<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 JUNE 30, 1996
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 JUNE 30, 1996
PART I. FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets, June 30, 1996 and December 31, 1995 . . . . 1
Statements of Operations,
Six and Three Months Ended June 30, 1996 and 1995 . 2
Statement of Partner's Equity (Deficiency),
Six Months Ended June 30, 1996 . . . . . . . . . . . 3
Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995 . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . 9
</TABLE>
PART II. OTHER INFORMATION
<TABLE>
<S> <C> <C>
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
JUNE 30, 1996 AND DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
(Unaudited) (Audited)
------------- --------------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $ 2,403,853 $ 2,191,335
CASH AND CASH EQUIVALENTS (Note 1) 334,065 250,570
SHORT TERM INVESTMENTS (Note 1) 125,000 125,000
RECEIVABLES FROM LIMITED
PARTNERSHIPS (Note 2) $ 148,932 $ 148,931
------------ ------------
TOTAL ASSETS $ 3,011,850 $ 2,715,836
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICENCY)
LIABILITIES:
Accounts payable $ 3,626 $ 20,036
Accrued fees and expenses due
general partner (Notes 3 and 6) 968,007 1,014,337
------------ ------------
$ 971,633 1,034,373
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)
PARTNERS' EQUITY (DEFICIENCY):
General partners (106,667) (110,255)
Limited partners 2,146,884 1,791,718
------------ ------------
2,040,217 1,681,463
------------ ------------
TOTAL LIABILITIES AND PARTNERS'
EQUITY (DEFICIENCY) $ 3,011,850 $ 2,715,836
============ ============
</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
SIX AND THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST AND OTHER INCOME $ 7,694 $ 3,785 $ 9,879 $ 5,471
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Legal and accounting 42,448 10,898 27,160 12,678
Management fees - general partner 203,670 101,835 203,670 101,835
Administrative (Note 3) 23,345 11,697 27,611 1,813
------------ ------------ ------------ ------------
Total operating expenses 269,463 124,430 258,441 116,326
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (261,769) (120,645) (248,562) (110,855)
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED
AS INCOME (Note 2) 398,522 332,070 690,525 635,109
EQUITY IN INCOME OF
LIMITED PARTNERSHIPS
AND AMORTIZATION OF
ACQUISITION COSTS (Note 2) 222,000 111,000 116,000 58,000
------------ ------------ ------------ ------------
NET INCOME $ 358,753 $ 322,425 $ 557,963 $ 582,254
------------ ------------ ------------ ------------
NET INCOME PER LIMITED
PARTNERSHIP INTEREST (Note 1) $ 22 $ 20 $ 34 $ 35
============ ============ ============ ============
</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)
SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS
June 30, 1996 16,505
============
EQUITY (DEFICIENCY),
January 1, 1996 $ (110,255) $ 1,791,719 $ 1,681,464
Net income for the six months
ended June 30, 1996 3,588 355,165 358,753
----------- ----------- -----------
EQUITY (DEFICIENCY),
June 30, 1996 $ (106,667) $ 2,146,884 $ 2,040,217
=========== =========== ===========
</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
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 358,753 $ 557,963
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in income of limited partnerships
and amortization of acquisition costs (222,000) (116,000)
(Decrease) Increase in accrued fees and
expenses due general partner (46,330) 88,670
Decrease in accounts payable (16,410) (634)
Decrease in deferred distributions - (183,588)
Increase in receivables from limited partnership - (21,558)
--------- ---------
Net cash provided by operating activities 74,013 324,853
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from limited partnership
recognized as return of capital 9,481 -
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 83,494 324,853
CASH AND CASH EQUIVALENTS, beginning of period 250,570 406,711
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 334,064 $ 731,564
========= =========
</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
JUNE 30, 1996
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, 1995 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 June 30, 1996, and the results of operations for the
six and three months then ended and changes in cash flows for the six
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.
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 reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
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.
5
<PAGE> 8
REAL ESTATE ASSOCIATES LIMITED
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and bank certificates of
deposit with an original maturity of six 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.
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 June 30, 1996:
<TABLE>
<S> <C>
Balance, beginning of period $2,191,335
Amortization acquisition costs (2,000)
Cash distribution recognized as return of capital (9,482)
Equity in income of limited partnerships 224,000
-----------
Balance, end of period $2,403,853
==========
</TABLE>
6
<PAGE> 9
REAL ESTATE ASSOCIATES LIMITED
(a California limited partnership)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED):
The limited partnership which owns Chidester Place Apartments, has
executed, with NAPICO's consent, an Agreement for Purchase and Sale of
the Chidester Place apartment complex. The pending sale is predicated
on a $4,600,000 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
Partnership has a zero carrying value for this investment.
The following are unaudited combined estimated statements of
operations for the six months ended June 30, 1996 and 1995 for the
limited partnerships in which the Partnership has investments:
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 1996 June 30, 1996 June 30, 1995 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INCOME
Rental and other $8,276,000 $4,138,000 $8,390,000 $4,195,000
---------- ---------- ---------- ----------
EXPENSES
Depreciation 1,338,000 669,000 1,362,000 681,000
Interest 2,388,000 1,194,000 2,504,000 1,252,000
Operating 4,406,000 2,203,000 4,254,000 2,127,000
---------- ---------- ---------- ----------
8,132,000 4,066,000 8,120,000 4,060,000
---------- ---------- ---------- ----------
NET INCOME $ 142,000 $ 72,000 $ 270,000 $ 135,000
========== ========== ========== ==========
</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 partnerships. Invested assets are defined as
the costs of acquiring project interests, including the proportionate
amount of the mortgage loans related to the Partnership's interests in
the capital accounts of the respective partnerships. The management
fee incurred for the six-month periods presented was $203,670.
7
<PAGE> 10
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
NOTE 3 - ACCRUED FEES AND EXPENSES DUE TO GENERAL PARTNER (CONTINUED)
The Partnership reimburses NAPICO for certain expenses. The
reimbursement paid to NAPICO was approximately $10,000 for the six
months ended June 30, 1996 and 1995, and is included in administrative
expenses.
As of June 30, 1996, 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.
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.
NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of fair
value information about financial instruments, when it is practicable
to estimate that value. The operations generated by the investee
limited partnerships, which account for the Partnership's primary
source of revenues, are subject to various government rules,
regulations and restrictions which make it impracticable to estimate
the fair value of accrued fees and expenses due general partner. The
carrying amount of other assets and liabilities reported on the
balance sheets that require such disclosure approximtes fair value due
to their short-term maturity.
8
<PAGE> 11
REAL ESTATE ASSOCIATES LIMITED
(a California limited partnership)
JUNE 30, 1996
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.
The limited partnership which owns Chidester Place Apartments, has
executed, with NAPICO's consent, an Agreement for Purchase and Sale of
the Chidester Place apartment complex. The pending sale is predicated
on a $4,600,000 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
Partnership has a zero carrying value for this investment.
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.
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)
JUNE 30, 1996
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)
JUNE 30, 1996
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 334,065
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 607,997
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,011,850
<CURRENT-LIABILITIES> 3,626
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,040,217
<TOTAL-LIABILITY-AND-EQUITY> 3,011,850
<SALES> 0
<TOTAL-REVENUES> 628,216
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 269,463
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 358,753
<INCOME-TAX> 0
<INCOME-CONTINUING> 358,753
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 358,753
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
