FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2000 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: 333-52117
AMERICA FIRST REAL ESTATE INVESTMENT PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 39-1965590
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(Registrant's telephone number, including area code)
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
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Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
AMERICA FIRST REAL ESTATE INVESTMENT PARTNERS, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
Sept. 30, 2000 Dec. 31, 1999
(unaudited)
--------------- ---------------
<S> <C> <C>
Assets
Cash $ 1,000 $ 1,000
--------------- ---------------
$ 1,000 $ 1,000
=============== ===============
Partners' Capital
General Partner $ 10 $ 10
Limited Partner 990 990
--------------- ---------------
$ 1,000 $ 1,000
=============== ===============
The accompanying notes are an integral part of the balance sheets.
</TABLE>
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AMERICA FIRST REAL ESTATE INVESTMENT PARTNERS, L.P.
NOTES TO BALANCE SHEETS
SEPTEMBER 30, 2000
1. Basis of Presentation
America First Real Estate Investment Partners, L.P. (the "Partnership") was
formed on June 18, 1999, under the Delaware Revised Uniform Limited
Partnership Act for the purpose of acquiring, holding, operating, selling and
otherwise dealing primarily with multifamily residential properties, including
the acquisition of debt and equity securities of entities engaged in similar
activities. The Partnership will facilitate the proposed merger of Capital
Source L.P. and Capital Source II L.P.-A (collectively referred to as the
"Capital Source Funds"). The Partnership intends to issue up to 7,765,772
units of assigned limited partnership interest to holders of Beneficial
Assignment Certificates (BACs) of the Capital Source Funds. The General
Partner of the Partnership is America First Capital Source I L.L.C. The
General Partner will hold a 1% interest in the Partnership. The Company has
not yet commenced operations.
2. Transactions with Related Parties
The Partnership will pay the General Partner an acquisition fee in connection
with the identification, evaluation and acquisition of new assets and the
financing thereof in an amount equal to 1.25% of the aggregate purchase price
paid by the Partnership for such new assets. The acquisition fee with respect
to an acquisition of a new asset will be payable at the time of the closing of
the acquisition. The Partnership will also pay the General Partner an
administrative fee in connection with the ongoing administration of the
business of the Partnership in an amount equal to 0.50%, per annum, of the sum
of (i) the fair market value on the merger date of the original assets that
are then still owned by the Partnership, plus, (ii) the purchase price paid by
the Partnership for new assets that are then held by the Partnership. The
first $100,000 of the administrative fee shall be payable each year, with the
balance payable only during years that funds from operations, as more fully
described in the Partnership's limited partnership agreement, calculated
before administrative fees, exceeds 7% of the unit holders' average capital
for that year. Such administrative fee will be paid on a monthly basis.
The Partnership may pay an affiliate of the General Partner a reasonable
property management fee in connection with the management of the Properties.
The property management fee paid with respect to any Property may not exceed
5% of the gross revenues of such Property (in the case of residential
property) or 6% of the gross revenues of such Property (in the case of
industrial or commercial property); provided, however, that the property
management fee shall not exceed an amount that would be charged by
unaffiliated parties rendering similar services in the same geographic
location and for comparable property.
The Partnership will reimburse the General Partner or its affiliates on a
monthly basis for the actual out-of-pocket costs of direct general and
administrative expenses.
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AMERICA FIRST REAL ESTATE INVESTMENT PARTNERS, L.P.
NOTES TO BALANCE SHEETS
SEPTEMBER 30, 2000
3. Legal Proceedings
The Partnership has been named as a defendant in a purported class action
lawsuit filed in the Delaware Court of Chancery on February 3, 1999, by Alvin
M. Panzer and Sandra G. Panzer, against the Partnership, its general partner,
America First and various of their affiliates (including Capital Source L.P.,
Capital Source II L.P.-A, and their general partners (Capital Source L.P. and
Capital Source II L.P.-A are partnerships with general partners that are
affiliates of America First.) and Lehman Brothers, Inc. Alvin M. Panzer and
Sandra G. Panzer are two Beneficial Assignment Certificate (BAC) holders of
Capital Source L.P. and Capital Source II L.P.-A. The plaintiffs seek to have
the lawsuit certified as a class action on behalf of all BAC holders of
Capital Source L.P. and Capital Source II L.P.-A. The lawsuit alleges, among
other things, that a proposed merger transaction involving the Partnership,
Capital Source L.P. and Capital Source II L.P.-A is deficient and coercive,
that the defendants have breached the terms of Capital Source L.P.'s and
Capital Source II L.P.-A's partnership agreement and that the defendants have
acted in manners which violate their fiduciary duties to the BAC holders. In
this complaint, the plaintiffs sought to enjoin the proposed merger
transaction and seek to appoint an independent BAC holder representative to
investigate alternative transactions. The lawsuit also requests a judicial
dissolution of Capital Source L.P. and Capital Source II L.P.-A, an
accounting, and unspecified damages and costs.
The general partners of the Partnership, Capital Source L.P. and Capital
Source II L.P.-A determined not to pursue the merger transaction which was the
subject of the initial lawsuit and proposed an alternative transaction to BAC
holders. A prospectus/consent solicitation statement outlining this
alternative transaction was sent to BAC holders on or about November 16,
1999. The plaintiffs amended their complaint on December 8, 1999, and again
on February 22, 2000. The second amended complaint challenges this current
prospectus/consent solicitation statement on grounds similar to those alleged
in the original complaint, as well as on other procedural grounds. The second
amended complaint does not seek to enjoin the proposed merger transaction.
To resolve the lawsuit, the Partnership and the other defendants to the
lawsuit, on April 24, 2000, entered into a settlement agreement (the
Settlement) with the plaintiffs. The Settlement remains subject to approval
by the Court. The complete terms of the Settlement, along with the updated
consent solicitation material describing the revised merger transaction, was
filed with the Securities and Exchange Commission (the SEC) on or about June
15, 2000. In connection with the Settlement, Capital Source L.P. and Capital
Source II L.P.-A submitted a revised transaction to BAC holders for approval
on or about June 30, 2000. On October 2, 2000, the BAC holders of both
Capital Source L.P. and Capital Source II L.P.-A approved the revised
transaction. In accordance with the Settlement, the parties to this
litigation sent a court-approved settlement notice to the class members on or
about November 10, 2000. This notice described the terms of the Settlement
and also notified the class that the Court will hold a hearing on December 19,
2000 to consider whether to approve the Settlement.
<PAGE> -3-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
As of September 30, 2000, the Partnership had not commenced operations. For
management's discussion and analysis of the financial condition and results of
operations of Capital Source L.P. (Cap Source) and Capital Source II L.P.-A
(Cap Source II) for the nine months ended September 30, 2000, please refer to
the Form 10-Qs of Cap Source and Cap Source II for the quarter ended September
30, 2000.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As of September 30, 2000, the Partnership had not yet commenced operations.
For quantitative and qualitative disclosure regarding market risk of the
assets to be acquired from Cap Source and Cap Source II as a result of the
merger, please refer to the Form 10-Qs of Cap Source and Cap Source II for the
quarter ended September 30, 2000.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Partnership has been named as a defendant in a purported class action
lawsuit filed in the Delaware Court of Chancery on February 3, 1999, by Alvin
M. Panzer and Sandra G. Panzer, against the Partnership, its general partner,
America First and various of their affiliates (including Capital Source L.P.,
Capital Source II L.P.-A, and their general partners (Capital Source L.P. and
Capital Source II L.P.-A are partnerships with general partners that are
affiliates of America First.) and Lehman Brothers, Inc. Alvin M. Panzer and
Sandra G. Panzer are two Beneficial Assignment Certificate (BAC) holders of
Capital Source L.P. and Capital Source II L.P.-A. The plaintiffs seek to have
the lawsuit certified as a class action on behalf of all BAC holders of
Capital Source L.P. and Capital Source II L.P.-A. The lawsuit alleges, among
other things, that a proposed merger transaction involving the Partnership,
Capital Source L.P. and Capital Source II L.P.-A is deficient and coercive,
that the defendants have breached the terms of Capital Source L.P.'s and
Capital Source II L.P.-A's partnership agreement and that the defendants have
acted in manners which violate their fiduciary duties to the BAC holders. In
this complaint, the plaintiffs sought to enjoin the proposed merger
transaction and seek to appoint an independent BAC holder representative to
investigate alternative transactions. The lawsuit also requests a judicial
dissolution of Capital Source L.P. and Capital Source II L.P.-A, an
accounting, and unspecified damages and costs.
The general partners of the Partnership, Capital Source L.P. and Capital
Source II L.P.-A determined not to pursue the merger transaction which was the
subject of the initial lawsuit and proposed an alternative transaction to BAC
holders. A prospectus/consent solicitation statement outlining this
alternative transaction was sent to BAC holders on or about November 16,
1999. The plaintiffs amended their complaint on December 8, 1999, and again
on February 22, 2000. The second amended complaint challenges this current
prospectus/consent solicitation statement on grounds similar to those alleged
in the original complaint, as well as on other procedural grounds. The second
amended complaint does not seek to enjoin the proposed merger transaction.
To resolve the lawsuit, the Partnership and the other defendants to the
lawsuit, on April 24, 2000, entered into a settlement agreement (the
Settlement) with the plaintiffs. The Settlement remains subject to approval
by the Court. The complete terms of the Settlement, along with the updated
consent solicitation material describing the revised merger transaction, was
filed with the Securities and Exchange Commission (the SEC) on or about June
15, 2000. In connection with the Settlement, Capital Source L.P. and Capital
Source II L.P.-A submitted a revised transaction to BAC holders for approval
on or about June 30, 2000. On October 2, 2000, the BAC holders of both
Capital Source L.P. and Capital Source II L.P.-A approved the revised
transaction. In accordance with the Settlement, the parties to this
litigation sent a court-approved settlement notice to the class members on or
about November 10, 2000. This notice described the terms of the Settlement
and also notified the class that the Court will hold a hearing on December 19,
2000 to consider whether to approve the Settlement.
There are no other material pending legal proceedings to which the
Partnership is a party or to which any of its property is subject.
<PAGE> -4-
Item 6. Exhibits and Reports on Form 8-K.
(a). Exhibits.
The following exhibits are filed as required by this report.
Exhibit numbers refer to the paragraph numbers under Item 601
of Regulation S-K:
2(a) Agreement and Plan of Merger among the
Partnership and Cap Source and Cap Source II
(incorporated by reference to Appendix A to the
Prospectus included in Registration Statement on
Form S-4 (No. 333-52117) filed by the Registrant
on November 8, 1999).
4(a) Certificate of Limited Partnership of the Partnership
(incorporated by reference to Exhibit 3.01 to
Registration Statement on Form S-4 (No. 333-52117)
filed by Registrant on July 21, 1999).
4(b) Amended and Restated Agreement of Limited
Partnership of America First Real Estate Investment
Partners, L.P. (incorporated by reference to Exhibit
3.02 to the Registration Statement on
Form S-4 (No. 333-52117) filed by the Registrant on
July 21, 1999).
4(c) Form of Indenture between Partnership and U.S. Bank
Trust National Association, as trustee, (incorporated
by reference to Exhibit 4.02 to the Registration
Statement on Form S-4 (No. 333-52117) filed by the
Registrant on May 7, 1998).
4(d) Form of Unit Certificate of the Registrant
(incorporated by reference to Exhibit 4.03 to the
Registration Statement on Form S-4 (No. 333-52117)
filed by the Registrant on September 28, 1999).
4(e) Form of Variable Rate Junior Notes are included in
Exhibit 4.02 (incorporated by reference to Exhibit
4.04 to the Registration Statement on Form S-4
(No. 333-52117) filed by the Registrant on May 7,
1998).
10(a) Stipulation of Settlement.
IN THE CASE OF
ALVIN M. PANZER and
SANDRA G. PANZER
Plaintiffs,
v.
INSURED MORTGAGE EQUITIES, INC.,
INSURED MORTGAGE EQUITIES II
LP., AMERICA FIRST CAPITAL
SOURCE I, LLC., AMERICA FIRST
CAPITAL SOURCE II, LLC, AMERICA
FIRST COMPANIES, LLC, AMERICA
FIRST REAL ESTATE INVESTMENT
PARTNERS, L.P., LEHMAN
BROTHERS, INC., CAPITAL SOURCE
L.P., PAUL L. ABBOTT, and CAPITAL
SOURCE II, L.P.,
Defendants.
(incorporated herein by reference to Form 10-Q dated
March 31, 2000 filed pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934 by the
Registrant (Commission File No. 333-52117)).
27. Financial Data Schedule.
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during
the last quarter of the period covered by this report.
<PAGE> -5-
SIGNATURES
Pursuant to the requirements of Section 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.
AMERICA FIRST REAL ESTATE INVESTMENT
PARTNERS, L.P.
By America First Capital
Source I, L.L.C., General
Partner of the Registrant
By /s/ Michael Thesing
Michael Thesing,
Vice President and
Principal Financial Officer
Date: November 11, 2000
<PAGE> -6-
