FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT of 1934
For the transition period.........to.........
Commission file number 0-11970
PRUDENTIAL-BACHE/VMS REALTY ASSOCIATES L.P. I
(Exact name of small business issuer as specified in its charter)
Delaware 36-3240083
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8700 W. Bryn Mawr
Chicago, Illinois 60631
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (312) 399-8700
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) PRUDENTIAL-BACHE/VMS REALTY ASSOCIATES L.P. I
BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1995
<S> <C> <C>
Assets
Cash:
Unrestricted $ 295,549
Restricted-tenant security deposits 90,397
Accounts receivable 531
Tax escrow 62,453
Restricted escrows 187,479
Other assets 235,882
Investment properties:
Land $ 1,242,490
Buildings and related personal property 10,014,342
11,256,832
Less accumulated depreciation (6,549,220) 4,707,612
$ 5,579,903
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 137,503
Tenant security deposits 89,485
Accrued taxes 149,032
Accrued interest 289,653
Other liabilities 199,335
Advances due to affiliates of the
Managing General Partner 10,768,156
Mortgage notes payable 6,600,190
Partners' Deficit
General partners $ (670,819)
Limited partners (25,000 units
issued and outstanding) (11,982,632) (12,653,451)
$ 5,579,903
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
b) PRUDENTIAL-BACHE/VMS REALTY ASSOCIATES L.P. I
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 468,627 $ 452,960 $ 1,392,199 $ 1,330,534
Other income 26,248 22,880 77,976 44,966
Total revenues 494,875 475,840 1,470,175 1,375,500
Expenses:
Operating 135,243 210,044 436,196 483,140
General and administrative 75,827 74,910 197,848 205,693
Property management fees 24,834 19,718 73,269 57,655
Maintenance 121,394 74,788 244,209 174,513
Depreciation 130,784 120,378 374,489 357,044
Interest 434,882 456,309 1,299,193 1,077,816
Property taxes 49,606 35,141 154,777 114,807
Total expenses 972,570 991,288 2,779,981 2,470,668
Casualty gain -- 64,525 -- 64,525
Net loss before
extraordinary item $(477,695) $(450,923) $(1,309,806) $(1,030,643)
Extraordinary item-gain on
sale of land 66,140 -- 66,140 --
Net loss $(411,555) $(450,923) $(1,243,666) $(1,030,643)
Net loss allocated to
general partners $ (6,049) $ (9,019) $ (22,691) $ (20,613)
Net loss allocated to
limited partners (405,506) (441,904) (1,220,975) (1,010,030)
$(411,555) $(450,923) $(1,243,666) $(1,030,643)
Net income per limited
partnership unit:
Net loss before
extraordinary item $ (18.73) $ (17.67) $ (51.34) $ (40.40)
Extraordinary gain from sale
of land 2.51 -- 2.51 --
Net loss $ (16.22) $ (17.67) $ (48.83) $ (40.40)
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
c) PRUDENTIAL-BACHE/VMS REALTY ASSOCIATES L.P. I
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 25,000 $ 1,000 $ 25,000,000 $25,001,000
Partners' deficit at
December 31, 1994 25,000 $(648,128) $(10,761,657) $(11,409,785)
Net loss for the nine months
ended September 30, 1995 -- (22,691) (1,220,975) (1,243,666)
Partners' deficit at
September 30, 1995 25,000 $(670,819) $(11,982,632) $(12,653,451)
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
d) PRUDENTIAL-BACHE/VMS REALTY ASSOCIATES L.P. I
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,243,666) $(1,030,643)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 374,489 357,044
Amortization of loan costs 35,666 8,807
Gain on sale of land (66,140) --
Change in accounts:
Restricted cash 13,605 (13,994)
Accounts receivable 4,794 (65,159)
Tax escrow (62,453) 71,769
Other assets 5,691 44,588
Accounts payable and other
accrued expenses 667,692 619,240
Accrued interest 262,474 (47,812)
Tenant security deposit liabilities (2,634) 4,112
Net cash used in operating activities (10,482) (52,048)
Cash flows from investing activities:
Property improvements and replacements (202,035) (109,799)
Deposits to restricted escrows (6,092) (304,027)
Receipts from restricted escrows 133,495 242,500
Proceeds from sale of land 150,022 --
Net cash provided by (used in)
investing activities 75,390 (171,326)
Cash flows from financing activities:
Payments on mortgage notes payable (28,711) (176,035)
Loan costs -- (202,942)
Repayment of mortgage notes payable -- (5,341,486)
Proceeds from refinancing -- 6,635,000
Payment on advances due to affiliate -- (700,000)
Net cash (used in) provided by
financing activities (28,711) 214,537
Net increase (decrease) in cash 36,197 (8,837)
Cash at beginning of period 259,352 183,899
Cash at end of period $ 295,549 $ 175,062
Supplemental disclosure of cash flow information:
Cash paid for interest $ 488,284 $ 464,556
</TABLE>
[FN]
See Accompanying Notes to Financial Statements
e) PRUDENTIAL-BACHE/VMS REALTY ASSOCIATES L.P. I
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Managing General Partner, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended September 30, 1995, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1995. For
further information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-KSB for the fiscal year
ended December 31, 1994.
Certain reclassifications have been made to the 1994 information to conform
to the 1995 presentation.
Note B - Going Concern
The financial statements have been prepared assuming that the Partnership
will continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of the uncertainties described
below, however, such uncertainties raise substantial doubt about the
Partnership's ability to continue as a going concern.
The Partnership's properties have, in the aggregate, experienced operating
deficits after debt service payments. As a means of funding the Partnership's
deficits, the Partnership had drawn upon working capital reserves and had taken
cash advances from affiliates of the Managing General Partner. The Managing
General Partner and affiliates are not obligated to and do not intend to further
fund any such cash flow deficits. In addition, the Partnership has deferred
repayment of cash advances from affiliates and other accrued expenses with the
consent of the Managing General Partner and its affiliates. Such accrued
expenses are periodically converted to interest-bearing advances. During 1994,
the Managing General Partner and its affiliates assigned a portion of the
advances to an affiliate of Insignia Financial Group, Inc.("Insignia"). The
willingness of the affiliates of the Managing General Partner and other related
parties to continue to defer repayment of the advances could adversely affect
the Partnership's financial condition. In the short term, it is likely that the
Partnership will suffer additional liquidity problems until cash flow
difficulties are resolved.
Note B - Going Concern (continued)
The Managing General Partner is evaluating its options for the Partnership
should the Partnership continue to suffer substantial losses from operations and
cash deficiencies.
The Managing General Partner and its affiliates have incurred serious
financial difficulties that may affect the ability of the Managing General
Partner to function in that capacity. The administration and management of the
Partnership is dependent on the Managing General Partner and its affiliates. In
addition, the Managing General Partner has not complied with a certain section
of the Partnership's Agreement of Limited Partners which requires that the
Managing General Partner maintain a net worth of at least $1,000,000. Pursuant
to an agreement dated July 14, 1994, a transaction is pending in which the
current Managing General Partner would be replaced by MAERIL, Inc., an affiliate
of Insignia. The substitution of MAERIL, Inc. as the Managing General Partner
is expected, but there is no assurance that the transaction will be
consummated. The pending replacement of the Managing General Partner will not
necessarily have a positive impact on the financial condition of the
Partnership.
The uncertainties and the ongoing cash flow difficulties described above
raise substantial doubt about the Partnership's ability to continue as a going
concern. The financial statements do not include any adjustments relating to
the recoverability of the recorded asset accounts or the amount of liabilities
that might be necessary should the Partnership be unable to continue as a going
concern.
Note C - Legal Proceedings
Certain affiliates of the Managing General Partner and certain officers and
directors of such affiliates are parties to certain pending legal proceedings.
The adverse outcome of any one or more legal proceedings against an affiliate of
the Managing General Partner which provides financial support or services to the
Partnership could have a materially adverse effect on the present and future
operations of the Partnership. However, the inclusion of this discussion is not
intended as a representation by the Partnership that any particular proceeding
is material. The ultimate outcome of the litigation cannot be presently
determined. Accordingly, no provision for any liability that may result has
been made in the financial statements.
Note D - Transactions with Affiliates and Related Parties
The Partnership has no employees and is dependent on the Managing General
Partner or its affiliates for the management and administration of all
partnership activities. The Managing General Partner or its affiliates may be
reimbursed for direct expenses relating to the Partnership's administration and
other costs paid on behalf of the Partnership.
Note D - Transactions with Affiliates and Related Parties (continued)
The Partnership had advances of $10,768,156 and $9,703,288 payable to
affiliates of the Managing General Partner at September 30, 1995 and 1994,
respectively. These advances bear interest at prime plus 1%. For the nine
months ended September 30, 1995 and 1994, the Partnership incurred interest of
$775,243 and $645,834, respectively, on the advances. Interest on advances is
reclassified to advances semi-annually; therefore interest was reclassed to
advances at June 30, 1995 and 1994.
Pursuant to an agreement dated July 14, 1994, a transaction is pending in
which the current Managing General Partner would be replaced by MAERIL, Inc., an
affiliate of Insignia. The substitution of MAERIL, Inc. as the Managing General
Partner is expected, but there is no assurance that the transaction will be
consummated.
The Partnership has engaged affiliates of Insignia to provide day-to-day
management of the Partnership's properties under an agreement which provides for
fees equal to 5% of revenues on each property. An affiliate of Insignia also
has provided partnership administration and management services for the
Partnership since March 1, 1994. Accrued reimbursements for direct expenses
relating to these services total approximately $134,732 as of September 30,
1995. Of this amount, $67,005 and $45,392 relate to the periods ended September
30, 1995 and 1994, respectively. For the period from January through July 14,
1994, Insignia assigned a portion of its fees to an affiliate of the Managing
General Partner. Payments to this affiliate under this assignment were
approximately $7,718 as of September 30, 1994.
Note E - Sale of Land
On July 21, 1995, the Partnership sold approximately one acre of land with an
unoccupied single family dwelling at Woodlawn House to an unaffiliated party.
The land did not generate rental income for the Partnership. Net proceeds from
the sale were $150,022, with the Partnership recognizing a gain of $66,140.
Note F - Refinancing of Woodlawn House and Meadows at Kendale Lakes
The Partnership refinanced the mortgages of both Woodlawn House and Meadows
at Kendale Lakes on September 30, 1994. For Woodlawn House the refinancing
replaced indebtedness in the amount of $1,944,092 which carried a stated
interest rate of 9% and was due on demand. The new mortgage indebtedness on
Woodlawn House of $2,475,000 carries a stated interest rate of 9.84% and is
amortized over thirty years with a balloon payment due on October 15, 2001. For
the Meadows at Kendale Lakes, the refinancing replaced indebtedness in the
amount of $3,397,394 which carried a stated interest rate of 9% and was due on
demand. The new mortgage indebtedness on the Meadows at Kendale Lakes of
$4,160,000 carries a stated rate of 9.84% and is amortized over thirty years
with a balloon payment due on October 15, 2001. The refinancing was consummated
under the terms of a multiple-asset real estate mortgage investment conduit
("REMIC"). The refinancing resulted in net cash proceeds of $61,373.
At the time of refinancing, $700,000 of accrued interest on advances owed by
the Partnership to affiliates of the Managing General Partner was repaid. At
September 30, 1995, the Partnership owes $11,030,630 including accrued interest
of $262,474, for advances. These advances have been subordinated to the new
mortgage indebtedness discussed above and are payable out of excess cash flow.
Note G - Casualty Gain
The Partnership recognized a casualty gain of $64,525 during 1994 related to
property damage at Meadows at Kendale Lakes. The gain resulted from the receipt
of escrowed insurance proceeds which were in excess of the actual damages.
Total insurance proceeds of $468,668 were received during 1993 (and escrowed by
the mortgage holder) due to storm damage from Hurricane Andrew. Related
expenses of $404,143 (of which approximately $37,546 was paid during 1994) were
incurred due to the hurricane.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of two apartment complexes.
The following table sets forth the average occupancy of the properties for the
nine months ended September 30, 1995 and 1994:
Average
Occupancy
1995 1994
Woodlawn House Apartments
Charlotte, North Carolina 96% 98%
Meadows at Kendale Lakes
Kendale Lakes, Florida 95% 95%
The Partnership's net loss for the nine months ended September 30, 1995,
was $1,243,666 compared to a net loss of $1,030,643 for the nine months ended
September 30, 1994. The Partnership's net loss for the three months ended
September 30, 1995, was $411,555 compared to a net loss of $450,923 for the
three months ended September 30, 1994. The increase in total income for the
three and nine months ended September 30, 1995, was due to slight increases in
rental rates at both properties in combination with increased lease cancellation
fees, deposit forfeitures and laundry income at Meadows at Kendale Lakes and
increased corporate unit income and laundry income at Woodlawn House.
Total expenses increased for the nine months ended September 30, 1995, due
primarily to increases in property management fees, maintenance, interest and
property tax expenses. Total expenses for the three months ended September 30,
1995, decreased slightly due to a decrease in operating expense partially offset
by increases in property management fees, maintenance and property tax
expenses. Operating expenses for the three months ended September 30, 1995,
decreased as a result of decreased professional fees and other administrative
fees incurred during the refinancings in September of 1994. Property
management fees, based on a percentage of revenues, increased for the three and
nine months ended September 30, 1995, primarily due to an approximate one
percent increase in the rate paid by the Partnership as well as increased
revenues. The increase in maintenance expense for the three and nine months
ended September 30, 1995, was a result of extensive landscaping at the pool and
entrance and interior andexterior painting at Meadows at Kendale Lakes.
Interest expense increased for the nine months ended September 30, 1995, due to
higher interest rates and amortization of new loan costs as a result of the
refinancings in 1994. Property taxes for the three and nine months ended
September 30, 1995, increased due to a tax reassessment at Meadows at Kendale
Lakes. These taxes are under appeal. The casualty gain of $64,525 related to
Meadows at Kendale Lakes as discussed in Note G to the Financial Statements.
The extraordinary gain on sale of land of $66,140 related to Woodlawn House as
discussed above in Note E to the Financial Statements.
As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from increases in
expenses. As part of this plan, the Managing General Partner attempts to
protect the Partnership from the burden of inflation-related increases in
expenses by increasing rents and maintaining a high overall occupancy level.
However, due to changing market conditions, which can result in the use of
rental concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Managing General Partner will be able to sustain
such a plan.
The Partnership had unrestricted cash of $295,549 for the nine months ended
September 30, 1995, as compared to $175,062 for the nine months ended September
30, 1994. Net cash used in operating activities decreased for the period ended
September 30, 1995, compared to the corresponding period in 1994 primarily due
to an increase in accrued interest partially offset by increases in deposits to
escrows for taxes. Net cash provided by investing activities increased for the
period ended September 30, 1995, compared to the corresponding period of 1994
due to proceeds received from the sale of the land at Woodlawn House and a
decrease in deposits to restricted escrows partially offset by increased
property improvements and replacements. Net cash provided by financing
activities decreased for the nine months ended September 30, 1995, due to the
non-recurring proceeds from the refinancings in 1994.
The sufficiency of existing liquid assets to meet future liquidity and
capital expenditure requirements is directly related to the level of capital
expenditures required at the various properties to adequately maintain the
physical assets as well as future maturing mortgage obligations and related
refinancing expenses. Such assets are currently thought to be sufficient for
any near-term needs of the partnership. The mortgage indebtedness of $6,600,190
is amortized over 30 years with balloon payments on October 15, 2001. Currently,
the Partnership is negotiating to sell Woodlawn House to an unaffiliated party
in the fourth quarter. The sale is expected, but there is no assurance the
transaction will be consummated. Future cash distributions will depend on the
levels of net cash generated from operations, refinancings, property sales and
the availability of portions of the funds described in the preceding paragraph.
RECENT DEVELOPMENTS - VMS REALTY PARTNERS AND AFFILIATES
There have been no material developments or changes from the Recent
Developments - VMS Realty Partners and Affiliates disclosed in Part 1, Item 2 of
the Partnership's report on Form 10-QSB for the quarter ended June 30, 1995.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no new material developments or changes from Part II, Item 1
of the Partnership's report on Form 10-QSB for the quarter ended June 30, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Partnership did not submit any matter to a vote of its holders of Limited
Partnership Interests during the nine months ended September 30, 1995.
ITEM 5. OTHER INFORMATION
On October 21, 1993, an affiliate of Prudential-Bache Properties, Inc.,
Prudential Securities Incorporated ("PSI"), settled, without admitting or
denying the allegations contained therein, civil and administrative proceedings
with the Securities and Exchange Commission, the National Association of
Securities Dealers, Inc., and various state regulators. These proceedings
concerned, among other things, the sale by PSI of limited partnership interests,
including interest of the Registrant, during the period of 1980 through 1990.
The settlement has no impact on the Registrant itself.
On October 27, 1994, PSI entered into cooperation and deferred prosecution
agreements (the "Agreements") with the Office of the United States Attorney for
the Southern District of New York (the "U.S. Attorney'). The Agreements resolved
a grand jury investigation that had been conducted by the U.S. Attorney into
PSI's sale during the 1980's of the Prudential-Bache Energy Income Fund oil and
gas limited partnership (the "Income Funds"). In connection with the Agreement,
the U.S. Attorney filed a complaint charging PSI with a criminal violations of
the securities laws. In its request for a deferred prosecution, PSI
acknowledged to having made certain misstatements in connection with the sale of
Income Funds. Pursuant to the Agreements, the U.S. Attorney will defer any
prosecution of the charge in the complaint for a period of three years, provided
that PSI complies with certain conditions during the three year period. These
include conditions that PSI not violate any criminal laws; that PSI contribute
an additional $330 million to a pre-existing settlement fund; that PSI cooperate
with the government in any future inquires; and the PSI comply with various
compliance-related provision. If, at the end of the three-year period, PSI has
complied with the terms of the Agreements, the U.S. Attorney will be barred from
prosecuting PSI on the charges set forth in the complaint. If, on the other
hand, during the course of the three-year period, PSI violates the terms of the
Agreements, the U.S. Attorney can elect to pursue such charges.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1995.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PRUDENTIAL-BACHE/VMS REALTY ASSOCIATES L.P. I
(Registrant)
By: VMS Realty Associates
Managing General Partner
By: JAS Realty Corporation
Date: November 3, 1995 By: /s/ Joel A. Stone
Joel A. Stone
President
By: /s/ Thomas A. Gatti
Date: November 3, 1995 Thomas A. Gatti
Senior Vice-President and Principal
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Prudential
Bache VMS Realty Associates L.P. I 1995 Third Quarter 10-QSB and is qualified in
its entirety by reference to such 10-QSB.
</LEGEND>
<CIK> 0000350558
<NAME> PURDENTAIL BACHE VMS REALTY ASSOC. L.P. I
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 295,549
<SECURITIES> 0
<RECEIVABLES> 531
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 872,291
<PP&E> 11,256,832
<DEPRECIATION> 6,549,220
<TOTAL-ASSETS> 5,579,903
<CURRENT-LIABILITIES> 865,008
<BONDS> 17,368,346
<COMMON> 0
0
0
<OTHER-SE> (12,653,451)
<TOTAL-LIABILITY-AND-EQUITY> 5,579,903
<SALES> 0
<TOTAL-REVENUES> 1,470,175
<CGS> 0
<TOTAL-COSTS> 2,779,981
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,299,193
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,243,666)
<EPS-PRIMARY> (48.83)
<EPS-DILUTED> 0
</TABLE>
