<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended JUNE 30, 1998
Commission File Number 2-82765
REAL EQUITY PARTNERS
(A California Limited Partnership)
I.R.S. Employer Identification No. 95-3784125
9090 WILSHIRE BLVD., SUITE 201
BEVERLY HILLS, CA 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No_____
<PAGE> 2
REAL EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes to Financial Statements
Balance Sheets, June 30, 1998 and December 31, 1997 ..........1
Statements of Operations,
Six and Three Months Ended June 30, 1998 and 1997 ......2
Statement of Partners' Equity (Deficiency),
Six Months Ended June 30, 1998 .........................3
Statements of Cash Flows,
Six Months Ended June 30, 1998 and 1997 ................4
Notes to Financial Statements ................................5
Item 2. Management's Discussion and Analysis of Financial
Position and Results of Operations ..........................10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................13
Item 6. Exhibits and Reports on Form 8-K ..................................14
Signatures..................................................................15
</TABLE>
<PAGE> 3
REAL-EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 1998 AND DECEMBER 31, 1997
ASSETS
<TABLE>
<CAPTION>
1998
(Unaudited) 1997
------------ ------------
<S> <C> <C>
RENTAL PROPERTY, at cost (Notes 1 and 2)
Land $ 6,553,357 $ 6,553,357
Buildings 22,096,723 22,096,723
Furniture and equipment 3,720,901 3,720,901
------------ ------------
32,370,981 32,370,981
Less accumulated depreciation (14,209,002) (13,839,796)
------------ ------------
18,161,979 18,531,185
------------ ------------
CASH AND CASH EQUIVALENTS 1,140,514 1,354,289
------------ ------------
OTHER ASSETS:
Due from affiliated rental agent (Note 5) 771,463 645,785
Other receivables and prepaid expenses 222,286 259,864
------------ ------------
993,749 905,649
------------ ------------
TOTAL ASSETS $ 20,296,242 $ 20,791,123
============ ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Mortgage notes payable (Notes 2 and 7) $ 14,320,565 $ 14,443,323
Accrued fees and expenses due general partner
(Notes 5 and 7) 756,574 735,685
Accrued interest payable (Note 2) 56,383 56,383
Accounts payable and accrued expenses (Note 1) 262,424 270,019
Liability for earthquake loss (Note 1) 506,016 506,016
Tenant security deposits 217,066 217,066
------------ ------------
16,119,028 16,228,492
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 5 and 6)
PARTNERS' EQUITY 4,177,214 4,562,631
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 20,296,242 $ 20,791,123
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 4
REAL-EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
SIX AND THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 1998 June 30, 1998 June 30, 1997 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
RENTAL OPERATIONS:
Revenues
Rental income $2,442,801 $1,244,340 $2,334,227 $1,164,122
Other income 87,606 51,227 93,051 44,522
---------- ---------- ---------- ----------
2,530,407 1,295,567 2,427,278 1,208,644
---------- ---------- ---------- ----------
Expenses
Operating expenses 1,341,928 680,851 1,164,303 648,306
Management fees - affiliate (Note 4) 125,216 64,176 119,934 60,083
Depreciation (Note 1) 369,206 184,603 369,206 184,603
General and administrative expenses 121,846 56,024 136,205 90,174
Interest expense (Note 2) 679,573 339,064 702,016 358,895
---------- ---------- ---------- ----------
2,637,769 1,324,718 2,491,664 1,342,061
---------- ---------- ---------- ----------
Loss from rental operations (107,362) (29,151) (64,386) (133,417)
---------- ---------- ---------- ----------
PARTNERSHIP OPERATIONS:
Interest income 28,185 14,050 75,391 11,211
---------- ---------- ---------- ----------
Expenses
General and administrative expenses (Note 5) 152,382 115,259 52,329 28,259
Professional fees (17,031) (33,423) 58,584 37,853
Interest expense - general partner (Note 5) 20,889 10,502 20,889 10,502
---------- ---------- ---------- ----------
156,240 92,338 131,802 76,614
---------- ---------- ---------- ----------
Loss from partnership operations (128,055) (78,288) (56,411) (65,403)
---------- ---------- ---------- ----------
NET LOSS $ (235,417) $ (107,439) $ (120,797) $ (198,820)
========== ========== ========== ==========
NET LOSS PER LIMITED PARTNERSHIP INTEREST (Note 4) $ (8) $ (4) $ (4) $ (7)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 5
REAL-EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY (DEFICIENCY)
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
----------- ----------- -----------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS 30,000
===========
EQUITY (DEFICIENCY),
January 1, 1998 $(1,621,800) $ 6,184,431 $ 4,562,631
Net loss for the six months
ended June 30, 1998 (2,355) (233,062) (235,417)
Cash distributions -- (150,000) (150,000)
----------- ----------- -----------
EQUITY (DEFICIENCY),
June 30, 1998 $(1,624,155) $ 5,801,369 $ 4,177,214
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 6
REAL-EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (235,417) $ (120,797)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation 369,206 369,206
Changes in operating assets and liabilities:
Decrease (increase) in:
Due from affiliated rental agent (125,678) (59,681)
Other receivables and prepaid expenses 37,578 (38,328)
Increase (decrease) in:
Accrued fees and expenses due general partner 20,889 20,889
Accounts payable and accrued expenses (7,595) 16,575
Accrued interest payable (20)
----------- -----------
Net cash provided by operating activities 58,983 187,844
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (150,000) (1,167,522)
Proceeds from mortgage note payable 5,600,000
Principal payments on mortgage notes payable (122,758) (5,102,034)
Payments on liability for earthquake loss -- (15,593)
----------- -----------
Net cash used in financing activities (272,758) (685,149)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (213,775) (497,305)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,354,289 1,827,286
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,140,514 $ 1,329,981
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 7
REAL EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
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, 1997 filed by Real Equity Partners (the
"Partnership"). National Partnership Investments Corp. ("NAPICO") is the
corporate general partner of the Partnership. Accounting measurements at
interim dates inherently involve greater reliance on estimates than at
year end. The results of operations for the interim periods presented
are not necessarily indicative of the results for the entire year.
In the opinion of the general partners of the Partnership, the
accompanying unaudited financial statements contain all adjustments
(consisting primarily of normal recurring accruals) necessary to present
fairly the financial position of the Partnership as of June 30, 1998,
and the results of operations for the six and three months then ended
and changes in cash flows for the six months then ended.
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.
RENTAL PROPERTY AND DEPRECIATION
Rental property is stated at cost. Depreciation is provided for on the
straight-line method over the estimated useful lives of the buildings
and equipment.
On January 17, 1994, the Park Creek and Warner Willows I and II rental
properties sustained damage, estimated at approximately $1,454,000, due
to the Northridge earthquake in the Los Angeles area. Insurance proceeds
of approximately $965,000 were allocated to the Partnership in 1995 and
1994, as the settlement under a master umbrella insurance policy
covering earthquake damage for these and other properties managed by a
related party. The total estimated expenditures needed to repair the
properties, net of the insurance recoveries were expensed in 1994 since
they did not extend the useful life of the properties.
5
<PAGE> 8
REAL EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Partnership is undergoing an extensive review of properties that may
be sold to the REIT as set forth below. The Partnership has incurred
expenses in connection with this review by various third party
professionals, including accounting, legal, valuation, structural review
and engineering costs, which amounted to approximately $185,000 through
June 30, 1998, including approximately $48,000 for the six months ended
June 30, 1998, which are included in general and administrative
expenses.
A real estate investment trust ("REIT") organized by affiliates of
NAPICO has advised the Partnership that it intends to make a proposal to
purchase from the Partnership the rental properties owned by the
Partnership.
The REIT proposes to purchase such limited partnership interests for
cash, which it plans to raise in connection with a private placement of
its equity securities. The purchase is subject to, among other things,
(i) consummation of such private placement by the REIT; (ii) the consent
of the limited partners to the sale of the rental properties owned by
REP; and (iii) the consummation of a minimum number of purchase
transactions with other NAPICO affiliated partnerships. As of June 30,
1998, the REIT had completed buy-out negotiations with a majority of the
general partners of the local limited partnerships.
A consent solicitation statement will be sent to the limited partners
setting forth the terms and conditions of the purchase of the limited
partners' interests held for investment by the Partnership, together
with certain amendments to the Partnership Agreement and other
disclosures of various conflicts of interest in connection with the
proposed transaction.
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. The
Partnership has its cash and cash equivalents on deposit primarily with
one high credit quality financial institution. Such cash and cash
equivalents are in excess of the FDIC insurance limit.
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership adopted Statement of Financial Accounting Standards No.
121, Accounting for the Improvement of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of as of January 1, 1996 without a
significant effect on its financial statements. The Partnership reviews
long-lived assets to determine if there has been any permanent
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. If the sum of the
expected future cash flows is less than the carrying amount of the
assets, the Partnership recognizes an impairment loss.
6
<PAGE> 9
REAL EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
NOTE 2 - MORTGAGE NOTES PAYABLE
Mortgage notes payable consist of the following:
a. Conventional mortgage notes bearing interest at rates ranging
from 9.125 percent to 10.25 percent per annum, payable in
monthly installments ranging from $13,653 to $45,563 per month
and having maturity dates from September 1998 to June 2007.
These notes total $12,143,000 at June 30, 1998.
b. Mortgage note, insured by the Department of Housing and Urban
Development under the Section 221(d)(4) program, bearing
interest at the rate of 7 percent per annum, payable in monthly
installments of approximately $19,500, including interest
through maturity in the year 2013. The note has a balance of
$2,178,000 at June 30, 1998.
The mortgage notes are secured by deeds of trust on the rental
properties.
NOTE 3 - INCOME TAXES
No provision has been made for income taxes in the accompanying
financial statements as such taxes, if any, are the liability of the
individual partners.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Partnership has entered into agreements with an affiliate of NAPICO
to manage the operations of the rental properties. The agreements are on
a month-to-month basis and provide, among other things, for a management
fee equal to 5 percent of gross rentals and other collections plus
reimbursement of certain expenses. Management fees charged to operations
under this agreement were approximately $125,216 and $119,900 for the
six months ended June 30, 1998 and 1997, respectively.
An affiliate of NAPICO performed certain of the earthquake repairs at
the Park Creek and Warner Willows I and II rental properties. The
payments to this affiliate for these repairs were approximately $859,000
as of June 30, 1998 (Note 1). Included in payments to the affiliate of
NAPICO was $122,773 paid under a contract entered into by the
Partnership on February 22, 1996, after receiving competitive bids.
NOTE 5 - FEES AND EXPENSES DUE GENERAL PARTNER
Under the terms of the Partnership Agreement, the Partnership is
obligated to NAPICO for a deferred acquisition fee. This fee is for
services rendered in connection with the selection, purchase,
acquisition, development, and monitoring the operations of its
properties. Distribution of any part of this from net cash from
operations shall be subordinated to receipt by each Limited Partner of
an amount equal to
7
<PAGE> 10
REAL EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
NOTE 5 - FEES AND EXPENSES DUE GENERAL PARTNER (CONTINUED)
a cumulative non-compounded 6 percent annual distribution with respect
to the adjusted capital value (as defined in the Partnership Agreement).
The aggregate amount of the deferred acquisition fee distributed in any
year from net cash from operations shall not exceed an amount equal to 3
percent of the investment in properties plus any proceeds from sale or
refinancing of the properties. The deferred acquisition fee shall be an
amount which, when present valued at 8 percent from certain dates as
defined in the Partnership Agreement, equals 10 percent of the gross
proceeds of the offering ($3,000,000). Distribution of the deferred
acquisition fee will be made from net cash from operations and net
proceeds from sale or refinancing for a maximum of 15 years, or until
the above limit is met.
The present value of the deferred acquisition fee plus accrued interest
has been reflected in the accompanying financial statements and has been
capitalized as part of the cost of rental property acquired. The amount
outstanding as of June 30, 1998 and December 31, 1997 was $756,574 and
$735,685, respectively.
Under the terms of the Partnership Agreement, cash available for
distribution is to be allocated 90 percent to the limited partners as a
group and 10 percent to the general partners. The Partnership made
distributions in the amount of $150,000 to the limited partners during
the six months ended June 30, 1998.
The Partnership reimburses NAPICO for certain expenses. The
reimbursement paid to NAPICO was $6,301 and $5,886 for the six months
ended June 30, 1998 and 1997, respectively, and is included in general
and administrative expenses.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The corporate general partner of the Partnership is involved in various
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 7 - 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. One of the mortgage notes payable is insured by HUD
and is secured by a rental property. The operations generated by the
property are subject to various government rules, regulations and
restrictions which make it impracticable to estimate the fair value of
this mortgage note payable. The book values of all other debt
instruments approximate their fair values because the interest rates of
these instruments are comparable to rates currently offered to the
Partnership. 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 EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership was formed to invest in residential rental properties
either directly or through investments in joint ventures and other
partnerships which will invest in such real estate. The Partnership
acquired 6 buildings at various dates during 1984 and 1985. One of the
buildings was foreclosed in 1996.
The Partnership's primary sources of funds are income from rental
operations and interest income earned on cash reserves.
Under the terms of the Partnership Agreement, cash available for
distribution is to be allocated 90 percent to the limited partners as a
group and 10 percent to the general partners. Distributions of net cash
from operations were normally intended to be made to the partners of
record on a quarterly basis during the months of February, May, August,
and November pro rata in proportion to the number of units held. From
November 1994 through May 1996, distributions to the partners were not
made due to the Partnership setting aside funds for losses incurred by
REP as a result of the January 17, 1994 Northridge Earthquake. Based on
cash distributions made to the partners as of December 31, 1996,
$834,188 was due to the general partners as their 10 percent share of
cash available for distribution. This amount was paid to the general
partners in February 1997. The Partnership made distributions in the
amount of $150,000 to the limited partners in the six months ended June
30, 1998.
Currently, it is anticipated that the Partnership will continue to meet
its current and long term obligations as they become due.
On May 21, 1997, the mortgage on Arbor Glen was refinanced with a
non-recourse loan in the amount of $5,600,000 bearing interest at 9.125%
per annum. The note is due June 1, 2007.
RESULTS OF OPERATIONS
Rental operations consist primarily of rental income and depreciation
expense, debt service, and normal operating expenses to maintain the
properties. Depreciation is provided on the straight-line method over
the estimated useful lives of the buildings and equipment. Substantially
all of the rental units in the apartment projects are leased on a
month-to-month basis.
An annual property management fee, which shall in any event not exceed 5
percent of gross revenues from each property under management, is
payable by the properties to an affiliate of NAPICO.
Occupancy at the Warner Willows I and II properties averaged 95 percent
for the six months of 1998, a 2 percent increase from the same period in
1997 (excluding capital repair costs). Both properties operated with
positive cash earnings for the six months ended June 30, 1998. Positive
cash earnings for the six months ended June 30, 1998 were approximately
$6,145 and $622 for Warner Willows I and II, respectively.
9
<PAGE> 12
REAL EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1998
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Occupancy at the Arbor Glen property averaged 100 percent during the
first six months of 1998, a 2 percent increase from the same period in
1997. The property operated with a positive cash flows of approximately
$13,238 during the first six months of 1998. On May 21, 1997, the
property was refinanced with a new non-recourse loan in the amount of
$5,600,000. The loan matures on June 1, 2007 and bears interest at
9.125% per annum.
Occupancy at the Park Creek property averaged 98 percent during the
first six months of 1998, a 5 percent increase from the same period in
1997. The property operated with a positive cash flows of approximately
$34,252 (excluding capital repair costs) during the first six months of
1998.
Occupancy at the Willowbrook property averaged 90 percent during the
first three months of 1998, a 1 percent decrease from the same period in
1997. The property operated with a positive cash flow of approximately
$96,889 during the first six months of 1998.
On January 17, 1994, the Park Creek and Warner Willows I and II rental
properties sustained damage, estimated at approximately $1,454,000, due
to the earthquake in January 1994. Included in liabilities as of June
30, 1998 is approximately $500,000 related to the earthquake damages.
The total estimated expenditures needed to repair the properties, net of
the insurance recoveries of $965,000, were expensed, since they did not
extend the useful life of the properties.
An affiliate of NAPICO performed certain of the earthquake repairs at
the Park Creek and Warner Willows I and II rental properties. The
payments to this affiliate for these repairs were approximately $859,000
as of June 30, 1998. Included in payments to the affiliate of NAPICO was
$122,773 paid under a contract entered into by the Partnership on
February 22, 1996, after receiving competitive bids.
The Partnership operations consist primarily of interest income earned
on certificates of deposit and other temporary investments of funds not
required for investment in projects. The amount of interest income
varies with market rates available on certificates of deposit and with
the amount of funds available for investment.
Operating expenses of the Partnership consist substantially of recurring
general and administrative expenses and professional fees for services
rendered to the Partnership and interest on the deferred acquisition fee
due the General Partners.
10
<PAGE> 13
REAL EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1998
PART II. OTHER INFORMATION
The Partnership is undergoing an extensive review of properties that may be
sold to the REIT as set forth below. The Partnership has incurred expenses in
connection with this review by various third party professionals, including
accounting, legal, valuation, structural review and engineering costs, which
amounted to approximately $185,000 through June 30, 1998, including
approximately $48.00 for the six months ended June 30, 1998, which are included
in general and administrative expenses.
A real estate investment trust ("REIT") organized by affiliates of NAPICO has
advised the Partnership that it intends to make a proposal to purchase from the
Partnership the rental properties owned by the Partnership.
The REIT proposes to purchase such limited partnership interests for cash,
which it plans to raise in connection with a private placement of its equity
securities. The purchase is subject to, among other things, (i) consummation of
such private placement by the REIT; (ii) the consent of the limited partners to
the sale of the rental properties owned by REP; and (iii) the consummation of a
minimum number of purchase transactions with other NAPICO affiliated
partnerships. As of June 30, 1998, the REIT has completed buy-out negotiations
with a majority of the general partners of the local limited partnerships.
A consent solicitation statement will be sent to the limited partners setting
forth the terms and conditions of the purchase of the limited partners'
interests held for investment by the Partnership, together with certain
amendments to the Partnership Agreement and other disclosures of various
conflicts of interest in connection with the proposed transaction.
The Partnership is incurring interest expense at a rate of 8 percent per annum
on the unpaid fees due the general partner. Under the terms of the Amended and
Restated Certificate and Agreement of Limited Partnership Agreement
Partnership, the Partnership is obligated to the general partner for a
deferred acquisition fee for services rendered in connection with the
selection, purchase, development and management of the Partnership and
monitoring the operations of the properties, in an amount which, when
calculated on a present value basis (using a discount factor of 8 percent for
this purpose) from the date of payment to the general partners to September 27,
1984 equals 10 percent of the gross proceeds of the offering ($3,000,000).
Distribution of any part of this fee from net cash from operations shall be
subordinate to receipt by each Limited Partner of an amount equal to a
cumulative noncompounded 6 percent distribution. The acquisition fee
distributed in any year from net cash from operations shall not exceed an
amount equal to 3 percent of investment in properties (approximately $600,000)
plus any proceeds from sale or refinancing of the properties. The amount
outstanding as of June 30, 1998 was approximately $756,000. An annual property
management fee, which shall not in any event exceed 5 percent of gross revenues
from each property under management, is also payable to an affiliate of the
corporate general partner.
ITEM 1. LEGAL PROCEEDINGS
As of June 30, 1998, the Partnership's corporate general partner is involved in
various 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.
12
<PAGE> 14
REAL EQUITY PARTNERS
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1998
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 EQUITY PARTNERS
(a California limited partnership)
By: National Partnership Investments Corp.
Corporate General Partner
/s/ BRUCE NELSON
-------------------------------------
Bruce Nelson
President
Date: 8/14/98
---------------------------------------
/s/ CHARLES H. BOXENBAUM
-------------------------------------
Charles H. Boxenbaum
Chief Executive Officer
Date: 8/14/98
---------------------------------------
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PARTNERSHIP'S STATEMENT OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,140,514
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,134,263
<PP&E> 32,370,981
<DEPRECIATION> 14,209,002
<TOTAL-ASSETS> 20,296,242
<CURRENT-LIABILITIES> 318,807
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,177,214
<TOTAL-LIABILITY-AND-EQUITY> 20,296,242
<SALES> 0
<TOTAL-REVENUES> 2,558,592
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,093,547
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 700,462
<INCOME-PRETAX> (235,417)
<INCOME-TAX> 0
<INCOME-CONTINUING> (235,417)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (235,417)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
