-----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, AxDbvxKMUbUuRvhC9V34leQQ1/IBBAdZRtiw7HgfEjmTmaYUXR9dUPo5pqBBKBZ0 S3I5VJQFSm0j3pX8HkcWBQ== 0000808420-98-000015.txt : 19981111 0000808420-98-000015.hdr.sgml : 19981111 ACCESSION NUMBER: 0000808420-98-000015 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 INCOME FUND CENTRAL INDEX KEY: 0000808420 STANDARD INDUSTRIAL CLASSIFICATION: LESSORS OF REAL PROPERTY, NEC [6519] IRS NUMBER: 954120092 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-11013 FILM NUMBER: 98743454 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 FORMER COMPANY: FORMER CONFORMED NAME: ASSOCIATED PLANNERS REALTY FUND II DATE OF NAME CHANGE: 19871006 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 33-11013 ASSOCIATED PLANNERS REALTY INCOME FUND (Exact name of registrant as specified in its charter) CALIFORNIA 95-4120092 (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 INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 1. FINANCIAL STATEMENTS In the opinion of the Co-General Partner (West Coast Realty Advisors, Inc.) of Associated Planners Realty Income 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) $3,631,335 $4,058,189 Cash and cash equivalents 217,779 230,503 Other assets 9,940 14,486 TOTAL ASSETS $3,859,054 $4,303,178 LIABILITIES AND PARTNERS' EQUITY LIABILITIES Accounts payable: Trade $ 4,554 $ 4,609 Related party (Note 3) 9,486 8,421 Security deposits 29,400 29,400 TOTAL LIABILITIES 43,440 42,430 PARTNERS' EQUITY (NOTE 6) Limited partners: $1,000 stated value per unit _ authorized 12,000 units; issued and outstanding 5,096 3,805,343 4,212,880 General partners 10,271 47,868 TOTAL PARTNERS' EQUITY 3,815,614 4,260,748 TOTAL LIABILITIES AND PARTNERS' EQUITY $3,859,054 $4,303,178
[FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME 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 $4,260,748 5,096 $4,212,880 $47,868 Net (loss) (156,360) -- (147,641) (8,719) Distributions to limited partners (259,896) -- (259,896) -- Distributions to general partner (28,878) -- -- (28,878) BALANCE AT SEPTEMBER 30, 1998 $3,815,614 5,096 $3,805,343 $10,271
NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE AT DECEMBER 31, 1996 $4,242,067 5,096 $4,205,288 $36,779 Net income 140,671 -- 119,688 20,983 Distributions to limited partners (157,976) -- (157,976) -- Distributions to general partner (17,552) -- -- (17,552) BALANCE AT SEPTEMBER 30, 1997 $4,207,210 5,096 $4,167,000 $40,210
[FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF INCOME THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS ENDED ENDED ENDED ENDED SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER 30, 1998 30, 1997 30, 1998 30, 1997 REVENUES: Rental $129,510 $106,885 $336,228 $314,956 Interest 3,018 1,353 8,408 2,417 132,528 108,238 344,636 317,373 COSTS AND EXPENSES: Operating 11,182 12,058 28,391 41,750 Property taxes 1,506 5,045 2,994 15,136 Property management fees 6,485 5,660 16,345 15,646 General and administrative 3,889 8,839 26,412 27,330 Depreciation and amortization 25,618 25,613 76,854 76,840 Impairment in value 350,000 --- 350,000 --- 398,680 57,215 500,996 176,702 NET INCOME (LOSS) $(266,152) $51,023 $(156,360) $140,671 NET INCOME PER LIMITED PARTNERSHIP UNIT $(47.46) $8.56 $(28.97) $23.49
[FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
NINE NINE MONTHS MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, INCREASE (DECREASE) IN CASH AND CASH 1998 1997 EQUIVALENTS CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(156,360) $140,671 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 76,854 76,840 Impairment loss (Note 2) 350,000 --- Increase (decrease) from changes in: Other assets 4,546 14,818 Accounts payable 1,010 2,622 Security deposits and prepaid rents --- 1,775 NET CASH PROVIDED BY OPERATING ACTIVITIES 276,050 236,726 CASH FLOWS FROM FINANCING ACTIVITIES Distributions to limited partners (259,896) (157,976) Distributions to general partners (28,878) (17,552) NET CASH (USED IN) FINANCING ACTIVITIES (288,774) (175,528) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (12,724) 61,198 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 230,503 72,207 CASH AND CASH EQUIVALENTS, END OF PERIOD $217,779 $133,405
[FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES BUSINESS Associated Planners Realty Income Fund (the "Partnership), a California limited partnership, was formed on December 23, 1986 under the Revised Limited Partnership Act of the State of California for the purpose of developing or acquiring, managing and operating unleveraged income producing real estate. The Partnership met its minimum funding of $1,200,000 on February 26, 1988 and terminated its offering on September 5, 1989. The Partnership was formed to acquire income-producing real property throughout the United States with emphasis on properties located in California and southwestern states. The Partnership purchases such properties on an all cash 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 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. RENTAL REAL ESTATE AND ESTATE AND DEPRECIATION Assets are stated at cost. Depreciation is computed using the straight-line method over estimated useful lives ranging from 31.5 to 40 years for financial reporting and income tax reporting purposes. 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. LEASE COMMISSIONS Lease commissions which are paid to real estate brokers for locating tenants are capitalized and amortized over the life of the lease. RENTAL REVENUE Rental revenue is recognized when the amount is due and payable under the terms of a lease agreement. STATEMENTS OF CASH FLOWS For purposes 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. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES (CONTINUED) 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. The Partnership has adopted this pronouncement during the fiscal year ended December 31, 1997. The adoption of SFAS 128 did not effect earnings per unit for fiscal year ended December 31, 1997 and prior years. 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 INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES (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 shareholders. 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 INCOME 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 BUSINESS Associated Planners Realty Income Fund, a California limited partnership (the "Fund"), was formed on December 23, 1986 under the Revised Limited Partnership Act of the State of California for the purpose of acquiring, managing, and operating income-producing real estate. The Partnership began accepting subscriptions in October 1987 and closed the offering on September 5, 1989. The Partnership began operations in March 1988. Under the terms of the partnership agreement, the General Partners (West Coast Realty Advisors, Inc. and W. Thomas Maudlin Jr.) are entitled to cash distributions from 10% to 15%. The General Partners are also entitled to net income (loss) allocations varying from 1% to 15% and 1% of depreciation and amortization in accordance with the partnership agreement. Further, the General Partners receive acquisition fees for locating and negotiating the purchase of rental real estate, management fees for operating the Partnership and a commission on the sale of the partnership properties. NOTE 2 - RENTAL REAL ESTATE The Partnership owns the following two rental real estate properties: Acquisition Location (Property Name) Date Purchased Cost Chino, California (Yorba Center) $ 1,882,283 Less: Yorba Center Property Impairment October 25, 1988 (350,000) Revised Yorba Center Property Value 1,532,283 San Marcos, California (90%) January 9, 1990 2,816,904 San Marcos, California (10%) November 1, 1996 188,001 The major categories of rental real estate: September 30, 1998 December 31, 1997 Land $1,332,861 $1,332,861 Building and improvements 3,554,327 3,554,327 4,887,188 4,887,188 Less: Impairment loss 350,000 --- Less: Accumulated depreciation 905,853 828,999 Net rental real estate 3,631,335 4,058,189 ASSOCIATED PLANNERS REALTY INCOME 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 2 - RENTAL REAL ESTATE (CONTINUED) A significant portion of the Partnership's rental revenue was earned from tenants whose individual rents represented more than 10% of total rental revenue. Specifically: One tenant accounted for 58% of total rental revenue in 1998 One tenant accounted for 58% of total rental revenue in 1997 One tenant accounted for 48% of total rental revenue in 1996 During the quarter ending September 30, 1998, the Partnership determined that the total expected future cash flows from disposition of the Yorba Center property located in Chino, California are less than the carrying value of the property. Therefore, the Yorba Center property was deemed to be impaired. As a result, an impairment loss of $350,000 was recorded, measured as the amount by which the carrying amount of the asset exceeded its fair value less cost to sell. Fair value was determined based on a negotiated sales contract with an unrelated buyer of the property (See Note 5). On November 1, 1996, Associated Planners Realty Income Fund ("Income Fund") purchased the remaining real estate asset from Associated Planners Realty Growth Fund ("Growth Fund"). This asset consisted of the 10% interest that Income Fund had not already owned in an office building located in San Marcos, California. Income Fund paid $185,968 on November 2, 1996 for the 10% interest in the San Marcos property. This amount consisted of $188,001 for the property itself, less $2,032 for the share of a cash security deposit from the current tenant that Growth Fund retained. There is no debt in connection with the property. 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 $16,987 for the quarter ended September 30, 1998 and $5,945 for the quarter ended September 30, 1997, and $28,878 for the nine months ended September 30, 1998 and $17,552 for the nine months ended September 30, 1997. (b) For administrative services provided to the Partnership, the General Partner, in accordance with the partnership agreement, is entitled to reimbursement for the cost of certain personnel and relevant expenses. These amounts totaled $9,000 for the nine months ended September 30, 1998 and September 30, 1997 and $3,000 for the quarters ending September 30, 1998 and 1997. ASSOCIATED PLANNERS REALTY INCOME 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 3 - RELATED PARTY TRANSACTIONS (CONT.) (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 $6,485 for the quarter ended September 30, 1998, and $5,660 for the quarter ended September 30, 1997, and $16,345 for the nine months ended September 30, 1998 and $15,646 for the nine months ended September 30, 1997. NOTE 4 - NET INCOME AND CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT The Net Income per Limited Partnership Unit was computed in accordance with the partnership agreement on the basis of the weighted average number of outstanding Limited Partnership Units of 5,096 for 1998 and 1997. The Limited Partner cash distributions, computed in accordance with the Partnership Agreement, were as follows: Record Date Outstanding Amount Total Units Per Unit Distribution June 30, 1998 5,096 $30.00 $152,880 December 31, 1997 5,096 21.00 107,016 June 30, 1997 5,096 10.50 53,508 March 31, 1997 5,096 10.50 53,508 December 31, 1996 5,096 10.00 50,960 Total $417,872 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, respectively. 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 INCOME 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 - SUBSEQUENT EVENTS The Partnership has negotiated contracts for the sale of the Partnerships properties. The sales prices for the properties are as follows: Yorba Shopping Center in Chino, CA $1,250,000 San Marcos Industrial Building in San Marcos, CA 2,700,000 Sales prices listed above are before sales commissions, 5-6% of the sales prices, and before title insurance and escrow closing costs. Buyers have due diligence periods in which to determine their satisfaction with the property and the availability of financing. Consequently, until buyers waive contingencies, these sales are contingent. ASSOCIATED PLANNERS REALTY INCOME 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 The Partnership began offering for sale limited partnership units on October 20, 1987. On February 26, 1988, the Partnership reached its minimum offer level of $1,200,000. The Partnership sold units throughout the remainder of the year, and had raised $3,891,000 in gross proceeds or $3,483,788 net of syndication costs and sales commissions as of December 31, 1988. During 1989, the Partnership continued to raise funds through the sale of Units and had raised $5,106,000 in gross proceeds or $4,594,101 net of syndication costs and sales commissions as of September 5, 1989, the day the Partnership terminated its offering of limited partnership units. 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 INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 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 West Coast Realty Advisors, Inc. ("WCRA") (the corporate General Partner) and Mr. W. Thomas Maudlin Jr. (an individual General Partner), collectively 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 WCRA, the corporate 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 two properties owned by the Partnership. Rental revenue increased $21,272 (6.8%) during the nine months ended September 30, 1998 compared to the nine months ended September 30, 1997 due primarily to higher rent collected from the San Marcos property. Interest income increased $5,991 (248%) for the nine months ended September 30, 1998 as compared to the nine months ended September 30, 1997. This increase is primarily due to a large amount of funds held from approximately January 1, 1998 to August 10, 1998 as a result of the Partnership electing to pay distributions semiannually instead of quarterly. The Partnership's overall costs and expenses increased for the nine months ended September 30, 1998 compared to the nine months ended September 30, 1997. Total expenses increased from $176,702 as of September 30, 1997 to $500,996 as of September 30, 1998, a $342,294 (183.5%) increase. This increase was the result of the Partnership recording a $350,000 impairment loss on the Yorba Center property during the quarter ending September 30, 1998, plus increases in property management fees and depreciation expense, offset by decreases in operating expenses, property taxes and general and administrative expenses. ASSOCIATED PLANNERS REALTY INCOME 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.) During the quarter ending September 30, 1998, the Partnership determined that the total expected future cash flows from disposition of the Yorba Center property located in Chino, California are less than the carrying value of the property. Therefore, the Yorba Center property was deemed to be impaired. As a result, an impairment loss of $350,000 was recorded, measured as the amount by which the carrying amount of the asset exceeded its fair value less cost to sell. Fair value was determined based on a negotiated sales contract with a buyer of the property. Property management fees increased $699 (4.5%) as a result of higher rental revenue collected from the San Marcos property during the nine months ended September 30, 1998 compared to the nine months ended September 30, 1997. Depreciation expense increased $14 as a result of timing differences from the nine months ended September 30, 1997. Operating expenses decreased 13,359 (32%) as a result lower leasing commissions, common area maintenance, utilities and property insurance during the nine months ended September 30, 1998 compared to the nine months ended September 30, 1997. Property taxes decreased $12,142 (85%) primarily as a result of the elimination of a one-time prior year property tax assessment imposed by the County of San Bernardino for the Yorba Center property. General and administrative expenses decreased $918 (3.4%) primarily due to lower legal and accounting fees paid during the nine months ended September 30, 1998 compared to the nine months ended September 30, 1997. Net loss for the nine months ended September 30, 1998 was $156,360 or $297,031 (211.1%) less than the $140,671 in net income for the nine months ended September 30, 1997. This decrease in net income can be attributed to the Partnership recording a $350,000 impairment loss on the Yorba Center property during the quarter ending September 30, 1998, offset by lower overall costs and expenses and increases in total rental revenue and interest income. 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 two properties owned by the Partnership. ASSOCIATED PLANNERS REALTY INCOME 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.) Rental revenue increased $22,625 (21.2%) during the quarter ended September 30, 1998 compared to the quarter ended September 30, 1997 due primarily to higher rent collected from the San Marcos property. Interest income increased $1,665 (123%) for the quarter September 30, 1998 as compared to the quarter ended September 30, 1997. This increase is primarily due to a large amount of funds held from approximately January 1, 1998 to August 10, 1998 as a result of the Partnership electing to pay distributions semiannually instead of quarterly. The Partnership's overall costs and expenses increased for the quarter ended September 30, 1998 compared to the quarter ended September 30, 1997. Total expenses increased from $57,215 as of September 30, 1997 to $398,680 as of September 30, 1998, a $341,465 (596.8%) increase. This increase was the result of the Partnership recording a $350,000 impairment loss on the Yorba Center property during the quarter ending September 30, 1998 plus increases in property management fees and depreciation expense, offset by decreases in general and administrative expenses, property taxes and operating expenses. During the quarter ending September 30, 1998, the Partnership determined that the total expected future cash flows from disposition of the Yorba Center property located in Chino, California are less than the carrying value of the property. Therefore, the Yorba Center property was deemed to be impaired. As a result, an impairment loss of $350,000 was recorded, measured as the amount by which the carrying amount of the asset exceeded its fair value less cost to sell. Fair value was determined based on a negotiated sales contract with a buyer of the property. Property management fees increased $825 (14.6%) as a result of higher rental revenue collected during the quarter September 30, 1998 compared to the quarter ended September 30, 1997. Depreciation expense increased $5 as a result of timing differences from the quarter ended September 30, 1997. General and administrative expenses decreased $4,950 (56%) due primarily to lower legal and accounting and general business insurance. Property taxes decreased $3,539 (70%) primarily as a result of the elimination of a one-time prior year property tax assessment imposed by the County of San Bernardino for the Yorba Center property. Operating expenses decreased $876 (7.3%) as a result lower leasing commissions, common area maintenance, and property insurance during the quarter September 30, 1998 compared to the quarter September 30, 1997. ASSOCIATED PLANNERS REALTY INCOME 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 loss for the quarter ended September 30, 1998 was $266,152 or $317,175 (621.6%) less than the net income of $51,023 for the quarter ended September 30, 1997. This decrease in net income can be attributed to the Partnership recording a $350,000 impairment loss on the Yorba Center property during the quarter ending September 30, 1998, offset by lower overall costs and expenses and increases in total rental revenue and interest income. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 30, 1998, the Partnership made distributions to the general and limited partners totaling $118,907 and $169,867 (for the record dates of December 31, 1997 and June 30, 1998, respectively), of which approximately $74,375 constituted a return of capital. Distributions of $118,907 and $169,867 compared favorably to the $155,789 and $279,494 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 the limited partners totaling $107,016 and $152,880, respectively. Additionally, the partnership distributed $11,891 and $16,987 to the general partner 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. 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 depends on several factors. Among them are: 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 ASSOCIATED PLANNERS REALTY INCOME 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 has adequate liquidity based upon the above four factors. The first factor refers to the approximately 1% property reserve requirement of capital funds raised that the Partnership currently has; this relatively low reserve level is appropriate since all Partnership properties are acquired without the use of debt financing. The 1% property reserve requirement is the minimum guideline that is disclosed in the Partnership's prospectus; the Partnership had more than enough funds to meet this requirement as of September 30, 1998. The second factor relates to the condition of the Partnership's properties. Since the properties are in good condition, no unusual maintenance and repair expenditures are anticipated. The third factor is relevant to the Partnership because after the January 1990 purchase of the San Marcos property, the Partnership had effectively completed its acquisition phase, and entered the operating phase. The subsequent purchase of the remaining 10% interest in San Marcos property was achieved utilizing a combination of reserves and undistributed operating profits that were held back for the purpose of facilitating the acquisition. The fourth factor relates to partner distributions. The Partnership makes semi-annual distributions from the results of operations. Such distributions are subject to payments of Partnership expenses and reasonable reserves for expenses, maintenance, and replacements. During the nine months ended September 30, 1998, the Partnership paid the General Partner a partnership management fee of $28,878. The partnership management fee distribution to the general partner was calculated and paid 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. The effects of the economy, inflation and changing prices have not had a material impact on the Partnership's revenues and income from operations. During the 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 clauses in the leases with its properties' tenants that would help alleviate much of the negative impact of inflation. ASSOCIATED PLANNERS REALTY INCOME 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 $12,724 for the nine months ended September 30, 1998 compared to a $61,198 increase for the nine months ended September 30, 1997. Cash provided from operating activities amounted to $276,050 for the nine months ended September 30, 1998, with the largest contributor being $270,494 in cash basis net income. In contrast, during the nine months ended September 30, 1997, cash provided from operating activities amounted to $236,726 with the largest contributor being $217,511 in cash basis net income. There were no investing activities during the nine months ended September 30, 1998 and September 30, 1997. Cash used for financing activities amounted to $288,774 during the nine months ended September 30, 1998 due to distributions to the limited and general partners. In contrast, cash used for financing activities for the nine months ended September 30, 1997 amounted to $175,528 due to distributions to the limited and general partners. PENDING PROPERTY DISPOSITIONS The Partnership has negotiated contracts for the sale of the Partnerships properties. The sales prices for the properties are as follows: Yorba Shopping Center in Chino, CA $1,250,000 San Marcos Industrial Building in San Marcos, CA 2,700,000 Sales prices listed above are before sales commissions, 5-6% of the sales prices, and before title insurance and escrow closing costs. Buyers have due diligence periods in which to determine their satisfaction with the property and the availability of financing. Consequently, until buyers waive contingencies, these sales are contingent. During the quarter ending September 30, 1998, the Partnership determined that the total expected future cash flows from disposition of the Yorba Center property located in Chino, California are less than the carrying value of the property. Therefore, the Yorba Center property was deemed to be impaired. As a result, an impairment loss of $350,000 was recorded, measured as the amount by which the carrying amount of the asset exceeded its fair value less cost to sell. Fair value was determined based on a negotiated sales contract with a buyer of the property. ASSOCIATED PLANNERS REALTY INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 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. 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 shareholders. 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 shareholder 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 INCOME 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 None 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 INCOME 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 INCOME FUND A California Limited Partnership (Registrant) November 10, 1998 By: WEST COAST REALTY ADVISORS, INC. A California Corporation, A General Partner W. Thomas Maudlin, Jr. President November 10, 1998 John R. Lindsey Vice President/Treasurer EX-27 2
5 0000808420 ASSOCIATED PLANNERS REALTY INCOME FUND L.P. 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 217,779 3,652 0 0 0 227,720 4,537,188 (905,853) 3,859,054 43,440 0 0 0 0 3,815,614 3,859,054 336,228 344,636 150,996 150,996 350,000 0 0 (156,360) 0 0 0 0 0 (156,360) (28.97) (28.97)
-----END PRIVACY-ENHANCED MESSAGE-----