<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, 1996
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________________ to ______________________
Commission file number: 0-12045
PRUDENTIAL ACQUISITION FUND I, L.P.
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(Exact name of Registrant as specified in its charter)
Delaware 13-3173903
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(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
One Seaport Plaza, New York, 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, 1996 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 9 and 10.
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CAUTIONARY STATEMENT FOR PURPOSES OF
THE 'SAFE HARBOR' PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
When used in this Annual Report on Form 10-K, the words 'Believes,'
'Anticipates,' 'Expects' and similar expressions are intended to identify
forward-looking statements. Statements looking forward in time are included in
this Annual Report on Form 10-K pursuant to the 'Safe Harbor' provision of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially, including, but not limited to, those set forth in 'Management's
Discussion and Analysis of Financial Condition and Results of Operations.'
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Registrant undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.
2
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PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I PAGE
<S> <C> <C>
Item 1 Business.......................................... 4
Item 2 Properties........................................ 4
Item 3 Legal Proceedings................................. 4
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........................... 5
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.................. 6
Prudential Realty Partnerships, Inc............... 7
Item 11 Executive Compensation............................ 8
Item 12 Security Ownership of Certain Beneficial Owners
and Management.................................. 8
Item 13 Certain Relationships and Related Transactions.... 8
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K
Financial Statements and Financial Statement
Schedules....................................... 9
Exhibits.......................................... 9
Reports on Form 8-K............................... 10
SIGNATURES....................................................... 13
</TABLE>
3
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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 in accordance
with a vote of the limited partners as described below. 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 had invested in and operated a real estate investment
portfolio which consisted of five properties: 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 ('Joint Venture'). All of the Registrant's
properties have been sold as of December 31, 1996, as described below.
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. Pursuant to the approval of the
plan of liquidation, the general partners sold all the properties of the
Partnership in the year ended December 31, 1996, as discussed below.
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 and pro-rations.
On December 18, 1996, an agreement was signed by and between the Registrant and
Prudential Realty Acquisition Fund II, L.P., an affiliated limited partnership,
outlining the terms of the dissolution of the Joint Venture. As of December 31,
1996, all remaining assets of the Joint Venture were distributed in liquidation
in accordance with this agreement.
The Norwalk Industrial warehouse facility was sold on August 6, 1996 for a
gross sales price of $6,600,000 less costs to sell and pro-rations, the One
Executive Center office building was sold on October 17, 1996 for a gross sales
price of $7,300,000 less costs to sell and pro-rations and the Norwest Center
office building was sold on October 18, 1996 for a gross sales price of
$6,900,000 less costs to sell and pro-rations. See Notes C and E to the
financial statements of the Registrant's Annual Report to Limited Partners for
the year ended December 31, 1996 ('Registrant's Annual Report') for further
information.
General partners
The general partners of the Registrant are Prudential-Bache Properties, Inc.
('PBP') and Prudential Realty Partnerships, Inc. ('PRP') (collectively, the
'General Partners').
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 F to the financial statements in
the Registrant's Annual Report for further information.
Item 2. Properties
All of the Registrant's properties were sold as of December 31, 1996. See
Notes C and E to the financial statements of the Registrant's Annual Report for
further information.
Item 3. Legal Proceedings
This information is incorporated by reference to Note G of the financial
statements in the Registrant's Annual Report which is filed as an exhibit
hereto.
4
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Item 4. Submission of Matters to a Vote of Limited Partners
None.
PART II
Item 5. Market for the Registrant's Units and Related Limited Partner Matters
As of March 3, 1997, there were 7,676 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 1996 1995
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<S> <C> <C>
March 31 $ 8.00 $6.875
June 30 $121.00 $ 8.00
September 30 $ 97.82 $ 8.00
December 31 $200.00 $ 8.00
</TABLE>
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 Registrant, all properties of
the Registrant were sold during the year ended December 31, 1996. The increase
in distributions during the year ended December 31, 1996 was primarily the
result of the distribution of net proceeds from the sales of the properties. See
Item 1 Business for further information. The Registrant intends to make a final
liquidating distribution in 1997. The distributions paid to limited partners
during 1996 and 1995 primarily 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.)
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 9 in the
Registrant's Annual Report which is filed as an exhibit hereto.
<TABLE>
<CAPTION>
Year ended December 31,
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<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
Rental income $ 2,079,886 $ 2,965,764 $ 3,048,468 $ 2,801,858 $ 2,705,969
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Joint venture equity income (loss)(a) $ 260,504 $ (654,903) $ 193,516 $(7,764,418) $(1,531,697)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Provision for loss on impairment
of assets $ -- $ -- $ 770,000 $ -- $ 1,100,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Gain on sale of properties $ 2,284,166 $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Estimated liquidation costs $ 295,000 $ -- $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) $ 3,225,170 $ (343,160) $ 22,610 $(7,805,498) $(3,009,138)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per limited
partnership unit $ 42.53 $ (8.32) $ (2.12) $ (113.25) $ (45.30)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total assets $ 1,727,960 $27,960,863 $30,609,791 $32,175,924 $41,413,523
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Total limited partnership
distributions $29,930,326 $ 2,165,091 $ 1,542,849 $ 1,226,992 $ 1,507,666
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Limited partner distributions per
unit $ 426.82 $ 30.88 $ 22.00 $ 17.50 $ 21.50
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</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.
5
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This information is incorporated by reference to pages 10 through 11 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 9
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.
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 Senior Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
</TABLE>
THOMAS F. LYNCH, III, age 38, 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 48, 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.
6
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EUGENE D. BURAK, age 51, 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 53, is a Senior 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 54, 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 LLC, 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 46, 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.
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.
Prudential Realty Partnerships, Inc.
The directors and executive officers of Prudential Realty Partnerships, Inc.
and their positions are as follows:
<TABLE>
<CAPTION>
Name Position
<S> <C>
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
</TABLE>
JOEL W. STOESSER, age 56, 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 43, 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 Prime Property Fund.
KEVIN R. SMITH, age 39, is a Vice President of Prudential Real Estate
Investors. He is a portfolio manager for three separate accounts and two
commingled funds. Mr. Smith has been employed by 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 46, is a Vice President, Operations and Systems, with
Prudential Asset Management Group. In his present assignment, he is responsible
for reporting for the institutional real estate management
7
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<PAGE>
arm of PAMG. Mr. Gener has been with Prudential since 1977, serving in a series
of comptrollership assignments. Since 1986 he has worked primarily with the
investment management units of Prudential.
C. EDWARD CHAPLIN, age 40, is Vice President and Treasurer of Prudential
Insurance Company of America. He is responsible for all borrowings, cash
management and securities custody activities of 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 44, 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 Prudential. Prior to assuming his current position in February 1992, Mr.
Pratt was Vice President in charge of the New Jersey regional office.
JOSEPH D. MARGOLIS, age 36, 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 entities. His assignments
with Prudential have included counsel to 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.
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 3, 1997, 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 3, 1997, 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 3, 1997, 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 F 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.
8
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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:
Statement of Net Assets--December 31,
1996 3
Statement of Financial
Condition--December 31, 1995 3
Statements of Operations--Three years
ended December 31, 1996 4
Statements of Changes in Partners'
Capital--Three years ended December
31, 1996 4
Statements of Cash Flows--Three years
ended December 31, 1996 5
Notes to Financial Statements 6
2. Financial Statement Schedules and
Independent Auditors' Report
Independent Auditors' Report on
Schedule
Schedules:
III--Real Estate and Accumulated
Depreciation--December 31, 1996
Notes to Schedule III-Real Estate and
Accumulated Depreciation
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:
2 Consent Solicitation Statement dated
January 26, 1996 (10)
3 Amended and Restated Agreement of
and Limited Partnership (1)
4
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)
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)
G. Purchase & Sale Agreement with
Exhibits dated November 1, 1995 by
and between Ridge Plaza Joint Venture
and PIRP, Inc. (7)
</TABLE>
9
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<TABLE>
<S> <C> <C>
H. First Amendment to Purchase and Sale
Agreement made as of March 4, 1996,
by and between Ridge Plaza Joint
Venture and PIRP, Inc. (7)
I. Purchase and Sale Agreement dated
April 11, 1996 between Registrant and
NNW Real Estate, Inc. (8)
J. First Amendment to Purchase and Sale
Agreement and Escrow Instructions
dated June 25, 1996 between
Registrant and NNW Real Estate, Inc.
(8)
K. Purchase and Sale Agreement dated
September 6, 1996 by and between the
Registrant and WCB Properties Limited
Partnership (9)
L. First Amendment to Purchase and Sale
Agreement dated September 30, 1996 by
and between the Registrant and WCB
Properties Limited Partnership (9)
M. Second Amendment to Purchase and Sale
Agreement dated October 11, 1996 by
and between the Registrant and WHEXC
Real Estate Limited Partnership (9)
N. Purchase and Sale Agreement dated
October 18, 1996 by and between the
Registrant and Norwest Bank Minnesota
South, N.A. (9)
O. Agreement for Dissolution of Joint
Venture/Partnership dated December
18, 1996 by and between the
Registrant and Prudential Realty
Acquisition Fund II, L.P. (filed
herewith)
13 Registrant's 1996 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 1996
Annual Report is to be deemed filed
as part of this report.)
27 Financial Data Schedule (filed
herewith)
(b) Reports on Form 8-K
Registrant's Current Report on Form
8-K dated October 17, 1996, as filed
with the Securities and Exchange
Commission on November 1, 1996,
relating to Item 2 regarding the
sales of the One Executive Center and
Norwest Center properties.
</TABLE>
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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
Incorporated by reference to Exhibits
(7) 10(g) and 10(h) of Registrant's Current
Report on Form 8-K dated March 26, 1996
Incorporated by reference to Exhibits
(8) 10(i) and 10(j) of Registrant's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1996
Incorporated by reference to Exhibits
(9) 10(k), 10(l), 10(m) and 10(n) of
Registrant's Current Report on Form 8-K
dated October 17, 1996
Incorporated by reference to Proxy
(10) Statement on Schedule 14A as filed with
the Commission on January 26, 1996
10
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Deloitte &
Touche LLP
--------------------------------------------------------
Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Prudential Acquisition Fund I, L.P.
New York, New York
We have audited the statement of net assets in process of liquidation of
Prudential Acquisition Fund I, L.P. (a Delaware Limited Partnership) as of
December 31, 1996, the statement of financial condition of Prudential
Acquisition Fund I, L.P. as of December 31, 1995, 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, 1996, and have issued our report thereon
dated March 24, 1997; such financial statements and report thereon are included
in your 1996 Annual Report to Limited Partners and are incorporated herein by
reference. Our audits also included the financial statement schedule of
Prudential Acquisition Fund I, L.P., listed in Item 14. This financial statement
schedule is the responsibility of the General Partners. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
/s/ Deloitte & Touche LLP
March 24, 1997
- -----------------
Deloitte Touche
Tohmatsu
International
- -----------------
11
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PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
Schedule III--Real Estate and Accumulated Depreciation
December 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Costs Gross Amounts at which
Initial Cost (A) Capitalized Carried at Close of Period
------------------------------ (Sold) ---------------------------------------------
Buildings Subsequent Buildings
and to and Accumulated
Description Land Improvements Acquisition Land Improvements Total (B) Depreciation(C)
- ------------------ ----------- ---------------- ----------- ----------- ---------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Norwest Center
Rochester, MN
Office Building $ 525,000 $ 8,027,899 $(8,552,899) $ -- $ -- $ -- $ --
Norwalk Industrial
Norwalk, CA
Industrial
Warehouse 2,248,792 5,678,285 (7,927,077 ) $ -- $ -- $ -- $ --
One Executive
Center
Albuquerque, NM
Office Building 2,085,729 15,228,676 (17,314,405) -- -- -- --
----------- ---------------- ----------- ----------- ---------------- ------------ ---------------
Totals $ 4,859,521 $ 28,934,860 $(33,794,381) $ -- $ -- $ -- $ --
----------- ---------------- ----------- ----------- ---------------- ------------ ---------------
----------- ---------------- ----------- ----------- ---------------- ------------ ---------------
</TABLE>
- --------------------------------------------------------------------------------
Notes to Schedule III -
Real Estate and Accumulated Depreciation
December 31, 1996
(A) Initial cost represents the initial purchase price of the properties
including acquisition fees.
(B) Reconciliation of Real Estate Owned:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Balance at Beginning of Year $ 35,130,360 $34,868,120 $35,293,581
Allocation of accumulated depreciation
against the carrying amount of the
properties based upon the
reclassification of the properties as
held for sale (17,417,828) -- --
Additions During Year 90,426 262,240 344,539
Write-downs During Year -- -- (770,000)
Property Sold During Year (17,802,958) -- --
------------ ----------- -----------
Balance at End of Year $ -- $35,130,360 $34,868,120
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
(C) Reconciliation of Accumulated Depreciation:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Balance at Beginning of Year $ 17,417,828 $16,214,016 $14,877,560
Additions During Year -- 1,203,812 1,336,456
Allocation of accumulated depreciation
against the carrying amount of the
properties based upon the
reclassification of the properties as
held for sale (17,417,828) -- --
------------ ----------- -----------
Balance at End of Year $ -- $17,417,828 $16,214,016
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
Effective December 31, 1995, the Registrant reclassified its properties from
held for use to held for sale and ceased depreciating the properties for
financial statement purposes only.
12
<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 27, 1997
---------------------------------------------
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 27, 1997
---------------------------------------------
Thomas F. Lynch, III
President, Chief Executive Officer,
Chairman of the Board of Directors and
Director
By: /s/ Barbara J. Brooks Date: March 27, 1997
---------------------------------------------
Barbara J. Brooks
Vice President-Finance and Chief Financial
Officer
By: /s/ Eugene D. Burak Date: March 27, 1997
---------------------------------------------
Eugene D. Burak
Vice President
By: /s/ Frank W. Giordano Date: March 27, 1997
---------------------------------------------
Frank W. Giordano
Director
By: /s/ Nathalie P. Maio Date: March 27, 1997
---------------------------------------------
Nathalie P. Maio
Director
13
<PAGE>
<PAGE>
Prudential Realty Partnerships, Inc.
A Delaware corporation, General Partner
By: /s/ Joel W. Stoesser Date: March 27, 1997
---------------------------------------------
Joel W. Stoesser
Chairman of the Board of Directors
By: /s/ David Bradford Date: March 27, 1997
---------------------------------------------
David Bradford
President and Director
By: /s/ Kevin R. Smith Date: March 27, 1997
---------------------------------------------
Kevin R. Smith
Vice President and Director
By: /s/ Jose Gener Date: March 27, 1997
---------------------------------------------
Jose Gener
Vice President and Comptroller
By: /s/ C. Edward Chaplin Date: March 27, 1997
---------------------------------------------
C. Edward Chaplin
Treasurer
By: /s/ Roger S. Pratt Date: March 27, 1997
---------------------------------------------
Roger S. Pratt
Director
By: /s/ Joseph D. Margolis Date: March 27, 1997
---------------------------------------------
Joseph D. Margolis
Secretary
14
<PAGE>
<PAGE>
AGREEMENT FOR DISSOLUTION OF JOINT VENTURE/PARTNERSHIP
THIS AGREEMENT FOR DISSOLUTION OF JOINT VENTURE/PARTNERSHIP (this
"Agreement") is made effective as of the 18th day of December, 1996, by and
between Prudential Acquisition Fund I, L.P. ("PAF") and Prudential Realty
Acquisition Fund II, L.P. ("PRAF").
BACKGROUND
On May 8, 1985, PAF and The Prudential Insurance Company of America
("Prudential") entered into a certain Joint Venture Agreement, thereby
creating a joint venture/partnership under Florida law, which operated under
the name of "Ridge Plaza Joint Venture" ("Ridge Plaza"). The purpose of Ridge
Plaza was to enter into contracts to purchase two shopping centers located in
Broward County, Florida (the "Centers"), and to acquire and operate for
investment purposes, the Centers.
As of May 15, 1986, Prudential sold its entire interest in Ridge Plaza to
PRAF as documented in that certain Third Amendment to Joint Venture Agreement
of Ridge Plaza Joint Venture dated as of May 15, 1986.
On March 26, 1996, Ridge Plaza sold the Centers and distributed the proceeds
of such sale to its joint venture partners.
The parties have agreed that since Ridge Plaza has distributed substantially
all of its assets, Ridge Plaza should be dissolved as of December 18th, 1996,
and that any remaining joint venture/partnership assets should be distributed
between the parties hereto.
NOW THEREFORE, in consideration of the promises and agreements herein
contained and for other good and valuable consideration, the receipt and
adequacy of which are acknowledged, the parties agree as follows:
AGREEMENT
1. Dissolution. Effective on the date first above written, Ridge Plaza is
hereby dissolved. Accordingly the business of Ridge Plaza shall be wound up
and all its assets distributed in liquidation in accordance with its Joint
Venture Agreement and this Agreement.
2. Closing of Books. The partnership books of Ridge Plaza will be closed and
an accounting will be completed on or before December 31, 1996.
1
<PAGE>
3. Distribution of the Assets. All remaining assets of Ridge Plaza shall be
distributed in accordance with Section 13.5 of the Joint Venture Agreement.
4. Final Partnership Return. Ridge Plaza will (i) file its final Form 1065,
U.S. Partnership Return of Income, and (ii) distribute Schedule K-1's,
Partner's Share of Income, Credits, Deductions, etc., to PAF and PRAF,
respectively, for the calendar year 1996, on or before April 15, 1997.
5. Retention of the Joint Venture/Partnership Books. The joint
venture/partnership books will be retained by Prudential Securities, as
agent for PAF and PRAF for a period of six (6) years. PAF and PRAF and
their agents will have access to the joint venture/partnership books during
said six (6) year period for all reasonable purposes.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
WITNESSES:
PAF
Prudential Acquisition Fund I, L.P.,
a Delaware limited partnership, partner
By: Prudential Realty Partnerships, Inc.,
general partner
/s/ Ellen T. Kendall By: /s/ Kevin R. Smith
- ------------------------------- -------------------------
Name: Ellen T. Kendall (print) Name: Kevin R. Smith
Its: Vice President
/s/ Kelly A. Arrigo
- -------------------------------
Name: Kelly A. Arrigo (print)
PRAF
Prudential Realty Acquisition Fund II, L.P.,
a Delaware limited partnership, partner
By: Prudential Realty Partnerships, Inc.,
general partner
/s/ Ellen T. Kendall By: /s/ Kevin R. Smith
- ------------------------------- -------------------------
Name: Ellen T. Kendall (print) Name: Kevin R. Smith
Its: Vice President
/s/ Kelly A. Arrigo
- -------------------------------
Name: Kelly A. Arrigo (print)
2
<PAGE>
1996
- --------------------------------------------------------------------------------
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, 1996
1
<PAGE>
<PAGE>
Deloitte &
Touche LLP
--------------------------------------------------------
Two World Financial Center Telephone: (212) 436-2000
New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Prudential Acquisition Fund I, L.P.
New York, New York
We have audited the accompanying statement of net assets in process of
liquidation of Prudential Acquisition Fund I, L.P. (a Delaware Limited
Partnership) as of December 31, 1996. In addition, we have audited the
accompanying statement of financial condition of Prudential Acquisition Fund I,
L.P. as of December 31, 1995, 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, 1996. 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.
As discussed in Notes A and B to the financial statements, the Partnership's
limited partners have approved the dissolution and ultimate liquidation of the
Partnership. As a result, the Partnership has changed its basis of accounting
from the going-concern basis to the liquidation basis effective December 31,
1996.
In our opinion, such financial statements present fairly, in all material
respects, (1) the net assets in process of liquidation of Prudential Acquisition
Fund I, L.P. at December 31, 1996, (2) its financial condition at December 31,
1995 and (3) the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996 in conformity with generally
accepted accounting principles on the bases described in the preceding
paragraph.
/s/ Deloitte & Touche LLP
March 24, 1997
- -----------------
Deloitte Touche
Tohmatsu
International
- -----------------
2
<PAGE>
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
STATEMENT OF NET ASSETS
(in process of liquidation)
December 31, 1996
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 928,108
Due from General Partners at liquidation 707,252
Other assets 92,600
------------
Total assets 1,727,960
------------
LIABILITIES
Estimated liquidation costs 295,000
Due to affiliates 35,819
Other liabilities 209,007
------------
Total liabilities 539,826
------------
Contingencies
Net assets available to Limited and General Partners $ 1,188,134
------------
------------
Limited partnership units issued and outstanding 70,124
------------
------------
- --------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF FINANCIAL CONDITION
(going concern basis)
December 31, 1995
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------------------------
ASSETS
Property held for sale $17,712,532
Investment in joint venture, net 9,057,964
Cash and cash equivalents 750,153
Deferred rent 391,978
Other assets 48,236
------------
Total assets $27,960,863
------------
------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 513,226
Tenant security deposits 18,724
------------
Total liabilities 531,950
------------
Partners' capital
Limited partners (70,124 units issued and outstanding) 27,428,913
General partners --
------------
Total partners' capital 27,428,913
------------
Total liabilities and partners' capital $27,960,863
------------
------------
- --------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
STATEMENTS OF OPERATIONS
(going concern basis)
<TABLE>
<CAPTION>
Year ended December 31,
----------------------------------------
1996 1995 1994
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
REVENUES
Rental income $2,079,886 $2,965,764 $3,048,468
Recovery of expenses 768,562 843,567 944,412
Interest income 81,717 41,266 18,702
Joint venture equity income (loss) 260,504 (654,903) 193,516
---------- ---------- ----------
3,190,669 3,195,694 4,205,098
---------- ---------- ----------
EXPENSES
Property operating 1,307,631 1,283,302 1,294,770
Real estate taxes 371,701 519,140 524,807
General and administrative 275,333 532,600 256,455
Provision for loss on impairment of assets -- -- 770,000
Depreciation and amortization -- 1,203,812 1,336,456
---------- ---------- ----------
1,954,665 3,538,854 4,182,488
---------- ---------- ----------
Income (loss)--going concern basis 1,236,004 (343,160) 22,610
Gain on sale of properties 2,284,166 -- --
Estimated liquidation costs (295,000) -- --
---------- ---------- ----------
Net income (loss) $3,225,170 $ (343,160) $ 22,610
---------- ---------- ----------
---------- ---------- ----------
ALLOCATION OF NET INCOME (LOSS)
Limited partners $2,982,295 $ (583,724) $ (148,813)
---------- ---------- ----------
---------- ---------- ----------
General partners $ 242,875 $ 240,564 $ 171,423
---------- ---------- ----------
---------- ---------- ----------
Net income (loss) per limited partnership unit $ 42.53 $ (8.32) $ (2.12)
---------- ---------- ----------
---------- ---------- ----------
- ----------------------------------------------------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(going concern basis)
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS PARTNERS TOTAL
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
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
Net income 2,982,295 242,875 3,225,170
Distributions (29,930,326) (242,875 ) (30,173,201)
Effect of restoration provision of
partnership agreement 707,252 -- 707,252
------------ --------- ------------
Net assets--December 31, 1996 $ 1,188,134 $ -- $ 1,188,134
------------ --------- ------------
------------ --------- ------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements
4
<PAGE>
<PAGE>
PRUDENTIAL ACQUISITION FUND I, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(going concern basis)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------------
1996 1995 1994
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Rental income received $ 2,385,701 $ 3,066,379 $ 3,095,522
Recovery of expenses received 773,731 848,260 963,285
Interest received 81,717 41,266 18,702
Tenant security deposits received (returned) (18,724) 2,532 (2,331)
Real estate taxes paid (417,428) (519,958) (524,648)
Property operating expenses paid (1,314,973) (1,384,557) (1,165,577)
General and administrative expenses paid (454,034) (362,220) (265,529)
Distributions from joint venture income 260,504 -- 193,516
------------ ----------- -----------
Net cash provided by operating activities 1,296,494 1,691,702 2,312,940
------------ ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capitalized property expenditures (90,426) (262,240) (344,539)
Net proceeds from sale of properties 20,087,124 -- --
Distributions from joint venture in excess of income 9,057,964 1,080,000 319,484
------------ ----------- -----------
Net cash provided by (used in) investing activities 29,054,662 817,760 (25,055)
------------ ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners (30,173,201) (2,405,655) (1,714,272)
------------ ----------- -----------
Net increase in cash and cash equivalents 177,955 103,807 573,613
Cash and cash equivalents at beginning of year 750,153 646,346 72,733
------------ ----------- -----------
Cash and cash equivalents at end of year $ 928,108 $ 750,153 $ 646,346
------------ ----------- -----------
------------ ----------- -----------
- -----------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME (LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income (loss) $ 3,225,170 $ (343,160) $ 22,610
------------ ----------- -----------
Adjustments to reconcile net income (loss) to net
cash
provided by operating activities:
Gain on sale of properties (2,284,166) -- --
Depreciation and amortization -- 1,203,812 1,336,456
Provision for loss on impairment of assets -- -- 770,000
Distributions from joint venture income 260,504 -- 193,516
Joint venture equity (income) loss (260,504) 654,903 (193,516)
Changes in:
Deferred rent 391,978 107,621 34,070
Other assets (44,364) (31,361) 24,275
Estimated liquidation costs 295,000 -- --
Accounts payable and accrued expenses (268,400) 97,355 127,860
Tenant security deposits (18,724) 2,532 (2,331)
------------ ----------- -----------
Total adjustments (1,928,676) 2,034,862 2,290,330
------------ ----------- -----------
Net cash provided by operating activities $ 1,296,494 $ 1,691,702 $ 2,312,940
------------ ----------- -----------
------------ ----------- -----------
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE>
<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 in accordance
with a vote of the limited partners as described below. 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'').
The Partnership had invested in and operated a real estate investment
portfolio which consisted of five properties: 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 (``Joint Venture''). All of the Partnership's
properties have been sold as of December 31, 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. 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. Pursuant to the approval of the
plan of liquidation, the General Partners sold all the properties of the
Partnership during 1996. See Notes C and E for further information regarding
these sales.
B. Summary of Significant Accounting Policies
Basis of accounting
The Partnership adopted the liquidation basis of accounting effective
December 31, 1996. Accordingly, the net assets of the Partnership at December
31, 1996 are stated at liquidation value, i.e., the assets have been valued at
their estimated net realizable values and the liabilities include estimated
amounts to be incurred through the date of liquidation of the Partnership. The
actual remaining net proceeds from liquidation will depend upon a variety of
factors and are likely to differ from the amounts reflected in the accompanying
financial statements. Prior to December 31, 1996, the books and records of the
Partnership were maintained on a going concern accrual basis of accounting.
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.
Certain reclassifications have been made to prior year balances to conform
with the current year's financial statement presentation.
Property
Prior to December 31, 1995, property investments were depreciated using the
straight-line method over their estimated economic lives ranging from 5 to 35
years, depending on property type. As of December 31, 1995, the properties were
accounted for as assets held for sale and were recorded at the lower of their
carrying value or their estimated fair value less costs to sell. In addition,
depreciation ceased for financial reporting purposes as of December 31, 1995.
Investment in Joint Venture
The Partnership accounted for its investment in the Joint Venture which owned
two shopping centers (the ``Shopping Centers'') using the equity method.
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.
6
<PAGE>
<PAGE>
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 Partnership Agreement, as amended 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) and
depreciation 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 from operations are made in accordance with
the Partnership Agreement and are allocated 90% to the limited partners and 10%
to the General Partners.
Income from a Terminating Sale, as defined in the Partnership Agreement, is
allocated first to all partners having negative capital account balances, to the
extent of such balances, and then to the limited partners until their capital
accounts equal their Original Invested Capital plus an amount equal to 15%
interest per year cumulative on their Adjusted Invested Capital, as those terms
are defined in the Partnership Agreement. Loss from a Terminating Sale is
allocated 10% to the General Partners and 90% to the limited partners. However,
the deficiency in the capital accounts of the General Partners cannot exceed
$707,252, (the maximum obligation of the General Partners upon the liquidation
of the Partnership), as more fully described in Section 5.4 of the Partnership
Agreement. Accordingly, at December 31, 1996, the Partnership recorded a
receivable from the General Partners of this amount. Sales proceeds from a
Terminating Sale are distributed to the partners having positive capital account
balances.
C. Property
The Partnership's directly-owned properties at December 31, 1995 were:
<TABLE>
<S> <C>
Norwest Center Office Building--
Rochester, MN $ 5,793,788
Norwalk Industrial Warehouse--
Norwalk, CA 5,967,467
One Executive Center Office Building--
Albuquerque, NM 5,951,277
-----------
$17,712,532
-----------
-----------
</TABLE>
Pursuant to the plan of sale and complete liquidation and dissolution of the
Partnership, the Partnership has sold all of its properties as of December 31,
1996.
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 or 1996.
The Partnership sold, for cash, its interest in Norwalk Industrial, a 180,000
square foot industrial warehouse located in Norwalk, California, on August 6,
1996 for a gross sales price of $6,600,000 less costs to sell and pro-rations of
approximately $300,000. In addition, approximately $300,000 of deferred rent and
other assets were written-off relating to the sale of the property. The gross
sales price represented 100% of the appraised value of the property based upon
an appraisal dated as of December 31, 1995. The purchaser of the Norwalk
property was NNW Real Estate, Inc., a California corporation and an affiliate of
the property's sole tenant, Weber Distribution, under a Purchase and Sale
Agreement dated April 11, 1996. On August 13, 1996, as a result of this sale, a
distribution of $89.82 per unit was made to the limited partners.
The Partnership sold, for cash, its interest in One Executive Center, a
114,000 square foot five-story office building located in Albuquerque, New
Mexico, on October 17, 1996 for a gross sales price of $7,300,000 less costs to
sell and pro-rations of approximately $409,000. The gross sales price was in
excess of the
7
<PAGE>
<PAGE>
appraised value. The purchaser of the One Executive Center property was WHEXC
Real Estate Limited Partnership, a Delaware limited partnership.
The Partnership also sold, for cash, its interest in Norwest Center, a 97,000
square foot multi-tenant office building located in Rochester, Minnesota, on
October 18, 1996 for a gross sales price of $6,900,000 less costs to sell and
pro-rations of approximately $245,000. The gross sales price was in excess of
98% of the appraised value. The purchaser of the Norwest Center property was
Norwest Bank Minnesota South, N.A., a national banking association.
On November 1, 1996, a distribution of $200 per unit was made to the limited
partners consisting of $193.17 per unit from the sale of the One Executive
Center and Norwest Center properties and $6.83 per unit from previous
undistributed cash flow from operations.
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>
1996 1995 1994
- ----------------------------------------------------------------------------------------------------
Net income (loss) per financial statements $ 3,225,170 $(343,160) $ 22,610
----------- --------- ---------
Tax gain on sale of properties greater than financial
statement amount 4,635,339 -- --
Tax depreciation greater than financial statement
depreciation (1,606,462) (451,170) (330,406)
Joint Venture financial statement income less (greater)
than income for tax purposes (7,181,714) 933,103 (64,845)
Estimated liquidation costs recorded for financial
statement purposes only 295,000 -- --
Provision for loss on impairment of assets -- -- 770,000
Lease concessions and other 543,528 109,883 34,555
----------- --------- ---------
Total adjustments (3,314,309) 591,816 409,304
----------- --------- ---------
Tax basis net income (loss) $ (89,139) $ 248,656 $ 431,914
----------- --------- ---------
----------- --------- ---------
</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 initial charge to partners' capital of syndication costs,
for book purposes, when the Partnership was formed.
E. Investment in Joint Venture
The Partnership had a 54% interest in the Joint Venture with an affiliated
limited partnership. The sale of the two shopping centers owned by the Joint
Venture occurred on March 26, 1996 for a gross sales price of $15,500,000 less
costs to sell and pro-rations resulting in a $56,000 loss on the sale. A
distribution was made in April 1996 in the amount of $121.00 per unit which
represented $112.66 per unit from the sale of the Shopping Centers by the Joint
Venture, and $8.34 per unit from current and prior undistributed cash flow from
operations.
Subsequently, on December 18, 1996, an agreement was signed by and between
the Partnership and Prudential Realty Acquisition Fund II, L.P., an affiliated
limited partnership, outlining the terms of the dissolution of the Joint
Venture. As of December 31, 1996, all remaining assets of the Joint Venture were
distributed in liquidation in accordance with this agreement.
The total assets and partners' capital of the Joint Venture as of December
31, 1995 were $17,094,071 and $16,767,372, respectively. The total revenues for
the Joint Venture for the years ended December 31, 1995 and 1994 were $4,037,347
and $3,613,077, respectively. The net loss for the Joint Venture for the year
ended December 31, 1995 was $1,204,227 and the net income for the Joint Venture
for the year ended December 31, 1994 was $366,919.
8
<PAGE>
<PAGE>
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 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.
F. 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,
----------------------------------
1996 1995 1994
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------
Prudential-Bache Properties, Inc. and
affiliates
General and administrative $127,600 $118,400 $ 89,400
Estimated liquidation costs 120,000 -- --
-------- -------- --------
247,600 118,400 89,400
-------- -------- --------
Prudential Realty Partnerships, Inc. and
affiliates
General and administrative 42,100 87,200 41,500
Estimated liquidation costs 15,000 -- --
-------- -------- --------
57,100 87,200 41,500
-------- -------- --------
$304,700 $205,600 $130,900
-------- -------- --------
-------- -------- --------
</TABLE>
Expenses payable to the General Partners and their affiliates (which are
included in accounts payable and accrued expenses) as of December 31, 1996 and
1995 are $35,800 and $74,000, respectively.
In addition, the General Partners and their affiliates performed similar
services for the Joint Venture. The Partnership's allocable share of the costs
and expenses incurred on behalf of the Joint Venture which are reimbursable to
the General Partners and their affiliates was $13,800, $38,400 and $30,900 for
the years ended December 31, 1996, 1995, and 1994, respectively.
Prudential Securities Incorporated (``PSI''), an affiliate of the General
Partners, owns 175 limited partnership units at December 31, 1996.
G. Subsequent Event
On March 5, 1997, a lawsuit captioned Madison Partnership Liquidity Investors
VIII, LLC (``Madison'') v. Prudential-Bache Properties, Inc. was filed in the
Court of Chancery in the State of Delaware. The suit alleges a breach of
contract with Madison and a breach of fiduciary duty to Madison, as well as
intentional interference with the contract between Madison and the purported
tendering limited partners. The suit seeks injunctive and declaratory relief
demanding that the Partnership's transfer agent effectuate the purported
transfers to Madison, pursuant to the tender offer made by Madison to the
limited partners. The lawsuit does not name the Partnership as a defendant but
does name PBP. The distribution amounts in excess of Madison's tender offer
price, with respect to the Units that are the subject of this lawsuit, have been
escrowed by the Partnership's transfer agent pending a resolution of this issue.
PBP is preparing an answer to the complaint at this time.
9
<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
As more fully described in Notes A, C and E to the financial statements, the
Partnership sold all its properties in 1996 for net proceeds of approximately
$28 million. During 1996, the Partnership paid distributions from the net
proceeds from these sales aggregating $395.65 per unit. In addition,
distributions of $31.17 per unit were paid to the limited partners from cash
flow from operations. The Partnership has retained funds for a contingency
reserve and to meet current and future operating costs until the liquidation of
the Partnership. The Partnership intends to liquidate in 1997 and will
distribute any remaining funds at such time. Estimated costs expected to be
incurred through the date of liquidation of the Partnership have been accrued in
the accompanying financial statements.
At December 31, 1996, the Partnership recorded a receivable from the General
Partners in the amount of $707,252. This amount represents the maximum
obligation of the General Partners, payable upon the liquidation of the
Partnership, in accordance with the Partnership Agreement. See Note B for
further information.
Results of Operations
All significant fluctuations between 1995 and 1996 were due to the sale of
all the Partnership's properties during 1996 and the accrual of estimated costs
relating to the liquidation of the Partnership.
1995 vs. 1994
The Partnership recorded a net loss of $343,000 for the year ended December
31, 1995 as compared to net income of $23,000 for the year ended December 31,
1994. As discussed in further detail below, the variance between 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 in
1995. A $770,000 provision for loss on impairment of assets was recorded in 1994
relating to the directly-owned properties. Other fluctuations between periods
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. Operating expenses for 1995 were comparable to 1994.
The Norwest Center property in Rochester, Minnesota was 92% and 92% leased
(88% and 87% occupied) as of December 31, 1995 and 1994, respectively. 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.
The One Executive Center office property in Albuquerque, New Mexico was 99%
and 100% leased as of December 31, 1995 and 1994, respectively. 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.
Depreciation and amortization for the year ended December 31, 1995 decreased
$133,000 as compared to 1994 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.
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 Statement and increased costs
to administer the Partnership.
10
<PAGE>
<PAGE>
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. 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.
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. Real estate taxes for the year ended December 31, 1995
increased $91,000 as compared to 1994 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. 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
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.
11
<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
12
<PAGE>
<PAGE>
Peck Slip Station BULK RATE
P.O. Box 2016 U.S. POSTAGE
New York, NY 10272-2016 PAID
Automatic Mail
PAF/17003
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Prudential Acquisition Fund I, L.P.
and is qualified in its entirety by reference
to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000717319
<NAME> Prudential Acquisition Fund I, L.P.
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-1-1996
<PERIOD-END> Dec-31-1996
<PERIOD-TYPE> 12-Mos
<CASH> 928,108
<SECURITIES> 0
<RECEIVABLES> 799,852
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,727,960
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,727,960
<CURRENT-LIABILITIES> 539,826
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,188,134
<TOTAL-LIABILITY-AND-EQUITY> 1,727,960
<SALES> 5,474,835
<TOTAL-REVENUES> 5,474,835
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,249,665
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,225,170
<EPS-PRIMARY> 42.53
<EPS-DILUTED> 0
</TABLE>
