<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 MARCH 31, 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
--- ---
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REAL ESTATE ASSOCIATES LIMITED
(a California limited partnership)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
Balance Sheets, March 31, 1996 and 1995 .................... 1
Statements of Operations,
Three Months Ended March 31, 1996 and 1995 .......... 2
Statement of Partner's Equity (Deficiency),
Three Months Ended March 31, 1996.................... 3
Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 .......... 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
<PAGE> 3
REAL ESTATE ASSOCIATES LIMITED
(a California limited partnership)
BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS (Note 2) $2,292,854 $2,191,335
CASH AND CASH EQUIVALENTS (Note 1) 287,588 250,570
SHORT TERM INVESTMENTS (Note 1) 125,000 125,000
RECEIVABLES FROM LIMITED
PARTNERSHIPS (Note 2) 148,931 148,931
---------- ----------
TOTAL ASSETS $2,854,373 $2,715,836
========== ==========
LIABILITIES AND PARTNERS' EQUITY (DEFICIENCY)
LIABILITIES:
Accounts payable $ 20,410 $ 20,036
Accrued fees and expenses due
general partner (Notes 3 and 6) 1,116,172 1,014,337
---------- ----------
1,136,582 1,034,373
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 4)
PARTNERS' EQUITY (DEFICIENCY):
General partners (109,892) (110,255)
Limited partners 1,827,683 1,791,718
---------- ----------
1,717,791 1,681,463
---------- ----------
TOTAL LIABILITIES AND PARTNERS'
EQUITY (DEFICIENCY) $2,854,373 $2,715,836
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
REAL ESTATE ASSOCIATES LIMITED
(a California limited partnership)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
INTEREST AND OTHER INCOME $ 3,909 $ 4,408
--------- ---------
OPERATING EXPENSES:
Legal and accounting 31,550 25,799
Management fees - general partner (Note 3) 101,835 101,835
Administrative (Note 3) 11,648 14,482
--------- ---------
Total operating expenses 145,033 142,116
--------- ---------
LOSS FROM OPERATIONS (141,124) (137,708)
DISTRIBUTIONS FROM LIMITED
PARTNERSHIPS RECOGNIZED AS
INCOME (Note 2) 66,452 55,416
EQUITY IN INCOME OF LIMITED
PARTNERSHIPS AND AMORTIZATION
OF ACQUISITION COSTS (Note 2) 111,000 58,000
--------- ---------
NET INCOME (LOSS) $ 36,328 $ (24,292)
========= =========
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP INTEREST (Note 1) $ 2 $ (1)
========= =========
</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)
THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
--------- ---------- ---------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS
March 31, 1996 16,505
==========
EQUITY (DEFICIENCY),
January 1, 1996 $(110,255) $1,791,718 $1,681,463
Net income for the three months
ended March 31, 1996 363 35,965 36,328
--------- ---------- ----------
EQUITY (DEFICIENCY),
March 31, 1996 $(109,892) $1,827,683 $1,717,791
========= ========== ==========
</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
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 36,328 $ (24,292)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Equity in income of limited partnerships
and amortization of acquisition costs (111,000) (58,000)
Increase in accrued fees and
expenses due general partner 101,835 81,835
Increase in accounts payable 374 11,311
Increase in receivables from limited partnerships -- (1,559)
--------- ---------
Net cash provided by operating activities 27,537 9,295
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from limited partnership
recognized as return of capital 9,481 --
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 37,018 9,295
CASH AND CASH EQUIVALENTS, beginning of period 250,570 406,711
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 287,588 $ 416,006
========= =========
</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
MARCH 31, 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 March 31, 1996, and the results of operations for the three months
then ended and changes in financial position for the three 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)
MARCH 31, 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 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.
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 March 31, 1996:
<TABLE>
<S> <C>
Balance, beginning of period $2,191,335
Amortization acquisition costs (1,000)
Cash distribution recognized as return of capital (9,481)
Equity in income of limited partnerships 112,000
-----------
Balance, end of period $2,292,854
==========
</TABLE>
6
<PAGE> 9
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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 $4,800,000 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 Partnership has a
zero carrying value for this investment at March 31, 1996 and December
31, 1995.
The following are unaudited combined estimated statements of operations
for the three months ended March 31, 1996 and 1995 for the limited
partnerships in which the Partnership has investments:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
INCOME
Rental and other $4,142,000 $4,195,000
---------- ----------
EXPENSES
Depreciation 670,000 681,000
Interest 1,194,000 1,252,000
Operating 2,198,000 2,127,000
---------- ----------
4,062,000 4,060,000
---------- ----------
NET INCOME $ 80,000 $ 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 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 three-month periods presented was $101,835.
7
<PAGE> 10
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 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 $5,154 for the three months ended March 31, 1996 and
1995, and is included in administrative expenses.
As of March 31, 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 approximates fair value due to their short-term maturity.
8
<PAGE> 11
REAL ESTATE ASSOCIATES LIMITED
(A CALIFORNIA LIMITED PARTNERSHIP
MARCH 31, 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.
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)
MARCH 31, 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)
MARCH 31, 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
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 287,588
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 561,519
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,854,373
<CURRENT-LIABILITIES> 20,410
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,717,791
<TOTAL-LIABILITY-AND-EQUITY> 2,854,373
<SALES> 0
<TOTAL-REVENUES> 181,361
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 145,033
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 36,328
<INCOME-TAX> 0
<INCOME-CONTINUING> 36,328
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,328
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
