-----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, C8tVorjLGvEmGTncOIE4ajJ4B66PoZ2GDlUAJdJ1elxNkVXAmYRCx991YSA4dXHl hGy3ryf1MpQ6ZYu08IMSUQ== 0000785791-96-000015.txt : 19960517 0000785791-96-000015.hdr.sgml : 19960517 ACCESSION NUMBER: 0000785791-96-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASSOCIATED PLANNERS REALTY GROWTH FUND CENTRAL INDEX KEY: 0000814077 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 954119808 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-13983 FILM NUMBER: 96567385 BUSINESS ADDRESS: STREET 1: 5933 W CENTURY BLVD STREET 2: STE 900 CITY: LOS ANGELES STATE: CA ZIP: 90045-5454 BUSINESS PHONE: 3106700800 MAIL ADDRESS: STREET 1: 5933 W CENTRUY 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 MARCH 31, 1996 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 33-13983 ASSOCIATED PLANNERS REALTY GROWTH FUND (Exact name of registrant as specified in its charter) CALIFORNIA 95-4119808 (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 ITEM 1. FINANCIAL STATEMENTS In the opinion of the General Partners of Associated Planners Realty Growth Fund (the "Partnership"), all adjustments necessary for a fair presentation of the Partnership's results for the three months ended March 31, 1996 and 1995 have been made in the following financial statements which are of normal recurring entries in nature. However, such financial statements are unaudited and are subject to any year-end adjustments that may be necessary. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS MARCH 31, 1996 (UNAUDITED) AND DECEMBER 31, 1995
MARCH 31, DECEMBER 31, 1996 1995 ASSETS RENTAL REAL ESTATE, net of accumulated depreciation (Notes 2 & 3) $1,268,008 $1,285,445 CASH AND CASH EQUIVALENTS 8,041 ----- OTHER RECEIVABLES 19,868 26,329 OTHER ASSETS 14,014 16,289 $1,309,931 $1,328,063 LIABILITIES AND PARTNERS' EQUITY BANK OVERDRAFT $ ----- $ 328 PAYABLE TO AFFILIATES 211,060 240,095 OTHER ACCRUED LIABILITIES 81,919 35,336 NOTE PAYABLE - RELATED PARTY (Note 4 (d)) 150,000 150,000 SECURITY DEPOSITS AND PREPAID RENTS 23,687 25,977 NOTE PAYABLE (Note 3) 1,689,309 1,676,385 TOTAL LIABILITIES 2,155,975 2,128,121 COMMITMENTS AND CONTINGENCIES PARTNERS' EQUITY: Limited Partners: $1,000 stated value per unit; authorized 10,000 units; issued - 2,061 (829,618) (784,092) General Partners: (16,426) (15,966) TOTAL PARTNERS' EQUITY (846,044) (800,058) $1,309,931 $1,328,063
[FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' EQUITY THREE MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE, DECEMBER 31, 1995 $(800,058) 2,061 $(784,092) $(15,966) Net loss (45,986) --- (45,526) (460) BALANCE, MARCH 31, 1996 $(846,044) 2,061 $(829,618) $(16,426) THREE MONTHS ENDED MARCH 31, 1995 (UNAUDITED) LIMITED PARTNERS GENERAL TOTAL UNITS AMOUNT PARTNER BALANCE, DECEMBER 31, 1994 $1,301,837 2,061 $1,296,785 $5,052 Net loss (38,712) --- (38,325) (387) BALANCE, MARCH 31, 1995 $1,263,125 2,061 $1,258,460 $4,665
[FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 1996 MARCH 31, 1995 REVENUES: Rental $56,962 $55,877 Interest 6 51 56,968 55,928 COSTS AND EXPENSES: Operating 33,642 18,327 Property taxes 2,610 4,496 Property management fees (Note 4 (b) ) 2,633 2,299 Interest 46,284 41,616 General and administration 9,865 11,303 Depreciation and amortization 7,920 16,599 102,954 94,640 NET LOSS $(45,986) $(38,712) NET LOSS PER LIMITED PARTNERSHIP UNIT $(22.09) $(18.60)
[FN] See accompanying notes to financial statements ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (Unaudited)
THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, MARCH 31, 1996 1995 Cash flow from operating activities: Net Loss $(45,986) $(38,712) Adjustments to reconcile net (loss) to net cash provided by operating activities: Depreciation and amortization 7,920 16,599 Accruedinterest on note payable 29,479 --- Increase (decrease) from changes in: Other receivables and assets 18,253 14,365 Accounts payable 2,132 11,090 Security deposits and prepaid rent (2,290) (1,756) Net cash provided by operating activities 9,508 1,586 Cash flows from financing activities: Repayments on note payable (1,467) (3,841) Net cash (used in) financing activities (1,467) (3,841) Net increase (decrease) in cash & cash equivalents 8,041 (2,255) Cash and cash equivalents at beginning of period ---- 5,657 CASH AND CASH EQUIVALENTS AT END OF PERIOD $8,401 $3,402
[FN] See accompanying notes to financial statements. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES BUSINESS Associated Planners Realty Growth Fund (the "Partnership"), a California limited partnership, was formed on March 9, 1987 under the Revised Limited Partnership Act of the State of California. The Partnership met its minimum funding of $1,200,00 on August 29, 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 intends to purchase such properties by borrowing up to an aggregate of fifty percent of the purchase price of such properties and intends to own and operate 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. The Partnership's financial statements for the quarter ended March 31, 1996 have been prepared on a going concern basis which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Partnership has suffered recurring loses from operations and has a net capital deficiency of $846,044 at March 31, 1996. The deficiency is attributable to a $1,912,727 impairment loss recognized in the fourth quarter of 1995 on the difference between the carrying amount of rental real estate and the fair value less cost to sell. The Partnership plans to seek relief from the debt holder, while at the same time seeking to enhance the value of the property by increasing occupancy and contracting long-term leases. Failure to obtain additional funding from the General Partner, relief from the lender, or significantly improved operations could result in the eventual loss of the building through foreclosure proceedings. RENTAL REAL ESTATE AND DEPRECIATION Assets are stated at the lower of cost or market. 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. Prior to the adoption of SFAS 121, the Partnership would not record an impairment in the value of properties unless circumstances and surrounding facts dictated that the value of the property could not possibly be recovered upon future sale. Prior to 1995, there were no circumstances or facts that dictated the recording of an impairment in value. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) SUMMARY OF ACCOUNTING POLICIES LOAN ORIGINATION FEES Loan origination fees are capitalized and amortized over the life of the loan. 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 on a straight-line basis to the extent that rental revenue is deemed collectible. 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. 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. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1995 NOTE 1 - NATURE OF PARTNERSHIP The Partnership began accepting subscriptions in October 1987 and closed the offering on September 5, 1989. The Partnership began operations in September 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% in accordance with the partnership agreement. Further, the General Partners will 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, one wholly-owned and the second, a 10% undivided interest. Location (Property Name) Date Purchased Cost Santa Ana, California November 17, 1989 $ 3,228,102 San Marcos, California January 9, 1990 311,878 The major categories of property are: March 31, 1996 December 31, 1995 Land $519,777 $519,777 Building and Improvements 796,951 806,468 1,316,728 1,326,245 Less accumulated depreciation 48,720 40,800 Net rental real estate 1,268,008 1,285,445 ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1995 (CONTINUED) NOTE 2- RENTAL REAL ESTATE (CONTINUED) A significant portion of the Partnership's rental revenue was earned from tenants whose individual rents represent more than 10% of total rental revenue. Specifically: One tenant accounted for 50% in 1996; Two tenants accounted for 14% and 41% in 1995. In December 1994, the County of Orange (where the Santa Ana Building is located) declared bankruptcy due to large losses in connection with unauthorized derivative and bond investment activity. The County's problems had a trickle down effect on the entire area as a large number of businesses dependent upon County purchases went out of business or moved away. This put further pressure on all commercial property owners to further lower rents to attract or retain tenants. The Partenrship saw the negative cash flow situation on the Santa Ana Building worsen as a result of these problems. In December 1995, the property tax assessment on the Santa Ana, California office building was significantly reduced. At that time, the Partnership determined that the total expected future cash flows from operations and disposition of the property are less than the carrying value of the property. Therefore the property was deemed to be impaired. As a result, an impairment loss of $1,912,727 was recorded, measured as the amount by which the carrying amount of the asset exceeded its fair value, less costs to sell. Fair value was determined based on comparable sales. The Partnership intends to continue to annually assess the carrying values of its long-lived assets. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1995 (CONTINUED) NOTE 3 - NOTE PAYABLE The Partnership has a 9.75% promissory note payable secured by a Deed of Trust. This note is due January 1, 2000, and provides significant prepayment penalties. Payments are made in monthly installments of $15,088 including principal and interest. The outstanding balance is $1,689,309 and $1,676,385 at March 31, 1996 and December 31, 1995. The balance of the note increased during the quarter due to the lender allowing the Partnership to defer making the January 1996 payment and adding the payment to the balance of the note. The carrying amount is a reasonable estimate of fair value of notes 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 March 31, 1996 are as follows: Amount 1996 $ 29,735 1997 20,129 1998 22,182 1999 24,443 2000 1,592,820 Total $1,689,309 NOTE 4 - RELATED PARTY TRANSACTIONS (a) For administrative services rendered by the corporate General Partner, in accordance with the partnership agreement, the Partnership incurred $3,000 for the quarters ended March 31, 1996 and March 31, 1995 for these services. (b) Property management fees incurred in accordance with the partnership agreement with West Coast Realty Management, Inc., an affiliate of the corporate General Partner, totaled $2,633 for the quarter ended March 31, 1996, and $2,299 for the quarter ended March 31, 1995. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1995 (CONTINUED) NOTE 4 - RELATED PARTY TRANSACTIONS (CONTINUED) (c) During the year ended December 31, 1990, the Partnership, in a joint venture with Associated Planners Realty Income Fund (an affiliate), purchased a one-story office building located in San Marcos, California (Note 2). The acquisition was paid for entirely in cash totaling $3,119,000 of which $311,900 was provided by the Partnership and $2,807,100 by Associated Planners Realty Income Fund. The Partnership owns a 10% interest in this joint venture. (d) The Partnership has a note payable to a General Partner of $150,000 at December 31, 1995 and March 31, 1996. The note outstanding bears interest of 7.5% and is payable in equal installments of principal and interest amortized over a 10 year period, with all remaining unpaid interest and principal due on May 1, 1997. Accrued interest payable on the note was $99,375 and $88,125 as of March 31, 1996 and 1995. NOTE 5 - NET LOSS AND CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT The Net Loss per Limited Partnership Unit was computed in accordance with the partnership agreement using the weighted average number of outstanding Limited Partnership Units of 2,061 for 1996 and 1995. No distributions were made in 1996 or 1995. NOTE 6 - NEW ACCOUNTING PRONOUNCEMENTS Statements of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of" (SFAS No. 121) issued by the Financial Accounting Standards Board (FASB) is effective for financial statements for fiscal years beginning after December 15, 1995. The new standard establishes new guidelines regarding when impairment losses on long-lived assets, which include plant and equipment, and certain identifiable intangible assets, should be recognized and how impairment losses should be measured. The Partnership has elected the early adoption of SFAS No. 121. An impairment loss of $1,912,727 was recorded in the statement of loss for the year ended December 31, 1995. Prior to adoption of SFAS 121, there were no facts or circumstances that dictated the recordation of an impairment in value of the Santa Ana Property. The effect of regional factors that affected the value of the Santa Ana property did not become known to management until the finalization of the property tax reassessment process in December 1995. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND YEAR ENDED DECEMBER 31, 1995 (CONTINUED) NOTE 7 - SUBSEQUENT EVENT - PARKCENTER OFFICE BUILDING FORECLOSURE On March 4, 1996 the Partnership requested that the lender re-structure the loan on the ParkCenter Office Building. On April 4, 1996, the Partnership received a reply from the lender denying the request to modify the loan and also notified the Partnership that an event of default had occurred under the deed of trust securing the loan due to the Partnership's nonpayment of the March 1, 1996 loan payment. The Partnership also did not make the loan payments due April 1, and May 1, 1996. It is anticipated that the lender will initiate foreclosure proceedings against the property. Unless the lender is willing to modify the loan (and there is no indication that the lender will do so), there is a substantial likelihood that the Partnership's investment in the ParkCenter Office Building will be lost. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION Associated Planners Realty Growth Fund (the "Partnership") was organized in December 1986, under the California Revised Limited Partnership Act. The Partnership began offering units for sale on October 20, 1987. As of December 31, 1989, the Partnership had raised $2,061,000 in gross capital contributions. The Partnership netted approximately $1,820,000 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 intends to own and operate 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. 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. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) 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. LIQUIDITY AND CAPITAL RESOURCES Due to the recurring losses from operations and a net capital deficiency of $800,058 at December 31, 1995, the Partnership's independent certified public accountants have included an explanatory paragraph in their report at December 31, 1995 stating that these factors raise substantial doubt as to Partnership ability to continue as a going concern. From 1992 to 1994, the overall operations of the Partnership gradually improved; however, the Partnership continued to generate net losses and negative cash flows. (These negative cash flows first started appearing in calendar 1991). For example, the net loss for 1993 of $123,357 was $17,737 (13%) less than the $141,094 net loss for 1992, while the negative cash flow (net loss excluding depreciation and amortization) dropped from $70,738 to $54,276, a $16,462 (23%) decrease. Progress continued in 1994, with the net loss of $115,143 that year being $8,214 (7%) less than that for 1993, and the negative cash flow dropping to $47,779, a $6,497 (12%) decrease from 1993's level. Despite these improvements, the fact remained that the Partnership's operations were still insufficient to support the Company without cooperation from the General Partner in deferring collection of various management fees, interest expense, and overhead cost allocations. As of March 31, 1996, the amount payable to the General Partner and its affiliates for deferred fees, overhead expense allocations, cash advances, and interest on those advances, was $211,060. The Partnership hopes to sell the Santa Ana property when conditions, at a minimum, would result in the full payment of the outstanding debt on the property. At this time, those conditions are not being met. In the absence of an impairment in the value of the property, foreclosure by the lender is inevitable. 1995 was a turning point in terms of the viability of the Partnership. Although the general economy in which the Santa Ana building is located was generally poor from 1990 to 1994, the operations of the Partnership's building were still somewhat stable (if not overly profitable) as explained above. However, in December of 1994, the County of Orange (in which the Santa Ana Building is located) declared bankruptcy due to large losses in connection with unauthorized derivative and bond investment activity. The County's problems had a trickle down effect on the entire area as a large number of small businesses dependent upon County purchases went out of business or moved away. This put further pressure on all commercial property owners to further lower rents to attract or retain tenants. The Partnership saw the negative cash flow situation on ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) the Santa Ana building worsen as a result of these problems. On July 31, 1995, at the Partnership's request, the holder of the first deed of trust on the Santa Ana property agreed to provide relief to the Partnership by deferring collection of debt payments due on the loan for September 1995 to January 1996. The General Partner used this opportunity to improve the liquidity of the Partnership, and to allow for the implementation of necessary capital improvements to the Property. However, the relief offered by the lender in the latter part of 1995 and the first month of 1996 was not sufficient to improve the operating results for the Partnership. Largely as a result of the economic problems in Orange County, the net loss from operations for the Partnership increased to $189,168 a $74,025 (64%) increase in loss. Cash basis loss (net loss from operations less depreciation expense) increased from $47,779 to $122,772 - a $74,993 (157%) increase. In addition, during the fourth quarter, despite the Partnership's best efforts to enhance the value of the property with tenant improvements and greater occupancy, it was determined that the surrounding economic conditions of the area dictated a thorough review of the carrying value of the property. Using recent comparative building sales data for the general area in which the building is located, it was determined that a $1,912,727 impairment loss in the value of the building should be recorded on the Partnership's Statement of Loss for 1995. This loss is unrealized, and thus does not flow through to the partners for tax purposes, and may not flow through until the Park Center Office Building is sold or otherwise disposed of. This allowance, in itself, does not directly affect the liquidity of the Partnership, which as previously set forth, is extremely poor. This impairment in value means that the equity of the Partnership is now a deficit, and the sale of the Santa Ana property would probably result in less proceeds than what is currently outstanding on the first deed of trust attached to the building. In February 1996, the Partnership failed to make the first payment due following the debt relief period granted by the holder of the first deed of trust. The Partnership again approached the holder of the first deed of trust to attempt to obtain additional debt relief. The holder of the note declined to provide additional relief, and demanded immediate payment of the installment due to prevent immediate foreclosure of the property. The Partnership met this demand and default provisions were not instituted. The General Partner has made no commitment at this time concerning the availability of further cash advances to the Partnership. The Partnership will continue to seek relief from the debt holder, while at the same time seeking to enhance the value of the property by increasing occupancy and contracting long term leases. Failure to obtain additional funding from the General Partner, relief from the lender, or significantly improved operations could result in the eventual loss of the building through foreclosure proceedings. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) Management intends upon increasing occupancy at the Santa Ana property by offering concessions to potential long term tennants (such as free rent, no security deposit requirement, generous leasehold improvement allowances) and by offering to pay local brokers a higher commission for bringing in qualified, long-term tennants. Although these plans by the Company are intended to enable it to operate in such a manner to overcome its financial difficulties, there is still no assurance that these plans will be successful in achieving that goal. Thus, there is no assurance that the Company will be able to operate as a going concern within the next twelve months, or even beyond that period. On March 4, 1996 the Partnership requested that the lender re-structure the loan on the ParkCenter Office Building. On April 4, 1996, the Partnership received a reply from the lender denying the request to modify the loan and also notified the Partnership that an event of default had occurred under the deed of trust securing the loan due to the Partnership's nonpayment of the March 1, 1996 loan payment. The Partnership also did not make the loan payments due April 1, and May 1, 1996. It is anticipated that the lender will initiate foreclosure proceedings against the property. Unless the lender is willing to modify the loan (and there is no indication that the lender will do so), there is a substantial likelihood that the Partnership's investment in the ParkCenter Office Building will be lost. Due to the large amount of vacancies, general economic problems in the area, and an increase in maintenance and repair expenses at the Santa Ana Property, the 3% reserve remained depleted during the quarter ended March 31, 1996. In addition, the General Partner has made loans to the Partnership and deferred collection of miscellaneous amounts owed to it by the Partnership. For this reason, there were no distributions made to the limited partners during the quarter ended March 31, 1996. It is the Partnership's intention to eliminate partner distributions until such time as the reserves are built back up to acceptable levels and various deferred liabilities due to the Advisor and its affiliates are paid. It is uncertain at this point how long it will take the Partnership to rebuild cash reserves and operate profitability on a cash basis; however, the possibility of partners receiving future cash distributions or a significant portion of their original investment back is considered remote. The Partnership's ability to meet cash requirements in the short-run is dependent upon the willingness of the General Partner and its affiliates to defer collection of amounts due for property management fees and overhead allocations, advance cash as needed for ongoing operating expenses, and the stabilization of the tenant base and rental rates at the Santa Ana property. The ability of the General Partner to make advances to the Partnership is also dependent upon the liquidity of the Parent company of the General Partner. The General Partner is a wholly owned subsidiary of Associated Financial Group (the "Parent"), which consolidated, as of December 31, 1995, had $6.2 million in assets, $2.1 million in cash and cash equivalents, and $3.3 million in equity, and had net income of $.2 million for the year ended December 31, 1995. In addition, the General Partner must be willing to make advances, and as of March 31, 1996, the General Partner has no future commitments to do so. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) In the long run, the Partnership's cash requirements will be further affected by the need to pay off the Deed of Trust that secures the Santa Ana property. This note is due on January 1, 2000, and is projected to have a balance of approximately $1,592,820 at that time. A sale or refinance of the property will be necessary prior to that date. The Partnership has a 10% interest in a building in San Marcos, California. In February 1995, the building was leased to a tenant at a rate 70% of the previous rental rate. Because the Partnership has such a small percentage interest in this property, the decrease in rent resulted in only a $750 per month decrease in cash flow. This particular decrease is not expected to have a material impact on operations. The San Marcos property has no debt financing and there are currently no plans by the Partnership or Associated Planners Realty Income Fund to seek financing on that jointly owned property. In the short-term, the fact that this property has a quality tenant and operates under a triple net lease, allows the Partnership to collect a nominal amount of cash from the operations of this property. In the long-run, the Partnership expects to benefit from the sale of this property when it is sold. The General Partner anticipates that the San Marcos property will be sold prior to the year 2000. The condition of the properties is relatively good, therefore there are no unusually large capital improvements or repair costs that would severely deplete the cash reserves. 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. 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 its leases with some of its properties' tenants that will help alleviate some of the negative impact of inflation. However, the lack of inflation is hurting the Partnership due to the stagnation of office rental rates. There are currently no plans for any material renovation, improvement or further development of the properties. ASSOCIATED PLANNERS REALTY GROWTH FUND (A CALIFORNIA LIMITED PARTNERSHIP) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) RESULTS OF OPERATIONS-QUARTER ENDED MARCH 31, 1996 Operations for the quarter ended March 31, 1996 and 1995 reflect full quarters of rental activities for the Partnership's properties. For the quarter ended March 31, 1996, the return on funds invested in property was -1.8% vs. -.2% in the quarter ended March 31, 1995. Rental revenue increased $1,085 (2%) from March 31, 1996 vs. March 31, 1995, as a result of timing differences in the recognition of revenue. Interest expense increased $4,668 (11%) due to a increase in the monthly mortgage payments on the note payable that is attributable to the prior six months deferral of the mortgage. However, the provisions of the debt relief did not require an increase in the use of cash as a result of this. Operating expenses increased $15,315 (83.6%) due to increased maintenance expenses incurred in order to improve the appearance of the Santa Ana Building. The cash basis loss for the quarter ended March 31, 1996 was $38,066 vs. $22,113 for the quarter ended March 31, 1995. This loss continued to push the Partnership close to default on its ability to meet its current loan and property tax obligations. As previously discussed, continual support from the lender and/or the General Partner and its affiliates will be necessary to avoid foreclosure of the Partnership's primary real estate asset. During the quarter ended March 31, 1996, $9,508 in cash was provided by operating activities. This resulted from an increase in accounts payable of $2,132 (primarily resulting from an increase in the deferral of payment of amounts due to the General Partner and affiliates) plus $18,253 decrease in receivables and other assets (primarily due to the write-off of prepaid insurance and amortization of repairs and maintenance costs incurred in 1995) plus $29,479 increase in accrued interest on notes payable (resulting from the relief of the Partnership received in making payments on the debt), offset by the net cash basis loss of $38,066 from operations (net loss plus depreciation expense) and the $2,290 decrease in security deposits and prepaid rent, (due to a security deposit refund to a vacated tenant during the quarter). There were no investing activities during the quarter by the Partnership; in recent years, some cash had been used for capital improvements to the properties. Financing activities resulted in a use of cash of $1,467 in connection with the Partnership's debt payment on the Santa Ana Building. Cash increased a net $8,041 as a result of the net cash provided by operating activities. As a result, the net cash at the end of the quarter was $8,041. The number of limited partnership units outstanding remained at 2,061. ASSOCIATED PLANNERS REALTY GROWTH 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 GROWTH 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 GROWTH FUND A California Limited Partnership (Registrant) May 15, 1996 By: WEST COAST REALTY ADVISORS, INC. A California Corporation, A General Partner William T. Haas Director and Executive Vice President/Secretary May 15, 1996 Michael G. Clark Vice President/Treasurer EX-27 2
5 0000814077 ASSOCIATED PLANNERS REALTY GROWTH FUND 3-MOS DEC-31-1996 MAR-31-1996 8,041 0 4,470 0 0 29,413 1,316,728 (48,720) 1,309,931 316,666 1,839,309 0 0 0 (846,044) 1,309,931 56,962 56,968 56,670 56,670 0 0 46,284 (45,986) 0 0 0 0 0 (45,986) (22.09) (22.09)
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