<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED SEPTEMBER 30, 1995
COMMISSION FILE NUMBER 2-60561
REAL ESTATE ASSOCIATES LIMITED
A CALIFORNIA LIMITED PARTNERSHIP
I.R.S. EMPLOYER IDENTIFICATION NO. 95-3187912
9090 Wilshire Blvd., Suite 201,
Beverly Hills, Calif. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Securities Registered Pursuant to
Section 12(b) or 12(g) of the Act
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed with the Commission by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve 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
----- -----
<PAGE> 2
REAL ESTATE ASSOCIATES LIMITED
(a California limited partnership)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
Balance Sheets, September 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . 1
Statements of Operations,
Nine and Three Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . 2
Statement of Partner's Equity (Deficiency),
Nine Months Ended September 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Cash Flows
Nine Months Ended September 30, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
<PAGE> 3
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
INVESTMENTS IN AND ADVANCES TO LIMITED
PARTNERSHIPS $1,990,340 $1,843,340
CASH AND CASH EQUIVALENTS 426,614 406,711
SHORT-TERM INVESTMENTS 125,000 125,000
OTHER RECEIVABLES FROM LIMITED PARTNERSHIPS 136,041 116,625
---------- ----------
$2,677,995 $2,491,676
========== ==========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
ACCOUNTS PAYABLE $ 3,394 $ 8,287
ACCRUED FEES DUE GENERAL PARTNER 1,077,502 1,396,997
DEFERRED DISTRIBUTION 489,039 672,627
---------- ----------
1,569,935 2,077,911
PARTNERS' EQUITY 1,108,060 413,765
---------- ----------
$2,677,995 $2,491,676
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
ended ended ended ended
Sept. 30, 1995 Sept. 30, 1995 Sept. 30, 1994 Sept, 30, 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 15,675 $ 5,795 $ 16,660 $ 6,293
--------- --------- --------- ---------
OPERATING EXPENSES:
General and administrative 38,071 10,909 37,189 7,741
Legal and accounting 45,489 17,878 26,595 1,437
Management fees-general partner 305,505 101,835 305,505 101,835
--------- --------- --------- ---------
Total operating expenses 389,065 130,622 369,289 111,013
--------- --------- --------- ---------
LOSS FROM OPERATIONS (373,390) (124,827) (352,629) (104,720)
DISTRIBUTIONS RECOGNIZED
AS INCOME 893,685 203,160 984,730 122,175
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS 174,000 58,000 297,000 99,000
--------- --------- --------- ---------
NET INCOME $ 694,295 $ 136,333 $ 929,101 $ 116,455
========= ========= ========= =========
NET INCOME PER LIMITED
PARTNERSHIP INTEREST $ 42 $ 8 $ 56 $ 7
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF PARTNERS' EQUITY (DEFICIENCY)
NINE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
---------- ----------- ----------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS,
September 30, 1995 16,505
==========
EQUITY (DEFICIENCY),
January 1, 1995 $(122,932) $ 536,697 $ 413,765
Net income for the nine months
ended September 30, 1995 6,943 687,352 694,295
--------- ---------- ----------
EQUITY (DEFICIENCY),
September 30, 1995 $(115,989) $1,224,049 $1,108,060
========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 694,295 $ 929,101
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Equity in income of limited partnerships (177,000) (300,000)
Amortization of acquisition costs 3,000 3,000
Increase in other receivables from limited partnerships (21,558) (13,626)
Increase (decrease) in -
Accounts payable (2,751) 684
Deferred distribution (183,588)
Accrued fees due general partner (319,495) (344,494)
--------- ---------
Net cash provided by (used in) operating activities (7,097) 274,665
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from limited partnership
recognized as return of capital 27,000 36,481
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 19,903 311,146
CASH AND CASH EQUIVALENTS, at beginning of period 406,711 571,754
--------- ---------
CASH AND CASH EQUIVALENTS, at end of period $ 426,614 $ 882,900
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the annual
audited financial statements; accordingly, the financial statements
included herein should be reviewed in conjunction with the financial
statements and related notes thereto contained in the annual report
for the year ended December 31, 1994 prepared by Real Estate
Associates Limited (the "Partnership.") Accounting measurements at
interim dates inherently involve greater reliance on estimates than at
year end. The results of operations for the interim period presented
are not necessarily indicative of the results for the entire year.
In the opinion of the Partnership, the accompanying unaudited
financial statements contain all adjustments (consisting primarily of
normal recurring accruals) neccessary to present fairly the financial
position as of September 30, 1995, and the results of operations for
the three and nine months then ended and changes in financial position
for the nine months then ended.
The general partners have a 1 percent interest in profits and losses
of the Partnership. The limited partners have the remaining 99
percent interest which is allocated in proportion to their respective
individual investments. National Partnership Investments Corp.
(NAPICO) is the corporate general partner of the Partnership.
METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS
The investment in limited partnerships is accounted for on the equity
method. Acquisition, selection fees and other costs related to the
acquisition of the projects have been capitalized to the investment
account.
NET INCOME PER LIMITED PARTNERSHIP INTEREST
Net income per limited partnership interest was computed by dividing
the limited partners' share of net income by the number of limited
partnership interests outstanding during the year. The number of
limited partnership interests was 16,505 for the periods presented.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and bank certificates of
deposit with an original maturity of three months or less.
SHORT-TERM INVESTMENTS
Short-term investments consist of bank certificates of deposit with
original maturities ranging from more than three months to twelve
months. The fair value of these securities, which have been
classified as held for sale, approximates their carrying value.
5
<PAGE> 8
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
INCOME TAXES
No provision has been made for income taxes in the accompanying
financial statements since such taxes, if any, are the liability of
the individual partners.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership has limited partnership interests in 18 limited
partnerships. The limited partnerships own residential rental
projects consisting of 1,969 apartment units. The mortgage loans of
these projects are insured by various governmental agencies.
The Partnership, as a limited partner, is entitled from 50 percent to
99 percent of the profits and losses in the limited partnerships.
Equity in losses of limited partnerships are recognized in the
financial statements until the limited partnership investment account
is reduced to a zero balance. Losses incurred after the limited
partnership investment account is reduced to zero are not recognized.
Distributions from the limited partnerships are accounted for as a
return of capital until the investment balance is reduced to zero.
Subsequent distributions received are recognized as income.
The following is a summary of the investment in limited partnerships
as of September 30, 1995:
<TABLE>
<S> <C>
Balance, beginning of period $1,843,340
Amortization acquisition costs (3,000)
Cash distribution recognized as return of capital (27,000)
Equity in income of limited partnerships 177,000
----------
Balance, end of period $1,990,340
==========
</TABLE>
In 1994, the Partnership received a cash distribution from a limited
partnership (Van Nuys Associates) in the amount of $672,626. The
distribution was in part the result of a settlement for rent subsidy
payments from prior periods awarded to a group of property owners
(including Van Nuys Associates) who participated in a lawsuit against
HUD. At this time, HUD has demanded the return of a substantial
portion of these funds based on the 9th Circuit Court's decision to
overturn the injunctions granted against HUD. Van Nuys Associates
engaged Alexander Consultants Inc. ("ACI") to review the demand by HUD
and perform an independent accounting of the amounts due pursuant to
the 9th Circuit Court's decision. Based on ACI's findings, HUD
agreed that the local partnership would be required to pay HUD only
$489,039, over the remaining seven year term of the Housing Assistance
Payments Contract.
6
<PAGE> 9
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED):
The local partnership which owns Chidester Place Apartments, has
executed, with the corporate general partner's consent, an Agreement
for Purchase and Sale ("Sale Agreement") of the Chidester Place
apartment complex. The pending sale is predicated on a $4,800,000
purchase offer from a Tennessee Limited Partnership sponsored by
Brencor Capital Funding ("Brencor"). Brencor has obtained preliminary
approval from the Ypsilanti Downtown Development Authority to finance
the acquisition of the property with a new tax-exempt bond issue which
will qualify the prospective buyer to receive an allocation of Low
Income Housing Tax Credits. If the sale is completed, it is
anticipated that the Partnership will receive sale proceeds more than
sufficient to return the Partnership's original capital investment and
to offset the projected tax liability associated with the
Partnership's disposition of the property.
The following are unaudited combined estimated statements of
operations for the limited partnerships in which the Partnership has
investments:
<TABLE>
<CAPTION>
Nine months Three months Nine months Three months
ended ended ended ended
Sept. 30, 1995 Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INCOME
Rental and other $12,585,000 $4,195,000 $12,672,000 $4,224,000
----------- ---------- ----------- ----------
EXPENSES
Depreciation 2,043,000 681,000 2,058,000 686,000
Interest 3,756,000 1,252,000 3,975,000 1,325,000
Operating 6,381,000 2,127,000 6,114,000 2,038,000
----------- ---------- ----------- ----------
12,180,000 4,060,000 12,147,000 4,049,000
----------- ---------- ----------- ----------
NET INCOME $ 405,000 $ 135,000 $ 525,000 $ 175,000
=========== ========== =========== ==========
</TABLE>
NAPICO, or one of its affiliates, is the general partner and property
management agent for certain of the limited partnerships included
above.
NOTE 3 - ACCRUED FEES AND EXPENSES DUE TO GENERAL PARTNER
Under the terms of the Restated Certificate and Agreement of Limited
Partnership, the Partnership is obligated to NAPICO for an annual
management fee equal to 1/2 of 1 percent of the original invested
assets of the limited partnership. Invested assets are defined as the
costs of acquiring project interests, including the proportionate
amount of the mortgage loans related to the Partnerships interests in
the capital accounts of the respective partnerships. The management
fee incurred for the nine-month periods presented was $305,500.
As of September 30, 1995, the fees and expenses due NAPICO exceeded
the Partnership's cash. The general partner, during the forthcoming
year, will not demand payment of amounts due in excess of such cash or
such that the Partnership would not have sufficient operating cash.
7
<PAGE> 10
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1995
NOTE 3 - ACCRUED FEES AND EXPENSES DUE TO GENERAL PARTNER (CONTINUED)
The Partnership reimburses NAPICO for certain expenses. In 1995, the
reimbursement to NAPICO of $15,463 has been paid and included in the
Partnership's operating expenses.
NOTE 4 - CONTINGENCIES
The corporate general partner of the Partnership is a plaintiff in
various lawsuits and has also been named a defendant in other lawsuits
arising from transactions in the ordinary course of business. In the
opinion of management and the corporate general partner, the claims
will not result in any material liability to the Partnership.
8
<PAGE> 11
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary sources of funds include interest income
earned from investing available cash and distributions from limited
partnerships in which the Partnership has invested. It is not
expected that any of the local limited partnerships in which the
Partnership has invested will generate cash flow sufficient to provide
for distributions to limited partners in any material amount.
RESULTS OF OPERATIONS
Partnership revenues consist primarily of interest income earned on
certificates of deposit and other temporary investment of funds not
required for investment in local partnerships.
Operating expenses consist primarily of recurring general and
administrative expenses and professional fees for services rendered to
the Partnership. In addition, an annual Partnership management fee in
an amount equal to .5 percent of investment assets is payable to the
corporate general partner. Operating expenses are consistent with the
prior year except for the following: Legal and accounting expenses are
higher in 1995 due to $4,000 being paid for legal consulting and
$13,000 legal services regarding the pending sale of one of the
limited partnership properties.
The Partnership accounts for its investments in the local limited
partnerships on the equity method, thereby adjusting its investment
balance by its proportionate share of the income or loss of the local
limited partnerships. The equity in income of limited partnerships is
received from one investee limited partnership. All other investee
limited partnerships have reduced their investment balances to zero
and as a result thereof, the Partnership does not recognize equity in
losses from those investments.
Distributions received from limited partnerships are recognized as
return of capital until the investment balance has been reduced to
zero or to a negative amount equal to future capital contributions
required. Subsequent distributions received are recognized as income.
Except for certificates of deposit and money market funds, the
Partnership's investments are entirely interests in other limited
partnerships owning government assisted projects. Available cash is
invested in these funds earning interest income as reflected in the
statements of operations. These investments can be converted to cash
to meet obligations as they arise.
9
<PAGE> 12
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The corporate general partner is a plaintiff or defandant in several
lawsuits. None of these are related to the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of item 7 of
regulation S-K.
10
<PAGE> 13
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP)
SEPTEMBER 30, 1995
SIGNATURES
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.
REAL ESTATE ASSOCIATES LIMITED
(a California limited partnership)
By: National Partnership Investments Corp.
General Partner
Date:_____________________________________
By:_______________________________________
Bruce Nelson
President
Date:_____________________________________
By:_______________________________________
Shawn Horwitz
Executive Vice President and
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 426,614
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 551,614
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,677,995
<CURRENT-LIABILITIES> 3,394
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,108,060
<TOTAL-LIABILITY-AND-EQUITY> 2,677,995
<SALES> 0
<TOTAL-REVENUES> 1,083,360
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 389,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 694,295
<INCOME-TAX> 0
<INCOME-CONTINUING> 694,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 694,295
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
