<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1995
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.
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(Exact name of Registrant as specified in its charter)
Delaware 13-3173903
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
One Seaport Plaza, New York, N.Y. 10292-0116
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 214-1016
Securities registered pursuant to Section 12(b) of the Act:
None
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Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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(Title of class)
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 requirements for the past 90 days. Yes _CK_ No __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [CK]
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Annual Report to Limited Partners for the year ended December
31, 1995 is incorporated by reference into Parts I, II and IV of this Annual
Report on Form 10-K
Amended and Restated Agreement of Limited Partnership included as part of the
Registration Statement filed with the Securities and Exchange Commission
pursuant to Rule 424(b) under the Securities Act of 1933, and amended on January
1, 1987, is incorporated by reference into Part IV of this Annual Report on Form
10-K
Index to exhibits can be found on pages 10 and 11.
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1 Business.......................................... 3
Item 2 Properties........................................ 4
Item 3 Legal Proceedings................................. 5
Item 4 Submission of Matters to a Vote of Limited
Partners........................................ 5
PART II
Item 5 Market for the Registrant's Units and Related
Limited Partner Matters......................... 5
Item 6 Selected Financial Data........................... 6
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of
Operations...................................... 6
Item 8 Financial Statements and Supplementary Data....... 6
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial
Disclosure...................................... 6
PART III
Item 10 Directors and Executive Officers of the Registrant
Prudential-Bache Properties, Inc.................. 7
Prudential Realty Partnerships, Inc............... 8
Item 11 Executive Compensation............................ 9
Item 12 Security Ownership of Certain Beneficial Owners
and Management.................................. 9
Item 13 Certain Relationships and Related Transactions.... 9
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K
Financial Statements and Financial Statement
Schedules....................................... 10
Exhibits.......................................... 10
Reports on Form 8-K............................... 11
SIGNATURES....................................................... 22
</TABLE>
2
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PART I
Item 1. Business
General
Prudential Acquisition Fund I, L.P. (the ``Registrant''), a Delaware limited
partnership, was formed on February 16, 1983 and will terminate on December 31,
2007 unless terminated sooner under the provisions of the Amended and Restated
Agreement of Limited Partnership (the ``Partnership Agreement''). The Registrant
was formed to acquire and manage income-producing commercial real estate with
proceeds raised from the initial sale of 70,124 limited partnership units
(``Units''). The Registrant's fiscal year for book and tax purposes ends on
December 31.
The Registrant has invested in and operates a real estate investment
portfolio consisting of five properties. These commercial real estate properties
consist of two office buildings, a warehouse and two shopping centers. The
shopping centers were acquired through a joint venture agreement with Prudential
Realty Acquisition Fund II, L.P., an affiliated limited partnership. 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. The Registrant is engaged
solely in the business of real estate investment; therefore, presentation of
industry segment information is not applicable. For more information regarding
the Registrant's operations, see Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations.
As the economy has improved in certain of the markets relating to the
Registrant's properties, the market for commercial real estate has also
generally improved. While property values continue to be below the levels
reached in the mid-1980's, investment capital is more readily available and
investor interest in acquiring certain types of real estate has increased. See
Note C to the financial statements of the Registrant's Annual Report to Limited
Partners for the year ended December 31, 1995 (``Registrant's Annual Report'')
which is filed as an exhibit hereto for additional information.
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 Registrant
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 Units approved the plan of sale and complete
liquidation and dissolution of the Registrant. Although no time schedule has
been adopted for this plan, the Registrant does expect to begin to actively
market all of its properties in 1996. It is not expected that the Registrant's
eventual total distributions, including sales proceeds, will equal the partners'
initial investments.
General partners
The general partners of the Registrant are Prudential-Bache Properties, Inc.
(``PBP'') and Prudential Realty Partnerships, Inc. (``PRP'') (collectively, the
``General Partners'').
Competition
The General Partners and/or their affiliates have formed, and may continue to
form, various entities to engage in businesses which may compete with the
Registrant while it continues to operate its properties.
The real estate industry is highly competitive. The Registrant's properties
are subject to competition in connection with both their operation and sale from
similar properties located in the immediate vicinity of its properties. See Item
2 Properties.
Employees
The Registrant has no employees. Management and administrative services for
the Registrant are performed by the General Partners and their affiliates
pursuant to the Partnership Agreement. See Note G to the financial statements in
the Registrant's Annual Report which is filed as an exhibit hereto.
3
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Item 2. Properties
As of December 31, 1995 the Registrant owns the following properties:
<TABLE>
<CAPTION>
Average Annual Rental
Occupancy Square Rates per
Rate at Footage Square Foot
Property Property of Property at Property
- ----------------------------------- --------- ------------ ---------------------
<S> <C> <C> <C>
Norwest Center
(Rochester, MN) 88% 97,000 $18.00 gross
Norwalk Industrial
(Norwalk, CA) 100 180,000 $ 3.60 net
One Executive Center
(Albuquerque, NM) 99 114,000 $14.60 gross
Joint Venture (Davie, FL)
Pine Island** 88 250,000 $ 8.84 gross
Ridge Plaza** 71 155,000 $ 7.18 gross
</TABLE>
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Square footage and average rental rates per square foot information reflects
current data as obtained from third-party appraisals. Gross rental rates
indicate the landlord pays the operating and fixed expenses and net rental rates
indicate the tenant pays the operating and fixed expenses.
** 54% interest held by the Registrant. These properties were sold on March 26,
1996.
Revenues from the Norwest Center in Rochester, Minnesota, a multi-tenant
office building, represented approximately 45%, 46% and 52% of the Registrant's
income from directly-owned properties for the years ended December 31, 1995,
1994 and 1993, respectively. One tenant at this property, Norwest Bank, N.A.,
whose lease expires in 2012, accounted for 26%, 28% and 21% of the revenues of
the Registrant for the years ended December 31, 1995, 1994 and 1993,
respectively.
The Registrant's industrial warehouse facility located in Norwalk, California
was vacant from September 1992 through February 1993; however, a ten year lease
for the entire building was signed March 1, 1993 with Weber Distribution.
Revenues from this property represented approximately 18%, 18% and 13% of the
Registrant's income from directly-owned properties for the years ended December
31, 1995, 1994 and 1993, respectively.
Revenues from One Executive Center, a five-story office building located in
Albuquerque, New Mexico represented approximately 37%, 36% and 35% of the
Registrant's income from directly-owned properties for the years ended December
31, 1995, 1994 and 1993, respectively.
In May 1985, the Registrant and The Prudential Insurance Company of America
(``The Prudential''), through the Ridge Plaza joint venture (the ``Joint
Venture''), acquired two shopping centers, Pine Island Ridge Plaza (``Pine
Island'') and Ridge Plaza (collectively, the ``Joint Venture Properties''),
located in Davie, Broward County, Florida. The Registrant had a 54% interest in
the Joint Venture. During 1986, The Prudential sold its 46% joint venture
interest to Prudential Realty Acquisition Fund II, L.P. (``PRAF II''), an
affiliated limited partnership. The Registrant's share of the Joint Venture's
net income (loss) is recorded as revenue (``Joint venture equity income
(loss)'') in the Registrant's Statements of Operations. The carrying value of
the Joint Venture's properties was reduced by $850,000 during the second quarter
of 1995 to reflect an impairment in value resulting from lease defaults and
market indications. In the fourth quarter of 1995, the Joint Venture recorded an
additional provision for loss on impairment of assets of $1,500,000 to reflect
the gross sales price less costs to sell from the sale of the two shopping
centers on March 26, 1996. See Notes B and C to the Joint Venture's financial
statements which are filed as an exhibit hereto for further information. One
tenant at Pine Island, Builders Square (whose lease expires in 2003), accounted
for 16%, 16% and 13% of the revenues of the Joint Venture for the years ended
December 31, 1995, 1994 and 1993, respectively.
4
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The estimated fair value of the Registrant's properties, based on third-party
appraisals as of December 31, 1995 and the Registrant's pro rata share of the
estimated net proceeds from the sale of the Joint Venture's properties, was
$28,700,000. Appraised values are only estimates of fair value and should not be
relied on as a measure of immediately realizable value. Estimated values may
fluctuate with changes in the real estate and financial markets, economic
conditions and other factors including the anticipated performance of the
properties, property type and geographic location.
The General Partners believe the Registrant's properties are adequately
insured.
For additional information describing the Registrant's properties, see Item 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Schedule III--Real Estate and Accumulated Depreciation on page 13
in Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Item 3. Legal Proceedings
This information is incorporated by reference to Note H to the financial
statements in the Registrant's Annual Report which is filed as an exhibit
hereto.
Item 4. Submission of Matters to a Vote of Limited Partners
There were no matters which were submitted to limited partners during the
quarter ended December 31, 1995. However, in January 1996, a Consent
Solicitation Statement was sent to all limited partners. See Item 1 for further
information.
PART II
Item 5. Market for the Registrant's Units and Related Limited Partner Matters
As of March 1, 1996, there were 7,781 holders of record owning 70,124 Units.
A significant secondary market for the Units has not developed, and it is not
expected that one will develop in the future. There are also certain
restrictions set forth in the Partnership Agreement limiting the ability of a
Limited Partner to transfer Units. Consequently, holders of Units may not be
able to liquidate their investments in the event of an emergency or for any
other reason.
The following per Unit cash distributions were paid to Limited Partners
during the quarter indicated:
<TABLE>
<CAPTION>
Quarter Ended 1995 1994
- ----------------------- ------ ------
<S> <C> <C>
March 31 $6.875 $4.375
June 30 $8.000 $5.000
September 30 $8.000 $5.750
December 31 $8.000 $6.875
</TABLE>
There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Registrant's Partnership Agreement. However, as a result of the approval by the
limited partners holding a majority of the Units, 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. These
amounts represent payments from current and prior undistributed cash flow
operations of the directly-owned and Joint Venture properties. The distributions
paid to limited partners during 1995 and 1994 represent a return of capital on a
generally accepted accounting principles (GAAP) basis. (The return of capital on
a GAAP basis is calculated as limited partner distributions less net income
allocated to limited partners.) For a discussion of other factors that may
affect the amount of future distributions, see Item 7 Management's Discussion
and Analysis of Financial Condition and Results of Operations.
5
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<PAGE>
Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This
data should be read in conjunction with the financial statements of the
Registrant and the notes thereto contained on pages 2 through 11 in the
Registrant's Annual Report which is filed as an exhibit hereto.
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
Rental income $ 2,965,764 $ 3,048,468 $ 2,801,858 $ 2,705,969 $ 2,841,684
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Joint venture equity income (loss)(a) $ (654,903) $ 193,516 $(7,764,418) $(1,531,697) $ (60,885)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Provision for loss on impairment
of assets $ -- $ 770,000 $ -- $ 1,100,000 $ 2,000,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) $ (343,160) $ 22,610 $(7,805,498) $(3,009,138) $(2,157,118)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net loss per limited partnership Unit $ (8.32) $ (2.12) $ (113.25) $ (45.30) $ (33.03)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total assets $27,960,863 $30,609,791 $32,175,924 $41,413,523 $46,133,461
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total limited partnership
distributions $ 2,165,091 $ 1,542,849 $ 1,226,992 $ 1,507,666 $ 1,430,530
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Limited partner distributions per
Unit $ 30.88 $ 22.00 $ 17.50 $ 21.50 $ 20.40
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
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(a) Includes $1,269,000, $7,587,000 and $1,674,000 provisions for loss on
impairment of assets in 1995, 1993 and 1992, respectively.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 12 through 14 of the
Registrant's Annual Report which is filed as an exhibit hereto.
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 11
of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The
Registrant is managed by the General Partners.
The Registrant, the Registrant's General Partners and their directors and
executive officers, and any persons holding more than ten percent of the
Registrant's Units are required to report their initial ownership of such Units
and any subsequent changes in that ownership to the Securities and Exchange
Commission on Forms 3, 4 and 5. Such executive officers, directors and persons
who own greater than ten percent of the Registrant's Units are required by
Securities and Exchange Commission regulations to furnish the Registrant with
copies of all Forms 3, 4 or 5 they file. All of these filing requirements were
satisfied on a timely basis. In making these disclosures, the Registrant has
relied solely on written representations of the General Partners' directors and
executive officers and persons who own greater than ten percent of the
Registrant's Units, if any, or copies of the reports they have filed with the
Securities and Exchange Commission during and with respect to its most recent
fiscal year.
6
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Prudential-Bache Properties, Inc.
The directors and executive officers of PBP and their positions with
regard to managing the Registrant are as follows:
<TABLE>
<CAPTION>
Name Position
<S> <C>
Thomas F. Lynch, III President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
Barbara J. Brooks Vice President--Finance and Chief Financial
Officer
Eugene D. Burak Vice President and Chief Accounting Officer
Chester A. Piskorowski Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
</TABLE>
THOMAS F. LYNCH, III, age 37, is the President, Chief Executive Officer,
Chairman of the Board of Directors and a Director of PBP. He is a Senior Vice
President of Prudential Securities Incorporated (``PSI''), an affiliate of PBP.
Mr. Lynch also serves in various capacities for other affiliated companies. Mr.
Lynch joined PSI in November 1989.
BARBARA J. BROOKS, age 47, is the Vice President-Finance and Chief Financial
Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in
various capacities for other affiliated companies. She has held several
positions within PSI since 1983. Ms. Brooks is a certified public accountant.
EUGENE D. BURAK, age 50, is a Vice President of PBP. He is a First Vice
President of PSI. Prior to joining PSI in September 1995, he was a management
consultant for three years and was with Equitable Capital Management Corporation
from March 1990 to May 1992. Mr. Burak is a certified public accountant.
CHESTER A. PISKOROWSKI, age 52, is a Vice President of PBP. He is a Senior
Vice President of PSI and is the Senior Manager of the Specialty Finance Asset
Management area. Mr. Piskorowski has held several positions within PSI since
April 1972. Mr. Piskorowski is a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 53, is a Director of PBP. He is a Senior Vice
President of PSI and an Executive Vice President and General Counsel of
Prudential Mutual Fund Management Inc., an affiliate of PSI. Mr. Giordano also
serves in various capacities for other affiliated companies. He has been with
PSI since July 1967.
NATHALIE P. MAIO, age 45, is a Director of PBP. She is a Senior Vice
President and Deputy General Counsel of PSI and supervises non-litigation legal
work for PSI. She joined PSI's Law Department in 1983; presently, she also
serves in various capacities for other affiliated companies.
James M. Kelso ceased to serve as President, Chief Executive Officer,
Chairman of the Board of Directors and Director effective June 30, 1995.
Effective June 30, 1995, Thomas F. Lynch, III was elected President, Chief
Executive Officer, Chairman of the Board of Directors and Director. Robert J.
Alexander ceased to serve as Vice President effective August 25, 1995. Eugene D.
Burak was elected Vice President effective October 9, 1995.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing directors and executive officers have
indefinite terms.
7
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<PAGE>
Prudential Realty Partnerships, Inc.
The directors and executive officers of Prudential Realty Partnerships, Inc.
and their positions are as follows:
Name Position
Joel W. Stoesser Chairman of the Board of Directors
David Bradford President and Director
Kevin R. Smith Vice President and Director
Jose Gener Vice President and Comptroller
C. Edward Chaplin Treasurer
Roger S. Pratt Director
Joseph D. Margolis Secretary
JOEL W. STOESSER, age 55, is a Managing Director of Prudential Real Estate
Investors. He is head of Investment Advisory services, which includes
responsibility for portfolio management and asset management of separate
accounts and certain co-investment programs and commingled funds. Prior to his
current assignment, Mr. Stoesser served as a Senior Vice President of the
Prudential Realty Group. Prior to joining Prudential in 1988, he also served as
a Senior Vice President in Real Estate Investment Management at CIGNA
Corporation and held assignments with Connecticut General Life Insurance Company
as head of real estate operations and as Director of strategic planning for all
investment operations.
DAVID BRADFORD, age 42, is a Managing Director of Prudential Real Estate
Investors. He is the portfolio manager of PRISA, a large commingled fund. Prior
to joining Prudential in 1995, Mr. Bradford was a Senior Vice President in
Portfolio Management at Equitable Real Estate. His 13-year tenure at Equitable
included positions in pension investment marketing across all asset classes,
real estate product management and portfolio operations and investment. Most
recently (1991-1995), Mr. Bradford was Assistant Portfolio Manager for
Equitable's $3.2 billion flagship equity real estate portfolio Prime Property
Fund.
KEVIN R. SMITH, age 38, is a Vice President of Prudential Real Estate
Investors. He is a portfolio manager for four separate accounts and two
commingled funds. Mr. Smith has been employed by The Prudential since 1981 and
has experience in asset management, development, property acquisitions and
sales, and mortgage loans as a result of field office assignments in Cleveland,
Houston, and Northern New Jersey.
JOSE GENER, age 45, is a Vice President with The Prudential Asset Management
Group. In his present assignment, he is responsible for accounting policy and
reporting as well as the control structure for the institutional real estate
management arm of PAMG. Mr. Gener has been with the Prudential since 1977,
serving in a series of comptrollership assignments. Since 1986 he has worked
primarily with the investment management units of The Prudential.
C. EDWARD CHAPLIN, age 39, is Vice President and Treasurer of the Prudential
Insurance Company of America. He is responsible for all borrowings, cash
management and securities custody activities of The Prudential. Mr. Chaplin
joined Prudential in the Realty Group in August 1983. In May 1992, he
transferred to the Treasurer's Department as Vice President and Assistant
Treasurer, with responsibility for Banking and Cash Management. In October 1993,
he was promoted to Managing Director and Assistant Treasurer, with
responsibility for managing Prudential's debt issuance, its relationships with
the major credit rating agencies and financial counterparty credit analysis. In
November 1995, Mr. Chaplin was appointed to Vice President and Treasurer.
ROGER S. PRATT, age 43, is Managing Director of Prudential Real Estate
Investors. He is the portfolio manager of PRISA II, a large commingled fund. Mr.
Pratt joined the Prudential Realty Group in June 1982 as an asset manager in the
Atlanta regional office and subsequently has served in a variety of positions
for the company. Prior to assuming his current position in February 1992, Mr.
Pratt was Vice President in charge of the New Jersey regional office.
8
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<PAGE>
JOSEPH D. MARGOLIS, age 35, is Assistant General Counsel responsible for the
provision and coordination of legal services to Prudential Real Estate Investors
as well as other Prudential Asset Management Group Real Estate entities. His
assignments with Prudential have included counsel to The Prudential Mortgage
Capital Company, Inc. and Associate Regional Counsel in the Boston Realty Group
office. Prior to joining Prudential, Mr. Margolis was employed by Nutter,
McClennen & Fish in Boston, Massachusetts.
Claude J. Zinngrabe, Jr. ceased to serve as director effective December 8,
1995. Effective August 7, 1995, Jose Gener was elected Vice President and
Comptroller. Effective August 7, 1995, Steven B. Saperstein ceased to serve as
Vice President and Comptroller. John C. Hoffman ceased to serve as Director and
President and Martin Pfinsgraff ceased to serve as Treasurer effective December
11, 1995. Effective December 11, 1995, C. Edward Chaplin was elected Treasurer
and David Bradford was elected Director and President.
There are no family relationships among any of the foregoing directors or
executive officers. All of the foregoing executive officers and directors have
indefinite terms.
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of
compensation to directors and officers of the General Partners for their
services. Certain executive officers and directors of the General Partners
receive compensation from affiliates of the General Partners, not from the
Registrant, for services performed for various affiliated entities, which may
include services performed for the Registrant; however, the General Partners
believe that any compensation attributable to services performed for the
Registrant is immaterial. See Item 13 Certain Relationships and Related
Transactions for information regarding compensation to the General Partners.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 1, 1996, no director or executive officer of either of the
General Partners owns directly or beneficially any interest in the voting
securities of the General Partners.
As of March 1, 1996, no director or executive officer of either of the
General Partners owns directly or beneficially any of the Units issued by the
Registrant.
As of March 1, 1996, no limited partner beneficially owns more than five
percent (5%) of the outstanding Units issued by the Registrant.
Item 13. Certain Relationships and Related Transactions
The Registrant has and will continue to have certain relationships with the
General Partners and their affiliates. However, there have been no direct
financial transactions between the Registrant and the directors or executive
officers of the General Partners.
Reference is made to Notes A and G to the financial statements of the
Registrant's Annual Report which is filed as an exhibit hereto, which identify
the related parties and discuss the services provided by these parties and the
amounts paid or payable for their services. The Joint Venture's relationship
with the General Partners is described in Notes A and F of the Joint Venture's
financial statements and notes thereto on pages 15 through 21 herein.
9
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<PAGE>
PART IV
<TABLE>
<CAPTION>
Page
in Annual
Report
<S> <C> <C>
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a)1 Financial Statements and Independent
Auditors' Report--Incorporated by
reference to the Registrant's Annual
Report which is filed as an exhibit
hereto
Independent Auditors' Report 2
Financial Statements:
Statements of Financial
Condition--December 31, 1995 and 1994 3
Statements of Operations--Three years
ended December 31, 1995 4
Statements of Changes in Partners'
Capital--Three years ended December
31, 1995 4
Statements of Cash Flows--Three years
ended December 31, 1995 5
Notes to Financial Statements 6
2 Financial Statement Schedules and
Independent Auditors' Report
Independent Auditors' Report on
Schedules
Schedules:
II--Valuation and Qualifying
Accounts and Reserves--Three years
ended December 31, 1995
III--Real Estate and Accumulated
Depreciation--December 31, 1995
Notes to Schedule III-Real Estate and
Accumulated Depreciation
Ridge Plaza Joint Venture Financial
Statements and Independent Auditors'
Report
Independent Auditors' Report
Financial Statements:
Statements of Financial
Condition--December 31, 1995 and 1994
Statements of Operations--Three years
ended December 31, 1995
Statements of Changes in Partners'
Capital--Three years ended December
31, 1995
Statements of Cash Flows--Three years
ended December 31, 1995
Notes to Financial Statements
All other schedules have been omitted
because they are not applicable or
the required information is included
in the financial statements and notes
thereto.
3 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)
10 Material Contracts:
A. Joint Venture Agreement dated May 8,
1985 between The Prudential Insur-
ance Company of America
(``Prudential'') and Registrant (3)
</TABLE>
10
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<PAGE>
<TABLE>
<S> <C> <C>
B. Purchase Agreement and First
Amendment to Joint Venture Agreement
dated June 28, 1985 between
Registrant and Prudential (4)
C. Amended and Restated Joint Venture
Interest Acquisition and Option
Agreement dated June 28, 1985 between
Prudential and Prudential Realty
Acquisition Fund II, L.P. (``PRAF
II'') (4)
D. Amended and Restated Acquisition Fee
Agreement dated June 28, 1985 among
Prudential Realty Partnerships, Inc.,
Prudential-Bache Properties, Inc.,
Registrant, PRAF II, Prudential, and
Ridge Plaza Joint Venture (4)
E. Second Amendment to Joint Venture
Agreement of Ridge Plaza Joint Ven-
ture and Second Amendment to Amended
and Restated Joint Venture Interest
Acquisition and Option Agreement and
First Amendment to Amended and
Restated Acquisition Fee Agreement
dated January 14, 1986 among
Registrant, Prudential and PRAF II
(5)
F. Third Amendment to Joint Venture
Agreement of Ridge Plaza Joint
Venture dated as of May 15, 1986
among Registrant, Prudential and PRAF
II (6)
13 Registrant's 1995 Annual Report to
Limited Partners (with the exception
of the information and data
incorporated by reference in Items 3,
7 and 8 of this Annual Report on Form
10-K, no other information or data
appearing in the Registrant's 1995
Annual Report is to be deemed filed
as part of this report.)
27 Financial Data Schedule (filed
herewith)
(b) Reports on Form 8-K
No reports on Form 8-K were filed
during the last quarter of the period
covered by this report.
- ---------------
Incorporated by reference to Prospectus
(1) dated July 1, 1983 as filed with the
Commission pursuant to Rule 424(b) under
the Securities Act of 1933
Incorporated by reference to Exhibits 3
(2) and 4 of Registrant's Annual Report on
Form 10-K for the year ended December 31,
1988
(3) Incorporated by reference to Exhibit 10(c)
of Registrant's Current Report on Form 8-K
dated May 23, 1985
(4) Incorporated by reference to Exhibit 10(d)
of Amendment on Form 8 to Registrant's
Current Report on Form 8-K dated May 23,
1985
(5) Incorporated by reference to Exhibit 10(a)
of Registrant's Current Report on Form 8-K
dated January 14, 1986
(6) Incorporated by reference to Exhibit 10(a)
of Registrant's Current Report on Form 8-K
dated May 15, 1986
</TABLE>
11
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of Prudential Acquisition Fund I, L.P.
New York, New York
We have audited the financial statements of Prudential Acquisition Fund I, L.P.
(a Delaware Limited Partnership) as of December 31, 1995 and 1994, and for each
of the three years in the period ended December 31, 1995, and have issued our
report thereon dated March 26, 1996; such financial statements and report
thereon are included in your 1995 Annual Report to Limited Partners and are
incorporated herein by reference. Our audits also included the financial
statement schedules of Prudential Acquisition Fund I, L.P., listed in Item 14.
These financial statement schedules are the responsibility of the General
Partners. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedules, when considered in relation to
the basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
Deloitte & Touche LLP
March 26, 1996
12
<PAGE>
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
Schedule II--Valuation and Qualifying Accounts and Reserves
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Allowance for Loss on Impairment of Assets
Deductions - Amounts
Year Ended Balance at Additions - Amounts Written-off During Balance at
December 31 Beginning of Year Reserved During Year Year End of Year
- ----------- ------------------- -------------------- -------------------- --------------
<S> <C> <C> <C> <C>
1995 $ -- $ -- $ -- $ --
1994 -- -- -- --
1993 3,100,000 -- 3,100,000 --
</TABLE>
Schedule III--Real Estate and Accumulated Depreciation
December 31, 1995
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Gross Amounts at which
Initial Cost (A) Costs Carried at Close of Period (C)
------------------------------ Capitalized ---------------------------------------------
Buildings Subsequent Buildings
and to and Accumulated
Description (B) Land Improvements Acquisition(F) Land Improvements Total (D) Depreciation(E)
- ------------------ ----------- ---------------- ----------- ----------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Norwest Center
Rochester, MN
Office Building $ 525,000 $ 8,027,899 $ 909,733 $ 525,000 $ 8,937,632 $ 9,462,632 $ 3,668,844
Norwalk Industrial
Norwalk, CA
Industrial
Warehouse 2,248,792 5,678,285 1,113,444 2,248,792 6,791,729 9,040,521 3,073,062
One Executive
Center
Albuquerque, NM
Office Building 2,085,729 15,228,676 (687,198 ) 1,234,329 15,392,878 16,627,207 10,675,922
----------- ---------------- ----------- ----------- ---------------- ------------ ----------------
Totals $ 4,859,521 $ 28,934,860 $1,335,979 $ 4,008,121 $ 31,122,239 $ 35,130,360 $ 17,417,828
----------- ---------------- ----------- ----------- ---------------- ------------ ----------------
----------- ---------------- ----------- ----------- ---------------- ------------ ----------------
<CAPTION>
Year of Date Depreciation
Construction Acquired Life
------------ -------- ----------------
<S> <C> <C> <C>
Rochester, MN 1982 8/29/83 5--35 years
Norwalk, CA 1976 2/24/84 5--30 years
Albuquerque, NM 1983 3/29/84 5--30 years
</TABLE>
- --------------------------------------------------------------------------------
See notes to Schedule III on the following page
13
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
Notes to Schedule III -
Real Estate and Accumulated Depreciation
December 31, 1995
(A) Initial cost represents the initial purchase price of the properties
including acquisition fees.
(B) There are no encumbrances against any of the properties.
(C) The aggregate cost of the real estate owned for Federal income tax purposes
is $37,972,373.
(D) Reconciliation of Real Estate Owned:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance at Beginning of Year $34,868,120 $35,293,581 $37,279,850
Additions During Year 262,240 344,539 1,113,731
Write-downs During Year -- (770,000) (3,100,000)
----------- ----------- -----------
Balance at End of Year $35,130,360 $34,868,120 $35,293,581
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
(E) Reconciliation of Accumulated Depreciation:
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance at Beginning of Year $16,214,016 $14,877,560 $13,252,407
Additions During Year 1,203,812 1,336,456 1,625,153
----------- ----------- -----------
Balance at End of Year $17,417,828 $16,214,016 $14,877,560
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
(F) Costs Capitalized Subsequent to Acquisition include noncash write-downs of
$3,870,000.
14
<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of Ridge Plaza Joint Venture
New York, New York
We have audited the accompanying statements of financial condition of Ridge
Plaza Joint Venture as of December 31, 1995 and 1994, and the related statements
of operations, changes in partners' capital and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are the
responsibility of the Joint Venture Partners. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Joint Venture Partners, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Ridge Plaza Joint Venture as of December 31,
1995 and 1994, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
Deloitte & Touche LLP
March 26, 1996
15
<PAGE>
<PAGE>
RIDGE PLAZA JOINT VENTURE
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------
ASSETS
Land $ 3,835,457 $ 4,422,957
Buildings and improvements 27,899,102 29,615,596
Less: accumulated depreciation (16,756,187) (15,627,896)
------------ ------------
Property 14,978,372 18,410,657
Accounts receivable, net of allowance for doubtful accounts of
$180,205 in 1995 and $97,105 in 1994 688,279 407,437
Cash and cash equivalents 1,427,420 2,054,578
------------ ------------
Total assets $ 17,094,071 $ 20,872,672
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Real estate taxes payable $ 17,086 $ 446,029
Accounts payable and accrued expenses 160,682 296,671
Tenant security deposits 148,931 158,373
------------ ------------
Total liabilities 326,699 901,073
------------ ------------
Partners' capital
Prudential Acquisition Fund I, L.P. 9,009,238 10,739,520
Prudential Realty Acquisition Fund II, L.P. 7,758,134 9,232,079
------------ ------------
Total partners' capital 16,767,372 19,971,599
------------ ------------
Total liabilities and partners' capital $ 17,094,071 $ 20,872,672
------------ ------------
------------ ------------
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
16
<PAGE>
RIDGE PLAZA JOINT VENTURE
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
REVENUES
Rental income $ 2,843,407 $2,613,050 $ 2,514,661
Recovery of expenses 1,091,276 937,386 1,070,228
Interest income 102,664 62,641 48,230
------------ ---------- ------------
4,037,347 3,613,077 3,633,119
------------ ---------- ------------
EXPENSES
Depreciation and amortization 1,128,291 1,675,411 1,646,412
Property operating 1,101,079 1,034,603 1,266,862
Real estate taxes 518,388 427,759 924,126
General and administrative 143,816 108,385 115,717
Provision for loss on impairment of assets 2,350,000 -- 14,050,000
------------ ---------- ------------
5,241,574 3,246,158 18,003,117
------------ ---------- ------------
Net income (loss) $ (1,204,227) $ 366,919 $(14,369,998)
------------ ---------- ------------
------------ ---------- ------------
ALLOCATION OF NET INCOME (LOSS)
Prudential Acquisition Fund I, L.P. $ (650,282) $ 198,136 $ (7,759,799)
------------ ---------- ------------
------------ ---------- ------------
Prudential Realty Acquisition Fund II, L.P. $ (553,945) $ 168,783 $ (6,610,199)
------------ ---------- ------------
------------ ---------- ------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
RIDGE PLAZA JOINT VENTURE
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PRUDENTIAL
PRUDENTIAL REALTY
ACQUISITION ACQUISITION
FUND I, FUND II,
L.P. L.P. TOTAL
----------- ----------- ------------
<S> <C> <C> <C>
Partners' capital--December 31, 1992 $19,597,183 $16,777,495 $ 36,374,678
Net loss (7,759,799) (6,610,199) (14,369,998)
Distributions (783,000) (667,000) (1,450,000)
----------- ----------- ------------
Partners' capital--December 31, 1993 11,054,384 9,500,296 20,554,680
Net income 198,136 168,783 366,919
Distributions (513,000) (437,000) (950,000)
----------- ----------- ------------
Partners' capital--December 31, 1994 10,739,520 9,232,079 19,971,599
Net loss (650,282) (553,945) (1,204,227)
Distributions (1,080,000) (920,000) (2,000,000)
----------- ----------- ------------
Partners' capital--December 31, 1995 $ 9,009,238 $ 7,758,134 $ 16,767,372
----------- ----------- ------------
----------- ----------- ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
17
<PAGE>
RIDGE PLAZA JOINT VENTURE
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income received $ 2,812,586 $ 2,957,742 $ 2,213,511
Recovery of expenses received 818,542 787,585 1,444,018
Property operating expenses paid (1,202,024) (942,091) (1,155,524)
Real estate taxes paid (947,331) (7,086) (934,009)
General and administrative expenses paid (156,147) (125,005) (108,988)
Interest received 102,664 62,641 48,230
Tenant security deposits received (returned) (9,442) 27,874 (10,845)
------------ ------------ ------------
Net cash provided by operating activities 1,418,848 2,761,660 1,496,393
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized property expenditures (46,006) (328,509) (1,322,959)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions (2,000,000) (950,000) (1,450,000)
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents (627,158) 1,483,151 (1,276,566)
Cash and cash equivalents at beginning of year 2,054,578 571,427 1,847,993
------------ ------------ ------------
Cash and cash equivalents at end of year $ 1,427,420 $ 2,054,578 $ 571,427
------------ ------------ ------------
------------ ------------ ------------
- -----------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Net income (loss) $ (1,204,227) $ 366,919 $(14,369,998)
------------ ------------ ------------
Adjustments to reconcile net income (loss) to net
cash
provided by operating activities:
Provision for loss on impairment of assets 2,350,000 -- 14,050,000
Bad debt expense (recovery) 83,100 31,931 (282,982)
Depreciation and amortization 1,128,291 1,675,411 1,646,412
Changes in:
Accounts receivable (363,942) 152,656 355,622
Accounts payable and accrued expenses (135,989) 86,196 70,607
Real estate taxes payable (428,943) 420,673 (9,882)
Tenant security deposits (9,442) 27,874 36,614
------------ ------------ ------------
Total adjustments 2,623,075 2,394,741 15,866,391
------------ ------------ ------------
Net cash provided by operating activities $ 1,418,848 $ 2,761,660 $ 1,496,393
------------ ------------ ------------
------------ ------------ ------------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
18
<PAGE>
<PAGE>
RIDGE PLAZA JOINT VENTURE
NOTES TO FINANCIAL STATEMENTS
A. General
Ridge Plaza Joint Venture (the ``Joint Venture'') is a joint venture formed
on May 8, 1985 which will terminate on May 8, 2025 unless ended sooner under the
provisions of the joint venture agreement (the ``Joint Venture Agreement''). The
Joint Venture was formed to acquire and manage two shopping centers, Ridge Plaza
Shopping Center and Pine Island Ridge Plaza Shopping Center, located in Davie,
Broward County, Florida. The co-venturers are Prudential Acquisition Fund I,
L.P. (``PAF I'') and Prudential Realty Acquisition Fund II, L.P. (``PRAF II'').
PAF I and PRAF II are Delaware limited partnerships of which Prudential-Bache
Properties, Inc. (``PBP'') and Prudential Realty Partnerships, Inc. (``PRP'')
are the co-general partners.
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.
B. Summary of Significant Accounting Policies
Basis of accounting
The books and records of the Joint Venture are maintained on the accrual
basis of accounting in accordance with generally accepted accounting principles.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the co-venturers to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Property
Effective December 31, 1995, the Joint Venture adopted Statement of Financial
Accounting Standards (``SFAS'') No. 121, ``Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of.'' Under SFAS No.
121, impairment of properties to be held and used is determined to exist when
estimated amounts recoverable through future operations on an undiscounted basis
are below the properties' carrying value. If a property is determined to be
impaired, it should be recorded at the lower of its carrying value or its
estimated fair value. For properties that are held for sale, SFAS No. 121 states
that they should be recorded at the lower of carrying amount or estimated fair
value less costs to sell. At December 31, 1995, the Joint Venture's properties
are recorded at the gross sales price less costs to sell, and the Joint Venture
has ceased depreciating the properties for financial statement purposes only.
Prior to December 31, 1995, the Joint Venture carried its property
investments at the lower of depreciated cost or estimated amounts recoverable
through future operations and ultimate disposition of the property. Property
investments were depreciated or amortized using the straight-line method over
their estimated economic lives which ranged from 5 to 35 years depending on
property type. A provision for loss on impairment of assets was recorded when
estimated amounts recoverable through future operations and ultimate disposition
of the property on an undiscounted basis were below depreciated cost. However,
property investments were reduced to estimated fair value when the property was
considered to be permanently impaired and the depreciated cost exceeded the
estimated fair value.
Buildings and improvements include furniture and fixtures, tenant
improvements and capitalized leasing costs. Tenant improvements and capitalized
leasing costs were amortized over the lives of the respective leases.
Capitalized leasing costs, net of accumulated amortization, were $107,438 and
$130,733 at December 31, 1995 and 1994, respectively.
Cash and cash equivalents
Cash and cash equivalents include money market funds whose cost approximates
market value.
19
<PAGE>
<PAGE>
Income taxes
The Joint Venture is not required to provide for, or pay, any Federal or
state income taxes. Income tax attributes that arise from its operations are
passed to the individual partners. The Joint Venture may be subject to other
state and local taxes in jurisdictions in which it operates.
Profit and loss allocations and distributions
For financial reporting purposes, net profits or losses are allocated 54% to
PAF I and 46% to PRAF II.
Distributions of cash are made in accordance with the Joint Venture Agreement
and are allocated 54% to PAF I and 46% to PRAF II.
C. Property
The Joint Venture's properties are comprised of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1995 1994
<S> <C> <C>
-------------------------------------------------------------------------------
Pine Island Ridge Plaza Shopping Center--
Davie, Broward County, FL $11,653,399 $14,111,632
Ridge Plaza Shopping Center--
Davie, Broward County, FL 3,324,973 4,299,025
----------- -----------
$14,978,372 $18,410,657
----------- -----------
----------- -----------
</TABLE>
The carrying value of the Joint Venture's properties were reduced by $850,000
during the second quarter of 1995 to reflect an impairment in value resulting
from lease defaults and market indications. In the fourth quarter of 1995, the
Joint Venture recorded a provision for loss on impairment of assets of
$1,500,000 to reflect the estimated net proceeds received from the sale of the
two shopping centers on March 26, 1996.
The Joint Venture's properties were considered to be impaired in 1993 because
declines in net operating income had continued for an extended period of time
and the trend was not expected to change in the foreseeable future. Accordingly,
a write-down of $17,150,000 was recorded at December 31, 1993 to reduce the
Joint Venture's properties to estimated fair value based on third party
appraisals. This consisted of a provision for loss on impairment of $14,050,000
and the utilization of a $3,100,000 valuation allowance recorded in 1992.
D. Income Taxes
The following is a reconciliation of net income (loss) for financial
reporting purposes with net income (loss) for tax reporting purposes.
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
----------------------------------------------------------------------------------
Net income (loss) per financial
statements $(1,204,227) $ 366,919 $(14,369,998)
Provision for loss on impairment of
assets 2,350,000 -- 14,050,000
Tax depreciation greater than
depreciation per financial
statements (694,203) (136,688) (130,660)
Bad debt expense (recovery) 83,100 31,931 (282,982)
Unearned rental income (22,713) 10,304 22,103
Other -- (37,416) --
----------- ------------ ------------
Tax basis net income (loss) $ 511,957 $ 235,050 $ (711,537)
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
20
<PAGE>
<PAGE>
The differences between the tax basis and book basis of partners' capital are
primarily attributable to the cumulative effect of the book-to-tax income (loss)
adjustments.
E. Leases
The Joint Venture has noncancellable operating leases at its two shopping
centers. One tenant, Builders Square (whose lease expires in 2003) accounted for
16%, 16% and 13% of the revenues of the Joint Venture for the years ended
December 31, 1995, 1994 and 1993, respectively. Future minimum base lease
receipts at December 31, 1995 due under these noncancellable leases are as
follows:
<TABLE>
<S> <C>
1996 $ 2,892,567
1997 2,853,529
1998 2,748,155
1999 2,211,534
2000 1,853,107
Thereafter 5,024,169
------------
$ 17,583,061
------------
------------
</TABLE>
In addition, certain of the leases require the lessees to reimburse the Joint
Venture for real estate taxes, insurance costs and other expenses.
F. Related Parties
The general partners of the co-venturers and their affiliates perform
services for the Joint Venture which include, but are not limited to: accounting
and financial management, asset management and other administrative services.
The amount of reimbursement from the Joint Venture is limited by the provisions
of the Joint Venture Agreement. The costs and expenses incurred on behalf of the
Joint Venture which are reimbursable to the general partners of the co-venturers
and their affiliates were:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------
1995 1994 1993
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Prudential Realty Partnerships, Inc. and
affiliates $45,800 $34,900 $40,100
Prudential-Bache Properties, Inc. and affiliates 25,400 22,400 23,700
------- ------- -------
$71,200 $57,300 $63,800
------- ------- -------
------- ------- -------
</TABLE>
Expenses payable to the general partners of the co-venturers and their
affiliates (which are included in accrued expenses) as of December 31, 1995 and
1994 were $22,400 and $19,900, respectively.
The Joint Venture maintains an account with the Prudential Institutional
Liquidity Portfolio Fund, an affiliate of the co-venturers, for investment of
its available cash in short-term instruments pursuant to the guidelines
established by the Joint Venture Agreement.
G. Subsequent Event
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.
21
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 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.
PRUDENTIAL ACQUISITION FUND I, L.P.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Eugene D. Burak Date: March 29, 1996
---------------------------------------------
Eugene D. Burak
Vice President and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities (with respect to the General Partners) and on
the dates indicated.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/ Thomas F. Lynch, III Date: March 29, 1996
---------------------------------------------
Thomas F. Lynch, III
President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
By: /s/ Barbara J. Brooks Date: March 29, 1996
---------------------------------------------
Barbara J. Brooks
Vice President-Finance and Chief Financial
Officer
By: /s/ Eugene D. Burak Date: March 29, 1996
---------------------------------------------
Eugene D. Burak
Vice President
By: /s/ Frank W. Giordano Date: March 29, 1996
---------------------------------------------
Frank W. Giordano
Director
By: /s/ Nathalie P. Maio Date: March 29, 1996
---------------------------------------------
Nathalie P. Maio
Director
22
<PAGE>
<PAGE>
Prudential Realty Partnerships, Inc.
A Delaware corporation, General Partner
By: /s/ Joel W. Stoesser Date: March 29, 1996
---------------------------------------------
Joel W. Stoesser
Chairman of the Board of Directors
By: /s/ David Bradford Date: March 29, 1996
---------------------------------------------
David Bradford
President and Director
By: /s/ Kevin R. Smith Date: March 29, 1996
---------------------------------------------
Kevin R. Smith
Vice President and Director
By: /s/ Jose Gener Date: March 29, 1996
---------------------------------------------
Jose Gener
Vice President and Comptroller
By: /s/ C. Edward Chaplin Date: March 29, 1996
---------------------------------------------
C. Edward Chaplin
Treasurer
By: /s/ Roger S. Pratt Date: March 29, 1996
---------------------------------------------
Roger S. Pratt
Director
By: /s/ Joseph D. Margolis Date: March 29, 1996
---------------------------------------------
Joseph D. Margolis
Secretary
23
<PAGE>
1995
- --------------------------------------------------------------------------------
Prudential Acquisition Annual
Fund I, L.P. Report
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
LETTER TO THE UNITHOLDERS
FOR THE YEAR ENDED DECEMBER 31, 1995
1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of Prudential Acquisition Fund I, L.P.
New York, New York
We have audited the accompanying statements of financial condition of Prudential
Acquisition Fund, I, L.P. (a Delaware Limited Partnership) as of December 31,
1995 and 1994, and the related statements of operations, changes in partners'
capital and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the General
Partners. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
General Partners, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Prudential Acquisition Fund I, L.P. as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
March 26, 1996
2
<PAGE>
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
-----------------------------
1995 1994
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------
ASSETS
Land $ 4,008,121 $ 4,008,121
Buildings and improvements 31,122,239 30,859,999
Less: accumulated depreciation (17,417,828 ) (16,214,016 )
Investment in joint venture, net 9,057,964 10,792,867
------------ ------------
Property 26,770,496 29,446,971
Cash and cash equivalents 750,153 646,346
Deferred rent 391,978 499,599
Other assets 48,236 16,875
------------ ------------
Total assets $27,960,863 $30,609,791
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 513,226 $ 415,871
Tenant security deposits 18,724 16,192
------------ ------------
Total liabilities 531,950 432,063
------------ ------------
Contingencies
Partners' capital
Limited partners (70,124 units issued and outstanding) 27,428,913 30,177,728
General partners -- --
------------ ------------
Total partners' capital 27,428,913 30,177,728
------------ ------------
Total liabilities and partners' capital $27,960,863 $30,609,791
------------ ------------
------------ ------------
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
REVENUES
Rental income $ 2,965,764 $ 3,048,468 $ 2,801,858
Recovery of expenses 843,567 944,412 1,026,098
Interest income 41,266 18,702 6,881
Joint venture equity income (loss) (654,903) 193,516 (7,764,418)
----------- ----------- -----------
3,195,694 4,205,098 (3,929,581)
----------- ----------- -----------
EXPENSES
Depreciation and amortization 1,203,812 1,336,456 1,625,153
Property operating 1,283,302 1,294,770 1,380,059
Real estate taxes 519,140 524,807 630,672
General and administrative 532,600 256,455 240,033
Provision for loss on impairment of assets -- 770,000 --
----------- ----------- -----------
3,538,854 4,182,488 3,875,917
----------- ----------- -----------
Net income (loss) $ (343,160) $ 22,610 $(7,805,498)
----------- ----------- -----------
----------- ----------- -----------
ALLOCATION OF NET INCOME (LOSS)
Limited partners $ (583,724) $ (148,813) $(7,941,836)
----------- ----------- -----------
----------- ----------- -----------
General partners $ 240,564 $ 171,423 $ 136,338
----------- ----------- -----------
----------- ----------- -----------
Net loss per limited partnership unit $ (8.32) $ (2.12) $ (113.25)
----------- ----------- -----------
----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Partners' capital--December 31, 1992 $41,038,218 $ -- $41,038,218
Net income (loss) (7,941,836) 136,338 (7,805,498)
Distributions (1,226,992) (136,338 ) (1,363,330)
----------- --------- -----------
Partners' capital--December 31, 1993 31,869,390 -- 31,869,390
Net income (loss) (148,813) 171,423 22,610
Distributions (1,542,849) (171,423 ) (1,714,272)
----------- --------- -----------
Partners' capital--December 31, 1994 30,177,728 -- 30,177,728
Net income (loss) (583,724) 240,564 (343,160)
Distributions (2,165,091) (240,564 ) (2,405,655)
----------- --------- -----------
Partners' capital--December 31, 1995 $27,428,913 $ -- $27,428,913
----------- --------- -----------
----------- --------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income received $ 3,066,379 $ 3,095,522 $ 2,513,760
Recovery of expenses received 848,260 963,285 994,157
Interest received 41,266 18,702 6,881
Tenant security deposits received (returned) 2,532 (2,331) (16,389)
Real estate taxes paid (519,958) (524,648) (626,099)
Property operating expenses paid (1,384,557) (1,165,577) (1,452,020)
General and administrative expenses paid (362,220) (265,529) (225,027)
Distributions from joint venture income -- 193,516 --
----------- ----------- -----------
Net cash provided by operating activities 1,691,702 2,312,940 1,195,263
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized property expenditures (262,240) (344,539) (1,113,731)
Distributions from joint venture in excess of income 1,080,000 319,484 783,000
----------- ----------- -----------
Net cash provided by (used in) investing activities 817,760 (25,055) (330,731)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners (2,405,655) (1,714,272) (1,363,330)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 103,807 573,613 (498,798)
Cash and cash equivalents at beginning of year 646,346 72,733 571,531
----------- ----------- -----------
Cash and cash equivalents at end of year $ 750,153 $ 646,346 $ 72,733
----------- ----------- -----------
----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income (loss) $ (343,160) $ 22,610 $(7,805,498)
----------- ----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Provision for loss on impairment of assets -- 770,000 --
Depreciation and amortization 1,203,812 1,336,456 1,625,153
Distributions from joint venture income -- 193,516 --
Joint venture equity (income) loss 654,903 (193,516) 7,764,418
Changes in:
Deferred rent 107,621 34,070 (299,856)
Other assets (31,361) 24,275 (20,183)
Accounts payable and accrued expenses 97,355 127,860 (46,910)
Tenant security deposits 2,532 (2,331) (21,861)
----------- ----------- -----------
Total adjustments 2,034,862 2,290,330 9,000,761
----------- ----------- -----------
Net cash provided by operating activities $ 1,691,702 $ 2,312,940 $ 1,195,263
----------- ----------- -----------
----------- ----------- -----------
- -----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements
</TABLE>
5
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
A. General
Prudential Acquisition Fund I, L.P. (the ``Partnership''), a Delaware limited
partnership, was formed on February 16, 1983 and will terminate on December 31,
2007 unless ended sooner under the provisions of the Amended and Restated
Partnership Agreement (the ``Partnership Agreement''). The Partnership was
formed to acquire and manage income-producing commercial real estate. The
general partners of the Partnership are Prudential Realty Partnerships, Inc.
(``PRP'') and Prudential-Bache Properties, Inc. (``PBP'') (collectively, the
``General Partners''). At December 31, 1995, the Partnership owns three
properties and has a 54% interest in a joint venture which owns two shopping
centers (the ``Joint Venture'').
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 Units approved the plan of sale and complete
liquidation and dissolution of the Partnership. Although no time schedule has
been adopted for this plan, the Partnership does expect to begin to actively
market all of its properties in 1996. It is not expected that the Partnership's
eventual total distributions, including sales proceeds, will equal the partners'
initial investments.
B. Summary of Significant Accounting Policies
Basis of accounting
The books and records of the Partnership are maintained on the accrual basis
of accounting in accordance with generally accepted accounting principles. The
preparation of financial statements in conformity with generally accepted
accounting principles requires the General Partners to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue from tenant operating leases which provide for rental concessions and
scheduled rental increases is recognized on a straight-line basis over the terms
of the leases for the directly-owned properties.
Property
Effective December 31, 1995, the Partnership adopted Statement of Financial
Accounting Standards (``SFAS'') No. 121, ``Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of.'' Under SFAS No.
121, impairment of properties to be held and used is determined to exist when
estimated amounts recoverable through future operations on an undiscounted basis
are below the properties' carrying value. If a property is determined to be
impaired, it should be recorded at the lower of its carrying value or its
estimated fair value. For properties that are held for sale, SFAS No. 121 states
that they should be recorded at the lower of carrying amount or estimated fair
value less costs to sell and that depreciation should cease. As of December 31,
1995, the properties are accounted for as assets held for sale. The
implementation of SFAS No. 121 did not have a significant impact on the
Partnership's financial position as of December 31, 1995.
The determination of estimated fair value is based, not only upon future cash
flows, which rely upon estimates and assumptions including expense growth,
occupancy and rental rates, but also upon market capitalization and discount
rates as well as other market indicators. The General Partners believe that the
estimates and assumptions used are appropriate in evaluating the carrying amount
of the Partnership's properties. However, changes in market conditions and
circumstances may occur in the near term which would cause these estimates and
assumptions to change, which, in turn, could cause the amounts ultimately
realized upon the sale or other disposition of the properties to differ
materially from their estimated fair value. Such changes may also require
write-downs in the future.
Prior to December 31, 1995, the Partnership carried its property investments
at the lower of depreciated cost or estimated amounts recoverable through future
operations and ultimate disposition of the property. Property investments were
depreciated or amortized using the straight-line method over their estimated
6
<PAGE>
<PAGE>
economic lives which ranged from 5 to 35 years depending on property type. A
provision for loss on impairment of assets was recorded when estimated amounts
recoverable through future operations and ultimate disposition of the property
on an undiscounted basis were below depreciated cost. However, property
investments were reduced to estimated fair value when the property was
considered to be permanently impaired and the depreciated cost exceeded the
estimated fair value.
Buildings and improvements include furniture and fixtures, tenant
improvements and capitalized leasing costs. Tenant improvements and capitalized
leasing costs were amortized over the lives of their respective leases.
Capitalized leasing costs, net of accumulated amortization, were $371,911 and
$404,520 as of December 31, 1995 and 1994, respectively.
Investment in Joint Venture
The Partnership accounts for its investment in the Joint Venture using the
equity method. Costs incurred in the acquisition of the investment
(approximately $83,000) that were in excess of the Partnership's basis in the
Joint Venture are being amortized over an eighteen-year period and are included
in Joint Venture equity income (loss).
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.
Cash and cash equivalents
Cash and cash equivalents include short-term investments with original
maturities of three months or less. They are carried at cost plus accrued
interest, which approximates market value.
Income taxes
The Partnership is not required to provide for, or pay, any Federal or state
income taxes. Income tax attributes that arise from its operations are passed
directly to the individual partners. The Partnership may be subject to other
state and local taxes in jurisdictions in which it operates.
Profit and loss allocations and distributions
Pursuant to Section 11 of the Amended Partnership Agreement (effective
January 1, 1987), the General Partners have the right to specially allocate
gross or net income, in certain circumstances, in an amount sufficient to
restore the deficit balances in their capital accounts. Allocations of income
(loss) are 90% to the limited partners and 10% to the General Partners for
financial and tax reporting purposes. To the extent that cash distributions to
the General Partners exceed the 10% allocation of income for tax reporting
purposes (creating an increase in their existing deficit capital balances), the
General Partners will receive a special allocation of additional income for the
difference.
Distributions of cash are made in accordance with the Partnership Agreement
and are allocated 90% to the limited partners and 10% to the General Partners.
Proceeds from the sale of the properties and liquidation of the Partnership will
be distributed in accordance with the Partnership Agreement.
C. Property
The Partnership's directly-owned properties are comprised of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
<S> <C> <C>
--------------------------------------------------------------------------------
Norwest Center Office Building--
Rochester, MN $ 5,793,788 $ 6,027,741
Norwalk Industrial Warehouse--
Norwalk, CA 5,967,467 6,222,487
One Executive Center Office Building--
Albuquerque, NM 5,951,277 6,403,876
------------ -----------
$ 17,712,532 $18,654,104
------------ -----------
------------ -----------
</TABLE>
In 1994, the properties' carrying value had been reduced to the lower of
depreciated cost or estimated fair value based on third party appraisals. As a
result, a provision for loss on impairment of assets of $770,000 was recorded
for the year ended December 31, 1994. No additional provisions were required in
1995.
Revenues from the Norwest Center in Rochester, Minnesota, a multi-tenant
office building, represented approximately 45%, 46% and 52% of the Partnership's
income from directly-owned properties for the years
7
<PAGE>
<PAGE>
ended December 31, 1995, 1994 and 1993, respectively. One tenant at this
property, Norwest Bank, N.A., accounted for 26%, 28% and 21% of the revenues of
the Partnership for the years ended December 31, 1995, 1994 and 1993,
respectively. Although the Norwest Bank lease expires in 2012, it contains a
termination option which expires in October 1997.
The Partnership's industrial warehouse facility located in Norwalk,
California was vacant from September 1992 through February 1993; however, a ten
year lease for the entire building was signed March 1, 1993 with Weber
Distribution. Revenues from this property represented approximately 18%, 18% and
13% of the Partnership's income from directly-owned properties for the years
ended December 31, 1995, 1994 and 1993, respectively.
Revenues from One Executive Center, a five-story office building located in
Albuquerque, New Mexico represented approximately 37%, 36% and 35% of the
Registrant's income from directly-owned properties for the years ended December
31, 1995, 1994 and 1993, respectively.
D. Income Taxes
The following is a reconciliation of net income (loss) reported for financial
reporting purposes with net income (loss) reported for tax reporting purposes.
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------
<S> <C> <C> <C>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------
Net income (loss) per financial statements $ (343,160) $ 22,610 $(7,805,498)
----------- ----------- -----------
Tax depreciation greater than financial statement
depreciation (451,170) (330,406) (206,387)
Joint Venture financial statement income less
(greater) than income for tax purposes 933,103 (64,845) 7,381,933
Bad debt expense (recovery) 2,262 485 (2,995)
Lease concessions 107,621 34,070 (299,856)
Provision for loss on impairment of assets -- 770,000 --
----------- ----------- -----------
Total adjustments 591,816 409,304 6,872,695
----------- ----------- -----------
Tax basis net income (loss) $ 248,656 $ 431,914 $ (932,803)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The differences between the tax basis and book basis of partners' capital are
primarily attributable to the cumulative effect of the book-to-tax income (loss)
adjustments and the recording of distributions to partners.
E. Leases
The Partnership has noncancellable operating leases at its two office
buildings and warehouse. Future minimum lease receipts at December 31, 1995 due
under these noncancellable leases are as follows:
<TABLE>
<S> <C>
1996 $ 3,084,648
1997 2,311,177
1998 1,884,384
1999 1,533,335
2000 1,335,868
Thereafter 8,716,643
------------
$ 18,866,055
------------
------------
</TABLE>
In addition, certain of the leases require the tenants to reimburse the
Partnership for real estate taxes, insurance costs and other expenses.
8
<PAGE>
<PAGE>
F. 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>
December 31,
---------------------------------------
1995 1994
<S> <C> <C>
---------------------------------------------------------------------------------------------
Assets
Land $ 3,835,457 $ 4,422,957
Buildings and improvements 27,899,102 29,615,596
Less: accumulated depreciation (16,756,187) (15,627,896)
----------------- -----------------
Property 14,978,372 18,410,657
Accounts receivable, net 688,279 407,437
Cash and cash equivalents 1,427,420 2,054,578
----------------- -----------------
Total assets $ 17,094,071 $ 20,872,672
----------------- -----------------
----------------- -----------------
Liabilities and partners' capital
Total liabilities $ 326,699 $ 901,073
----------------- -----------------
Partners' capital
Prudential Acquisition Fund I, L.P. 9,009,238 10,739,520
Prudential Realty Acquisition Fund II, L.P. 7,758,134 9,232,079
----------------- -----------------
Total partners' capital 16,767,372 19,971,599
----------------- -----------------
Total liabilities and partners' capital $ 17,094,071 $ 20,872,672
----------------- -----------------
----------------- -----------------
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------
Revenues
Rental income $ 2,843,407 $ 2,613,050 $ 2,514,661
Recovery of expenses 1,091,276 937,386 1,070,228
Interest income 102,664 62,641 48,230
----------- ------------ ------------
4,037,347 3,613,077 3,633,119
----------- ------------ ------------
Expenses
Depreciation and amortization 1,128,291 1,675,411 1,646,412
Property operating 1,101,079 1,034,603 1,266,862
Real estate taxes 518,388 427,759 924,126
General and administrative 143,816 108,385 115,717
Provision for loss on impairment of assets 2,350,000 -- 14,050,000
----------- ------------ ------------
5,241,574 3,246,158 18,003,117
----------- ------------ ------------
Net income (loss) $(1,204,227) $ 366,919 $(14,369,998)
----------- ------------ ------------
----------- ------------ ------------
</TABLE>
Investment in joint venture and joint venture equity income (loss) include
amortization of $4,620 annually of the Partnership's acquisition costs that were
in excess of the asset basis. Accumulated amortization was $32,338 at December
31, 1995.
Effective December 31, 1995, the Joint Venture adopted Statement of Financial
Accounting Standards (``SFAS'') No. 121, ``Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of.'' Under SFAS No.
121, impairment of properties to be held and used is determined to exist when
estimated amounts recoverable through future operations on an undiscounted basis
are below the properties' carrying value. If a property is determined to be
impaired, it should be recorded at the lower of its carrying value or its
estimated fair value. For properties that are held for sale, SFAS No. 121 states
that they should be recorded at the lower of carrying amount or estimated fair
value less cost to sell and depreciation should cease.
9
<PAGE>
<PAGE>
The carrying value of the Joint Venture's properties were reduced by $850,000
during the second quarter of 1995 to reflect an impairment in value resulting
from lease defaults and market indications. In the fourth quarter of 1995, the
Joint Venture recorded a provision for loss on impairment of assets of
$1,500,000 to reflect the estimated net proceeds received from the sale of the
two shopping centers on March 26, 1996.
The Joint Venture's properties were considered to be impaired in 1993 because
declines in net operating income had continued for an extended period of time
and the trend was not expected to change in the foreseeable future. Based on low
rental rates, which continued to decline in comparison to the average rental
rates charged by the competition, significant tenant concessions and oversupply
of retail space in the Joint Venture's submarket, a write-down of $17,150,000
was recorded at December 31, 1993 to reduce the Joint Venture's properties to
estimated fair value based on third party appraisals.
G. Related Parties
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>
Year ended December 31,
----------------------------------
1995 1994 1993
<S> <C> <C> <C>
- ------------------------------------------------------------------------
Prudential Realty Partnership, Inc.
and affiliates $ 87,200 $ 41,500 $ 38,900
Prudential-Bache Properties, Inc.
and affiliates 118,400 89,400 92,300
-------- -------- --------
$205,600 $130,900 $131,200
-------- -------- --------
-------- -------- --------
</TABLE>
Expenses payable to the General Partners and their affiliates (which are
included in accrued expenses) as of December 31, 1995 and 1994 are $74,000 and
$41,100, respectively.
In addition, the General Partners and their affiliates perform 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 $38,400, $30,900 and $34,400 for
the years ended December 31, 1995, 1994, and 1993, respectively.
Prudential Securities Incorporated (``PSI''), an affiliate of the General
Partners, owns 175 limited partnership units at December 31, 1995.
H. Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes et
al. v. Prudential Securities Group Inc. et al. (CV-93-654), was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership, against the Partnership, PBP, PSI and a number
of other defendants. Plaintiffs alleged violation of the federal Racketeer
Influenced and Corrupt Organizations Act (``RICO'') statutes, breach of
fiduciary duty, fraud and deceit, negligence, and demanded an accounting.
Plaintiffs sought unspecified compensatory, punitive and treble damages, and
rescission, including costs and attorneys' fees, but the only relief sought
against the Partnership was an accounting. The Prudential defendants filed a
motion to dismiss on December 22, 1993.
By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, the Kinnes case, together with a number of other actions not involving the
Partnership, was transferred to a single judge of the United States District
Court for the Southern District of New York and consolidated for pretrial
proceedings under the caption In re Prudential Securities Incorporated Limited
Partnerships Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs in the
transferred cases filed a complaint that consolidated the previously filed
complaints and named as defendants, among others, PSI, certain of its present
and former employees, PRP
10
<PAGE>
<PAGE>
and PBP. The Partnership was not named as a defendant in the consolidated
complaint, but the name of the Partnership was listed as being among the limited
partnerships at issue in the case.
On August 9, 1995 PRP, PBP, PSI and other Prudential defendants entered into
a Stipulation and Agreement of Partial Compromise and Settlement with legal
counsel representing plaintiffs in the consolidated actions. The court
preliminarily approved the settlement agreement by order dated August 29, 1995
and, following a hearing held November 17, 1995, found that the agreement was
fair, reasonable, adequate and in the best interests of the plaintiff class. The
court gave final approval to the settlement, certified a class of purchasers of
specific limited partnerships, including the Partnership, released all settled
claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing or
prosecuting any settled claim against the released parties. The full amount due
under the settlement agreement has been paid by PSI.
I. Subsequent Events
In February 1996, a distribution of $623,000 was paid to the partners for the
quarter ended December 31, 1995. Limited partners received a total of $561,000,
which represents $8.00 per unit, and the General Partners received the
remainder.
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.
11
<PAGE>
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
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 has an equity interest in a joint venture (the
``Joint Venture'') which owned two 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. The sale of the property is expected to
result in a significant distribution during the second quarter of 1996.
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. As of March 11, 1996, the majority of the
limited partners 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 or for the liquidation of the Partnership. However,
the Partnership expects to begin 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.
During the year ended December 31, 1995, the Partnership's cash and cash
equivalents increased $104,000 primarily as a result of increased distributions
from the Joint Venture as compared to the prior year. The Joint Venture, in
which the Partnership has a 54% interest, has cash and cash equivalents of
$1,427,000 at December 31, 1995 as compared to $2,055,000 at December 31, 1994.
This amount is anticipated to be sufficient to pay outstanding liabilities, fund
capital expenditures (including leasing commissions and tenant improvements) and
provide additional cash distributions to the Partnership. Cash distributions to
the Partnership from the Joint Venture totalled $1,080,000 and $513,000 for the
years ended December 31, 1995 and 1994, respectively. The level of distributions
of cash from the Joint Venture is impacted by the operating results of its
properties as well as the levels of cash reserves it maintains. The Joint
Venture expended $46,000 for capital improvements during 1995.
In connection with the capital improvements which are discussed in further
detail below, the amount of actual expenditures and their timing will depend on
the success of 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 the timing of the sale of the
properties.
Cash Distributions
Cash distributions paid to the limited partners and General Partners totalled
$2,406,000 and $1,714,000 for the years ended December 31, 1995, and 1994,
respectively, of which the limited partners received $2,165,000 and $1,543,000
($30.88 and $22.00 per unit), respectively, and the General Partners received
the remainder. These amounts represent payments from current and prior
undistributed cash flow from operations of the directly-owned and Joint Venture
properties discussed below in Results of Operations.
In February 1996, cash distributions of $623,000 were paid to the limited
partners and General Partners. Limited partners received $561,000 ($8.00 per
unit) and the General Partners received the remainder.
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.
Capital Improvements--Directly-Owned Properties
For the year ended December 31, 1995, the Partnership expended $262,000 on
capital improvements ($208,000 at One Executive Center and $54,000 at Norwest
Center) for tenant improvements, leasing commissions and building improvements
necessary to maintain the properties. For the year ended December 31, 1994 the
Partnership expended $345,000 on capital improvements. Projected capital
expenditures for the directly-owned properties for 1996 are estimated at
$89,000. This includes $54,000 in anticipated tenant improvements and leasing
commissions and $35,000 for improvements necessary to maintain the
12
<PAGE>
<PAGE>
properties. These capital improvements will be funded from either undistributed
cash balances or cash derived from future operations.
Capital Improvements--Joint Venture
During 1995, the Joint Venture, in which the Partnership has a 54% interest,
expended $46,000 for capital improvements of which $16,000 represented building
and land improvements and $30,000 represented leasing commissions. Projected
capital expenditures for the Joint Venture for 1996 are estimated at $40,000 for
anticipated tenant improvements and leasing commissions.
Results of Operations
The Partnership recorded a net loss of $343,000 for the year ended December
31, 1995. For the years ended December 31, 1994 and 1993, the Partnership
recorded net income of $23,000 and a net loss of $7,805,000, respectively. As
discussed in further detail below, the fluctuations in these amounts were
primarily the result of the timing and magnitude of the provisions for loss on
impairment of assets recorded for the Partnership and Joint Venture properties.
The Partnership's pro rata share of provisions for loss on impairment of assets
recorded for the Joint Venture properties was $1,269,000 and $7,587,000 in 1995
and 1993, respectively. A $770,000 provision for loss on impairment of assets
was recorded in 1994 relating to the directly-owned properties. Fluctuations
between periods in other operating results are discussed below.
Directly-Owned Properties
As of December 31, 1995 and 1994, the Norwalk Industrial property in Norwalk,
California was 100% leased. Rental income for 1995 decreased $59,000 as compared
to 1994 primarily as a result of an adjustment in the first quarter of 1994 to
properly reflect the impact of additional free rent concessions given to its
sole tenant. Rental income for 1994 increased $227,000 as compared to 1993 due
to the signing on March 1, 1993 of a ten-year lease for the entire building to a
single tenant, Weber Distribution. Rent receipts began in September 1993 after a
six month free rent period. Operating expenses for 1995 were comparable to 1994.
Operating expenses for 1994 decreased $53,000 as compared to 1993. The vacancy
at the Norwalk property caused property expenses such as utilities and repairs
and maintenance, usually charged to the tenant, to be charged to the Partnership
for the first nine months of 1993.
The Norwest Center property in Rochester, Minnesota was 92% and 92% leased
(88% and 87% occupied) as of December 31, 1995 and 1994, respectively. During
the next twelve months, three leases representing 14% of the leased space are
scheduled to expire. One major tenant at the property, Norwest Bank, has a lease
expiring in 2012 with a termination option which expires in October 1997. Rental
income for 1995 was comparable to 1994 while operating expenses decreased
$40,000 as compared to 1994 due to lower cleaning, utility and professional
fees. Rental income for 1994 decreased $72,000 as compared to 1993 due primarily
to lower occupancy rates while operating expenses increased $26,000 due to an
increase in repairs and maintenance and cleaning expenses.
The One Executive Center office property in Albuquerque, New Mexico was 99%
and 100% leased as of December 31, 1995 and 1994, respectively. During the next
twelve months, four leases representing 9% of the rentable space are scheduled
to expire. Discussions are underway with existing tenants regarding the renewal
of the affected leases. Rental income for the year ended December 31, 1995
decreased $21,000 as compared to 1994 due to the decrease in occupancy.
Operating expenses in 1995 were comparable to 1994. Rental income for the year
ended December 31, 1994 increased $94,000 as compared to 1993 due to increased
rental rates, and operating expenses decreased $16,000 due to lower repairs and
maintenance expenses.
Depreciation and amortization for the years ended December 31, 1995 and 1994
decreased $133,000 and $289,000, respectively, as compared to 1994 and 1993 as
several tenant improvements at One Executive Center became fully depreciated
during 1994. In addition, there was a lower depreciable basis at One Executive
Center in 1995 as a result of an impairment provision recorded in the fourth
quarter of 1994.
Real estate taxes for the year ended December 31, 1995 were comparable to
1994. Real estate taxes for the year ended December 31, 1994 decreased $106,000
as compared to 1993 due to the effect of a successful appeal of the assessed
property value at the Norwalk and Norwest Properties which resulted in tax
refunds in the fourth quarter of 1994.
General and administrative expenses increased $276,000 for the year ended
December 31, 1995 as compared to 1994 mainly due to costs relating to the
preparation and review of the Consent Solicitation
13
<PAGE>
<PAGE>
Statement and increased costs to administer the Partnership. General and
administrative expenses for the year ended December 31, 1994 increased $16,000
as compared to 1993 due to the timing of certain expense accruals recorded in
the respective years.
Joint Venture Properties
As of December 31, 1995, Pine Island and Ridge Plaza were 94% and 81% leased
(88% and 71% occupied), respectively, as compared to 93% and 90% leased (93% and
80% occupied) as of December 31, 1994. Over the next twelve months, five leases
representing 7% of the rentable space are scheduled to expire at Pine Island. In
the third quarter of 1994, a new tenant who had signed a ten-year lease notified
the Joint Venture it would not occupy its space (approximately 10% of the leased
space of Ridge Plaza). The tenant is not making payments as required by its
lease. Negotiations continue with the tenant relating to a buy-out of the lease.
Occupancy further dropped at Ridge Plaza by 10% in April 1995 when a tenant was
evicted due to the non-compliance of an operating covenant. There are no
significant leases scheduled to expire in the next twelve months at Ridge Plaza.
A drug store which occupies 5% of the total space in Pine Island was acquired by
another chain in June 1995. The new owner closed the store during the third
quarter; however, it is required under its lease obligations to continue making
payments until expiration of the lease in 2003.
Rental income for the year ended December 31, 1995 increased $230,000
compared to 1994 due to increased occupancy at Pine Island and the expiration of
free rent periods for several tenants during 1994 at Ridge Plaza. Rental income
for the year ended December 31, 1994 increased $98,000 as compared to 1993
mainly due to the increased average rental and occupancy rates at Pine Island.
Property operating expenses for the year ended December 31, 1995 increased
$66,000 as compared to 1994 primarily due to an increase in provisions for
doubtful accounts. Property operating expenses for the year ended December 31,
1994 decreased $232,000 as compared to 1993 primarily due to provisions for
doubtful accounts recorded in 1993.
Real estate taxes for the year ended December 31, 1995 increased $91,000 as
compared to 1994 and decreased $496,000 for the year ended December 31, 1994 as
compared to 1993 due to refunds received for prior periods at both Pine Island
and Ridge Plaza in the fourth quarter of 1994 as a result of a lower assessment
on the properties.
Depreciation and amortization expense for the year ended December 31, 1995
decreased $547,000 as compared to 1994 because a vacated outparcel and related
tenant improvements at Ridge Plaza were demolished to provide additional parking
at the Joint Venture's properties in 1994. Additionally, in the third quarter of
1994, a tenant with a new ten-year lease notified the Joint Venture it would not
occupy its space. Negotiations are ongoing with the tenant relating to a buy-out
of the lease. As a result, depreciation and amortization expense in 1994
includes the write-off of related tenant improvements and leasing commissions of
$108,000. Furthermore, a tenant vacated its space at Pine Island in the third
quarter of 1994, resulting in a write-off of tenant improvements of $154,000.
Depreciation and amortization expense for the year ended December 31, 1994
increased $29,000 as compared to 1993 primarily due to the reasons mentioned
above, offset by the effect of a lower depreciable basis resulting from the
write-down of the Joint Venture properties in 1993.
General and administrative expenses for the year ended December 31, 1995
increased $35,000 as compared to 1994 primarily due to costs relating to the
preparation and review of the Consent Solicitation Statement and increased costs
to administer the Joint Venture.
The carrying value of the Joint Venture's properties were reduced by $850,000
during the second quarter of 1995 to reflect an impairment in value resulting
from lease defaults and market indications. In the fourth quarter of 1995, the
Joint Venture recorded a provision for loss on impairment of assets of
$1,500,000 to reflect the estimated net proceeds received from the sale of the
two shopping centers on March 26, 1996.
The Joint Venture's properties were considered to be impaired in 1993 because
declines in net operating income had continued for an extended period of time
and the trend was not expected to change in the foreseeable future. Based on low
rental rates, which continued to decline in comparison to the average rental
rates charged by the competition, significant tenant concessions and oversupply
of retail space in the Joint Venture's submarket, the General Partners
considered this impairment to be permanent. As a result, the depreciated cost
basis of the properties was reduced to estimated fair value based on third party
appraisals through a write-down of $17,150,000 in 1993.
14
<PAGE>
<PAGE>
OTHER INFORMATION
The Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission is available to limited partners without charge upon written
request to:
Prudential Acquisition Fund I, L.P.
c/o Prudential-Bache Properties, Inc.
Client Services Department
P.O. Box 2016
New York, New York 10272-2016
15
<PAGE>
<PAGE>
Peck Slip Station
BULK RATE
P.O. Box 2016
U.S. POSTAGE
New York, NY 10272-2016
PAID
Automatic Mail
PAF/17003
<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-31-1995
<PERIOD-START> Jan-1-1995
<PERIOD-END> Dec-31-1995
<PERIOD-TYPE> 12-Mos
<CASH> 750,153
<SECURITIES> 0
<RECEIVABLES> 440,214
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,190,367
<PP&E> 44,188,324
<DEPRECIATION> 17,417,828
<TOTAL-ASSETS> 27,960,863
<CURRENT-LIABILITIES> 531,950
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 27,428,913
<TOTAL-LIABILITY-AND-EQUITY> 27,960,863
<SALES> 3,195,694
<TOTAL-REVENUES> 3,195,694
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,538,854
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (343,160)
<EPS-PRIMARY> (8.32)
<EPS-DILUTED> 0
</TABLE>
