-----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, GtKo+usXy5XNf8coe27W1F01nG+n6UIX9JfOZ2kXyCJZfpSFoMNoDh2AjRhA4Svc LG5c5ADndn4CmLGZaKln/Q== 0000785791-96-000020.txt : 19960731 0000785791-96-000020.hdr.sgml : 19960731 ACCESSION NUMBER: 0000785791-96-000020 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960730 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-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 033-13983 FILM NUMBER: 96601268 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-K/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A AMENDMENT TO GENERAL FORM FOR REGISTRATION OF SECURITIES Filed pursuant to Section 12(g) THE SECURITIES EXCHANGE ACT OF 1934 ASSOCIATED PLANNERS REALTY GROWTH FUND (Exact name of registrant as specified in its charter) AMENDMENT NO. 2 File No. 33-13983 The undersigned Registrant hereby amends the following items, financial statements, exhibits or other portions of its General Form for Registration of Securities on Form 10-K as set forth in the pages attached hereto: Item 7 (Management Discussion and Analysis) and Item 8 (Financial Statements and Supplementary Data) Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed on its behalf by the undersigned thereunto duly authorized. Associated Planners Realty Growth Fund (Registrant) Date: July 30, 1996 By: West Coast Realty Advisors, Inc. (Advisor) By: Michael G. Clark, Vice President/Treasurer ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Partnership began offering for sale limited partnership units in October 1987. On August 29, 1988, the Partnership reached its minimum offering level of $1,200,000 and funds were released from escrow, to the Partnership. The Partnership sold units throughout the remainder of 1988, and had raised $1,362,000 in gross proceeds or $1,219,262 net of syndication costs and sales commissions as of December 31, 1988. As of December 31, 1989, gross proceeds from sales of partnership units totaled $2,061,000 or $1,823,953 net of syndication costs and sales commissions. In reading the discussion of operations, the reader should understand that the Partnership has a 100% interest in an office building in Santa Ana, California, and a 10% interest in a commercial building in San Marcos, California. The results of the Partnership's operations have been dominated by the results of operations for the Santa Ana building; thus, the discussion of the Partnership's results of operations will emphasize the operations of that building. 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 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 unacceptable 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. The property tax installment that was due April 15, 1995 was paid on June 29, 1995. The amount paid was $9,896.71, which included a penalty of $908.97. The property tax installment due November 10, 1995 ($8,987.74) was made on a timely basis. ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.) As of December 31, 1995, the amount payable to the General Partner and its affiliates for deferred fees, overhead expense allocations, cash advances, and interest on those advances, was $240,095. The Partnership intends 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. 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 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 from 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 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 ParkCenter Office Building is sold or otherwise disposed of. This allowance, in itself, does not directly ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.) 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 Partnership projects that additional cash advances will be necessary from the General Partner, or one of its affiliates, in order to prevent an additional liquidity crisis in April 1996 when property taxes become due on the property. The General Partner has made no commitment at this time concerning the availability of future 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. 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. This plan is intended to enable the Partnership to operate during the twelve month period following December 31, 1995, and to operate beyond that 1996 twelve month period as well. However, there is no assurance that this plan will be successful. During the year ended December 31, 1995, the Partnership did not make distributions to limited partners or pay General Partner management fees, in an attempt to rebuild cash reserves. Distributions are determined by management based on cash flow and the liquidity position of the Partnership. ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.) 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. Time in the partnership's life cycle (e.g., money-raising, acquisition, operating or disposition phase); and 4. Partner distributions. 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 1995. 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 year. 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 profitably 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 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 December 31, 1995, the General Partner has no future commitments to do so. 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 $1,550,000 at that time. A sale or refinance of the property will be necessary prior to that date. The San Marcos property has no debt financing and their are currently no plans by the ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.) 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. As previously discussed, the Partnership has a 10% interest in a building in San Marcos, California. Subsequent to year-end, 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 results in only a $750 per month decrease in cash flow. This particular decrease is not expected to have a material impact on operations. 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. RESULTS OF OPERATIONS - 1995 VS. 1994 Operations for the years ended December 31, 1995 and 1994 reflect full years of rental activities for the Partnership's properties. For the year ended December 31, 1995, the return on funds invested in property was (1.8%) vs. (.2%) in calendar 1994. As previously discussed, poor economic conditions resulted in a $27,729 (10.2%) decrease in rental revenue. Of this decrease, approximately 25% ($7,000) was due to decreases in rental rates at the San Marcos and Santa Ana properties, with the remaining 75% ($20,729) due to increased vacancy at the properties. As a result of the ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.) debt relief received, interest expense increased $19,312 (11.4%). 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 $24,027 (25.4%) due to increased maintenance expenses incurred in order to improve the appearance of the Santa Ana Building. The cash basis loss for 1995 was $122,772 vs. $47,779 in 1994. This $74,993 (157%) increase pushed 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. The actual net loss for the year ended December 31, 1995 totaled $2,101,895--a large increase over the $115,143 net loss recognized in 1994. Much of this loss was due to the impairment loss ($1,912,727) recognized in connection with the Santa Ana property. This loss is currently non-cash in nature, and cash provided by operating activities ($4,468) was actually $14,111 higher than the $9,443 in cash used by operating activities in 1994. However, much of the cash provided by operations in 1995 was the result of an increase in amounts deferred by the General Partner, which is not indicative of improved operating results. During the year ended December 31, 1995, $4,468 in cash was provided by operating activities. This resulted from an increase in accounts payable of $70,899 (primarily resulting from an increase in the deferral of payment of amounts due to the General Partner and affiliates) plus the $71,954 increase in accrued interest on notes payable (resulting from the relief the Partnership received in making payments on the debt from September 1995 through January 1996), offset by the net cash basis loss of $122,772 from operations (net loss plus depreciation expense and impairment loss), and the $16,409 net increase in receivables and other assets (primarily work in progress pertaining to certain capital improvements to the Santa Ana Building). There were no investing activities during the year 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 $10,125 in connection with the Partnership's debt on the Santa Ana Building. Cash decreased a net $5,657 as a result of the net cash used by operating activities and financing activities. As a result, the net cash at the end of the year was zero. The number of limited partnership units outstanding remained at 2,061. ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONT.) RESULTS OF OPERATIONS - 1994 VS. 1993 Operations for the years ended December 31, 1994 and 1993 reflect full years of rental activities for the Partnership's properties. For the year ended December 31, 1994, the return on funds invested in property was (.2%) vs. (.1%) in calendar 1993. As has been the case for several years, the Partnership realized an overall cash basis net loss due to the administrative costs of operating the Partnership (cash basis is net income plus an addback of depreciation expense). Rental income fell $17,298 (6%) due to continuing rental rate and occupancy problems at the Santa Ana Building. Of the $17,298 decrease in rental revenue from 1993, we would estimate that $12,000 was due to increased vacancy at the Santa Ana property, with the balance due to lower overall rental rates in the area. Operating expense decreased $22,400 (19%) as a result of less maintenance and ongoing operating costs due to lower vacancy at the Santa Ana property and lower property taxes due to some relief granted by the County of Orange in 1994. The cash basis loss decreased from $54,276 in 1993 to $47,779 in 1994. Although this did represent a $6,497 (12.0%) decrease, the viability of the Partnership was dependent upon the General Partner and affiliates waiving collection of certain fees and reimbursements that it was entitled to. Coupled with prior year (1991-1993) losses, the cash loss for 1994 continued to put the Partnership in a mode of extremely low liquidity. During the year ended December 31, 1994, $9,443 in cash was used in operating activities. This resulted from a net cash basis loss of $47,779 (net loss plus depreciation expense), plus the $11,486 decrease in security deposits and prepaid rents (primarily resulting decrease in occupancy from 85% in 1993 to 73% in 1994), offset by a increase in accounts payable of $46,235 (primarily resulting from an increase in the deferral of payment of amounts due to the General Partner and affiliates), and the $3,887 net increase in receivables and other assets (primarily work in progress pertaining to certain capital improvements to the Santa Ana Building). There were no investing activities during the year 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 $14,464 in connection with the Partnership's debt on the Santa Ana Building. Cash decreased a net $23,907 as a result of the net cash used by operating activities and financing activities. As a result, the net cash at the end of the year was $5,657. The number of limited partnership units outstanding remained at 2,061. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Certified Public Accountants 1 Financial Statements: Balance Sheets 2 Statements of Loss 3 Statements of Partners' Equity (Deficit) 4 Statements of Cash Flows 5 Summary of Accounting Policies 6-7 Notes to Financial Statements 8-12 Report of Independent Certified Public Accountants Associated Planners Realty Growth Fund (a California limited partnership) Los Angeles, California We have audited the accompanying balance sheets of Associated Planners Realty Growth Fund (a California limited partnership) as of December 31, 1995 and 1994 and the related statements of loss, partners' equity (deficit), and cash flows for each of the three years in the period ended December 31, 1995. We have also audited the schedules listed in the accompanying index at item 14(a). These financial statements and schedules are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedules are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedules. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Associated Planners Realty Growth Fund (a California limited partnership), at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, the schedules present fairly, in all material respects, the information set forth therein. As discussed in Note 8 to the financial statements, the Partnership changed its method of accounting for the impairment of long-lived assets in 1995. The accompanying financial statements and schedules have been prepared assuming that the Partnership will continue as a going concern. As discussed in the summary of accounting policies, the Partnership has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in the summary of accounting policies. The financial statements and schedules do not include any adjustments that might result from the outcome of this uncertainty. BDO SEIDMAN, LLP Los Angeles, California February 12, 1996 ASSOCIATED PLANNERS REALTY GROWTH FUND (A California limited partnership) BALANCE SHEETS
December 31, 1995 1994 Assets Rental real estate, less accumulated depreciation (Note 2) $1,285,445 $3,255,051 Cash and cash equivalents --- 5,657 Accounts receivable --- 4,724 Other receivables 26,329 --- Other assets 16,289 31,002 Total assets $1,328,063 $3,296,434 Liabilities and Partners' Equity (Deficit) Liabilities Bank overdraft $ 328 $ --- Accounts payable: Trade 35,336 16,725 Related party (Note 4) 240,095 187,807 Note payable - related party (Note 4) 150,000 150,000 Security deposits and prepaid rent 25,977 25,181 Note payable (Note 5) 1,676,385 1,614,884 Total liabilities 2,128,121 1,994,597 Partners' equity (deficit) Limited partners: $1,000 stated value per unit - authorized 10,000 units; issued and outstanding 2,061 (784,092) 1,296,785 General partners (15,966) 5,052 Total partners' equity (deficit) (800,058) 1,301,837 Total liabilities and partners' equity (deficit) $ 1,328,063 $3,296,434
[FN] See accompanying summary of accounting policies and notes to financial statements. ASSOCIATED PLANNERS REALTY GROWTH FUND (A California limited partnership) STATEMENTS OF LOSS
Years ended December 31, 1995 1994 1993 Revenues Rental (Notes 2 and 3) $ 243,067 $ 270,796 $ 288,094 Interest 147 472 530 243,214 271,268 288,624 Costs and expenses Operating 118,523 94,496 116,896 Interest 188,998 169,686 170,849 General and administrative 58,465 54,865 55,155 Depreciation and amortization 66,396 67,364 69,081 Impairment loss (Note 2) 1,912,727 --- --- 2,345,109 386,411 411,981 Net loss $ (2,101,895) $ (115,143) $(123,357) Net loss per limited partnership unit (Note 6) $(1,009.64) $(55.31) $ (59.25)
[FN] See accompanying summary of accounting policies and notes to financial statements. ASSOCIATED PLANNERS REALTY GROWTH FUND (A California limited partnership) STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
Limited Partners General Total Units Amount Partner Balance, January 1, 1993 $1,540,337 2,061 $1,532,899 $7,438 Net loss for the year (123,357) --- (122,122) (1,235) Balance, December 31, 1993 1,416,980 2,061 1,410,777 6,203 Net loss for the year (115,143) --- (113,992) (1,151) Balance, December 31, 1994 1,301,837 2,061 1,296,785 5,052 Net loss for the year (2,101,895) --- (2,080,877) (21,018) Balance, December 31, 1995 $(800,058) 2,061 $(784,092) $(15,966)
[FN] See accompanying summary of accounting policies and notes to financial statements. ASSOCIATED PLANNERS REALTY GROWTH FUND (A California limited partnership) STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents Years ended December 31, 1995 1994 1993 Cash flows from operating activities Net loss $(2,101,895) $(115,143) $(123,357) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 66,396 67,364 69,081 Accrued interest on note payable 71,954 --- --- Impairment loss 1,912,727 --- --- Increase (decrease) from changes in: Accounts receivable 4,724 (2,189) 2,996 Other receivables and assets (21,133) 6,076 (2,512) Accounts payable 70,899 46,235 33,669 Security deposits and prepaid rent 796 (11,786) 432 Net cash provided by (used in) operating activities 4,468 (9,443) (19,691) Cash flows used in investing activities Additions to rental real estate --- --- (3,519) Cash flows from financing activities Bank overdraft 328 --- --- Decrease in note payable (10,453) (14,464) (13,125) Proceeds from note payable - related party --- --- 50,000 Net cash provided by (used in) financing activities (10,125) (14,464) 36,875 Net increase (decrease) in cash and cash equivalents (5,657) (23,907) 13,665 Cash and cash equivalents, beginning of year 5,657 29,564 15,899 Cash and cash equivalents, end of year $ --- $ 5,657 $ 29,564
[FN] See accompanying summary of accounting policies and 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 $1,200,000 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 year ended December 31, 1995 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 losses from operations and has a net capital deficiency of $800,055 at December 31, 1995. The deficiency is attributable to a $1,912,727 impairment loss recognized 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. ASSOCIATED PLANNERS REALTY GROWTH FUND (A California limited partnership) SUMMARY OF ACCOUNTING POLICIES New Accounting Pronouncements Statement 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. At the beginning of the fourth quarter of 1995, The Partnership elected the early adoption of SFAS No. 121. Prior to the adoption of SFAS 121, real estate was carried at the lower of cost or net realizable value. The adoption of SFAS No. 121 did not have a material effect on its financial position or result of operations. 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 record an impairment in the value of assets when circumstances and surrounding facts dictated that the market value of the property had permanently declined below cost and book value 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. 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 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. 2. Rental Real Estate The Partnership owns the following two rental real estate properties, one wholly-owned and the second, a 10% undivided interest: Acquisition 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 rental real estate are: December 31, 1995 1994 Land $519,777 $1,349,900 Buildings and improvements 806,468 2,241,600 1,326,245 3,591,500 Less accumulated depreciation 40,800 336,449 Rental real estate, net $1,285,445 $3,255,051 ASSOCIATED PLANNERS REALTY GROWTH FUND (A California limited partnership) NOTES TO FINANCIAL STATEMENTS 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: Two tenants accounted for 14% and 41% in 1995; Two tenants accounted for 11% and 43% in 1994; Two tenants accounted for 11% and 43% in 1993. 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 Partnership saw the negative cash flow situation on the Santa Ana Building worsen as a result of these problems. During 1995, the property tax assessment on the Santa Ana, California office building was significantly reduced. It is the intention of the General Partner to sell the Santa Ana property when it is reasonably feasible. 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 cost 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. 3. Future Minimum Rental Income As of December 31, 1995, future minimum rental income under existing leases, excluding month to month rental agreements, that have remaining noncancelable terms in excess of one year are as follows: Amount 1996 $179,124 1997 48,930 1998 10,383 $238,437 Future minimum rental income does not include lease renewals or new leases that may result after a noncancelable lease expires. ASSOCIATED PLANNERS REALTY GROWTH FUND (A California limited partnership) NOTES TO FINANCIAL STATEMENTS 4. Related Party Transactions (a) In accordance with the partnership agreement, compensation earned by or services reimbursed to the corporate General Partner consisted of the following: Years ended December 31, 1995 1994 1993 Administrative services: Data processing $5,645 $5,680 $5,669 Postage 710 640 662 Investor processing 2,258 2,272 2,268 Duplication 1,129 1,136 1,134 Investor communications 1,693 1,704 1,701 Miscellaneous 565 568 566 $12,000 $12,000 $12,000 (b) The Partnership owns a 10% undivided interest in the property located in San Marcos, California. The 90% interest is owned by Associated Planners Realty Income Fund, an affiliate. (c) Property management fees incurred in accordance with the partnership agreement with West Coast Realty Management, Inc., totaled $10,393, $12,045 and $12,422 for the years ended December 31, 1995, 1994 and 1993. (d) The Partnership has a note payable of $150,000 at December 31, 1995 and December 31, 1994 which is payable on demand to the corporate General Partner and bears interest of 7.5%. (e) Related party accounts payables are as follows: December 31, 1995 1994 Associated Planners Realty Income Fund $ --- $2,173 West Coast Realty Advisors 108,408 73,158 West Coast Realty Management 81,056 70,663 Associated Financial Group, Inc. 50,631 41,813 $240,095 $187,807 ASSOCIATED PLANNERS REALTY GROWTH FUND (A California limited partnership) NOTES TO FINANCIAL STATEMENTS 5. 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 $1,676,385 and $1,614,884 at December 31, 1995 and 1994. 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 December 31, 1995 are as follows: Amount 1996 $16,811 1997 20,129 1998 22,182 1999 24,443 2000 1,592,820 Total $1,676,385 6. 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 1995, 1994 and 1993. No distributions were made in 1995, 1994 or 1993. 7. Fourth Quarter Adjustment In the fourth quarter of 1995 the Partnership recorded an adjustment to the carrying value of rental real estate to recognize an impairment loss of $1,912,727 as discussed in Note 2. 8. Supplemental Disclosures of Cash Flow Information Cash paid during the years ended December 31, 1995, 1994 and 1993 for interest was $117,044, $168,731 and $159,565. Noncash investing and financing activities: Notes payable was increased by $71,954 of accrued interest relating to a deferral of loan payments during 1995. SIGNATURES Pursuant to the requirements of the 13 or 15(d) 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) W. THOMAS MAUDLIN JR. (A General Partner) By: West Coast Realty Advisors, Inc. (A General Partner) WILLIAM T. HAAS (Director and Executive Vice President/Secretary) MICHAEL G. CLARK (Vice President/Treasurer) Date: July 30, 1996 -----END PRIVACY-ENHANCED MESSAGE-----