<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10 - Q
Annual Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 1995 Commission File No.: 2-80756
INDEPRO PROPERTY FUND I, L.P.
(Exact name of registrant as specified in its charter)
600 Dresher Road, Horsham, PA 19044
(Address of principal executive offices and zip code)
DELAWARE 51-0265801
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
(215) 956-0400
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Interests
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 for the
past 90 days.
YES X NO
------ ------
There is no public market for the Limited Partnership Interests. Non-affiliates
hold 23,579 Limited Partnership Interests as of March 31, 1995.
<PAGE> 2
INDEPRO PROPERTY FUND I, L.P.
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
Part I - Financial Information
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets, as of March 31, 1995
and December 31, 1994 3
Consolidated Statements of Income, for the three months
ended March 31, 1995 and 1994 4
Consolidated Statement of Partners' Capital for the three
months ended March 31, 1995 5
Consolidated Statements of Cash Flows, for the three months
ended March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 7-8
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 9-12
Part II - Other Information 13
</TABLE>
<PAGE> 3
INDEPRO PROPERTY FUND I, L.P. AND SUBSIDIARY
(A Delaware Limited Partnership)
CONSOLIDATED BALANCE SHEETS
As of March 31, 1995 and December 31, 1994
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1995 1994
---- ----
<S> <C> <C>
Assets
Investments in real estate at cost (note 3) $8,938,709 $8,913,733
Less: Accumulated depreciation and amortization 3,276,793 3,144,977
---------- ----------
Total investments 5,661,916 5,768,756
Cash and cash equivalents 1,990,787 2,226,528
Accounts receivable (net of allowance for doubtful
accounts of $21,240 in 1995 and $22,996 in 1994) 391,915 421,224
Prepaid expenses and other assets (net of accumulated
amortization of $8,252 in 1995 and $7,859 in 1994 180,858 114,520
---------- ----------
Total Assets $8,225,476 $8,531,028
========== ==========
Liabilities and Partners' Capital
Notes payable 588,801 605,814
Capital lease obligation 20,782 23,438
Due to general partner and affiliates 34,089 119,307
Accrued liabilities 131,257 194,108
Advance deposits 11,693 7,614
---------- ----------
Total Liabilities 786,622 950,281
---------- ----------
Partners' capital 7,438,854 7,580,747
---------- ----------
Total liabilities and partners' capital $8,225,476 $8,531,028
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE> 4
INDEPRO PROPERTY FUND I, L.P. AND SUBSIDIARY
(A Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 1995, and 1994
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
Income
Hotel revenues $ 942,230 $1,064,659
Hotel cost of revenues 379,417 434,940
---------- ----------
Gross profit from hotel operations 562,813 629,719
Miscellaneous income -- 222
Equity income of joint venture -- 6,022
Investment income 31,727 16,094
---------- ----------
Total income 594,540 652,057
---------- ----------
Expenses
Property operating expenses $ 248,931 $ 252,446
Depreciation and amortization 132,209 127,588
Real estate taxes 56,554 50,031
Administrative 13,650 12,474
Repairs and maintenance 29,488 32,425
Insurance 16,354 15,600
Provision for doubtful accounts (906) 14,680
Interest expense 12,879 14,446
---------- ----------
Total Expenses 509,159 519,690
---------- ----------
Net Income $ 85,381 $ 132,367
========== ==========
Net income allocated to Limited Partners $ 84,527 $ 131,043
Net income allocated to General Partner 854 1,324
---------- ----------
$ 85,381 $ 132,367
========== ==========
Net income per Limited Partnership
interests outstanding (30,000) $ 3 $ 4
========== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE> 5
INDEPRO PROPERTY FUND I, L.P. AND SUBSIDIARY
(A Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
For the three months ended March 31, 1995
<TABLE>
<CAPTION>
Limited
General Partnership
Partner Units Total
------- ----- -----
<S> <C> <C> <C>
Partners' capital at January 1, 1995 $ 771,190 $ 6,809,557 $ 7,580,747
Net income 854 84,527 85,381
Cash distributions from operations (22,727) (204,547) (227,274)
---------- ------------ -----------
Partners' capital at March 31, 1995 $ 749,317 $ 6,689,537 $ 7,438,854
========== ============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE> 6
INDEPRO PROPERTY FUND I, L.P. AND SUBSIDIARY
(A Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1995 and 1994
<TABLE>
<CAPTION>
Three months Three months
Ended Ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 85,381 $ 132,367
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 132,209 127,588
Change in assets and liabilities
Decrease (increase) in accounts receivable 29,309 (339,030)
Increase in prepaid expenses (66,731) (11,964)
Decrease in accrued liabilities (62,851) (109,671)
Increase in advance deposits 4,079 7,469
Increase (decrease) in amounts due to general
partner and affiliates (85,218) 5,280
------------ ------------
Net cash provided by (used in) operating activities 36,178 (187,961)
------------ ------------
Cash flows from investing activities:
Distributions received from joint venture in excess of
equity in earnings -- 28,501
Additions to real estate (24,976) (130,741)
------------ ------------
Net cash provided by (used in) investing activities (24,976) (102,240)
------------ ------------
Cash flows from financing activities:
Repayment of notes payable (17,013) (15,690)
Repayment of capital lease obligation (2,656) (2,416)
Distributions to partners from operations (227,274) (454,470)
------------ ------------
Net cash (used in) financing activities (246,943) (472,576)
------------ ------------
Net increase (decrease) in cash and cash equivalents (235,741) (762,777)
Cash and cash equivalents, beginning of period 2,226,528 2,257,939
------------ ------------
Cash and cash equivalents, end of period $ 1,990,787 $ 1,495,162
============ ============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE> 7
INDEPRO PROPERTY FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
As of March 31, 1995
1. General
The preceding unaudited financial information sets forth the operations of
Indepro Property Fund I, L.P. for the three months ended March 31, 1995.
In the opinion of Management, the financial statements reflect all
adjustments necessary to present fairly the results of operations for the
three months ended March 31, 1995.
Footnotes are presented pursuant to Rule 10-01 of Regulation S-X and do
not include complete financial information otherwise made in the Form
10-K. These interim financial statements should be read in conjunction
with the Form 10-K for the year ended December 31, 1994.
2. Partners' Capital
Indepro Property Fund I, L.P. made a distribution of $227,274 in March
1995 relating to the fourth quarter of 1994. Pennsylvania withholding
taxes that were paid by Indepro Property Fund I, L.P. on the partners
behalf were deducted from this distribution. In addition, the General
Partner expects to continue distributions for 1995 at approximately
$227,000 per quarter.
The General Partner is obligated under the terms of the Partnership
Agreement to make capital contributions upon the Partnership's dissolution
in the amount necessary to enable the Partnership to pay to each Limited
Partner an 8% non-compounded return on the unrecovered capital
contribution of the Limited Partner, less all distributions of
distributable cash and all distributions of sale or refinancing proceeds
in excess of the capital contributions of the Limited Partner. This
guaranteed return is computed from the date of each Limited Partner's
admission to the Partnership. This obligation does not guarantee to the
Limited Partners a return of their capital contributions and is limited by
the available assets of the Partnership and the General Partner.
3. Investment in Real Estate
Investment in real estate consisted of the following as of March 31, 1995:
<TABLE>
<CAPTION>
Building and
Property Land Improvements Total
-------- ---- ------------ -----
<S> <C> <C> <C>
Brunswick Hotel and Conference Center $ 285,000 $ 8,653,709 $ 8,938,709
Less: Accumulated Depreciation 0 3,276,793 3,276,793
--------- ----------- -----------
Total $ 285,000 $ 5,376,916 $ 5,661,916
========= =========== ===========
</TABLE>
<PAGE> 8
INDEPRO PROPERTY FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
As of March 31, 1995
3. Investments in Real Estate (continued)
On at least an annual basis, the General Partner prepares an estimate of
value for each property in the Partnership. The methodology used is either a
discounted cash flow analysis or a value based on a direct capitalization of
net operating income. This information is used to assist the General Partner
in determining net realizable value of the assets of the Partnership. A
valuation allowance is provided for assets in cases where the net realizable
value is less than the carrying amount of the asset. In addition, assets are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset may not be recoverable.
4. Cash Flow Information
Net cash provided by operating activities reflects cash payments for
interest of $12,386 and $14,446 respectively, during the three months
ended March 31, 1995 and March 31, 1994.
For purposes of the Consolidated Statements of Cash Flows, the Partnership
considers highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
5. Concentration of Credit Risk
The Partnership's operations consist of ownership of a hotel located in
Lancaster, Pennsylvania. The Partnership maintains adequate levels of
property and liability insurance for the hotel. The Partnership's hotel
customers primarily include governmental agencies, and to a lesser extent,
corporate travelers and tourists. The Partnership performs credit
evaluations of its customers and generally does not require collateral.
The Partnership invests its excess cash primarily through a major commercial
bank. Cash available in these accounts may at times exceed FDIC insurance
limits.
6. Investment in Joint Venture
The Partnership previously invested in a Joint Venture which was accounted
for under the equity method. The property in this joint venture was sold on
June 22, 1994 for a gain of $1,434,295 and a loss of $106,620 was recorded
related to the write off of the remaining balance of capitalized fees paid
in connection with the acquisition of the Partnership's interest in the
joint venture. The following is a summary of the results of operations of
the Joint Venture for the quarter ended March 31, 1994:
March 31,
1994
Revenues $ 279,821
Operating Expenses 267,777
---------
Net Income $ 12,044
=========
Partnership's equity in net income
(loss) $ 6,022
=========
<PAGE> 9
INDEPRO PROPERTY FUND I, L.P. AND SUBSIDIARY
(A Delaware Limited Partnership)
Part I, Item 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The Partnership's net income for the three months ended March 31, 1995 was
$85,381, a decrease of $46,986 from the same period of the prior year. This
decrease is attributable to a decline in occupancy rates at the Brunswick Hotel
from an average of 70% for the three months ended March 31, 1994 to an average
of 62% for the three months ended March 31, 1995. (See discussion under
Brunswick Hotel and Conference Center below. )
Brunswick Hotel and Conference Center
The Brunswick Hotel and Conference Center (the Hotel) is a 227 room hotel
located in downtown Lancaster, Pennsylvania. It recently has served three main
client segments which are the U.S. Government, tourist and corporate. Income
attributable to the Brunswick Hotel decreased from $123,030 for the three months
ended March 31, 1994 to $86,923 for the three months ended March 31, 1995 due to
the decline in occupancy rates. This decline in occupancy was attributable to
the cancellation of Army classes and the fact that the OPM business was slower
than anticipated during the first three months of the year. These factors caused
a decline in rooms revenue of approximately $95,000 from the same period of the
prior year. In addition, as a result of the decline in Government business, food
revenue also decreased by approximately $25,000 over the same time period. The
Government business with both the Army and OPM is expected to recover during the
second quarter of the 1995 with the shifting of some of the classes scheduled
for first quarter into the second quarter. The decline in revenue was partially
offset by a decrease in cost of sales of approximately $55,000 and a decrease in
the allowance for bad debts of approximately $15,000 due to a lower accounts
receivable balance.
The Brunswick Hotel property also includes an adjacent conference center. Prior
to 1991, this space was primarily a retail mall. In 1991, the Partnership
converted a portion of the upper level Mall to office space for the Army. In
addition, the lower level Mall was converted to additional conference facilities
and office space for the Office of Personnel Management (OPM). Hotel room night
charges generally include a provision for the use of the office and conference
space. The Hotel does not separately charge customers for these facilities in
most cases. The remaining mall retail space does not generate revenues that are
significant to the operations of the Hotel. The Hotel's lease with the adjacent
United Artist Theater expires in November, 1995, and the operators of the
theater have indicated that they do not intend to renew or extend their lease
beyond its current term. Annual revenues from the Theater of approximately
$41,000 are not significant to the operations of the hotel.
In October 1990, the Partnership contracted with two agencies of the U.S.
Government to provide training facilities and rooms. The Department of Defense
(the Army) has guaranteed a minimum of 11,000 room nights per year of the
agreement. The current agreement grants to the Army two one-year options
expiring on September 30, 1997. The U.S. Army has booked approximately 18,000
room nights for the period from October 1, 1994 to September 30, 1995. The lease
is terminable by the Army at any time by giving at least sixty days prior
written notice.
<PAGE> 10
Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Results of Operations (continued)
Brunswick Hotel and Conference Center (continued)
In addition, the U.S. Government's Office of Personnel Management ("OPM") was
offered three six month options extending through May, 1996. OPM has exercised
all three consecutive six month options. OPM has booked approximately 22,000
room nights for the period ending September 30, 1995. Historically, OPM has
canceled less than 5% of rooms booked.
In 1992, the Office of Personnel Management closed its training and conference
facility in King's Point, New York and relocated the majority of this business
to the Brunswick Hotel and Conference Center in Lancaster, Pennsylvania. OPM
expressed a further commitment to the facility in Lancaster by closing another
training center in Oak Ridge, Tennessee in January 1995 and relocating personnel
and equipment to the Brunswick Hotel. There are currently fourteen full-time
employees occupying space in the OPM offices with plans for further expansion
under review. The Hotel is currently developing plans to schedule an additional
track of classes for OPM that would run throughout this year. Denver, Colorado
and Lancaster, Pennsylvania are now the two primary training facilities for the
OPM with the OPM offices in Lancaster having the distinction of being the
reservation center for all training including those classes held in the Denver
location.
Lincoln Oaks
Lincoln Oaks Apartments (Phase I) in Fort Worth, Texas, was sold on June 22,
1994. Accordingly, no equity income was recognized for the three months ended
March 31, 1995. Equity income for the three months ended March 31, 1994 was
$6,022.
Liquidity and Capital Resources
As of March 31, 1995, the Partnership had cash and cash equivalents totaling
$1,990,787, in comparison with $2,226,528 at December 31, 1994 and $1,495,162
at March 31, 1994.
Since 1989, competition to the Hotel has increased dramatically as more than ten
new hospitality facilities have opened, adding many additional new rooms to the
marketplace. In order to remain competitive with the other hotels in the area
for business in the government, corporate and tourist segments, an upgrading of
the Hotel began in 1991 and continues in 1995. These renovations have included
upgrades to most guest rooms, renovations of the lobby and other common areas,
and replacement of the boiler and laundry equipment. During 1993, the Hotel
spent approximately $381,000 to install a complete sprinkler system in all guest
rooms and common areas. Approximately $64,000 was spent during 1994 to complete
this sprinkler work. In addition, approximately $245,000 was spent during 1994
for the replacement of bedding, carpet, and other room fixtures. The General
Partner has budgeted approximately $150,000 to be spent in 1995 for the
continued upgrading of the Hotel rooms and an additional $50,000 will be spent
during 1995 for work that was completed during 1994. Approximately $25,000 of
the amounts budgeted for 1995 was expended in the three months ended March 31,
1995.
<PAGE> 11
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Liquidity and Capital Resources (continued)
During 1991, the Hotel obtained third party financing in the form of a
promissory note to fund the major renovations to the Hotel and Mall. On August
12, 1993, this promissory note was refinanced from a 10.7% interest rate to an
8.25% interest rate. Monthly payments decreased from $10,958 to $9,800, which
began in September 1993, due to this refinancing. There were $16,000 in loan
fees related to this refinancing which were advanced under the note.
Approximately $791,443, which includes the $16,000 in loan fees has been
advanced under this note.
On June 22, 1994, Lincoln Oaks I, Fort Worth Ltd., (the "Joint Venture"), a
joint venture in which Indepro Property Fund I, L.P. (the "Registrant") had a
50% interest, including certain significant priorities and preferences in the
event of sale, conveyed title to Lincoln Oaks Apartments (Phase I) to South West
Properties, L.P., (the "Purchaser"). Lincoln Oaks Apartments is a 248 unit
garden apartment complex located on approximately 10 acres in Fort Worth, Texas.
In accordance with the joint venture agreement, the net sales proceeds of
$3,193,000 were distributed to the Partnership. The Partnership distributed the
net sales proceeds, less $90,900 due to the Advisor for its purchase of the
preferred return, to the Limited Partners on July 28, 1994 in a distribution of
$97.38 per unit.
The sale of Lincoln Oaks Apartments will not have a material ongoing impact on
the net income of the Partnership. The Partnership had been receiving cash
distributions averaging approximately $150,000 each year for the past three
years from its investment in Lincoln Oaks. The General Partner does not believe
that the loss of these cash flows will result in a change in the level of the
quarterly distribution in the future.
With the sale of Lincoln Oaks on June 22, 1994, the Brunswick Hotel is now the
sole remaining property owned by the Partnership. The General Partner has listed
the Brunswick Hotel for sale with Grubb and Ellis. In accordance with the
Partnership Agreement, the Partnership is expected to be dissolved upon the sale
of the Brunswick Hotel, unless all or a portion of the purchase price is payable
on a deferred basis.
<PAGE> 12
Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Liquidity and Capital Resources (continued)
Distributions
Indepro Property Fund I, L.P. made a distribution of $227,274 in March 1995
relating to the fourth quarter of 1994. Pennsylvania withholding taxes that were
paid by Indepro Property Fund I, L.P. on the partners behalf were deducted from
this distribution. In addition, the General Partner expects to continue
distributions for 1995 at approximately $227,000 per quarter. In addition, a
distribution of excess Partnership cash will be made in May 1995 which amounts
to $50 per Limited Partnership Unit.
The General Partner is obligated under the terms of the Partnership agreement to
make capital contributions upon the Partnership's dissolution in the amount
necessary to enable the Partnership to pay to each Limited Partner an 8%
non-compounded return on the unrecovered capital contribution of the Limited
Partner, less all distributions of distributable cash and all distributions of
sale or refinancing proceeds in excess of the capital contributions of the
Limited Partner. This guaranteed return is computed from the date of each
Limited Partner's admission to the Partnership. This obligation does not
guarantee to the Limited Partners a return of their capital contributions and is
limited by the available assets of the Partnership and the General Partner. As
of March 31, 1995, the estimated amount of this obligation to the Limited
Partners (excluding the General Partner's Limited Partnership Units) was
approximately $4,214,275. The Partnership had cash of $1,990,787 at March 31,
1995. If the General Partner distributed this cash, the Limited Partners' share
would have been $1,549,045, which would have reduced the amount of this
obligation to $2,665,230. The General Partner has cash of $1,528,976, demand
notes of $1,400,000, and would have $441,742 of its share of Partnership cash
for a total of $3,370,718 available to satisfy the remaining obligation. This
does not include the value of the General Partner's investment in the
Partnership or any estimated proceeds from disposal of the Brunswick Hotel which
would be distributed to the General Partner. Future operations of the
Partnership may impact the ability of the Partnership and the General Partner to
satisfy this obligation. In addition to its various initiatives to improve the
financial condition of the Partnership as discussed herein, the General Partner
is considering the potential benefits and liabilities, and their impact on the
Limited Partners, of sale of the Brunswick Hotel, the sole remaining property in
the Partnership, and the ultimate dissolution and liquidation of the
Partnership. The Hotel is currently listed for sale with Grubb and Ellis.
Inflation
The rate of inflation during the three most recent years has been low. Low rates
of inflation combined with increased market competition generally produce an
environment in which rental rate increases are relatively modest. The Brunswick
Hotel has not experienced significant increases in major expenditures since
inflation has been offset by more effective expense management. In the markets
in which the Brunswick Hotel competes, it is not feasible to pass on all
increasing costs in the form of higher room rates.
In the past, it was assumed that inflation would result in capital appreciation
in investment properties through increases in rental rates and replacement costs
in comparison with new properties. During the term in which the Brunswick Hotel
has been owned by the Partnership, inflation has been modest and capital
appreciation as a result of inflation has not occurred.
<PAGE> 13
INDEPRO PROPERTY FUND I, L.P.
(A Delaware Limited Partnership)
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
None
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
No reports were filed on Form 8-K during the quarter ended
March 31, 1995.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 12 of 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.
INDEPRO PROPERTY FUND I, L.P.
By: Indepro Property Fund I Corp.,
General Partner
By: /s/ Ronald M. Pappas
--------------------------
Ronald M. Pappas
President
Date: May 12, 1995 By: /s/ Ann M. Strootman
----------------------------
Ann M. Strootman
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,990,787
<SECURITIES> 0
<RECEIVABLES> 413,155
<ALLOWANCES> 21,240
<INVENTORY> 0
<CURRENT-ASSETS> 2,563,560
<PP&E> 8,938,709
<DEPRECIATION> 3,276,793
<TOTAL-ASSETS> 8,225,476
<CURRENT-LIABILITIES> 177,039
<BONDS> 588,801
<COMMON> 0
0
0
<OTHER-SE> 7,438,854
<TOTAL-LIABILITY-AND-EQUITY> 8,225,476
<SALES> 942,230
<TOTAL-REVENUES> 973,957
<CGS> 379,417
<TOTAL-COSTS> 379,417
<OTHER-EXPENSES> 496,280
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,879
<INCOME-PRETAX> 85,381
<INCOME-TAX> 0
<INCOME-CONTINUING> 85,381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85,381
<EPS-PRIMARY> 3
<EPS-DILUTED> 3
</TABLE>
