-----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, DJRlAlcEZL3d5ftQb2uaQgTpZdOx5Y3zOUhx0iIofyBHpHq9WpHn613yui0zhGfP bM0RIHhOrQsnQkDYJRwJMQ== 0000808420-98-000016.txt : 19981111 0000808420-98-000016.hdr.sgml : 19981111 ACCESSION NUMBER: 0000808420-98-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASSOCIATED PLANNERS REALTY FUND CENTRAL INDEX KEY: 0000785791 STANDARD INDUSTRIAL CLASSIFICATION: LESSORS OF REAL PROPERTY, NEC [6519] IRS NUMBER: 954036980 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16805 FILM NUMBER: 98743464 BUSINESS ADDRESS: STREET 1: 5933 W CENTURY BLVD STREET 2: 9TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90045-5454 BUSINESS PHONE: 3106700800 MAIL ADDRESS: STREET 1: 5933 W CENTURY BLVD STREET 2: 9TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90045-5454 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 1998 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-16805 ASSOCIATED PLANNERS REALTY FUND (Exact name of registrant as specified in its charter) CALIFORNIA 95-4036980 (State or other Jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5933 W. CENTURY BLVD., SUITE 900 LOS ANGELES, CALIFORNIA 90045 (Address of principal executive offices) (Zip Code) (310) 670-0800 (Registrant's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 1. FINANCIAL STATEMENTS In the opinion of the General Partner of Associated Planners Realty Fund (the "Partnership"), all adjustments necessary for a fair presentation of the Partnership's results for the three and nine months ended September 30, 1998 and 1997, have been made in the following financial statements which are normal and recurring in nature. However, such financial statements are unaudited and are subject to any year-end adjustments that may be necessary. BALANCE SHEETS SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
SEPTEMBER 30, 1998 December 31, 1997 ASSETS Rental real estate, less accumulated Depreciation (Note 2) $5,648,496 $5,765,095 Cash and cash equivalents 175,745 287,641 Other assets 54,009 39,812 TOTAL ASSETS $5,878,250 $6,092,548 LIABILITIES AND PARTNERS' EQUITY LIABILITIES Accounts payable: Trade $20,246 $16,152 Related party (Note 3) 12,026 13,375 Notes payable (Note 4) 1,447,115 1,469,817 Security deposits and prepaid rent 37,232 32,254 TOTAL LIABILITIES 1,516,619 1,531,598 Minority interest 199,667 204,741 PARTNERS' EQUITY (NOTES 6 AND 7) Limited partners: $1,000 stated value per unit - authorized 7,500 units; issued and outstanding 7,499 4,116,979 4,303,000 General partner 44,985 53,209 TOTAL PARTNERS' EQUITY 4,161,964 4,356,209 TOTAL LIABILITIES AND PARTNERS' EQUITY $5,878,250 $6,092,548
[FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED)
LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE AT DECEMBER 31, 1997 $4,356,209 7,499 $4,303,000 $53,209 Net income 92,300 -- 71,870 20,430 Distributions to limited partners (257,891) -- (257,891) -- Distributions to general partner (28,654) -- -- (28,654) BALANCE AT SEPTEMBER 30, 1998 $4,161,964 7,499 $4,116,979 $44,985
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE AT DECEMBER 31, 1996 $4,392,108 7,499 $4,350,158 $41,950 Net income 154,231 -- 127,670 26,561 Distributions to limited partners (214,472) -- (214,472) -- Distributions to general partner (23,830) -- -- (23,830) BALANCE AT SEPTEMBER 30, 1997 $4,308,037 7,499 $4,263,356 $44,681
[FN] See accompanying notes to financial statements ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF INCOME THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
THREE THREE NINE NINE MONTHS MONTHS MONTHS MONTHS ENDED ENDED ENDED ENDED SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER 30, 1998 30, 1997 30, 1998 30, 1997 REVENUES: Rental $179,606 $187,440 $526,359 $585,633 Interest 2,247 2,491 7,203 7,100 181,853 189,931 533,562 592,733 COST AND EXPENSES: Operating 29,019 39,462 97,359 109,088 Property taxes 10,357 9,410 35,683 28,466 Property management fees-Note3(c) 9,026 9,413 25,246 29,218 General and administrative 5,012 13,287 50,889 40,668 Depreciation 41,834 41,250 124,449 123,752 Interest expense 33,040 33,710 105,575 101,603 128,288 146,532 439,201 432,795 LESS: MINORITY INTEREST IN NET (INCOME) OF JOINT VENTURE (3,306) (1,597) (2,061) (5,707) NET INCOME $50,259 $41,802 $92,300 $154,231 NET INCOME PER LIMITED PARTNERSHIP UNIT $5.53 $4.52 $9.58 $17.03
[FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
NINE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, 1998 1997 Cash Flow from operating activities: Net income $92,300 $154,231 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 124,449 123,752 Minority interest in net income 2,061 5,707 Increase (decrease) from changes in: Other assets (14,197) (18,126) Accounts payable 2,745 12,998 Security deposits and prepaid rents 4,978 (3,282) Net cash provided by operating activities 212,336 275,280 Cash flows used in investing activities: Tenant improvement additions (7,850) (20,980) Net cash (used in) investing activities (7,850) (20,980) Cash flows used in financing activities: Repayment of notes payable (22,702) (20,734) Distributions to minority interest (7,135) (11,848) Distributions to general partners (28,654) (23,830) Distributions to limited partners (257,891) (214,472) Net cash (used in) financing activities (316,382) (270,884) Net (decrease) in cash and cash equivalents (111,896) (16,584) Cash and cash equivalents at beginning of period 287,641 206,413 CASH AND CASH EQUIVALENTS AT END OF PERIOD $175,745 $189,829
[FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES BUSINESS Associated Planners Realty Fund (the "Partnership"), a California limited partnership, was formed on November 19, 1985 under the Revised Limited Partnership Act of the State of California. The Partnership was formed to acquire income-producing real property throughout the United States with emphasis on properties located in California. The Partnership purchased such properties on an all cash basis or operated them on a moderately leveraged basis, and originally intended on owning and operating such properties for investment over an anticipated holding period of approximately five to ten years. BASIS OF PRESENTATION The consolidated financial statements do not give effect to any assets that the partners may have outside of their interest in the partnership, nor to any personal obligations, including income taxes, of the partners. The consolidated financial statements include the accounts of Associated Planners Realty Fund and all joint ventures in which it has a majority interest. RENTAL REAL ESTATE AND DEPRECIATION Assets are stated at cost. Depreciation is computed using the straight-line method over estimated useful lives ranging from five to 35 years. In the event that facts and circumstances indicate that the cost of an asset may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset would be compared to the carrying amount to determine if a write-down to market value is required. RENTAL INCOME Rental revenue is recognized on a straight-line basis to the extent that rental revenue is deemed collectible. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES STATEMENTS OF CASH FLOWS For the purpose of the statements of cash flows, the Partnership considers cash in the bank and all highly liquid investments purchased with original maturities of three months or less, to be cash and cash equivalents. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. EARNINGS (LOSS) PER UNIT On March 3, 1997, the FASB issued Statement of Financial Accounting Standards No. 128 - Earnings per unit (SFAS 128). This pronouncement provides a different method of calculating earnings per unit than is currently used in accordance with APB 15, Earnings per Unit. SFAS 128 provides for the calculation of Basic and Diluted earnings per unit. Basic earnings per unit includes no dilution and is computed by dividing income available to common unitholders by the weighted average number of common units outstanding for the period. Diluted earnings per unit reflects the potential dilution of securities that could unit in the earnings of the entity, similar to fully diluted earnings per unit. Except where the provisions of the Securities and Exchange Commission's Staff Accounting Bulletin No. 98 are applicable, common unit equivalents have been excluded in all years presented in the Statements of Operations when the effect of their inclusion would be anti-dillutive. SFAS 128 is effective for fiscal years and interim periods after December 15, 1997; early adoption is not permitted. The Partnership had adopted this pronouncement during the fiscal year ended December 31, 1997. The adoption of SFAS 128 does not effect earnings per unit for the fiscal year ended December 31, 1997 and prior years. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 130 (SFAS No. 130) "Reporting Comprehensive Income," issued by the Financial Accounting Standards Board is effective for financial statements with fiscal years beginning after December 15, 1997. Earlier application is permitted. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Partnership has not determined the effect on its financial position or results of operations, if any, from the adoption of this statement. Statement of Financial Accounting Standards No. 131 (SFAS No. 131), "Disclosure about Segments of an Enterprise and Related Information," issued by the Financial Accounting Standards Board is effective for financial statements with fiscal years beginning after December 15, 1997. The new standard requires that public business enterprises report certain information about operating segments in complete sets of financial statements of the enterprises and in condensed financial statements of interim periods issued to unitholders. It also requires that public business enterprises report certain information about their products and services, the geographic areas in which they operate and their major customers. The Partnership has not determined the effect on its financial position or results of operations, if any, from the adoption of this statement. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 NOTE 1- NATURE OF PARTNERSHIP The Partnership began accepting subscriptions in March 1986 and completed its funding in December 1987. Under the terms of the partnership agreement, the General Partner, West Coast Realty Advisors, is entitled to cash distributions ranging from 10% to 15%. The General Partner is also entitled to net income or loss allocations varying from 1% to 15% and 1% depreciation and amortization allocations in accordance with the partnership agreement. NOTE 2- RENTAL REAL ESTATE The Partnership currently has interests in the following four rental real estate properties. Two are wholly-owned and two are jointly owned by the Partnership (81.2%) and Prado Land Company, an affiliate (18.8%): Location (Property Name) Date Purchased Cost Encinitas, California (179 Calle Magdalena) December 31, 1986 $ 705,918 Encinitas, California (187 Calle Magdalena) December 31, 1986 861,410 Clovis, California January 23, 1987 2,854,221 Simi Valley, California November 12, 1987 2,616,523 The major categories of property are: September 30, 1998 December 31, 1997 Land $2,361,894 $2,361,894 Building and Improvements 4,629,518 4,621,668 Furniture and Fixtures 46,660 46,660 7,038,072 7,030,222 Less accumulated depreciation 1,389,576 1,265,127 Net rental real estate $5,648,496 $5,765,095 ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 NOTE 2- RENTAL REAL ESTATE (CONTINUED) A significant portion of the Partnership's rental revenue was earned from a tenant whose individual rent represented more than 10% of total rental revenue. Specifically: Four tenants accounted for 41%, 22%, 18% and 13% of total rental revenue in 1998; Four tenants accounted for 41%, 22%, 18% and 13% of total rental revenue in 1997; Two tenants accounted for 34% and 18% of total rental revenue in 1996; NOTE 3 - RELATED PARTY TRANSACTIONS (a) For Partnership management services rendered to the Partnership, the General Partner is entitled to receive 10% of all distributions of cash from operations. These amounts totaled $11,665 for the quarter ended September 30, 1998 and $8,499 for the quarter ended September 30, 1997, and $28,654 for the nine months ended September 30, 1998 and $23,830 for the nine months ended September 30, 1997. (b) For administrative services provided to the Partnership, the General Partner is entitled to reimbursement for the cost of certain personnel and relevant expenses. These amounts totaled $3,000 for the quarter ended September 30, 1998 and September 30, 1997, and $9,000 for the nine months ended September 30, 1998 and 1997. (c) Property management fees incurred, in accordance with the Partnership Agreement, to West Coast Realty Management, Inc., an affiliate of the corporate General Partner, totaled $9,026 for the quarter ended September 30, 1998, and $9,413 for the quarter ended September 30, 1997, and $25,246 for the nine months ended September 30, 1998 and $29,218 for the nine months ended September 30, 1997. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 (Continued) NOTE 4- NOTES PAYABLE In January 1995, the Partnership closed escrow on a parcel of land adjacent to the Shaw Villa Shopping Center. The purchase price of the land was $206,749, including a $13,102 acquisition fee paid to the Advisor. The purchase was financed using $23,602 in cash, and the remainder by a one year construction loan from Valliwide Bank of Fresno. The total construction loan commitment was for $1,365,000 that matured on October 5, 1996. The construction was completed during 1995 and total construction costs of $1,372,900 was allocated to land, building and improvements. Included in construction costs is $87,838 in construction loan interest that was capitalized. In October 1996, the Partnership obtained permanent financing from a major insurance company to replace the construction loan with a twenty-year loan. The terms of the loan are as follows: Principal - $1,500,000; Interest Rate of 9.1% fixed for five years, then may be adjusted to the weekly average of the five-year Treasury Note yield for the seventh week prior to the Adjustment Date (5th anniversary date) plus 250 basis points, but in no event less than the existing rate, nor to exceed the maximum rate allowed by law; Amortized over twenty years; due November 1, 2006; and current monthly payments of principal and interest of $14,919. The note payable balance is $1,447,115 at September 30, 1998. The carrying amount is a reasonable estimate of fair value of the construction loan payable because the interest rates approximate the borrowing rates currently available for mortgage loans with similar terms and average maturities. The aggregate annual future maturities at September 30, 1998 are as follows: 1998 ..................................$ 7,917 1999 .................................. 33,524 2000 .................................. 36,706 2001 .................................. 40,189 2002 .................................. 44,002 Thereafter ..........................1,284,777 Total $1,447,115 ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1997 (Continued) NOTE 5- NET INCOME AND CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP LIST The Net Income per Limited Partnership Unit was computed in accordance with the partnership agreement using the weighted average number of outstanding limited partnership units of 7,499 for 1998 and 1997. The Limited Partner cash distributions, computed in accordance with the Partnership Agreement, were as follows: Outstanding Amount Total Record Date Units Per Unit Distribution June 30, 1998 7,499 $ 14.00 $104,986 December 31, 1997 7,499 20.39 152,905 June 30, 1997 7,499 10.20 76,490 March 31, 1997 7,499 9.20 68,991 December 31, 1996 7,499 9.20 68,991 Total $472,363 The Partnership began paying distributions on a semi-annual basis with the first record date and payment date being December 31, 1997 and February 6, 1998. This change will permit the Partnership to operate more efficiently with lower Partnership operating expenses. These semi-annual distributions will include cash distributions for the previous six months of operations. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements in the Management Discussion and Analysis constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking statements 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 of implied by such forward-looking statements. INTRODUCTION Associated Planners Realty Fund (the "Partnership") was organized in November 1985, under the California Revised Limited Partnership Act. The Partnership began offering units for sale on March 28, 1986. As of December 27, 1987, the Partnership had raised $7,499,000 in gross capital contributions. The Partnership netted approximately $6,720,000 after sales commissions and syndication costs. The Partnership was organized for the purpose of investing in, holding, and managing improved, leveraged income-producing property, such as residential property, office buildings, commercial buildings, industrial properties, and shopping centers. The Partnership originally intended on owning and operating such properties for investment over an anticipated holding period of approximately five to ten years. The Partnership's principal investment objectives are to invest in rental real estate properties which will: (1) Preserve and protect the Partnership's invested capital; (2) Provide for cash distributions from operations; (3) Provide gains through potential appreciation; and (4) Generate Federal income tax deductions so that during the early years of property operations, a portion of cash distributions may be treated as a return of capital for tax purposes and, therefore, may not represent taxable income to the limited partners. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) INTRODUCTION (CONT.) The ownership and operation of any income-producing real estate is subject to those risks inherent in all real estate investments, including national and local economic conditions, the supply and demand for similar types of properties, competitive marketing conditions, zoning changes, possible casualty losses, increases in real estate taxes, assessments, and operating expenses, as well as others. The Partnership is operated by the General Partner subject to the terms of the Amended and Restated Agreement of Limited Partnership. The Partnership has no employees, and all administrative services are provided by West Coast Realty Advisors, Inc., the General Partner. RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. NINE MONTHS ENDED SEPTEMBER 30, 1997 Operations for the nine months ended September 30, 1998 reflect an entire period of operations for the four properties owned by the Partnership. During 1998, the 187 Calle Magdalena building located in the Santa Fe Business Park was converted from executive suites to a single occupying tenant. While initially this change has had the effect of decreasing rental revenue, the partnership anticipates that operating costs reductions in subsequent periods will more than offset such reduced revenue. Rental revenue decreased $59,274 (10%) due primarily to the successful phase out of the small tenants at the Santa Fe Business Park properties. Interest income increased $103 (1.5%) as a result of the Partnership investing more excess funds in money market accounts during the nine months ended September 30, 1998 as compared to the nine months ended September 30, 1997. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. NINE MONTHS ENDED SEPTEMBER 30, 1997 (CONT.) The Partnership's overall costs and expenses decreased for the nine months ended September 30, 1998 compared to the nine months ended September 30, 1997. Total expenses decreased from $432,795 as of September 30, 1997 to $439,201 as of September 30, 1998, a $6,406 (1.5%) increase. This increase was the result increases in property taxes, interest expense, depreciation and general & administrative expenses offset by decreases in operating costs and property management fees. Property management fees decreased $3,972 (13.6%) as a result of lower rental revenue collected during the nine months ended September 30, 1998 compared to the nine months ended September 30, 1997. Operating expenses decreased $11,729 (10.8%) due to lower payroll, utilities and consulting expenses paid during the nine months ended September 30, 1998 compared to the nine months ended September 30, 1997. Property taxes increased $7,217 (25.4%) primarily due to an increase in property taxes in connection with the Shaw Villa Shopping Center. Interest expense increased $3,972 (3.9%) as a result of interest charges incurred after the completion of construction at the Shaw Villa Shopping Center. Depreciation expense increased $697 (.6%) as a result of $7,850 in fixed asset additions during the nine months ended September 30, 1998. General and administrative expenses increased $10,221 (25.1%) primarily due to an increase in legal and accounting expenses. Net income for the nine months ended September 30, 1998 was $61,931 (40.2%) lower than the nine months ended September 30, 1998. This decrease can be attributed to the successful phase out of the small tenants at the Santa Fe Business Park properties as well as a reduction to Countrywide's monthly rent payment. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1998 VS. THREE MONTHS ENDED SEPTEMBER 30, 1997 Operations for the quarter ended September 30, 1998 reflect an entire period of operations for the four properties owned by the Partnership. During 1998, the 187 Calle Magdalena building located in the Santa Fe Business Park was converted from executive suites to a single occupying tenant. While initially this change has had the effect of decreasing rental revenue, the partnership anticipates that operating costs reductions in subsequent quarters will more than offset such reduced revenue. Rental revenue decreased $7,834 (4.2%) due primarily to the successful phase out of the small tenants at the Santa Fe Business Park properties. Interest income decreased $244 (9.8%) during the quarter ended September 30, 1998 as compared to the quarter ended September 30, 1997 due to lower cash balances maintained in money market accounts. The Partnership's overall costs and expenses decreased for the quarter ended September 30, 1998 compared to the quarter ended September 30, 1997. Total expenses decreased from $146,532 as of September 30, 1997 to $128,288 as of September 30, 1998, a $18,244 (12.5%) decrease. This decrease was the result of decreases in four major expense categories, offset by increases in depreciation expense and property taxes. Operating expenses decreased $10,443 (26.5%) due to lower payroll, property legal and common area maintenance expenses paid during the quarter ended September 30, 1998 compared to the quarter ended September 30, 1997. General and administration expenses decreased $8,275 (62.3%) due to lower partnership legal and accounting and partnership insurance expenses during the quarter ended September 30, 1998 compared to the quarter September 30, 1997. Property management fees decreased $387 (4.1%) as a result of lower rental revenue collected during the quarter ended September 30, 1998 compared to the quarter September 30, 1997. Interest expense decreased $656 (2%) as a result of larger amounts being allocated to principal as the loan on the Shaw Villa Shopping Center approaches maturity. Property taxes increased $947 (10.1%) primarily due to an increase in property taxes in connection with the Shaw Villa Shopping Center. Depreciation expense increased $584 (1.4%) as a result of $7,850 in fixed asset additions during the nine months ended September 30, 1998. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1998 VS. THREE MONTHS ENDED SEPTEMBER 30, 1997 (CONT.) Net income for the quarter ended September 30, 1998 was $8,457 (20.2%) higher than the quarter ended September 30, 1997. This increase can be attributed to the successful phase out of the small tenants at the Santa Fe Business Park properties, offset by a reduction to Countrywide's monthly rent payment. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 30, 1998 the Partnership made distributions to the general and limited partners totaling $169,894 and $116,651 (for the record dates of December 31, 1997 and June 30, 1998, respectively), of which approximately $152,600 constituted a return of capital. Distributions of $169,894 and $116,651 compared favorably to the $172,473 and $124,656 in cash generated from property operations (net income plus depreciation expense), for the six months ended December 31, 1997 and June 30, 1998 on which such distributions were based. On February 6, 1998 and on August 10, 1998 the Partnership made distributions to limited partners totaling $152,905 and $104,986, respectively. Additionally, the partnership distributed $16,989 and $11,665 to the general partner and $3,659 and $3,476 to the minority interest in certain joint ventures during the nine months ended September 30, 1998 for the record dates of December 31, 1997 and June 30, 1998, respectively. Distributions are determined by management based on cash flow and the liquidity position of the Partnership and anticipated occupancy of the properties. It is the intention of management to make semi-annual distributions of cash, subject to maintenance of reasonable reserves. The Partnership began paying distributions on a semi-annual basis and made related payments on February 6, 1998. This change will permit the Partnership to operate more efficiently with lower Partnership operating expenses. These semi-annual distributions will include cash distributions for the previous six months of operations. Management uses cash as its primary measure of a partnership's liquidity. The amount of cash that represents adequate liquidity for a real estate limited partnership, in the short-term and long-term, depends on several factors. Among them are: ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) 1. Relative risk of the partnership; 2. Condition of the partnership's properties; 3. Stage in the partnership's life cycle (e.g., money-raising, acquisition, operating or disposition phase); and 4. Distribution to partners. The Partnership believes that it has the ability to generate sufficient cash to meet both short-term and long-term liquidity needs, based upon the above four factors. The first factor refers to the risk of Partnership's investments. The Partnership's investments in properties were paid for in cash or on a moderately leveraged basis. The second factor relates to the condition of the Partnership's properties. All Partnership properties are in good condition. There is no foreseeable need to increase reserves to fund deferred or unusual maintenance and repair expenditures. The third factor relates to life cycle. The Partnership completed its funding and acquisition of properties in previous years. Thus, the Partnership is in the property operating stage. As part of these operating activities, the partnership was involved in purchasing and developing the aforementioned parcel in Clovis, California in 1994 and 1995. This activity is expected to enhance rental revenues and increase the value of the Shaw Villa Shopping Center. The Partnership believes that cash flows provided by operating activities will continue. The fourth factor relates to Partnership distributions. The Partnership is currently making semi-annual distributions from operations. Such distributions are subject to payments of Partnership expenses and reasonable reserves for expenses, maintenance, and replacements. In addition, at least six months of cash profits are left in the Partnership's balance sheet at each quarter end, since the Partnership makes distributions to the limited partners one month after each record date of June 30, and December 31. The General Partner believes that the Partnership will have the ability to meet its cash requirements in both the short-term and long-term. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES (CONT.) The Partnership began making distributions on a semi-annual basis and related payments were made on February 6, 1998. This change will permit the Partnership to operate more efficiently with lower Partnership operating expenses. These semi-annual distributions will include cash distributions for the previous six months of operations. The Partnership is attempting to sell the two office buildings located in Encinitas, California (179 and 187 Calle Magdalena), and the Shaw Villa Shopping Center located in Clovis, California. The net proceeds from such sales will be distributed to the limited partners and General Partner in accordance with the terms of the Partnership Agreement. The cost basis of these properties are: 179 Calle Magdalena $ 705,918 187 Calle Magdalena 861,410 Shaw Villa Shopping Center 2,854,221 During the nine months ended September 30, 1998, the General Partner earned partnership management fees of $28,654. Partnership management fees were paid and calculated in accordance with the partnership agreement. The Tax Reform Acts of 1986 and 1987 and the Revenue Reconciliation Acts of 1990 and 1993 did not have a material impact on the Partnership's operations. Slowdowns in the economy, inflation and changing prices have had a nominal effect on the Partnership's revenues and income from continuing operations. During the twelve years of the Partnership's existence, inflationary pressures in the U.S. economy have been minimal, and this has been consistent with the experience of the Partnership in operating rental real estate in California. The Partnership has several lease clauses with its tenants that will help alleviate much of the negative impact of inflation. Among these are: Triple net leases at the Shaw Villa Shopping Center and Pacific Bell Building which give the Partnership an ability to pass on higher operating costs to its tenants. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) CASH FLOWS - NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. NINE MONTHS ENDED SEPTEMBER 30, 1997 Cash and cash equivalents decreased $111,896 for the nine months ended September 30, 1998 compared to a $16,584 decrease for the nine months ended September 30, 1997. The continued decrease in cash resources is primarily due to distributions in excess of current earnings and fixed asset additions in the Santa Fe Business Park property. Cash provided from operating activities increased by $212,336 for the nine months ended September 30, 1998, with the largest contributor being $216,749 in cash basis net income. In contrast, during the nine months ended September 30, 1997, cash provided from operating activities amounted to $275,280 with the largest contributor being $277,983 in cash basis net income. Investing activities resulted in a $7,850 decrease in cash resources during the nine months ended September 30, 1998 due to tenant improvements relating to the Santa Fe Business Park property. In contrast, the nine months ended September 30, 1997 resulted in a $20,980 decrease in investing activities due to tenant improvements relating to the Santa Fe Business Park property. Cash from financing activities decreased $316,382 during the nine months ended September 30, 1998 due to $293,680 being distributed to the limited, general and minority interest and $22,702 used as payments on notes payable. In contrast, cash used in financing activities for the nine months ended September 30, 1997 decreased $270,884 due to $250,150 being distributed to the limited, general and minority interest partners and $20,734 used as payments on notes payable. NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards No. 130 (SFAS No. 130) "Reporting Comprehensive Income," issued by the Financial Accounting Standards Board is effective for financial statements with fiscal years beginning after December 15, 1997. Earlier application is permitted. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general-purpose financial statements. The Partnership has not determined the effect on its financial position or results of operations, is any, from the adoption of this statement. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) NEW ACCOUNTING PRONOUNCEMENTS (CONT.) Statement of Financial Accounting Standards No. 131 (SFAS No. 131), "Disclosure about Segments of an Enterprise and Related Information," issued by the Financial Accounting Standards Board is effective for financial statements with fiscal years beginning after December 15, 1997. The new standard requires that public business enterprises report certain information about operating segments in complete sets of financial statements of the enterprises and in condensed financial statements of interim periods issued to unitholders. It also requires that public business enterprises report certain information about their products and services, the geographic areas in which they operate and their major customers. The Partnership has not determined the effect on its financial position or results of operations, if any, from the adoption of this statement. IMPACT OF YEAR 2000 Many existing computer systems and applications, and other control devices, use only two digits to identify a year in the date field, without considering the impact of the upcoming change in the century. As a result, such systems and applications could fail or create erroneous results unless corrected so that they can process data related to the Year 2000. The Partnership relies on its systems, applications and devices in operating and monitoring all major aspects of its business, including financial systems (such as general ledger, accounts receivable, accounts payable and unitholder servicing), and embedded computer chips, networks and telecommunications equipment and end products. The Partnership also relies, directly and indirectly, on external systems of business enterprises such as its advisor, lessees, suppliers, creditors, financial organizations, and of governmental entities for accurate exchange of data. The Partnership's current estimate is that the costs associated with the Year 2000 issue will not have a material adverse effect on the results of operations or financial position of the Partnership. However, despite the Partnership's efforts to address the Year 2000 impact on its internal systems, the Partnership may not have fully identified such impact or whether it can resolve it without disruption of its business and without incurring significant expense. In addition, even if the internal systems of the Partnership are not materially affected by the Year 2000 issue, the Partnership could be affected through disruption in the operations of the enterprises with which the Partnership interacts. ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) PART II O T H E R I N F O R M A T I O N ITEM 1.LEGAL PROCEEDINGS The Partnership was named as a defendant in CARMEN MARGALA V. DAVID L. MURDOCK, WILBUR HORWITZ, ASSOCIATED PLANNERS REALTY FUND AND DOES 1-100, INCLUSIVE. The lawsuit was filed on July 31, 1997 and served on the Partnership on November 14, 1997. The plaintiff alleged breach of contract, fraud and deceit, intentional misrepresentation, conversion, interference with third party economic benefit and sexual harassment. All defendants denied the allegations in their entirety. After a lengthy and contentious discovery process, the trial court dismissed the entire case on May 8, 1998. Plaintiff's motion for a re-hearing on the merits was denied on July 30, 1998. It is unknown whether plaintiff will pursue a further appeal. ITEM 2.CHANGES IN SECURITIES None ITEM 3.DEFAULTS UPON SENIOR SECURITIES None ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None ITEM 5.OTHER INFORMATION None ITEM 6.EXHIBIT AND REPORTS ON FORM 8-K (a) Information required under this section has been included in the financial statements. (b) Reports on Form 8-K None ASSOCIATED PLANNERS REALTY FUND (A CALIFORNIA LIMITED PARTNERSHIP) S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ASSOCIATED PLANNERS REALTY FUND A California Limited Partnership (Registrant) November 10, 1998 By: WEST COAST REALTY ADVISORS, INC. A California Corporation, General Partner W. Thomas Maudlin Jr. President November 10, 1998 John R. Lindsey Vice President/Treasurer EX-27 2
5 0000785791 ASSOCIATED PLANNERS REALTY FUND L.P. 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 175,745 0 11,895 0 0 216,918 7,038,072 (1,389,576) 5,878,250 269,171 1,447,115 0 0 0 4,161,964 5,878,250 526,359 533,562 335,687 335,687 0 0 105,575 92,300 0 0 0 0 0 92,300 9.58 9.58
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