-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CYL6gMqFGbojmVqMZgPLE+pn4i2fvzukPgfmXNXxEIYI0zZsT/8Xq4ZPgSFv8/+5 4ZbYVkzap0o3ihZUOZbGMw== 0000730013-98-000005.txt : 19980810 0000730013-98-000005.hdr.sgml : 19980810 ACCESSION NUMBER: 0000730013-98-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980807 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTORS FIRST STAGED EQUITY L P CENTRAL INDEX KEY: 0000768834 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 363310965 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14470 FILM NUMBER: 98679483 BUSINESS ADDRESS: STREET 1: 630 DUNDEE ROAD STREET 2: SUITE 220 CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 8032391000 MAIL ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 10QSB 1 FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 or [ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from .........to......... Commission file number 0-14470 INVESTORS FIRST-STAGED EQUITY L.P. (Exact name of small business issuer as specified in its charter) Delaware 36-3310965 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (847) 562-4537 Issuer's telephone number Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED BALANCE SHEET (in thousands, except unit data) (Unaudited) June 30, 1998 Assets Cash and cash equivalents $ 2,842 Receivables and deposits, net of allowance for doubtful accounts of $10 699 Restricted escrows 437 Other assets 1,580 Investment properties: Land $ 8,402 Buildings and related improvements 39,526 47,928 Less accumulated depreciation (25,090) 22,838 $ 28,396 Liabilities and Partners' Deficit Liabilities Accounts payable $ 38 Accrued interest 377 Tenant security deposit liabilities 421 Other liabilities 98 Advances from affiliates of General Partner 322 Mortgage notes payable 45,194 Partners' Deficit General partner $ (362) Limited partners (16,267 units issued and outstanding) (17,692) (18,054) $ 28,396 See Accompanying Notes to Consolidated Financial Statements b) INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1998 1997 1998 1997 Revenues: Rental income $ 2,013 $ 1,718 $ 3,991 $ 3,556 Other income 99 78 185 151 Total revenues 2,112 1,796 4,176 3,707 Expenses: Operating 667 732 1,332 1,392 General and administrative 70 19 139 72 Depreciation 464 385 928 861 Interest 838 1,144 1,666 2,220 Property taxes 114 104 227 229 Total expenses 2,153 2,384 4,292 4,774 Loss before gain on sale of investment property and extraordinary item (41) (588) (116) (1,067) Gain on sale of investment property (Note D) -- 2,042 -- 2,042 (Loss) income before extraordinary item (41) 1,454 (116) 975 Extraordinary item - (loss) gain on early extinguishment of debt (Note C and E) -- (1,348) 10 (1,348) Net (loss) income $ (41) $ 106 $ (106) $ (373) Net (loss) income allocated to general partner (1%) $ -- $ 1 $ (1) $ (4) Net (loss) income allocated to limited partners (99%) (41) 105 (105) (369) Net (loss) income $ (41) $ 106 $ (106) $ (373) Net (loss) income per limited partnership unit: (Loss) income before extraordinary item $ (2.52) $ 88.49 $ (7.06) $ 59.34 Extraordinary item -- (82.04) .61 (82.04) Net (loss) income $ (2.52) $ 6.45 $ (6.45) $(22.70) See Accompanying Notes to Consolidated Financial Statements
c) INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (in thousands, except unit data) (Unaudited) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 16,267 $ -- $ 48,802 $ 48,802 Partners' deficit at December 31, 1997 16,267 $ (361) $ (17,587) $ (17,948) Net loss for the six months ended June 30, 1998 -- (1) (105) (106) Partners' deficit at June 30, 1998 16,267 $ (362) $ (17,692) $ (18,054) See Accompanying Notes to Consolidated Financial Statements d) INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Six Months Ended June 30, 1998 1997 Cash flows from operating activities: Net loss $ (106) $ (373) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Gain on sale of investment property -- (2,042) Extraordinary (gain) loss on early extinguishment of debt (10) 1,348 Depreciation 928 861 Amortization of loan costs and leasing commissions 96 76 Change in accounts: Receivables and deposits 13 191 Other assets (69) (175) Accounts payable (14) (14) Accrued interest 194 (674) Tenant security deposit liabilities 30 (37) Other liabilities (3) (162) Net cash provided by (used in) operating activities 1,059 (1,001) Cash flows from investing activities: Proceeds from sale of investment property -- 4,360 Property improvements and replacements (356) (157) Withdrawals from restricted escrows 329 30 Net cash (used in) provided by investing activities (27) 4,233 Cash flows from financing activities: Payment of loan costs (106) (348) Payments on mortgage notes payable (726) (268) Repayment of mortgage note payable -- (11,725) Payment of mortgage fee -- (1,102) Proceeds from refinance of mortgage note payable -- 12,000 Advances to affiliates 2 226 Net cash used in financing activities (830) (1,217) Net increase in cash and cash equivalents 202 2,015 Cash and cash equivalents at beginning of period 2,640 1,557 Cash and cash equivalents at end of period $ 2,842 $ 3,572 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,394 $ 2,863 See Accompanying Notes to Consolidated Financial Statements
e) INVESTORS FIRST-STAGED EQUITY L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Investors First- Staged Equity L.P. (the "Partnership") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of MAERIL, Inc. (the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1998. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1997. Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. NOTE B - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES The Partnership has no employees and is dependent on the General Partner or its affiliates for the management and administration of all partnership activities. The General Partner is a wholly-owned subsidiary of Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc. ("Insignia"). The General Partner or its affiliates may be reimbursed for direct expenses relating to the Partnership's administration and other costs charged on behalf of the Partnership. Effective January 2, 1998, VMS Realty Investment II, the prior General Partner, was replaced by MAERIL, Inc. an affiliate of Insignia. The Partnership has engaged affiliates of Insignia to provide day-to-day management of the Partnership's properties. These affiliates received approximately $225,000 and $194,000 of such fees for the six months ended June 30, 1998 and 1997, respectively. An affiliate of Insignia also provided partnership administration and management services for the Partnership. Reimbursements for direct expenses relating to these services totaled approximately $116,000 (including $40,000 of loan costs related to the refinancing of the properties in 1997) for the six months ended June 30, 1998, and $70,000 for the six months ended June 30, 1997. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in IPT, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in September or October of 1998, is subject to customary conditions, including government approvals and the approval of Insignia's shareholders. If the closing occurs, AIMCO will then control the General Partner of the Partnership. NOTE C - EARLY EXTINGUISHMENT OF DEBT At June 30, 1998, the total estimated future cash payments, on the Partnership's properties second mortgages, are less than the recorded balances. Therefore, in compliance with Financial Accounting Standards 15, the Partnership reduced the carrying balances to the estimated future cash payments of $1,573,000 (Richardson Highlands) and $3,355,000 (Rivercrest Village), recognizing an extraordinary gain of approximately $10,000 on the partial extinguishment of debt. NOTE D - SALE OF BUILDINGS AND LAND AT SERRAMONTE PLAZA On April 10, 1997, the Partnership sold three buildings and two parcels of land associated with Serramonte Plaza located in Daly City, California to an unaffiliated party, Daly City Partners, LLC, a California limited liability company. The property was sold in an effort to maximize the Partnership's return on its investment. The sales price for the three buildings and two parcels of land was approximately $4,778,000 and was determined primarily by reference to appraised values. The sale resulted in net proceeds of $4,360,000, after payment of closing costs, and the gain on the sale amounted to approximately $2,042,000. The proceeds from the sale were used to reduce the mortgage debt secured by Serramonte Plaza. NOTE E - REFINANCE OF SERRAMONTE PLAZA In June 1997, the Partnership refinanced the mortgage indebtedness encumbering Serramonte Plaza. The previous mortgage note of approximately $7,365,000 was repaid from loan proceeds received from the refinancing. The new mortgage debt of $12,000,000 carries a stated interest rate of 8.67%, with a balloon payment due July 1, 2004. An extraordinary loss on early extinguishment of debt of approximately $1,348,000 was realized during the second quarter of 1997 due to the payment of approximately $1,102,000 in early payment mortgage fees and a loss of approximately $246,000 on the write-off of unamortized loan costs. In conjunction with the refinancing, a capital improvement reserve of approximately $500,000 was established and approximately $348,000 in loan costs were incurred. These loan costs are included in "Other assets" and will be amortized over the term of the loan. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment properties consist of two apartment complexes and one commercial property. The following table sets forth the average occupancy for these properties for the six months ended June 30, 1998 and 1997: Average Occupancy 1998 1997 Rivercrest Village Apartments Sacramento, California 89% 93% Richardson Highlands Apartments Marin City, California 99% 98% Serramonte Plaza Daly City, California 96% 83% The General Partner attributes the decrease in occupancy at Rivercrest Village Apartments to a recent change in demographics of the property's location. The increase in occupancy at Serramonte Plaza was primarily due to the vacancy of one building during 1997 which accounted for approximately 8% of the property. This building was sold in April of 1997. Results of Operations The Partnership realized a net loss of approximately $106,000 for the six months ended June 30, 1998, compared to a net loss of approximately $373,000 for the six months ended June 30, 1997. For the three months ended June 30, 1998, the Partnership realized a net loss of approximately $41,000 compared to net income of approximately $106,000 for the corresponding period of 1997. The decrease in net income for the three months ended June 30, 1998 compared to the corresponding period of 1997, resulted primarily from the gain of approximately $2,042,000 realized on the sale of buildings and land at Serramonte Plaza in April, 1997 (See "Note D"). Partially offsetting this gain was an extraordinary loss on early extinguishment of debt of approximately $1,348,000 realized on the refinance of Serramonte Plaza during the same period (See "Note E"). The decrease in net loss before gain on sale of investment property and extraordinary item for the three and six month periods ended June 30, 1998, is attributable to an increase in rental income and a decrease in interest expense. Rental income increased due to increased occupancy at Serramonte Plaza and Richardson Highlands Apartments which was partially offset by a decrease in occupancy at Rivercrest Village Apartments. The increase in rental income was also due to rental rate increases at all properties. Interest expense decreased due to the refinancing of the first mortgages on Serramonte Plaza, Richardson Highland and Rivercrest Village and the pay down of Richardson Highland and Rivercrest Village's second mortgages. The pay down of these second mortgages caused the total estimated future cash payments to be less than the recorded balances; therefore, in compliance with Financial Accounting Standard 15, the Partnership reduced the carrying balance to the estimated future cash payments of $1,573,000 (Richardson Highlands) and $3,355,000 (Rivercrest Village), recognizing an extraordinary gain of approximately $10,000 on the partial extinguishment of debt at June 30, 1998. Included in operating expense for the six months ended June 30, 1998, is approximately $19,000 of major repairs and maintenance comprised primarily of exterior painting and exterior building repairs. For the six months ended June 30, 1997, approximately $100,000 of major repairs and maintenance comprised primarily of exterior painting, major landscaping, exterior building and swimming pool repairs are included in operating expense. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources The Partnership held cash and cash equivalents of approximately $2,842,000 at June 30, 1998, compared to approximately $3,572,000 at June 30, 1997. The net increase in cash and cash equivalents for the six months ended June 30, 1998 was approximately $202,000. The net increase in cash and cash equivalents for the six months ended June 30, 1997 was approximately $2,015,000. The net cash provided by operating activities increased primarily due to the decrease in net loss as described above and an increase in accrued interest at June 30, 1998. The increase in accrued interest is a result of the timing of mortgage interest payments. Net cash used in investing activities increased due to an increase in property improvements and replacements. The increase was partially offset by withdrawals from the capital improvement and replacement reserve escrows to be used to purchase these improvements and replacements. In addition, the Partnership received proceeds from the sale of Serramonte Plaza in 1997. Net cash used in financing activities decreased due to the result of the payment of a mortgage fee incurred in connection with the refinancing of Serramonte Plaza in the six months ended 1997 (See "Note E"). The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the properties to adequately maintain the physical assets and other operating needs of the Partnership. The mortgage indebtedness of approximately $45,194,000, matures from January 2000 until January 2008, with balloon payments due at maturity, at which time the properties will either be refinanced or sold. Future cash distributions will depend on the levels of cash generated from operations, property sales, and availability of cash reserves. No cash distributions were paid during the six months ended June 30, 1998 or June 30, 1997. Year 2000 The Partnership is dependent upon the General Partner and Insignia for management and administrative services. Insignia has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter (the "Year 2000 Issue"). The project is estimated to be completed not later than December 31, 1998, which is prior to any anticipated impact on its operating systems. The General Partner believes that with modifications to existing software and conversions to new software, the Year 2000 Issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Partnership. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates of revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended June 30, 1998. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MAERIL, Inc. (Registrant) By: MAERIL, Inc. General Partner Date: August 7, 1998 By: /s/ Carroll D. Vinson Carroll D. Vinson President and Director Date: August 7, 1998 By: /s/ Robert D. Long, Jr. Robert D. Long, Jr. Vice President and CAO EX-27 2
5 This schedule contains summary financial information extracted from Investors First-Staged Equity, L.P. 1998 Second Quarter 10-QSB and is qualified in its entirety by reference to such 10-QSB filing. 0000768834 INVESTORS FIRST-STAGED EQUITY, L.P. 1,000 6-MOS DEC-31-1998 JUN-30-1998 2,842 0 699 0 0 0 47,928 25,090 28,396 0 45,194 0 0 0 (18,054) 28,396 0 4,176 0 4,292 0 0 1,666 0 0 0 0 0 0 (106) (6.45) 0 Registrant has an unclassified balance sheet. Multiplier is 1.
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