from such proceeds. Advertising The Partnership expenses the costs of advertising as incurred. Advertising expense, included in operating expenses, was approximately $64,000 for both of the years ended December 31, 2000 and 1999. Fair Value of Financial Statements Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for long term debt) approximates their fair value due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity, approximates its carrying balance. Cash and Cash Equivalents Includes cash on hand, in banks, and money market accounts. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances included approximately $2,600,000 at December 31, 2000 that are maintained by the affiliated management company on behalf of affiliated entities in cash concentration accounts. Restricted Escrows Capital Improvement Reserve - In connection with the refinancing of Richardson Highlands Apartments and Rivercrest Village Apartments in 1997, approximately $835,000 of the proceeds were designated as a repair escrow and capital improvement escrow for the funding of immediately required capital improvements and repairs as noted in the loan documents. The balance of these funds were expended during the year ended December 31, 1999. Replacement Reserve - In connection with the refinancing of Richardson Highlands Apartments and Rivercrest Village Apartments in 1997, monthly deposits of approximately $11,000 are required each month during the term of the loan. At December 31, 2000 the replacement reserve balance is approximately $49,000. Depreciation Depreciation is computed using the following methods and estimated useful lives:
GAAP BASIS (1) TAX BASIS Lives Lives Method (Years) Method (Years) Buildings and improvements Straight-line 17-25 175% Declining 18,19 and Balance (ACRS & 27.5 MACRS) Personal Property 150% Declining 5 & 7 150 Declining 5 & 7 Balance (ACRS & MACRS)
(1) As a result of adopting the liquidation basis of accounting as of December 31, 2000, the gross carrying value of the Partnership's sole remaining asset was adjusted to its net realizable value and will not be depreciated further for GAAP purposes. Investment Property Acquisition fees are capitalized as a cost of real estate. In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Costs of investment properties that have been permanently impaired have been written down to appraised value. No adjustment for impairment of value was recorded in the years ended December 31, 2000 and 1999. The Partnership sold one of its investment properties, Richardson Highlands Apartments, on December 27, 2000. The Partnership sold its commercial property, Serramonte Plaza, on December 16, 1999. As a result of the Partnership adopting the liquidation basis of accounting, the investment property was adjusted to its estimated net realizable value at December 31, 2000. The effect of the adoption was to increase the carrying value of the investment property by approximately $12,256,000. Loan Costs Loan costs, previously included in other assets on the consolidated balance sheet, of approximately $350,000 were being amortized on a straight-line basis over the lives of the related loans. Accumulated amortization was approximately $105,000 at December 31, 2000 and was also included in other assets on the consolidated balance sheet. As a result of adopting the liquidation basis of accounting as of December 31, 2000, these amounts were written off and included in the net adjustments to liquidation basis. Tenant Security Deposits The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on rental payments. Leases The Partnership generally leases apartment units for twelve months or less. The Partnership recognizes income as earned on its leases. In addition, the General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Segment Reporting SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. See "Note J" for required disclosure. Note C - Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and IPT merged into AIMCO, a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the General Partner. The General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Note D - Sale of Investment Property On December 27, 2000, Richardson Highlands Apartments, located in Sausalito, California, was sold to an unaffiliated third party for $34,325,000. After closing expenses and other payments of approximately $729,000, and the assumption by the purchaser of the property's first mortgage of approximately $16,451,000, the net proceeds received by the Partnership were approximately $17,145,000. The Partnership distributed the net proceeds from the sale of the property to the limited partners during January 2001 in accordance with the Partnership Agreement. The Partnership recorded a gain on the sale of investment property of approximately $25,375,000. The Partnership recorded a loss on early extinguishment of debt of approximately $264,000 due to the write off of unamortized loan costs. The following unaudited pro-forma information reflects the operations of the Partnership for the twelve months ended December 31, 2000 and 1999, as if Richardson Highlands Apartments and Serramonte Plaza (see Note E) had been sold January 1, 1999 (in thousands except per unit data). 2000 1999 (unaudited) (unaudited) Revenues $ 2,906 $ 2,587 Net loss (2,106) (539) Net loss per limited partnership unit (128.22) (32.84) Note E - Disposition of Discontinued Operations On December 16, 1999, Serramonte Plaza, located in Daly City, California, was sold to an unaffiliated third party for $20,089,000. After closing expenses and other payments of approximately $732,000 and the assumption by the purchaser of the property's mortgage of approximately $11,637,000, the net proceeds received by the Partnership were approximately $7,720,000. The Partnership distributed the net proceeds from the sale of the property to the limited partners during January 2000 in accordance with the Partnership Agreement. The sale of the property resulted in a gain on sale of discontinued operations of approximately $11,735,000. In connection with the sale, a commission of approximately $603,000 was accrued to the General Partner in accordance with the terms of the Partnership Agreement. Serramonte Plaza was the only commercial property owned by the Partnership and represented one segment of the Partnership's operations. Due to the sale of this property, the results of the commercial segment have been shown as income from discontinued operations and gain on sale of discontinued operations for 1999. Revenues of this property were approximately $3,109,000 for 1999. Income from operations was approximately $451,000 for 1999. Note F - Mortgage Notes Payable
Principal Monthly Principal Balance At Payment Stated Balance December 31, Including Interest Maturity Due At Property 2000 Interest Rate Date Maturity (in thousands) (in thousands) Rivercrest Village Apartments 1st mortgage $11,293 $ 80 7.348% 01/01/08 $10,053 2nd mortgage 3,152 (1) (1) (1) 3,152 Totals $14,445 $13,205
(1) See discussion below regarding the second mortgage. The mortgage agreement includes non-recourse provisions which limit the lenders' remedies in the event of default to the specific property collateralizing the loan. In October 1990, the Partnership defaulted on the Richardson Highlands and Rivercrest Village Subordinate notes payable (the second mortgage loans) due to the failure to make the required monthly debt service payments. The Partnership and the lender finalized an agreement on June 22, 1994, retroactive to July 1, 1993, to restructure the debt held on Richardson Highlands and Rivercrest Village. The junior lien mortgages were restructured to mature on January 15, 2000, and provided for a 10% interest rate (with a 7% pay rate), based on the "Agreed Valuation Amount", as defined in the restructure agreement. Interest payments were payable from surplus cash. The second mortgages included a "shadow debt" portion that was payable only in the event that the mortgages were not paid prior to maturity. The shadow debt portion, which is the difference between the Agreed Valuation Amount and the Note Face Amount, for Richardson Highlands and Rivercrest Village was approximately $858,000 and $1,307,000, respectively. The Agreed Valuation Amounts for Richardson Highlands and Rivercrest Village were approximately $7,268,000 and $7,110,000, respectively. The Note Face Amount was $8,126,000 for Richardson Highlands and $8,417,000 for Rivercrest Village. The agreement also allowed the lender to receive fifty percent of any net proceeds from the sale or refinancing of the properties after the payment of all mortgage notes payable and subordinated debt. Prior to the restructuring of the loans, interest accrued under the terms of the original subordinate notes payable. This accrued interest of $1,732,000 for Richardson Highlands and $2,327,000 for Rivercrest Village was added to the carrying amount of the loans at the date of restructure. The debt restructurings were accounted for as a modification of terms in which total future cash payments under the restructured loans exceeded the carrying values of the loans as of the date of restructure. Consequently, the carrying amounts of the loans were not changed and no gains were recognized on the restructurings. Interest accrued at an effective interest rate of 6.14% for Richardson Highlands and 4.37% for Rivercrest Village to equate the present values of the total future cash payments under the new terms with the carrying amounts of the loans at the date of restructure. During the year ended December 31, 2000, no payments of excess cash were required to be made on Richardson Highlands Apartments and Rivercrest Village Apartments second mortgages, respectively. During the year ended December 31, 1999, payments of excess cash of $55,000 and $611,000 were made on Richardson Highlands and Rivercrest Village's second mortgages, respectively. During the fourth quarter of 1999, the Partnership was notified that it was in default on the Residual Proceeds Agreements relating to Rivercrest Village Apartments and Richardson Highlands Apartments, at the time the two remaining investment properties owned by the Partnership. These agreements required, among other things, that each property be marketed for sale six months prior to January 15, 2000, which was the maturity date of the subordinated notes payable, and that half of certain residual proceeds from the sale be paid to the lender. The Partnership did not market these properties for sale in accordance with the agreements, which also provide that the lender may commence an action for the appointment of a receiver to sell each property. If the properties are not sold within 180 days thereafter, the lender may foreclose on the properties. After notifying the Partnership of such defaults, the lender proposed that a party believed by the Partnership to be an affiliate of the lender purchase the properties. During the third quarter of 2000, the properties were marketed for sale in accordance with the Residual Proceeds Agreements. Based upon current market conditions within the location of the properties, there has been an increase in the value of the properties and accordingly, the liability representing the anticipated amount due to the lender for its fifty percent share of the expected net proceeds from the sale of the properties after the payment of all mortgage notes payable and subordinated debt has been adjusted. The increase of approximately $9,851,000 was recorded during the year ended December 31, 2000 and is included in interest expense. As of December 31, 2000 the estimated amount that the lender is entitled to receive is approximately $3,152,000 and is based upon the current sale value for Rivercrest Village Apartments which has subsequently been sold on March 16, 2001. During the year ended December 31, 2000, Richardson Highlands Apartments made a payment of approximately $8,636,000 to the lender from the proceeds resulting from the sale of the property. On December 27, 2000, Richardson Highlands Apartments was sold to an unaffiliated third party. The purchaser assumed the outstanding first mortgage loan of approximately $16,451,000. In connection with the sale of Richardson Highlands during the year ended December 31, 2000, the Partnership recognized an extraordinary loss on the early extinguishment of debt of approximately $264,000 resulting from the write off of unamortized loan costs. In connection with the sale of Serramonte Plaza during the year ended December 31, 1999, the Partnership recognized an extraordinary loss on extinguishment of debt of $103,000 resulting from the write off of unamortized loan costs of $243,000, offset by forgiveness of accrued interest of approximately $140,000. Scheduled principal payments of the mortgage note payable subsequent to December 31, 2000 have not been included as the remaining investment property was sold on March 16, 2001, with the purchaser assuming the indebtedness. Note G - Income Taxes The Partnership received a ruling from the Internal Revenue Service that it is to be classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the consolidated financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners. The following is a reconciliation of reported net income and Federal taxable income (in thousands, except per unit data for the years ended December 31, 2000 and 1999): 2000 1999 Net income as reported $ 15,792 $11,977 Add (deduct) Debt forgiveness (2,306) 1,953 Depreciation differences 323 124 Deferred expense 3,152 360 Gain on sale of property 1,062 1,446 Other 30 (587) Federal taxable income $ 18,053 $15,273 Federal taxable income per limited partnership unit $1,097.43 $927.98 The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net assets and liabilities as of December 31, 2000 (in thousands): Net assets as reported $13,997 Land and buildings 2,581 Accumulated depreciation (16,405) Syndication 6,832 Other 3,075 Net assets - Federal tax basis $10,080 Note H - Transactions with Affiliated 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 Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were made or accrued to the General Partner and its affiliates during the year ended December 31, 2000 and 1999: 2000 1999 (in thousands) Property management fees (included in operating expenses) $244 $230 Reimbursement for services of affiliates (included in operating, general and administrative expense, and investment properties) 143 115 Real estate brokerage commission due to general partner (included in gain on sale of discontinued operations) -- 603 During the years ended December 31, 2000 and 1999, affiliates of the General Partner were entitled to receive 5% of gross receipts from both of the Registrant's residential properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $244,000 and $230,000 for the years ended December 31, 2000 and 1999, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $143,000 and $115,000 for the years ended December 31, 2000 and 1999, respectively. In prior years the Partnership was advanced funds from a former General Partner in order to meet its existing obligations. Interest accrues on these advances at rates agreed to by the Partnership and the former General Partner. The interest rates at December 31, 2000 ranged from 4.70% and 9.50%. The unpaid balance on these advances at December 31, 2000, and the related accrued interest is approximately $340,000 and $189,000, respectively. As mentioned in Note E, in connection with the sale of Serramonte Plaza, a commission of approximately $603,000 was accrued to the General Partner in accordance with the terms of the Partnership Agreement. Payment of the commission will not be made until the limited partners have received distributions equal to their original invested capital plus a 6% per annum non-compounded cumulative preferred return on their adjusted invested capital. This liability was written off upon the adoption of the liquidation basis of accounting as this preferred return to the limited partners will not be met. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 2,497.46 limited partnership units in the Partnership representing 15.37% of the outstanding units. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of their affiliation with the General Partner. Note I - Real Estate and Accumulated Depreciation As a result of adopting the liquidation basis of accounting, an adjustment of approximately $12,256,000 was made to adjust the gross carrying value of the Partnership's remaining property, Rivercrest Village Apartments to its net realizable value of approximately $17,577,000 and will not be depreciated further. The carrying value was estimated using the anticipated net sales value expected to be received for the property in 2001. Reconciliation of "Investment Properties and Accumulated Depreciation": Years Ended December 31, 2000 1999 (in thousands) Real Estate Balance at beginning of year $ 35,805 $ 48,466 Property improvements 589 604 Disposition of property (17,599) (13,265) Adjustment to liquidation basis (1,218) -- Balance at end of year $ 17,577 $ 35,805 Accumulated Depreciation Balance at beginning of year $ 21,324 $ 25,949 Additions charged to expense 1,528 1,990 Disposition of property (9,378) (6,615) Adjustment to liquidation basis (13,474) -- Balance at end of year $ -- $ 21,324 The aggregate cost of the real estate for Federal income tax purposes at December 31, 2000 and 1999, is approximately $20,158,000 and $38,406,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2000 and 1999, is approximately $16,405,000 and $26,818,000, respectively. Note J - Segment Reporting Description of the types of products and services from which the reportable segment derives its revenues: The Partnership had two reportable segments: residential properties and commercial properties. The Partnership's residential property segment consisted of two apartment complexes located in California one of which was sold on December 27, 2000 and the other which was sold on March 16, 2001. The Partnership rents apartment units to tenants for terms that are typically twelve months or less. The commercial property segment consisted of office space located in California, which was sold on December 16, 1999. As a result of the sale of the commercial property during 1999, the commercial segment is shown as a discontinued operation. Measurement of segment profit or loss: The Partnership evaluates performance based on segment profit (loss) before depreciation. The accounting policies of the reportable segment are the same as those of the Partnership described in the summary of significant accounting policies. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segments are investment properties that offer different products and services. The reportable segments are each managed separately because they provide distinct services with different types of products and customers. Segment information for the years ended December 31, 2000 and 1999 is shown in the tables below. The "Other" Column includes partnership administration related items and income and expense not allocated to the reportable segments (in thousands).
2000 Residential Commercial Other Totals (discontinued) Rental income $ 5,872 $ -- $ -- $ 5,872 Other income 338 -- 96 434 Interest expense 11,795 -- -- 11,795 Depreciation 1,528 -- -- 1,528 General and administrative expense -- -- 186 186 Gain on sale of investment property 25,375 -- -- 25,375 Loss on extraordinary item (264) -- -- (264) Segment profit (loss) 15,882 -- (90) 15,792 Total assets 20,538 -- 8,910 29,448 Capital expenditures 589 -- -- 589
1999 Residential Commercial Other Totals (discontinued) Rental income $ 5,561 $ -- $ -- $ 5,561 Other income 220 -- 27 247 Interest expense 2,213 -- -- 2,213 Depreciation 1,522 -- -- 1,522 General and administrative expense -- -- 168 168 Income from discontinued operations -- 451 -- 451 Gain on sale of discontinued operations -- 11,735 -- 11,735 Loss on extraordinary item -- (103) -- (103) Segment profit (loss) 35 12,083 (141) 11,977 Total assets 16,677 -- 9,210 25,887 Capital expenditures 604 -- -- 604
Note K - Legal Proceedings The Partnership is unaware of any pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. Note L - Abandonment of Units In 2000, the number of Limited Partnership Units decreased by 17.336 due to limited partners abandoning these units. In abandoning his or her Limited Partnership Units, a limited partner relinquishes all right, title and interest in the Partnership as of the date of abandonment. However, during the year of abandonment, the limited partner is allocated his or her share of the income or loss for that year. The net income and distributions per limited partnership unit is calculated based on the number of units outstanding at the beginning of the year. Note M - Distributions A distribution of approximately $7,701,000 from the proceeds of the sale of Serramonte Plaza (approximately $473.58 per limited partnership unit) was made all to the limited partners during the year ended December 31, 2000. Also, a distribution of approximately $828,000 (approximately $50.92 per limited partnership unit) was paid from operations all to the limited partners. No cash distributions were paid during the year ended December 31, 1999. Subsequent to December 31, 2000 a distribution of approximately $10,137,000 was declared and paid all to the limited partners. The distribution consisted of approximately $8,636,000 (approximately $531.65 per limited partnership unit) of sales proceeds from Richardson Highlands Apartments and approximately $1,501,000 (approximately $92.40 per limited partnership unit) from partnership operations. Note N - Subsequent Event - Sale of Rivercrest Village Apartments On March 16, 2001, Rivercrest Village Apartments, located in Sacramento, California, was sold to an unaffiliated third party for $18,000,000. After closing expenses and other payments of approximately $423,000, and the assumption by the purchaser of the property's first mortgage of approximately $11,261,000, the net proceeds received by the Partnership were approximately $6,316,000. In connection with the sale the Partnership paid approximately $3,152,000, to the lender of the second mortgage in accordance with the Residual Proceeds Agreement (see Note F - Mortgages Note Payable). Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act The Registrant has no officers or directors. The General Partner of the Registrant is Maeril, Inc. The names and ages of, as well as the position and offices held by the present executive officers and directors of the General Partner are set forth below. There are no family relations between or among any officers or directors. Name Age Position Patrick J. Foye 43 Executive Vice President and Director Martha L. Long 41 Senior Vice President and Controller Patrick J. Foye has been Executive Vice President and Director of the General Partner since October 1, 1998. Mr. Foye has served as Executive Vice President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and serves as a member of the New York State Privatization Council. He received a B.A. from Fordham College and a J.D. from Fordham University Law School. Martha L. Long has been Senior Vice President and Controller of the General Partner since October 1998 as a result of the acquisition of Insignia Financial Group, Inc. As of February 2001, Ms. Long was also appointed head of the service business for AIMCO. From June 1994 until January 1997, she was the Controller for Insignia, and was promoted to Senior Vice President - Finance and Controller in January 1997, retaining that title until October 1998. From 1988 to June 1994, Ms. Long was Senior Vice President and Controller for The First Savings Bank, FSB in Greenville, South Carolina. One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also directors and/or officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act. The executive officers and director of the General Partner fulfill the obligations of the Audit Committee and oversee the Partnership's financial reporting process on behalf of the General Partner. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the executive officers and director of the General Partner reviewed the audited financial statements with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The executive officers and director of the General Partner reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of the Partnership's accounting principles and such other matters as are required to be discussed with the Audit Committee or its equivalent under generally accepted auditing standards. In addition, the Partnership has discussed with the independent auditors the auditors' independence from management and the Partnership including the matters in the written disclosures required by the Independence Standards Board and considered the compatibility of non-audit services with the auditors' independence. The executive officers and director of the General Partner discussed with the Partnership's independent auditors the overall scope and plans for their audit. In reliance on the reviews and discussions referred to above, the executive officers and director of the General Partner has approved the inclusion of the audited financial statements in the Form 10-KSB for the year ended December 31, 2000 for filing with the Securities and Exchange Commission. The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for the current fiscal year. Fees for the last fiscal year were annual audit services of approximately $39,000 and non-audit services (principally tax-related) of approximately $20,000. Item 10. Executive Compensation None of the directors and officers of the General Partner received any remuneration from the Partnership. Item 11. Security Ownership of Certain Beneficial Owners and Management Except as noted below, no person or entity was known by the Registrant to be the beneficial owner of more than 5% of the Limited Partnership Units of the Registrant as of December 31, 2000. Entity Number of Units Percentage Insignia Properties LP 13.335 0.08% (an affiliate of AIMCO) AIMCO Properties LP (an affiliate of AIMCO) 2,484.125 15.29% Insignia Properties LP is indirectly ultimately owned by AIMCO. Its business address is 55 Beattie Place, Greenville, SC 29602. AIMCO Properties LP is indirectly ultimately controlled by AIMCO. Its business address is 2000 South Colorado Boulevard, Denver, Colorado 80222. No director or officer of the General Partner owns any Units. Item 12. Certain Relationships and Related Transactions 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 Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were made or accrued to the General Partner and its affiliates during the year ended December 31, 2000 and 1999: 2000 1999 (in thousands) Property management fees $244 $230 Reimbursement for services of affiliates 143 115 Real estate brokerage commission due to general partner -- 603 During the years ended December 31, 2000 and 1999, affiliates of the General Partner were entitled to receive 5% of gross receipts from both of the Registrant's residential properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $244,000 and $230,000 for the years ended December 31, 2000 and 1999, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $143,000 and $115,000 for the years ended December 31, 2000 and 1999, respectively. In prior years the Partnership was advanced funds from a former General Partner in order to meet its existing obligations. Interest accrues on these advances at rates agreed to by the Partnership and the former General Partner. The interest rates at December 31, 2000 ranged from 4.70% and 9.50%. The unpaid balance on these advances at December 31, 2000, and the related accrued interest is approximately $340,000 and $189,000, respectively. As mentioned in "Item 7. Financial Statements - Note E", in connection with the sale of Serramonte Plaza, a commission of approximately $603,000 was accrued to the General Partner in accordance with the terms of the Partnership Agreement. Payment of the commission will not be made until the limited partners have received distributions equal to their original invested capital plus a 6% per annum non-compounded cumulative preferred return on their adjusted invested capital. This liability was written off upon the adoption of the liquidation basis of accounting as the preferred return to the limited partners will not be met. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 2,497.46 limited partnership units in the Partnership representing 15.37% of the outstanding units. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of their affiliation with the General Partner. PART IV Item 13. Exhibits and Reports on Form 8-K (a) Exhibits: None. (b) Reports on Form 8-K filed in the fourth quarter of calendar year 2000: Form 8-K dated December 27, 2000, as filed with the Securities and Exchange Commission on January 8, 2001, in connection with the sale of Richardson Highlands Apartments. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INVESTORS FIRST-STAGED EQUITY L.P. (Registrant) By: Maeril, Inc. Its General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: March 30, 2001 In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Partnership and in the capacities and on the dates indicated. /s/Patrick J. Foye Executive Vice President Date: March 30, 2001 Patrick J. Foye and Director /s/Martha L. Long Senior Vice President Date: March 30, 2001 Martha L. Long and Controller EXHIBIT INDEX Exhibit Description 3 The Partnership Agreement is incorporated by reference to the Form 10-K dated December 31, 1987 (file number 0-14470). 10A Assignment and Assumption Agreement dated May 23, 1994 between the Federal Deposit Insurance Corporation, VMS Apartment Portfolio Associates I, VMS Apartment Portfolio Associates, Ltd., and Investors First-Staged Equity L.P. related to East Bluff Apartments is incorporated by reference to the Form 10-QSB dated June 30, 1994. 10B Contracts related to debt restructure: a) Restated note dated July 1, 1993 between VMS Apartment Portfolio Associates Ltd. and the Federal Deposit Insurance Corporation related to Rivercrest Village is incorporated by reference to the Form 10-QSB dated June 30, 1994. b) Modification of Security Agreement between Investors First-Staged Equity, L.P., VMS Apartment Portfolio Associates, Ltd., and the Federal Deposit Insurance Corporation dated July 1, 1993 related to Rivercrest Village is incorporated by reference to the Form 10-QSB dated June 30, 1994. 10C Contracts related to debt restructure: a) Restated note dated July 1, 1993 between VMS Apartment Portfolio Associates Ltd. and the Federal Deposit Insurance Corporation related to Richardson Highlands is incorporated by reference to the Form 10-QSB dated June 30, 1994. b) Modification of Security Agreement between Investors First-Staged Equity, L.P., VMS Apartment Portfolio Associates, Ltd., and the Federal Deposit Insurance Corporation dated July 1, 1993 related to Richardson Highlands is incorporated by reference to the Form 10-QSB dated June 30, 1994. 10D Contracts related to sale of buildings and land at Serramonte Plaza: a) CONTRACT OF SALE executed August 28, 1996, made and entered into by and between Serramonte Plaza, a California limited partnership, and Daly City Partners, LLC, a California limited liability company. b) FIRST AMENDMENT TO CONTRACT OF SALE entered into effective as of September 27, 1996, by and between Serramonte Plaza, a California limited partnership, and Daly City Partners, LLC, a California limited liability company. c) SECOND AMENDMENT TO CONTRACT OF SALE entered into effective as of October 7, 1996, by and between Serramonte Plaza, a California limited partnership, and Daly City Partners, LLC, a California limited liability company. d) THIRD AMENDMENT TO CONTRACT OF SALE entered into effective as of October 14, 1996, by and between Serramonte Plaza, a California limited partnership, and Daly City Partners, LLC, a California limited liability company. e) FOURTH AMENDMENT TO CONTRACT OF SALE entered into effective as of November 1996, by and between Serramonte Plaza, a California limited partnership, and Daly City Partners, LLC, a California limited liability company. f) FIFTH AMENDMENT TO CONTRACT OF SALE entered into effective as of January 1997, by and between Serramonte Plaza, a California limited partnership, and Daly City Partners, LLC, a California limited liability company. g) SIXTH AMENDMENT TO CONTRACT OF SALE entered into effective as of March 20, 1997, by and between Serramonte Plaza, a California limited partnership, and Daly City Partners, LLC, a California limited liability company. h) ASSIGNMENT AND ASSUMPTION OF LEASES. i) BLANKET CONVEYANCE, BILL OF SALE AND ASSIGNMENT. 10E Contracts related to debt refinancing of Rivercrest Apartments: a) Promissory note dated December 31, 1997 between VMS Apartment Portfolio Associates III and Lehman Brothers Holdings, Inc. b) Deed of Trust, Security Agreement, Fixture Filing and Assignment of Leases and Rents by VMS Apartment Portfolio Associates III to Commonwealth Land Title Insurance Company for the benefit of Lehman Brothers Holdings, Inc. dated December 31, 1997. c) Absolute Assignment of Leases and Rents by VMS Apartment Portfolio Associates III to Lehman Brothers Holdings, Inc. dated December 31, 1997. 10F Contracts related to debt refinancing of Richardson Highlands Apartments. a) Promissory note dated December 31, 1997 between VMS Apartment Portfolio Associates II and Lehman Brothers Holdings, Inc. b) Deed of Trust, Security Agreement, Fixture Filing and Assignment of Leases and Rents by VMS Apartment Portfolio Associates II to Commonwealth Land Title Insurance Company for the benefit of Lehman Brothers Holdings, Inc. dated December 31, 1997. c) Absolute Assignment of Leases and Rents by VMS Apartment Portfolio Associates II to Lehman Brothers Holdings, Inc. dated December 31, 1997. 10.1 Contract for sale of real estate for Serramonte Plaza dated December 16, 1999, between Investors First-Staged Equity, a Delaware limited partnership and Strategic Acquisition Corporation. (Filed with Form 8-K December 31, 1999) 10.2 First amendment to contract for sale of real estate for Serramonte Plaza dated December 16, 1999 between Investors First-Staged Equity, a Delaware limited partnership and Strategic Acquisition Corporation. (Filed with Form 8-K December 31, 1999) 10.3 Second amendment to contract for sale of real estate for Serramonte Plaza dated December 16, 1999 between Investors First-Staged Equity, a Delaware limited partnership and Strategic Acquisition Corporation. (Filed with Form 8-K December 31, 1999) 10.4 Third amendment to contract for sale of real estate for Serramonte Plaza dated December 16, 1999 between Investors First-Staged Equity, a Delaware limited partnership and Strategic Acquisition Corporation. (Filed with Form 8-K December 31, 1999) 10.5 Fourth amendment to contract for sale of real estate for Serramonte Plaza dated December 16, 1999 between Investors First-Staged Equity, a Delaware limited partnership and Strategic Acquisition Corporation. (Filed with Form 8-K December 31, 1999) 10.6 Fifth amendment to contract for sale of real estate for Serramonte Plaza dated December 16, 1999 between Investors First-Staged Equity, a Delaware limited partnership and Strategic Acquisition Corporation. (Filed with Form 8-K December 31, 1999) 10.7 Purchase and Sale Agreement for Richardson Highlands Apartments between Registrant and Archstone Communities Trust effective December 27, 2000. (Filed with Form 8-K January 8, 2001) 10.8 Amendments to Purchase and Sale agreement for Richardson Highlands Apartments. (Filed with Form 8-K January 8, 2001)