-----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, JWD/70KQCWnSKM+2h3JngdiU7ihMh+JCs4kmPJvOlsB/M5ZhzEwsagqbAmB56OK/ xRavAYtAJl0UFwNEfiyIhw== 0000768834-96-000004.txt : 19960513 0000768834-96-000004.hdr.sgml : 19960513 ACCESSION NUMBER: 0000768834-96-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 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: 1934 Act SEC FILE NUMBER: 000-14470 FILM NUMBER: 96559855 BUSINESS ADDRESS: STREET 1: ONE INSIGNIA FINANCIAL PLAZA STREET 2: PO BOX 1089 CITY: GREENVILLE STATE: SC ZIP: 29602 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 REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report (As last amended by 34-32231, eff. 6/3/93.) 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 March 31, 1996 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period.........to......... Commission file number 0-14470 INVESTORS FIRST-STAGED EQUITY L.P. (Exact name of small business issuer as specified in its charter) Delaware 36-3310965 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 8700 West Bryn Mawr Chicago, Illinois 60631 (Address of principal executive offices) (Zip Code) Issuer's telephone number (312) 399-8700 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) March 31, 1996 Assets Cash and cash equivalents: Unrestricted $ 3,471 Restricted-tenant security deposits 406 Accounts receivable, net of allowance for doubtful accounts of $202 200 Note receivable 150 Escrows for taxes and insurance 209 Restricted escrows 453 Other assets 260 Investment properties: Land $ 9,088 Buildings and related improvements 41,866 50,954 Less accumulated depreciation (22,779) 28,175 $ 33,324 Liabilities and Partners' Deficit Liabilities Accounts payable $ 45 Accrued interest 2,822 Tenant security deposits 401 Accrued property taxes 23 Other liabilities 613 Advances from affiliates of the General Partner 821 Mortgage notes payable, including $22,405 in default 45,754 Partners' Deficit General partners $ (353) Limited partners (16,267 units issued and outstanding) (16,802) (17,155) $ 33,324 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 March 31, 1996 1995 Revenues: Rental income $ 1,829 $ 1,935 Other income 60 64 Total revenues 1,889 1,999 Expenses: Operating 330 390 General and administrative 54 82 Property management fees 98 117 Maintenance 169 239 Depreciation 473 500 Interest 869 1,027 Property taxes 119 110 Total expenses 2,112 2,465 Loss on disposition of investment property -- (78) Net loss $ (223) $ (544) Net loss allocated to general partners $ (2) $ (5) Net loss allocated to limited partners (221) (539) $ (223) $ (544) Net loss per limited partnership unit $ (13.59) $ (33.12) 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 Partners Partners Total Partners' deficit at December 31, 1995 16,267 $ (351) $ (16,581) $ (16,932) Net loss for the three months ended March 31, 1996 -- (2) (221) (223) Partners' deficit at March 31, 1996 16,267 $ (353) $ (16,802) $ (17,155) See Accompanying Notes to Consolidated Financial Statements
d) INVESTORS FIRST-STAGED EQUITY L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Three Months Ended March 31, 1996 1995 Cash flows from operating activities: Net loss $ (223) $ (544) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 473 500 Amortization of loan costs and leasing commissions 11 25 Loss on disposition of investment property -- 78 Change in accounts: Restricted cash (68) (7) Note receivable 10 8 Accounts receivable (41) (71) Escrows for taxes and insurance 317 (26) Other assets (82) (27) Accounts payable (50) (20) Accrued interest 497 343 Tenant security deposit liabilities (5) (6) Accrued taxes 23 61 Other liabilities 5 71 Net cash provided by operating activities 867 385 Cash flows from investing activities: Property improvements and replacements (22) (118) Deposits to restricted escrows (13) (13) Net cash used in investing activities (35) (131) Cash flows from financing activities: Payments on mortgage notes payable (168) (69) Net cash used in financing activities (168) (69) Net increase in cash and cash equivalents 664 185 Cash and cash equivalents at beginning of period 2,807 1,899 Cash and cash equivalents at end of period $ 3,471 $ 2,084 Supplemental disclosure of cash flow information: Cash paid for interest $ 356 $ 676 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 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 the General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1996. 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, 1995. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. Note B - Going Concern The consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainties described below, however, such uncertainties raise substantial doubt about the Partnership's ability to continue as a going concern. The Partnership's properties historically experienced operating deficits after debt service payments. As a means of funding the Partnership's deficits, the Partnership previously drew upon working capital reserves which were exhausted as of December 31, 1989, and had taken cash advances from affiliates of the General Partner. The General Partner and affiliates are not obligated to and do not intend to further fund any such cash flow deficits. In addition, the partners deficit at March 31, 1996, was $17,155,000. Also, since December 31, 1989, the Partnership has typically deferred repayment of these advances and other accrued expenses with the consent of the General Partner and its affiliates. During 1994, the General Partner and its affiliates assigned a portion of the advances to an affiliate of Insignia Financial Group, Inc.("Insignia"). The willingness of the affiliates of the General Partner and other related parties to continue to defer repayment of the advances could adversely affect the Partnership's financial condition. Note B - Going Concern - continued In addition, the General Partner and its affiliates have incurred serious financial difficulties that may affect the ability of the General Partner to function in that capacity. The administration and management of the Partnership is dependent on the General Partner and its affiliates. The pending replacement of the General Partner as discussed in "Note D" will not necessarily have a positive impact on the financial condition of the Partnership. Due to cash flow deficiencies at Rivercrest Village Apartments and Richardson Highlands Apartments, the Partnership stopped making the required monthly payments on the second mortgage loans for these properties in October 1990 and September 1991, respectively. The Registrant negotiated with the subordinate debt holder for Rivercrest Village and Richardson Highlands and finalized a debt restructure on June 22, 1994. The Partnership is in default of certain provisions of these restructured subordinate loans due to the failure to make the required debt service payments of surplus cash amounts as provided by The Department of Housing and Urban Development ("HUD") Regulatory Agreement. Due to the default, management could be forced to relinquish the related properties to the debt holder in satisfaction of the obligations. The Partnership, VMS Realty Management, Inc. and HUD are engaged in discussions covering the appropriateness of certain Richardson Highlands and Rivercrest Village disbursements totalling approximately $2,168,000 and $1,608,000, respectively, made during the years 1987 through 1991. The parties are attempting to resolve this issue, but the ultimate outcome cannot presently be determined. The General Partner is vigorously defending its past actions and does not believe the eventual outcome of these discussions will have a material adverse effect on the operations of the Partnership. Given the General Partner's beliefs and the uncertainty regarding the eventual resolution of the amounts in question, the responsible parties and their ability to make repayment if deemed necessary, no adjustment has been made to the Partnership's consolidated financial statements concerning this matter. The consolidated financial statements do not include any adjustments relating to the recoverability of the recorded asset accounts or the amount of liabilities that might be necessary should the Partnership be unable to continue as a going concern. Note C - Legal Proceedings Certain affiliates of the Partnership, including the General Partner and certain officers and directors of such affiliates are parties to certain pending legal proceedings. The adverse outcome of any one or more legal proceedings against these affiliates who provide financial support or services to the Partnership could have a materially adverse effect on the present and future operations of the Partnership. However, the inclusion of this discussion is not intended as a representation by the Partnership that any particular proceeding is material. There can be no assurance as to the outcome of any of these legal proceedings. Note D - 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 or its affiliates may be reimbursed for direct expenses relating to the Partnership's administration and other costs charged on behalf of the Partnership. The General Partner or its affiliates received approximately $1,000 in the first three months of 1996 as reimbursement of such advances and out-of-pocket expenses. No reimbursements were made during the first quarter of 1995. Pursuant to an agreement dated July 14, 1994, a transaction is pending in which the current General Partner would be replaced by MAERIL, Inc., an affiliate of Insignia. The substitution of MAERIL, Inc. as the General Partner is expected, but there is no assurance that the transaction will be consummated. The Partnership has engaged affiliates of Insignia to provide day-to-day management of the Partnership's properties. These affiliates received approximately $98,000 and $117,000 of such fees for the three months ended March 31, 1996 and 1995, 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 $36,000 for the three months ended March 31, 1996, and $60,000 for the three months ended March 31, 1995. Of these reimbursements, approximately $513,000 remains unpaid at March 31, 1996, and is included in other liabilities. Note E - Sale of Property On December 12, 1995, Serramonte Plaza, Ltd. sold a building at Serramonte Plaza to an unaffiliated party for approximately $6,000,000. This building, the Breuner building, had a net book value of approximately $2,592,000. The Partnership received net proceeds of $5,670,000 after payment of closing costs. Note E - Sale of Property (continued) The gain on the sale was approximately $3,078,000 and was allocated to the partners in accordance with the Restated Limited Partnership Agreement. Approximately $3,861,000 of the proceeds were applied to the mortgage note payable and $1,500,000 of the proceeds were used to repay General Partner advances. 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 three months ended March 31, 1996 and 1995: Average Occupancy 1996 1995 Rivercrest Village Apartments Sacramento, California 93% 96% Richardson Highlands Apartments Marin City, California 97% 94% Serramonte Plaza Daly City, California 90% 91% The decrease in occupancy at Rivercrest Village Apartments was primarily due to college students vacating the property during the semester break. The occupancy increase at Richardson Highlands was due to overall improved market conditions since March 1995. The Partnership realized a net loss of $223,000 for the three months ended March 31, 1996, compared to a net loss of $544,000 for the three months ended March 31, 1995. The decrease in total expenses for the three months ended March 31, 1996, compared to the three months ended March 31, 1995, was primarily due to decreases in operating, general and administrative, property management fees, maintenance, and interest expense. Operating expenses decreased due to decreases of approximately $15,000 at Richardson Highlands resulted from decreased training and travel expenses and other various administrative and marketing expenses. Rivercrest Village also experienced decreases in operating expenses of approximately $11,000 primarily due to decreases in salary expense as a result of the elimination of the maintenance supervisor position and decreases in advertising and other marketing expenses. Additionally, Serramonte Plaza experienced a reduction of approximately $18,000 in operating expenses as a result of the sale of the Breuner building ("Note E" of the Notes to Consolidated Financial Statements). General and administrative expenses decreased for the three months ended March 31, 1996, primarily due to decreases in expense reimbursements resulting from lower administrative costs. The decrease in property management fees for the first quarter of 1996 was due to the reduction in rental revenues of Serramonte Plaza resulting from the sale of the Breuner building. Maintenance expenses decreased for the first quarter of 1996 compared to the first quarter of 1995 as a result of declines in maintenance costs at both Serramonte Plaza and Richardson Highlands. The reduction in maintenance expenses at Serramonte Plaza was directly related to the sale of the Breuner building. The decrease in maintenance expenses at Richardson Highlands was primarily due to a decrease in roof and pool repairs for the quarter ended March 31, 1996. Interest expense decreased for the quarter ended March 31, 1996, as a result of the payment of approximately $3,860,000 towards the principal balance of the Serramonte Plaza mortgage note. The payment was made from the sales proceeds from the sale of the Breuner building. The loss on disposal of property for the three months ended March 31, 1995, related to roof replacements at Richardson Highlands. 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 unrestricted cash of $3,471,000 at March 31, 1996, compared to unrestricted cash of $2,084,000 at March 31, 1995. Net cash provided by operating activities increased primarily due to an approximate $320,000 reduction in mortgage interest payments during 1996, reduced operating and maintenance expenses, and the receipt of tax and insurance escrows related to the Breuner building sale in late 1995. Net cash used in investing activities decreased due to reductions in property improvements and replacements after the significant additions in the prior year. Net cash used in financing activities increased due to increased payments on mortgage notes resulting from the application of approximately $113,000 in funds held in a tax escrow at the time of the Breuner building sale to mortgage principal. The consolidated financial statements have been prepared assuming that the Partnership will continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of the uncertainties described below, however, such uncertainties raise substantial doubt about the Partnership's ability to continue as a going concern. The Partnership's properties historically experienced operating deficits after debt service payments. As a means of funding the Partnership's deficits, the Partnership previously drew upon working capital reserves which were exhausted as of December 31, 1989, and had taken cash advances from affiliates of the General Partner. The General Partner and affiliates are not obligated to and do not intend to fund any further such cash flow deficits. In addition, the partners' deficit at March 31, 1996, was $17,155,000. Also, since December 31, 1989, the Partnership has typically deferred repayment of these advances and other accrued expenses with the consent of the General Partner and its affiliates. During 1994, the General Partner and its affiliates assigned a portion of the advances to an affiliate of Insignia Financial Group, Inc. ("Insignia"). The willingness of the General Partner and its affiliates to continue to defer repayment of these amounts could adversely affect the Partnership's financial condition. Due to cash flow deficiencies at Rivercrest Village Apartments and Richardson Highlands Apartments, the Partnership stopped making the required monthly payments on the second mortgage loans for these properties in October 1990 and September 1991, respectively. The Registrant negotiated with the subordinate debt holder for Rivercrest Village and Richardson Highlands and finalized a debt restructure on June 22, 1994. The Partnership is in default of certain provisions of these restructured subordinate loans. Due to the default, the Partnership could be forced to relinquish the related properties to the debt holder in satisfaction of the obligations. The Partnership, VMS Realty Management, Inc. and The Department of Housing and Urban Development ("HUD") are engaged in discussions covering the appropriateness of certain Richardson Highlands and Rivercrest Village disbursements totalling approximately $2,168,000 and $1,608,000, respectively, made during the years 1987 through 1991. The parties are attempting to resolve this issue, but the ultimate outcome cannot presently be determined. The General Partner is vigorously defending its past actions and does not believe the eventual outcome of these discussions will have a material adverse effect on the operations of the Partnership. Given the General Partner's beliefs and the uncertainty regarding the eventual resolution of the amounts in question, the responsible parties and their ability to make repayment if deemed necessary, no adjustment has been made to the Partnership's financial statements concerning this matter. Recent Developments - VMS Realty Partners and Affiliates There have been no material developments or changes from Recent Developments - - VMS Realty Partners and Affiliates disclosed in "Part I, Item 1" of the Partnership's report on Form 10-KSB for the year ended December 31, 1995. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There have been no new material developments or changes from "Part I, Item 3" of the Partnership's report on the Form 10-KSB for the year ended December 31, 1995. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Partnership did not submit any matter to a vote of its holders of Limited Partnership Interests during the three months ended March 31, 1996. 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 March 31, 1996. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INVESTORS FIRST-STAGED EQUITY L.P. (Registrant) By: VMS Realty Investment II, General Partner By: JAS Realty Corporation Date: May 10, 1995 By: /s/ Joel A. Stone Joel A. Stone President Date: May 10, 1995 By: /s/ Thomas A. Gatti Thomas A. Gatti, Senior Vice-President and Principal Accounting Officer EX-27 2
5 This schedule contains summary financial information extracted from Investors First-Staged Equity L.P. 1996 First Quarter 10-Q and is qualified in its entirety by reference to such 10-Q filing. 0000768834 IINVESTORS FIRST-STAGED EQUITY L.P. 1,000 3-MOS DEC-31-1996 MAR-31-1996 3,471 0 200 202 0 0 50,954 (22,779) 33,324 0 45,754 0 0 0 (17,155) 33,324 0 1,889 0 2,112 0 0 869 0 0 0 0 0 0 (223) (13.59) 0 The Registrant has an unclassified balance sheet.
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