<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1996
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-12045
PRUDENTIAL ACQUISITION FUND I, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3173903
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification No.)
One Seaport Plaza, New York, NY 10292-0116
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-1016
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check CK 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 requirements for the past 90 days. Yes _CK_ No __
<PAGE>
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
ASSETS
Property held for sale $ 26,432,342 $ 26,770,496
Cash and cash equivalents 1,154,130 750,153
Deferred rent 360,292 391,978
Other assets, net 22,131 48,236
------------- ------------
Total assets $ 27,968,895 $ 27,960,863
------------- ------------
------------- ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 515,219 $ 513,226
Tenant security deposits 19,624 18,724
------------- ------------
Total liabilities 534,843 531,950
------------- ------------
Partners' capital
Limited partners (70,124 units issued and outstanding) 27,434,052 27,428,913
General partners -- --
------------- ------------
Total partners' capital 27,434,052 27,428,913
------------- ------------
Total liabilities and partners' capital $ 27,968,895 $ 27,960,863
------------- ------------
------------- ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
2
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months
ended March 31,
-------------------------
1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
REVENUES
Rental income $ 771,869 $ 735,353
Recovery of expenses 215,769 213,478
Interest income 8,807 10,747
Joint venture equity income 182,180 150,364
---------- ----------
1,178,625 1,109,942
---------- ----------
EXPENSES
Property operating 337,116 289,236
Real estate taxes 132,819 142,755
General and administrative 80,226 61,667
Depreciation and amortization -- 303,074
---------- ----------
550,161 796,732
---------- ----------
Net income $ 628,464 $ 313,210
---------- ----------
---------- ----------
ALLOCATION OF NET INCOME
Limited partners $ 566,131 $ 259,643
---------- ----------
---------- ----------
General partners $ 62,333 $ 53,567
---------- ----------
---------- ----------
Net income per limited partnership unit $ 8.07 $ 3.70
---------- ----------
---------- ----------
- --------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Partners' capital--December 31, 1995 $27,428,913 $ -- $27,428,913
Net income 566,131 62,333 628,464
Distributions (560,992) (62,333) (623,325)
----------- -------- -----------
Partners' capital--March 31, 1996 $27,434,052 $ -- $27,434,052
----------- -------- -----------
----------- -------- -----------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months
ended March 31,
-------------------------
<S> <C> <C>
1996 1995
- --------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income received $ 796,562 $ 751,476
Recovery of expenses received 214,530 211,481
Interest received 8,807 10,747
Tenant security deposits received 900 1,654
Real estate taxes paid (9,253) (16,570)
Property operating expenses paid (348,870) (382,274)
General and administrative expenses paid (155,708) (66,996)
Distributions from joint venture income 182,180 150,364
---------- ----------
Net cash provided by operating activities 689,148 659,882
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized property expenditures (19,666) (44,349)
Distributions from joint venture in excess of income 357,820 389,636
---------- ----------
Net cash provided by investing activities 338,154 345,287
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners (623,325) (535,682)
---------- ----------
Net increase in cash and cash equivalents 403,977 469,487
Cash and cash equivalents at beginning of period 750,153 646,346
---------- ----------
Cash and cash equivalents at the end of period $1,154,130 $1,115,833
---------- ----------
---------- ----------
- --------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income $ 628,464 $ 313,210
---------- ----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization -- 303,074
Changes in:
Deferred rent 31,686 26,810
Other assets, net 26,105 (10,725)
Accounts payable and accrued expenses 1,993 25,859
Tenant security deposits 900 1,654
---------- ----------
Total adjustments 60,684 346,672
---------- ----------
Net cash provided by operating activities $ 689,148 $ 659,882
---------- ----------
---------- ----------
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
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 for Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for annual financial
statements. In the opinion of management, all adjustments (consisting of only
normal recurring adjustments as well as those adjustments relating to the sale
of the Ridge Plaza joint venture (``Joint Venture'') as reflected in Note C)
considered necessary for a fair presentation of the financial position of
Prudential Acquisition Fund I, L.P. (the ``Partnership'') as of March 31, 1996
and the results of its operations and its cash flows for the three months ended
March 31, 1996 and 1995 have been included. Operating results for the interim
periods may not be indicative of the results expected for the full year. It is
suggested that these financial statements be read in conjunction with the
financial statements and footnotes thereto included in the Partnership's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for the
year ended December 31, 1995.
Certain balances from prior years have been reclassified to conform with
current financial statement presentation.
B. Related Parties
Prudential-Bache Properties, Inc. (``PBP'') and Prudential Realty
Partnerships, Inc. (collectively, the
``General Partners'') and their affiliates perform services for the Partnership
which include, but are not limited to: accounting and financial management,
registrar, transfer and assignment functions, asset management, investor
communications, printing and other administrative services. The amount of
reimbursement from the Partnership is limited by the provisions of the
Partnership Agreement. The costs and expenses incurred on behalf of the
Partnership which are reimbursable to the General Partners and their affiliates
are:
<TABLE>
<CAPTION>
Three months
ended March 31,
--------------------
1996 1995
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
Prudential Realty Partnerships, Inc. and affiliates $ 20,100 $ 11,600
Prudential-Bache Properties, Inc. and affiliates 33,200 22,600
-------- --------
$ 53,300 $ 34,200
-------- --------
-------- --------
</TABLE>
Expenses payable to the General Partners and their affiliates (which are
included in accrued expenses) as of March 31, 1996 and December 31, 1995 are
$87,200 and $74,000, respectively.
In addition, the General Partners and their affiliates performed similar
services for the Joint Venture. The Partnership's allocable share of the costs
and expenses incurred on behalf of the Joint Venture which are reimbursable to
the General Partners and their affiliates were $8,800 and $9,100 for the three
months ended March 31, 1996 and 1995, respectively.
Prudential Securities Incorporated (``PSI''), an affiliate of the General
Partners, owns 175 limited partnership units at March 31, 1996.
5
<PAGE>
C. Investment in Joint Venture
The Partnership has a 54% interest in a joint venture with an affiliated
limited partnership. Presented below is summarized financial information for the
Joint Venture:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
Assets
Property held for sale $ -- $ 14,978,372
Accounts receivable, net 412,907 688,279
Cash and cash equivalents 15,889,184 1,427,420
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Total assets $16,302,091 $ 17,094,071
------------- ------------
------------- ------------
Liabilities and partners' capital
Total liabilities $ 107,114 $ 326,699
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Partners' capital:
Prudential Acquisition Fund I, L.P. 8,700,144 9,009,238
Prudential Realty Acquisition Fund II, L.P. 7,494,833 7,758,134
------------- ------------
Total partners' capital 16,194,977 16,767,372
------------- ------------
Total liabilities and partners' capital $16,302,091 $ 17,094,071
------------- ------------
------------- ------------
</TABLE>
<TABLE>
<CAPTION>
Three months
ended March 31,
-----------------------
1996 1995
<S> <C> <C>
- --------------------------------------------------------------------------------------------------
Revenues
Rental income $ 769,900 $675,806
Recovery of expenses 250,341 282,788
Interest income 20,888 25,485
---------- --------
1,041,129 984,079
---------- --------
Expenses
Depreciation and amortization -- 262,176
Property operating 418,246 249,948
Real estate taxes 113,475 161,907
General and administrative 25,263 29,457
Loss on sale of assets 56,540 --
---------- --------
613,524 703,488
---------- --------
Net income $ 427,605 $280,591
---------- --------
---------- --------
</TABLE>
The two shopping centers owned by the Joint Venture (``Shopping Centers'')
were sold on March 26, 1996 for a gross sales price of $15,500,000 less costs to
sell.
Joint venture equity income includes a write-off of $49,000 during the three
months ended March 31, 1996 of the remaining Partnership costs incurred in the
acquisition of the Joint Venture investment that were in excess of its basis in
the Joint Venture. These excess costs were previously being amortized over an
eighteen-year period and are being written-off as a result of the sale of the
Joint Venture properties.
6
<PAGE>
D. Subsequent Events
A distribution was made in April 1996 in the amount of $121.00 per $1,000
unit which represented $112.66 per unit from the sale of the Shopping Centers by
the Joint Venture, and $8.34 per unit from current and prior undistributed cash
flow from operations.
Norwalk Industrial, a 180,000 square foot industrial warehouse facility
located in Norwalk, California, is presently subject to a contract of sale with
the sole tenant of that facility for a gross sales price of $6,600,000 which
represents 100% of the appraised value of the property. It is anticipated that
the closing will occur during the third quarter of 1996. There can be no
assurance that this transaction will close or if closed that the terms of sale
will not change from the terms described in the contract of sale.
7
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership has a real estate investment portfolio consisting of two
office buildings, a warehouse and an equity interest in a joint venture (the
``Joint Venture'') which owned two shopping centers (``Shopping Centers''). The
two shopping centers owned by the Joint Venture were sold on March 26, 1996 for
a gross sales price of 15,500,000 less costs to sell.
In January 1996, the General Partners mailed to all limited partners a
Consent Solicitation Statement (the ``Statement'') asking for their written
consent to approve (i) a plan of sale of the remaining assets of the Partnership
and (ii) the complete liquidation and dissolution of the Partnership, as more
fully described in the Statement. On March 11, 1996, the limited partners
holding a majority of the limited partnership units approved the plan of sale
and complete liquidation and dissolution of the Partnership. There is no
specific time schedule for the sale of the remaining properties (except for the
Norwalk Industrial property as discussed in Note D to the financial statements)
or for the liquidation of the Partnership. However, the Partnership expects to
actively market all of its remaining properties in 1996. It is not expected that
the Partnership's eventual total distributions, including sales proceeds, will
equal the partners' initial investments.
Cash distributions from the Joint Venture, rental revenue from the
Partnership's directly-owned properties and interest earned on short-term
investments have provided sufficient liquidity to meet expenses incurred by the
Partnership and its properties. Despite the sale of the Joint Venture's
properties completed in March 1996, the General Partners anticipate that the
directly-owned properties will continue to meet the Partnership's liquidity
requirements.
During the three months ended March 31, 1996, the Partnership's cash and cash
equivalents increased $404,000 because cash generated by operating activities
and distributions from the Joint Venture exceeded capital expenditures and
distributions paid to the partners. The Joint Venture, in which the Partnership
has a 54% interest, has cash and cash equivalents of approximately $15,889,000
at March 31, 1996 as compared to approximately $1,427,000 at December 31, 1995.
The high level of cash and cash equivalents at March 31, 1996 was due to the net
proceeds received from the sale of the Shopping Centers by the Joint Venture. In
April 1996, substantially all of the Partnership's interest in the net proceeds
from the sale were distributed to the limited partners.
In connection with the capital improvements which are discussed below, the
amount of actual expenditures and their timing will depend on the success of
sales and leasing efforts, the nature and timing of new leases and lease
renewals, ongoing evaluation of the need for the planned improvements and
optimal timing of their implementation as well as general market conditions.
Cash Distributions
Cash distributions during the three months ended March 31, 1996 totalled
$623,000, of which the limited partners received $561,000 ($8.00 per unit) and
the General Partners received the remainder. These distributions were funded
with current and prior undistributed cash flow from operations of the
directly-owned and Joint Venture properties.
As a result of the approval by the limited partners of the plan of sale and
liquidation of the Partnership and the sale of the two shopping center
properties, future cash distributions may be significantly impacted. However, it
is expected that as properties are sold, a portion of the net sales proceeds
will be distributed in the quarter following the closing of each sale and the
balance will be distributed within one year of the final sale.
Furthermore, the amount of cash generated by the Partnership from operations
of the directly-owned properties, the amount expended for capital improvements,
and the amount of reserves set aside for anticipated capital improvements as
well as the timing of the sale of the Partnership's properties could affect the
Partnership's ability to make future distributions to the partners and the
amount of the distributions that may be made.
8
<PAGE>
Capital Improvements--Directly-Owned Properties
For the three months ended March 31, 1996, the Partnership expended $20,000
on capital improvements ($12,000 at One Executive Center and $8,000 at Norwest
Center) which were necessary to maintain the properties. Projected capital
expenditures for the directly-owned properties for the remainder of 1996 are
estimated at $120,000. This includes $55,000 in anticipated tenant improvements
and leasing commissions and $65,000 for improvements necessary to maintain the
properties. These capital improvements will be funded from undistributed cash
balances or cash derived from future operations.
Capital Improvements--Joint Venture
There were no capital expenditures at the Joint Venture for the period from
January 1, 1996 through March 26, 1996, the date of sale of the two shopping
centers owned by the Joint Venture.
Results of Operations
The Partnership's net income increased $315,000 for the three months ended
March 31, 1996 as compared to the corresponding period in 1995. The variances
for the directly-owned properties and Joint Venture properties are discussed
below.
Directly-Owned Properties
The Norwalk Industrial Park in Norwalk, California was 100% leased to one
tenant as of March 31, 1996 and 1995. Rental income for the three months ended
March 31, 1996 was comparable to 1995. Operating expenses decreased $6,000 for
the three months ended March 31, 1996 compared to 1995 due to a decrease in
insurance expense. The Norwalk property, a 180,000 square foot industrial
warehouse facility, is presently subject to a contract of sale with the sole
tenant of that facility for a gross sales price of $6,600,000 which represents
100% of the appraised value of the property. It is anticipated that closing will
occur during the third quarter of 1996. There can be no assurance that this
transaction will close or, if closed, that the terms of sale will not change
from the terms described in the contract of sale.
The Norwest Center property in Rochester, Minnesota was 93% and 89% leased
(93% and 84% occupied) as of March 31, 1996 and 1995, respectively. During the
next twelve months, three leases representing 15% of the rentable space are
scheduled to expire. Rental income for the three months ended March 31, 1996 was
comparable to 1995. Operating expenses increased $8,000 for the three months
ended March 31, 1996 as compared to 1995 primarily due to an increase in repairs
and maintenance.
The One Executive Center office property in Albuquerque, New Mexico was 99%
and 100% leased (99% and 98% occupied) as of March 31, 1996 and 1995,
respectively. During the next twelve months, six leases representing 52% of the
rentable space are scheduled to expire. One tenant representing 42% of the
rentable space has indicated that it will vacate its space when its lease
expires in February 1997. Rental income increased $36,000 for the three months
ended March 31, 1996 as compared to 1995 due to increased rental rates.
Operating expenses increased $46,000 for the three months ended March 31, 1996
as compared to 1995 primarily as a result of an increase in repairs and
maintenance, cleaning and utilities expenses.
General and administrative expense increased $19,000 for the three months
ended March 31, 1996 as compared to 1995 primarily due to costs to administer
the Partnership.
Depreciation expense decreased $303,000 for the three months ended March 31,
1996 as compared to 1995 due to the reclassification of the Partnership's
properties from held for use to held for sale as of December 31, 1995. Under
generally accepted accounting principles, such properties are no longer
depreciated and, therefore, no depreciation expense has been recorded for the
three months ended March 31, 1996.
Joint Venture Properties
The Partnership's joint venture equity income increased $32,000 for the three
months ended March 31, 1996 as compared to 1995. The major components of this
variance are discussed below.
The sale of the two shopping centers owned by the Joint Venture occurred on
March 26, 1996 at a gross sales price of $15,500,000 less costs to sell,
resulting in a $56,000 loss on the sale.
9
<PAGE>
Joint venture equity income includes a write-off of $49,000 during the three
months ended March 31, 1996 of the remaining Partnership costs incurred in the
acquisition of the Joint Venture investment that were in excess of its basis in
the Joint Venture. These excess costs were previously being amortized over an
eighteen-year period and are being written-off as a result of the sale of the
Joint Venture properties.
Total revenues increased $57,000 for the period from January 1, 1996 to March
26, 1996 as compared to the three months ended March 31, 1995 primarily as a
result of an increase in rental income at Ridge Plaza and Pine Island due to an
increase in rental rates at both properties.
Property operating expenses increased $168,000 for the period from January 1,
1996 to March 26, 1996 as compared to the three months ended March 31, 1995
primarily as a result of an increase in provision for bad debts, property
management fees and payroll.
Real estate taxes decreased $48,000 for the period from January 1, 1996 to
March 26, 1996 as compared to the three months ended March 31, 1995 due to lower
assessments at both properties.
Depreciation and amortization expense decreased $262,000 due to the reason
noted above for directly-owned properties.
10
<PAGE>
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
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
Description required by Item 4 is contained in the Registrant's Current Report on Form
8-K dated March 26, 1996 as previously filed with the Securities and Exchange
Commission, which report is herein incorporated by reference.
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Description:
3 and 4 Amended and Restated Agreement of Limited Partnership(1)
Amendment to Limited Partnership Agreement dated as of January 1, 1987(2)
27 Financial Data Schedule (filed herewith)
b. Reports on Form 8-K
Current Report on Form 8-K dated March 26, 1996, as filed with the Securities and
Exchange Commission on April 9, 1996, relating to (i) Item 2 regarding the sale of two
shopping centers owned by a joint venture in which the Registrant has an interest, (ii)
Item 5 regarding the results of the voting on a consent solicitation statement sent to
the limited partners and (iii) Item 7 containing summarized pro forma information
regarding the sale of the shopping centers noted above.
</TABLE>
- ---------------
(1) Incorporated by reference to Prospectus dated July 1, 1983 as filed with the
Commission pursuant to Rule 424(b) under the Securities Act of 1933
(2) Incorporated by reference to Exhibits 3 and 4 of the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1988
11
<PAGE>
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.
<TABLE>
<S> <C>
Prudential Acquisition Fund I, L.P.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Eugene D. Burak Date: May 15, 1996
-----------------------------------------
Eugene D. Burak
Vice President
Chief Accounting Officer for the
Registrant
</TABLE>
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Prudential Acquisition
Fund I, L.P. and is qualified in its entirety
by reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000717319
<NAME> Prudential Acquisition Fund I, L.P.
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Mar-31-1996
<PERIOD-TYPE> 3-Mos
<CASH> 1,154,130
<SECURITIES> 0
<RECEIVABLES> 382,423
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,536,553
<PP&E> 26,432,342
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,968,895
<CURRENT-LIABILITIES> 534,843
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 27,434,052
<TOTAL-LIABILITY-AND-EQUITY> 27,968,895
<SALES> 1,178,625
<TOTAL-REVENUES> 1,178,625
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 550,161
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 628,464
<EPS-PRIMARY> 8.07
<EPS-DILUTED> 0
</TABLE>
