<PAGE>
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, 1996 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, 1996.
<PAGE>
INDEPRO PROPERTY FUND I, L.P.
INDEX OF FINANCIAL STATEMENTS
Page Number
-----------
Part I - Financial Information
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets, as of March 31, 1996
and December 31, 1995 3
Consolidated Statements of Income, for the three months
ended March 31, 1996 and 1995 4
Consolidated Statement of Partners' Capital for the three
months ended March 31, 1996 5
Consolidated Statements of Cash Flows, for the three months
ended March 31, 1996 and 1995 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
<PAGE>
INDEPRO PROPERTY FUND I, L.P. AND SUBSIDIARY
(A Delaware Limited Partnership)
CONSOLIDATED BALANCE SHEETS
As of March 31, 1996 and December 31, 1995
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
---- ----
<S> <C> <C>
Assets
Investments in real estate at cost (note 3) $ 9,042,782 $ 9,035,105
Less: Accumulated depreciation and amortization 3,813,021 3,677,432
--------------- --------------
Total investments 5,229,761 5,357,673
Cash and cash equivalents 642,720 967,574
Accounts receivable (net of allowance for doubtful
accounts of $3,286 in 1996 and $16,730 in 1995)
481,102 293,472
Prepaid expenses and other assets (net of accumulated
amortization of $5,250 in 1996 and $4,750 in 1995
134,211 99,465
-------------- ---------------
Total Assets $ 6,487,794 $ 6,718,184
============== ===============
Liabilities and Partners' Capital
Notes payable 517,918 536,258
Capital lease obligation 9,509 12,428
Due to general partner and affiliates 52,629 45,530
Accrued liabilities 148,176 187,214
Advance deposits 9,194 4,786
-------------- ---------------
Total Liabilities 737,426 786,216
-------------- ---------------
Partners' capital 5,750,368 5,931,968
-------------- ---------------
Total liabilities and partners' capital $ 6,487,794 $ 6,718,184
============== ===============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
INDEPRO PROPERTY FUND I, L.P. AND SUBSIDIARY
(A Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF INCOME For the
three months ended March 31, 1996, and 1995
<TABLE>
<CAPTION>
Three Months Three Months
March 31, 1996 March 31, 1995
--------------- --------------
<S> <C> <C>
Income
Hotel revenues $ 928,604 $ 942,230
Hotel cost of revenues 381,829 379,417
--------- ---------
Gross profit from hotel operations 546,775 562,813
Investment income 8,644 31,727
--------- ---------
Total income 555,419 594,540
--------- ---------
Expenses
Property operating expenses $ 256,669 $ 248,931
Depreciation and amortization 136,089 132,209
Real estate taxes 54,231 56,554
Administrative 21,996 13,650
Repairs and maintenance 23,462 29,488
Insurance 18,376 16,354
Provision for doubtful accounts (12,244) (906)
Interest expense 11,166 12,879
Total Expenses 509,745 509,159
--------- ---------
Net Income $ 45,674 $ 85,381
========= =========
Net income allocated to Limited Partners $ 45,217 $ 84,527
Net income allocated to General Partner
457 854
--------- ---------
$ 45,674 $ 85,381
========= =========
Net income per Limited Partnership
interests outstanding (30,000) $ 2 $ 3
========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
INDEPRO PROPERTY FUND I, L.P. AND SUBSIDIARY
(A Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF PARTNERS'
CAPITAL For the three months ended
March 31, 1996
<TABLE>
<CAPTION>
Limited
General Partnership
Partner Units Total
------------ -------------- -------------
<S> <C> <C> <C> <C>
Partners' capital at January 1, 1996 $ 754,702 $ 5,177,266 $ 5,931,968
Net income 457 45,217 45,674
Cash distributions from operations (22,727) (204,547) (227,274)
------------ -------------- -------------
Partners' capital at March 31, 1996 $ 732,432 $ 5,017,936 $ 5,750,368
============ ============== =============
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
INDEPRO PROPERTY FUND I, L.P. AND SUBSIDIARY
(A Delaware Limited Partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Three months Three months
Ended Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 45,674 $ 85,381
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 136,089 132,209
Change in assets and liabilities
Decrease (increase) in accounts receivable (187,630) 29,309
Increase in prepaid expenses (35,246) (66,731)
Decrease in accrued liabilities (39,038) (62,851)
Increase in advance deposits 4,408 4,079
Increase (decrease) in amounts due to general
partner and affiliates 7,099 (85,218)
---------- -----------
Net cash provided by (used in) operating activities (68,644) 36,178
---------- -----------
Cash flows from investing activities:
Additions to real estate ( 7,677) (24,976)
---------- -----------
Net cash used in investing activities ( 7,677) (24,976)
---------- -----------
Cash flows from financing activities:
Repayment of notes payable (18,340) (17,013)
Repayment of capital lease obligation (2,919) (2,656)
Distributions to partners from operations (227,274) (227,274)
---------- -----------
Net cash (used in) financing activities (248,533) (246,943)
---------- -----------
Net decrease in cash and cash equivalents (324,854) (235,741)
Cash and cash equivalents, beginning of period 967,574 2,226,528
---------- -----------
Cash and cash equivalents, end of period $ 642,720 $ 1,990,787
=========== ===========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
<PAGE>
INDEPRO PROPERTY FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
As of March 31, 1996
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,
1996. 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, 1996.
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, 1995.
2. Partners' Capital
Indepro Property Fund I, L.P. made a distribution of $227,274 in March
1996 relating to the fourth quarter of 1995. In addition, the General
Partner expects to continue distributions for 1996 at approximately
$227,000 per quarter, subject to the potential sale of the Brunswick
Hotel in 1996. Pennsylvania withholding taxes that were paid by Indepro
Property Fund I, L.P. on the partners behalf will be deducted from future
distributions.
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,
1996:
<TABLE>
<CAPTION>
Building and
Property Land Improvements Total
-------- ---- ------------ -----
<S> <C> <C> <C>
Brunswick Hotel and Conference Center $ 285,000 $ 8,757,782 $ 9,042,782
Less: Accumulated Depreciation 0 3,813,021 3,813,021
--------- ----------- -----------
Total $ 285,000 $ 4,944,761 $ 5,229,761
========= =========== ===========
</TABLE>
<PAGE>
INDEPRO PROPERTY FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
As of March 31, 1996
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 $11,331 and $12,386 respectively, during the three months ended
March 31, 1996 and March 31, 1995.
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.
<PAGE>
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, 1996 was
$45,674, a decrease of $39,707 from the same period of the prior year. This
decrease is primarily attributable to a decline of $23,013 in investment income
earned on excess Partnership cash. Excess Partnership cash reserves of
$1,500,000 were distributed to the Limited Partners and $15,151.52 to the
General Partner in May of 1995. In addition, income provided by operations of
the Brunswick Hotel declined by $13,429 in comparison with the same period of
the prior year. (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 $67,339 for the three months
ended March 31, 1995 to $53,910 for the three months ended March 31, 1996.
The decrease in net income was primarily attributable to the operations of the
adjacent mall. The Hotel's lease with the United Artist Theater (which was
located in the mall) expired in November, 1995 and the operators of the theater
did not extend their lease. This factor caused a decline in revenues of $10,275
from the three months ended March 31, 1995 to the three months ended March 31,
1996. In addition room nights sold have decreased slightly from the prior year,
causing a decline in hotel revenues of approximately $3,000.
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.
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, 1998. The U.S. Army has booked approximately 15,100
room nights for the fiscal year ended September 30, 1996. The lease is
terminable by the Army at any time by giving at least sixty days prior written
notice, subject to the guarantee provisions in the lease.
<PAGE>
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) had a
contract for the provision of food, rooms and conference facilities for OPM's
training sessions which extended through November, 1994. In addition, OPM was
offered three six month options extending through May, 1996. OPM has exercised
all three consecutive six month options.
OPM and the Brunswick Hotel have entered into a new agreement which commences
May 1, 1996 and expires September 30, 1997. The initial rate per participant is
$74.30 with additional charges for certain other expenses. The agreement gives
OPM four one year renewal options, with increases in the daily per participant
charge based upon increases in the Consumer Price Index for the Northeast
Region. OPM has booked approximately 23,600 room nights for the period January
1, 1996 to September 30, 1996. Historically, OPM has canceled less than 5% of
rooms booked.
In October, 1995, OPM mailed a solicitation for offers to the Hotel and other
interested parties for a ten year contract which could commence as early as
September, 1997. If the Brunswick Hotel is selected as the contractor,
significant funds would have to be spent on capital expenditures for the Hotel.
The additional revenues provided by the proposed contract would have a positive
impact on the Hotel's operations. If the Brunswick Hotel is not selected by OPM
for the ten year contract and another facility is chosen, the Hotel would
experience a significant decline in revenues and cash flows until it can be
repositioned to attract other business. This decline is not expected to occur,
if at all, until September 1997 or September 1998. OPM is anticipated to make a
decision on the ten year contract by the end of the second quarter of 1996.
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. 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.
Liquidity and Capital Resources
As of March 31, 1996, the Partnership had cash and cash equivalents totaling
$642,720, in comparison with $967,574 at December 31, 1995 and $1,990,787 at
March 31, 1995. The decrease in cash from March, 1995 is primarily attributable
to an extra distribution from excess Partnership reserves of $1,500,000 made to
the Limited Partners in May, 1995. The distribution of excess Partnership cash
was made after the General Partner reviewed the current and future anticipated
cash requirements of the Partnership. The decrease in cash from December 31,
1995 to March 31, 1996 was primarily attributable to a slower collection of
accounts receivable.
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liquidity and Capital Resources (continued)
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 continued through 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 and
1994, the Hotel spent approximately $690,000 to install a complete sprinkler
system in all guest rooms and common areas, and to replace bedding, carpet, and
other room fixtures. Approximately, $121,000 was spent in 1995 for the continued
upgrading of the Hotel rooms. The General Partner has budgeted approximately
$154,132 to be spent in 1996 for capital improvements, $7,677 of which was spent
in the three months ended March 31, 1996.
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.
Approximately $791,443 has been advanced under this note, which has a balance of
$517,918 at March 31, 1996.
The Brunswick Hotel is now the sole remaining property owned by the Partnership.
The General Partner has engaged the Grubb and Ellis Hospitality Group to assist
in the marketing and sale of the Brunswick Hotel. The General Partner is
reviewing several offers from prospective buyers and anticipates that a sale
will be completed in 1996. 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.
Distributions
Indepro Property Fund I, L.P. made a distribution of $227,274 in March 1996
relating to the fourth quarter of 1995. Pennsylvania withholding taxes that were
paid by Indepro Property Fund I, L.P. on the partners behalf were deducted from
this distribution. The General Partner expects to continue distributions for
1996 at approximately $227,000 per quarter, subject to the potential sale of the
Brunswick Hotel in 1996.
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Distributions (continued)
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, 1996, the estimated amount of this obligation to the Limited
Partners (excluding the General Partner's Limited Partnership Units) was
approximately $3,072,579. The Partnership had cash of $642,720 at March 31,
1996. If the General Partner distributed this cash, the Limited Partners' share
would have been $500,105, which would have reduced the amount of this obligation
to $2,572,474. The General Partner has cash of $2,136,992, demand notes of
$1,400,000, and would have $142,615 of its share of Partnership cash for a total
of $3,679,607 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. As mentioned above, the Partnership has engaged the Grubb and Ellis
Hospitality Group to assist in the sale of the Brunswick Hotel, the sole
remaining property in the Partnership. If a desirable sale transaction can be
completed, it would be followed by the dissolution and liquidation of the
Partnership.
Inflation
The rate of inflation during 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>
INDEPRO PROPERTY FUND I, L.P.
(A Delaware Limited Partnership)
PART II
OTHER INFORMATION
ITEM 1. Legal Proceedings
As of March 31, 1996, the Partnership was not a party to any
pending legal proceeding. However, Hotel Brunswick, Inc. and
Indepro Property Fund I, Corp. have been named as defendants in a
complaint filed November 16, 1995 by Elwood Corbett, Plaintiff.
On November 27, 1993, the Plaintiff was a non-paying guest at the
Hotel who had received a complimentary room as a bus driver for a
group of visitors to the property from New York. The complaint
alleges that the Plaintiff slipped and fell in his guest room and
further alleges that the Defendants are liable for failure to
provide adequate safety measures. The Defendants have filed an
answer to the complaint and deny any liability for the alleged
occurrence. The liability insurance carrier for the property has
engaged legal counsel to represent the Defendants and the outcome
of this litigation is not anticipated to have any material impact
on the financial condition or results of operations of the
Partnership.
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, 1996.
<PAGE>
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 13, 1996 By: /s/ Ann M. Strootman
------------------------
Ann M. Strootman
Controller
By: /s/ Wayne L. Harris
------------------------
Wayne L. Harris
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 642,720
<SECURITIES> 0
<RECEIVABLES> 484,388
<ALLOWANCES> 3,286
<INVENTORY> 0
<CURRENT-ASSETS> 1,217,282
<PP&E> 9,042,782
<DEPRECIATION> 3,813,021
<TOTAL-ASSETS> 6,487,794
<CURRENT-LIABILITIES> 209,998
<BONDS> 527,427
0
0
<COMMON> 0
<OTHER-SE> 5,750,369
<TOTAL-LIABILITY-AND-EQUITY> 6,487,794
<SALES> 928,604
<TOTAL-REVENUES> 937,248
<CGS> 381,829
<TOTAL-COSTS> 734,567
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,166
<INCOME-PRETAX> 45,674
<INCOME-TAX> 0
<INCOME-CONTINUING> 45,674
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,674
<EPS-PRIMARY> 2
<EPS-DILUTED> 2
</TABLE>
