FORM 10-K
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| ANNUAL REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31,
1998
OR
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the transition period
from _________ to _________.
Commission File number 0-15755
FJS PROPERTIES FUND I, L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3252067
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
264 Route 537 East, Colts Neck, NJ 07722
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 732-542-9209
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
NONE N/A
Securities registered pursuant to Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(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 X 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. [ ]
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. N/A No public market exists.
Documents Incorporated by Reference
Prospectus of Registrant, dated June 10, 1985, as supplemented by Supplement
dated November 7, 1985, filed pursuant to Rule 424 under the Securities Act of
1933. Annual Report on Form 10-K of Registrant for the fiscal years ended
December 31, 1986 through December 31, 1997, filed pursuant to section 13 or
15(d) of the Securities Exchange Act of 1934, but each only to the extent
expressly incorporated by reference in Parts I, II and III.
<PAGE>
PART I
Item 1. Business
Registrant is a Delaware limited partnership formed as of October 5,
1984. FJS Properties, Inc., a Delaware corporation and an affiliate of First
Jersey Securities, Inc. ("First Jersey" or the "Underwriter"), is the general
partner ("General Partner") of the Registrant.
Reference is made to the Prospectus (the "Prospectus") of Registrant
dated June 10, 1985, as supplemented by a Supplement (the "Supplement"), dated
November 7, 1985, which have been filed pursuant to rule 424 under the
Securities Act of 1933, as amended, each of which is incorporated herein by
reference. The Prospectus was filed as part of Registrant's Registration
Statement on Form S-11, pursuant to which 100,000 Units of Limited Partnership
Interest (the "Units") were registered. On May 1, 1986, the sole closing of the
Units, the Registrant received $8,391,500 in Gross Proceeds from the sale of
16,783 Units to investors. Registrant paid $671,320 in underwriting commissions
to First Jersey and a total of $419,575 in organization and offering expenses to
the General Partner.
Registrant owns and operates one 312 unit garden apartment complex,
the Pavilion Apartments ("Pavilion"), located in West Palm Beach, Florida. The
description of the acquisition is set forth in the Prospectus under "Property
Acquisitions" and is incorporated herein by reference. Registrant will not
invest in or acquire any other properties.
For the years ended December 31, 1998, 1997 and 1996, revenues from
Pavilion accounted for approximately 98.4%, 98.7%, and 98.8% respectively of
Registrant's gross revenues.
Competition
The real estate business is highly competitive and Pavilion has
active competition from similar properties in the vicinity. Registrant will also
experience competition for potential buyers at such time as it seeks to sell
Pavilion.
Employees
Services are performed by Registrant's employees at Pavilion by nine
full-time on site personnel. The personnel are under the direct supervision of a
local unaffiliated management company which in turn is supervised by the General
Partner. Salaries for such on-site personnel are paid by Registrant or by the
local unaffiliated management company from fees received from Registrant. The
General Partner also provides certain supervisory property management services
to Registrant under a management agreement.
Tax Legislation
The Tax Reform Act of 1986 (the "1986 Act"), which was enacted on
October 22, 1986, requires that losses from "passive activities" (which includes
any rental activity) may only offset income from "passive activities" Passive
losses in excess of passive income are suspended and are carried over to future
years when they may be deducted against passive income generated by the
Partnership in such year (including gain recognized on the sale of the
Partnership's assets) or against passive income derived by Unitholders from
other sources.
The Revenue Act of 1987 (the "1987 Act") was enacted on December 22,
1987 and provides certain adverse tax consequences for "publicly traded
partnerships." A "publicly traded partnership" is defined as a partnership whose
interests are traded on an established securities market or readily tradable on
a secondary market (or the substantial equivalent thereof). Such a partnership
will be taxed as a corporation (unless at least 90% of its gross income is
derived from certain passive sources, such as real property rents, dividends or
interest) and each tax-exempt entity acquiring an interest in any such
partnership after December 17, 1987 will have all of its share of the
partnership's income attributable to interests acquired after such date treated
as unrelated business income. In addition, the income from such a partnership
would be treated as other than passive income, and losses from any such
partnership could only be offset by income from the same partnership.
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The Revenue Act of 1987 adopted provisions which have an adverse
impact on investors in a "publicly traded partnership." A "publicly traded
partnership" is a partnership whose interests are traded on an established
securities market or readily tradable on a secondary market (or the substantial
equivalent thereof). If the Partnership were classified as such, (i) it may be
taxed as a corporation, (ii) qualified plans and other entities exempt from
taxation acquiring interests in the Partnership after December 17, 1987 would
have to treat income derived from the Partnership as unrelated business income,
with the result that the limited partnership interests would be less attractive
to tax-exempt investors (and therefore could be less marketable) or (iii) income
derived from an investment in the Partnership would be treated as other than
passive income, in which case losses from the Partnership could only be offset
by income from the same partnership. The IRS has established alternative safe
harbors that allow interests in a partnership to be transferred or redeemed in
certain circumstances without causing the partnership to be characterized a
"publicly traded partnership." Interests in the Partnership are not listed or
quoted for trading on an established securities exchange. However, it is
possible that transfers of interests could occur in a secondary market in
sufficient amount and frequency to cause the Partnership to be treated as a
"publicly traded partnership." The Partnership has adopted a policy of
prohibiting transfers in secondary market transactions unless, notwithstanding
such transfers, the Partnership will satisfy at least one of the safe harbors.
Such a restriction could impair the ability of an investor to liquidate its
investment quickly. It is anticipated that such policy will remain in effect
until such time, if ever, as further clarification of the Revenue Act of 1987
permits the Partnership to lessen the scope of these restrictions. The General
Partner, if so authorized, will take such steps as are necessary, if any, to
prevent the reclassification of the Partnership as a "publicly traded
partnership."
Item 2. Properties
The sole property owned and operated by Registrant is the Pavilion
Apartments (the "Project"), a 312 Unit garden apartment complex located at 401
Executive Center Drive, West Palm Beach, Florida. Registrant will not acquire or
invest in any other properties. Registrant acquired a 50% interest in the
Pavilion on December 31, 1984, and the remaining 50% on January 1, 1985. It owns
Pavilion in fee ownership, subject to a first mortgage.
Pavilion, constructed in 1972, is located on a 15 acre tract and
consists of 312 apartment units containing 286,500 square feet of rentable area
in 11 low-rise buildings. Rental units are available in one, two and three
bedroom plans. There are 108 one-bedroom apartments, 44 two- bedroom apartments
with one bath, 116 two-bedroom apartments with two baths, and 44 three-bedroom
apartments. Ground amenities include a heated swimming pool, lighted tennis
courts, basketball and shuffle-board courts, and a clubhouse with game room,
saunas, lounge and outdoor barbecues. An equipped children's playground is also
provided.
The apartments in the Project are available for rent to residential
tenants, generally under one year leases. No tenant occupies more than one
apartment in the Pavilion except for the West Palm Beach Recovery Center which
occupies 8 Units, and Country Nights which occupies 2 units. Each of such units
was leased at the then current market rents. With substantially all tenants
occupying their apartments under one year leases, it is anticipated that leases
for all apartments will expire each year. The current rent schedule for leases
is as follows:
Unit Size1 Monthly Rent2
1 BR/1B $519/$549
2 BR/1B $619/$649
2 BR/2B $639/$679
3 BR/2B $759/$799
In the opinion of the management of Registrant, the Project is
adequately covered by insurance.
- --------
1BR = Bedroom; B = Bathroom
2Varies depending on location of unit in the Project.
Page 2
<PAGE>
First Mortgage: The existing first mortgage affecting the Project is
held of record by Greenwich Capital Financial Products, Inc., and serviced by
Bank United of Texas FSB, Houston, Texas. As of December 31, 1998, the mortgage
had an unpaid principal balance of approximately $4,722,579. This mortgage was
closed on March 31, 1994, and refinanced the former first mortgage held by The
Bank of Tokyo. At that time, a new loan secured by a first mortgage on the
project was obtained from the Long Beach Bank, FSB, Orange, California, in the
amount of $5,000,000. This loan provides for a term of ten (10) years with an
interest rate of 9.75% per annum. The loan is repayable in equal monthly
installments of $44,556.87 for principal and interest, with a balloon payment
due in March 2004. At maturity a balance of approximately $4,215,000 will be
due. The loan requires deposits with the lender for real estate taxes, insurance
premiums, a debt service reserve of one month's payment, as well as deposits for
replacement reserves for the project. These deposits are held in interest
bearing accounts for the benefit of Registrant. The loan is not prepayable
during the first five years of its term, and thereafter is prepayable with
payment of a penalty based upon a "rate protection" formula for the lender. The
loan requires consent of the holder to the transfer or sale of the Pavilion
Apartments and to certain transfers of ownership interests in Registrant. For
the complete terms and provisions of this loan see Exhibits 10(m) through 10(s).
The following table sets forth the components of the Pavilion
Apartments upon which depreciation, for Federal Tax purposes, is taken:
Item Tax Basis Rate Method Life
Building $6,897,424 5% ACRS 18 yrs
Improvements $ 207,427 3.6% MACRS 27.5 yrs
Improvements $ 528,798 Fully Depreciated SL 10 yrs
Furniture/Fixtures $1,048,378 Fully Depreciated ACRS 5 yrs
Furniture/Fixtures $ 204,639 Various MACRS 5/7 yrs
Furniture/Fixtures $ 6,635 Fully Depreciated MACRS 7 yrs
Improvements $ 5,639 1.2% MACRS 27.5 yrs
Improvements $ 6,185 2.9% MACRS 27.5 yrs
Improvements $ 5,071 .15% MACRS 27.5 yrs
Ad Valorem Real Estate taxes for the 1998 calendar year were in the
amount of $187,348.66 which was based upon an assessed valuation of $7,300,000
and the following millage rates:
Taxing Authority: Millage rate:
County 4.6000
School State 6.5470
School Local 2.6320
City of West Palm Beach 8.3129
So Fl Water Management Dist. 0.5970
Children's Services Council 0.4403
F.I.N.D. 0.0470
PBC Health Care District 1.0500
Everglades Construction Project 0.1000
County - Debt 0.2582
School - Debt 0.5030
City of West Palm Beach - Debt 0.5768
Total: 25.6642
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<PAGE>
In addition a non-advalorem assessment of $18,671.82 was levied by the
Solid Waste Authority against the Pavilion. The aggregate tax of $206,020.48 was
paid in the discounted amount of $197,779.66 in November 1998.
Item 3. Legal Proceedings
There are no material legal proceedings pending against or involving
Registrant or Pavilion.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the 1998
calendar year.
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<PAGE>
PART II
Item 5. Market for Registrant's Securities and Related Security Holder Matters
Units of the Registrant are not publicly traded nor is it anticipated
that a public trading market will develop for the Units. On and as of December
31, 1997, beneficial interests in an aggregate of 1,843 Units were acquired from
the unaffiliated holders thereof, by three third parties at a price of $75 per
Unit, pursuant to a tender offer filed with the Securities and Exchange
Commission. As of March 15, 1999, there were approximately 669 holders owning an
aggregate of 16,788 Units. The General Partner has established a policy of
limiting transfers of Units in secondary market transactions unless,
notwithstanding such transfers, the Partnership will satisfy one or more
applicable safe harbors prescribed by the Internal Revenue Service to avoid
having the Partnership classified as a publicly traded partnership which could
have adverse tax effects on limited partners. In order to comply with the safe
harbor provisions, the transfer of Units may be restricted.
There were no distributions per Unit of Registrant during the 1985
fiscal year. The Registrant distributed $3.01 per Unit for the 1986 fiscal year,
$4.63 per Unit for 1987, $6.59 per Unit for 1988, $14.72 per Unit for 1989,
$7.75 per Unit for 1990, and $1.97 per Unit for the first quarter of 1991. There
were no distributions made for the second, third or fourth quarters of 1991, for
1992, or for 1993. Distributions aggregating $5.19 and $5.64 per Unit were
distributed for 1994 and 1995 respectively, and a distribution of $1.54 was made
for the first quarter of 1996. No distributions were made for the remaining
quarters of 1996, during which period all available cash flow was utilized for
work being done on the Pavilion Apartments. Distributions of $1.30, $2.40 and
$1.83 were made for the first three quarters of 1997 respectively. No
distribution was made for the fourth quarter of 1997 as all available cash flow
was utilized for capital improvements at the Pavilion Apartments. Distributions
of $2.70, $2.62, $0.91 and $2.19 (disbursed in February 1999) were made for the
respective quarters of 1998.
There are no material legal restrictions set forth in Registrant's
Limited Partnership Agreement, annexed to the Prospectus as Exhibit A thereto
("Partnership Agreement"), upon Registrant's present or future ability to make
distributions.
Item 6. Selected Financial Information
The information set forth below presents selected financial data of
Registrant. Additional financial information is set forth in the audited
financial statements and footnotes contained herein.
<TABLE>
Years Ended
December 31,
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $7,076,729 $7,258,818 $7,448,953 $7,756,871 $8,022,290
Mortgage Note Payable $4,722,579 $4,793,033 $4,856,968 $4,914,986 $4,967,636
Revenue $2,081,901 $2,040,543 $1,852,877 $1,841,892 $1,817,308
Interest Expense - Mortgages $ 463,687 $ 470,769 $ 476,199 $ 481,611 $ 438,481
Net Profit [Loss] $ 34,952 $ (50,582) $ (270,996) $ (121,682) $ (241,357)
Net Cash Provided by
Operating Activities $ 233,981 $ 280,140 $ 51,495 $ 116,822 $ 30,551
Net Cash [Used] in Investing
Activities - Capital
Expenditures $ (134,645) $ (80,481) $ (10,336) $ (2,687) $ (45,228)
Net Cash [Used] in Financing
Activities $ (176,100) $ (157,710) $ (89,899) $ (146,425) $ (9,026)
Profit (Loss) Per Limited
Partnership Unit $ 2.06 $ (2.98) $ (15.98) $ (7.18) $ (14.23)
Distributions Per Limited
Partnership Unit $ 6.23 $ 5.53 $ 1.88 $ 5.53 $ 4.96
Weighted Average Number of
Limited Partnership Units
Outstanding 16,788 16,788 16,788 16,788 16,788
</TABLE>
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<PAGE>
Item 7. Management's Discussion and Analysis of Financial Conditions and Results
of Operations
Liquidity and Capital Resources
As of the present date, Registrant owns one Property, the Pavilion
Apartments, and does not intend to acquire any other property.
As of May 1, 1986, Registrant admitted as Limited Partners
purchasers of 16,783 Units. Total capital raised was $8,391,500. In addition,
Registrant received accrued interest on the escrow account in the amount of
$82,471. Thus proceeds from the admission of Limited Partners aggregated
$8,473,971.
The Pavilion Apartments are owned by Registrant subject to a first
mortgage loan in the original principal amount of $5,000,000. This loan was
obtained from Long Beach Bank in March 1994, to refinance the previous first
mortgage affecting the property. (See "First Mortgage" above for a description
of the terms of this loan).
Registrant anticipates that cash flow from Pavilion should be
sufficient to permit the Partnership to make the monthly payments on the first
mortgage due prior to maturity and to meet Registrant's monthly operating
expenses, however, should there be a significant decrease in Pavilion's
occupancy or rental rates, there can be no assurance that Registrant would be
able to obtain sufficient funds to make such payments.
Registrant distributed $3.01 per Unit for the 1986 fiscal year,
$4.63 per Unit for 1987, $6.59 per Unit for 1988, $14.72 per Unit for 1989,
$7.75 per Unit for 1990, and $1.97 per Unit for the first quarter of 1991. There
were no distributions made for the second, third or fourth quarters of 1991, for
1992, or for 1993. Distributions aggregating $5.19 and $5.64 per Unit were made
for 1994 and 1995 respectively, and a distribution of $1.54 was made for the
first quarter of 1996. No distributions were made for the remaining quarters of
1996. The reduction in distributions in the years from 1989 through 1991,
resulted from decreasing interest rates and the reduced occupancy levels which
the Pavilion Apartments experienced. When there was cash flow available for
distribution during 1992 and 1993, no distributions were made to retain
available cash which might be required for use in connection with the
refinancing of the existing first mortgage. During the last three quarters of
1996 all available cash flow was utilized for work being done on the Pavilion
Apartments. Distributions of $1.30, $2.40 and $1.83 were made for the first
three quarters of 1997 respectively. No distribution was made for the fourth
quarter of 1997 as all available cash flow was utilized for capital improvements
at the Pavilion Apartments. (See "Operations - 1997 Fiscal Year" below).
Distributions of $2.70, $2.62, $0.91 and $2.19 (disbursed in February 1999) were
made for the respective quarters of 1998.
OPERATIONS
Registrant has operated the Pavilion Apartments, located in West
Palm Beach, Florida, since January 1985.
Management Agreement
The Pavilion Apartments are currently managed by M.L. Property
Management Inc., an unaffiliated property manager, under a five year agreement
as extended in January 1999. The agreement will also terminate on the earlier
sale or disposition of the Pavilion Apartments.
1998 Fiscal Year
Rental Income for the year ended December 31, 1998, was $2,081,901
as compared with $2,040,543 for the 1997 calendar year. The increase in income
in 1997 reflected increased rental rates for apartments at the project as
reduced by slightly increased vacancies at the property. Rental allowances, were
still being utilized to attracted tenants to the Pavilion, and were in
substantially the same amounts as experienced in the prior year. Occupancy rates
at the project held in the low to mid 90% range for the 1998 year. As of March
15, 1999, the Pavilion Apartments had sixteen apartments out of 312 available
for rent. These sixteen apartments represent seven of nine presently vacant
apartments and nine additional apartments where the tenants have given notice of
their intent to vacate. Two of the
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vacant apartments have already been rented. The nine apartments presently vacant
equates to a physical occupancy of 97.1%.
Cost of Rental Income, consisting mainly of real estate taxes,
repairs and maintenance and utilities, decreased in 1998 to $625,402 as compared
to the 1997 cost of $665,541. This decrease principally reflected reductions in
Real Estate Taxes as a result of a reduced assessed valuation of the project, as
well as a reduction in replacements at the Pavilion.
Selling, General and Administrative Expenses for 1998 decreased to
$689,444 from $711,626 in 1997. This decrease resulted principally from
insurance costs which showed a reduction as a result of better rates from a
change in the company providing such coverage to the Project.
In connection with the Tender Offer made by unaffiliated third
parties in December 1997 for Units of Limited Partnership Interests of
Registrant, other income of $10,300 for transfer fees was received, and expenses
of $13,200 for administrative fees and disbursements in connection with the
preparation of required Securities and Exchange Commission filings and
subsequent mailings to Limited Partners were incurred. This resulted in the net
Other Expenses of $2,900 which appears in 1998.
1997 Fiscal Year
Rental Income for the year ended December 31, 1997, was $2,040,543
as compared with $1,852,877 for the 1996 calendar year. The increase in income
in 1997 reflected increased rental rates for apartments at the project as well
as substantially decreased vacancies at the property. Rental allowances, were
still being utilized to attracted tenants to the Pavilion, and were again
reduced slightly during 1997. Occupancy rates at the project held in the low to
mid 90% range for the 1997 year. As of March 16, 1998, the Pavilion Apartments
had sixteen apartments out of 312 available for rent. These 16 apartments
represent 8 of 21 presently vacant apartments and 8 of an additional 11
apartments where the tenants have given notice of their intent to vacate.
Thirteen of the vacant apartments and three of the apartments scheduled to
become vacant have already been rented. In addition three tenants are under
eviction notices. The 21 apartments presently vacant equates to a physical
occupancy of 93.3%.
Cost of Rental Income, consisting mainly of real estate taxes,
repairs and maintenance and utilities, decreased in 1997 to $665,541 as compared
to the 1996 cost of $749,911. This decrease reflected the significant work
completed in 1996, and the resulting reduction in the work required during 1997.
This reduction was offset by an increase in water and sewer charges at the
Pavilion.
Selling, General and Administrative Expenses for 1997 increased to
$711,626 from $645,114 in 1996. This increase resulted principally from
increases in payroll expenses and real estate commissions. The real estate
commissions were paid for tenant referrals from unaffiliated sources which have
not been utilized in prior years, and which helped to increase the occupancy
levels at the Pavilion Apartments. Insurance costs showed a reduction as a
result of better rates from a change in the company providing such coverage to
the Project.
INFLATION
As of the present date, inflation has not had a major impact on the
operations of the Partnership. It is anticipated that future increases in
operating expenses will be offset if not exceeded by corresponding increases in
operating income.
YEAR 2000 ISSUES
Registrant has reviewed its operations and has concluded that the
consequences of Year 2000 issues will not have a material effect on the
company's business, results of operations or financial condition.
With respect to information technology systems, these are limited to
record keeping and servicing, and are not directly related to the furnishing of
apartments for rental at the Pavilion Apartments. Registrant has been advised by
its vendors that the software packages utilized for property management
functions are Year 2000 compliant as upgraded in the normal course of business.
Software
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utilized for Registrant's partnership bookkeeping have been reviewed and also
appear to be Year 2000 compliant.
The Pavilion Apartments do not have any significant embedded
technologies in use which would be anticipated to cause significant Year 2000
problems.
Registrant does not anticipate the requirement for any extraordinary
measures or expenses with respect to operations after January 1, 2000.
Naturally, no assurances can be made as to unanticipated Year 2000 problems
which may occur.
We are unable to comment on Year 2000 readiness of public utility
suppliers such as electric, gas, water and telephone, or on possible disruption
of public utility service to the Pavilion Apartments or to other similar
projects in the area.
Page 8
<PAGE>
Item 8. Financial Statements and Supplementary Data
FJS Properties Fund I, L.P.
Financial Statements
INDEX
Page
Number
Independent Auditor's Report............................................10
Financial statements
Balance Sheets as of December 31, 1998 and 1997.......................11
Statements of Operations for the years ended
December 31, 1998, 1997 and 1996..................................12
Statements of Partners' Capital [Deficit] for the years ended
December 31, 1998, 1997 and 1996..................................13
Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996 ................................14
Notes To Financial Statements ........................................15-18
Independent Auditor's Report on Supplementary Schedules.................19
Real Estate and Accumulated Depreciation................................20
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INDEPENDENT AUDITOR'S REPORT
To the Partners of
FJS Properties Fund I, L.P.
New York, New York
We have audited the accompanying balance sheets of FJS Properties
Fund I, L.P. as of December 31, 1998 and 1997, and the related statements of
operations, partners' capital, and cash flows for each of the three years in the
period ended December 31, 1998. These financial statements are the
responsibility of the Partnership's management. 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 management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of FJS Properties Fund
I, L.P. as of December 31, 1998 and 1997, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1998, in conformity with generally accepted accounting principles.
MOORE STEPHENS, P. C.
Certified Public Accountants.
Cranford, New Jersey
February 4, 1999
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Item 8: Financial Statements
FJS PROPERTIES FUND I, L.P.
- ------------------------------------------------------------------------------
BALANCE SHEETS
- ------------------------------------------------------------------------------
December 31,
1 9 9 8 1 9 9 7
Assets:
Current Assets:
Cash and Cash Equivalents $ 458,782 $ 535,546
Cash - Escrow 148,617 97,661
Cash - Security Deposits 125,397 121,878
Other Current Assets 25,752 35,971
---------- -----------
Total Current Assets 758,548 791,056
---------- -----------
Property Investment:
Land 2,296,804 2,296,804
Buildings 6,569,125 6,569,125
Furniture, Fixtures and Building Improvements 1,953,010 1,818,365
---------- -----------
Totals - At Cost 10,818,939 10,684,294
Less: Accumulated Depreciation (4,772,099) (4,507,327)
---------- -----------
Property Investment - Net 6,046,840 6,176,967
---------- -----------
Other Assets 271,341 290,795
---------- -----------
Total Assets $7,076,729 $ 7,258,818
========== ===========
Liabilities and Partners' Capital:
Current Liabilities:
Accounts Payable $ 66,582 $ 97,300
Accrued Interest 38,371 38,944
Other Accrued Expenses 6,826 6,423
Accounts Payable - Related Party 19,707 26,138
Tenant Security Deposits 125,397 121,878
Mortgage Payable - Current Portion 77,641 70,455
Deferred Income - Current Portion 7,143 7,142
---------- -----------
Total Current Liabilities 341,667 368,280
---------- -----------
Long-Term Liabilities:
Mortgage Payable - Non-Current Portion 4,644,938 4,722,578
Deferred Income - Non-Current Portion 25,000 32,141
---------- -----------
Total Long-Term Liabilities 4,669,938 4,754,719
---------- -----------
Partners' Capital:
General Partner (1,215,207) (1,214,501)
Limited Partners 3,280,331 3,350,320
---------- -----------
Total Partners' Capital 2,065,124 2,135,819
---------- -----------
Total Liabilities and Partners' Capital $7,076,729 $ 7,258,818
========== ===========
The Accompanying Notes are an Integral Part of These Financial Statements.
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FJS PROPERTIES FUND I, L.P.
- ------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------
<TABLE>
Y e a r s e n d e d
D e c e m b e r 3 1,
1 9 9 8 1 9 9 7 1 9 9 6
------- ------- -------
<S> <C> <C> <C>
Rental Income $ 2,081,901 $ 2,040,543 $ 1,852,877
Cost of Rental Income 625,402 665,541 749,911
----------- ----------- -----------
Gross Profit 1,456,499 1,375,002 1,102,966
----------- ----------- -----------
Expenses:
Selling, General and Administrative Expenses 689,444 711,626 645,114
Depreciation and Amortization 289,180 269,025 275,295
----------- ----------- -----------
Total Expenses 978,624 980,651 920,409
----------- ----------- -----------
Operating Income 477,875 394,351 182,557
----------- ----------- -----------
Other [Income] and Expenses:
Interest Income (23,664) (25,836) (22,646)
Interest Expense 463,687 470,769 476,199
Other Expense 2,900 -- --
----------- ----------- -----------
Other Expenses - Net 442,923 444,933 453,553
----------- ----------- -----------
Net Income [Loss] $ 34,952 $ (50,582)$ (270,996)
=========== =========== ===========
Income [Loss] Per Limited Partnership Unit $ 2.06 $ (2.98)$ (15.98)
=========== =========== ===========
Distributions Per Limited Partnership Unit $ 6.23 $ 5.53 $ 1.88
=========== =========== ===========
Weighted Average Number of Limited
Partnership Units Outstanding 16,788 16,788 16,788
=========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
Page 12
<PAGE>
FJS PROPERTIES FUND I, L.P.
- ------------------------------------------------------------------------------
STATEMENTS OF PARTNERS' CAPITAL
- ------------------------------------------------------------------------------
<TABLE>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Partners' Capital - December 31, 1995 $(1,210,028)$ 3,793,081 $ 2,583,053
Net [Loss] for the year ended December 31, 1996 (2,710) (268,286) (270,996)
Distributions to Partners (319) (31,562) (31,881)
----------- ----------- -----------
Partners' Capital - December 31, 1996 (1,213,057) 3,493,233 2,280,176
Net [Loss] for the year ended December 31, 1997 (506) (50,076) (50,582)
Distributions to Partners (938) (92,837) (93,775)
----------- ----------- -----------
Partners' Capital - December 31, 1997 (1,214,501) 3,350,320 2,135,819
Net Income for the year ended December 31, 1998 350 34,602 34,952
Distributions to Partners (1,056) (104,591) (105,647)
----------- ----------- -----------
Partners' Capital - December 31, 1998 $(1,215,207)$ 3,280,331 $ 2,065,124
=========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
Page 13
<PAGE>
FJS PROPERTIES FUND I, L.P.
- ------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
<TABLE>
Y e a r s e n d e d
D e c e m b e r 3 1,
1 9 9 8 1 9 9 7 1 9 9 6
------- ------- -------
Operating Activities:
<S> <C> <C> <C>
Net Income [Loss] $ 34,952 $ (50,582)$ (270,996)
----------- ----------- -----------
Adjustments to Reconcile Net Income [Loss]
to Net Cash Provided by Operating Activities:
Depreciation 264,772 244,617 250,887
Amortization 24,408 24,408 24,408
Deferred Income (7,142) (7,142) (3,572)
Changes in Assets and Liabilities:
[Increase] Decrease in:
Escrow (50,956) 85,210 (106,591)
Security Deposits (3,519) (711) 1,200
Other Current Assets 10,220 (34,541) 99,610
Other Assets (4,955) (6,421) --
Increase [Decrease] in:
Accounts Payable and Accrued Expenses (30,886) 16,677 15,074
Accounts Payable - Related Party (6,432) 7,914 (7,325)
Tenant Security Deposits 3,519 711 (1,200)
Deferred Income -- -- 50,000
----------- ----------- -----------
Total Adjustments 199,029 330,722 322,491
----------- ----------- -----------
Net Cash - Operating Activities 233,981 280,140 51,495
----------- ----------- -----------
Investing Activities:
Capital Expenditures (134,645) (80,481) (10,336)
----------- ----------- -----------
Financing Activities:
Principal Payments on Mortgages (70,453) (63,935) (58,018)
Cash Distributions to Partners (105,647) (93,775) (31,881)
----------- ----------- -----------
Net Cash - Financing Activities (176,100) (157,710) (89,899)
----------- ----------- -----------
Net [Decrease] Increase in Cash and Cash
Equivalents (76,764) 41,949 (48,740)
Cash and Cash Equivalents - Beginning of Years 535,546 493,597 542,337
----------- ----------- -----------
Cash and Cash Equivalents - End of Years $ 458,782 $ 535,546 $ 493,597
=========== =========== ===========
</TABLE>
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest during the years ended December 31, 1998, 1997 and 1996
was $464,260, $470,790 and $476,639, respectively.
The Accompanying Notes are an Integral Part of These Financial Statements.
Page 14
<PAGE>
FJS PROPERTIES FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
[1] Organization
FJS Properties Fund I, L.P. [the "Partnership"] was formed under the Delaware
Revised Uniform Limited Partnership Act on October 5, 1984. The Partnership owns
and operates the Pavilion apartment complex in West Palm Beach, Florida. The
Partnership operates under one reportable segment.
[2] Summary of Significant Accounting Policies
Loan Acquisition Fees - The Partnership amortizes fees incurred in connection
with mortgage refinancings utilizing the straight-line method over the term of
the related mortgage, which is currently ten years.
Income Taxes - The Partnership is treated as a partnership for federal income
tax purposes. The Partnership will make no provision for income taxes because
all income and losses will be allocated to the partners for inclusion in their
respective tax returns.
Property Investment and Depreciation - Property, improvements, furniture and
equipment are carried at cost and depreciated over their estimated useful lives.
The cost of maintenance and repairs are expensed as incurred, whereas
significant betterments and renewals are capitalized. The Partnership
depreciates buildings using the straight-line method over 30 years. Furniture
and fixtures and building improvements are depreciated using the straight-line
method over periods from 3 to 10 years.
Depreciation expense for the years ended December 31, 1998, 1997 and 1996 was
$264,772, 244,617, and $250,887, respectively.
For tax purposes, the Partnership depreciates residential real property using
the 18-year accelerated depreciation method for property placed in service prior
to May 8, 1985. In accordance with ongoing changes in the Internal Revenue Code,
the Partnership will utilize the depreciation method, which, in the opinion of
the Managing General Partner, will be the most beneficial to the Partnership.
Cash Equivalents - The Partnership considers all highly liquid investments with
original maturities of three months or less to be cash equivalents.
Financial Instruments - The Partnership had amounts on deposit with financial
institutions which are approximately $471,000 and $456,000 in excess of the
amounts insured for December 31, 1998 and 1997, respectively. The partnership
does not require collateral for financial instruments.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
Actual results could differ from those estimates.
Advertising - The Company expenses advertising cost as incurred. Advertising
expense for the years ended December 31, 1998, 1997 and 1996 was $36,773,
$36,036 and $40,279, respectively.
Impairment - Certain long-term assets of the Company including property and
furniture and fixtures are reviewed at least annually as to whether their
carrying value has become impaired, pursuant to guidance established in
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." Management considers assets to be impaired if the carrying value exceeds
the future projected cash flows from related operations [undiscounted and
without interest charges]. If impairment is deemed to exist, the assets will be
written down to fair value or projected discounted cash flows from related
operations. Management also re-evaluates the periods of amortization to
determine whether subsequent events and circumstances warrant revised estimates
of useful lives.
Page 15
<PAGE>
FJS PROPERTIES FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS, Sheet #2
- ------------------------------------------------------------------------------
[3] Partnership Agreement
Pursuant to the terms of the Partnership Agreement, which expires December 31,
2009, the General Partner is liable for all general obligations of the
Partnership to the extent not paid by the Partnership. The Limited Partners are
not liable for expenses, liabilities or obligations of the Partnership beyond
the amount of their contributed capital.
Pursuant to the terms of the Partnership Agreement, adjusted cash from
operations is allocated, after payment of the Partnership Management Fee to the
Managing General Partner, 99% to the Limited Partners and 1% to the General
Partner.
Pursuant to the terms of the Partnership Agreement, taxable income and loss are
allocated 99% to the Limited Partners and 1% to the General Partner subsequent
to the release of the Limited Partners' funds to the Partnership, which occurred
on May 1, 1986. Prior to the release of funds, taxable income and loss were
allocated 99% to the General Partner and 1% to the Original Limited Partner.
Pursuant to the terms of the Partnership Agreement, allocations of net income or
loss among the partners in the accrual basis financial statements will be in
conformity with the allocations of taxable income or loss from operations.
[4] Other Assets
A summary of other assets is as follows:
December 31,
1 9 9 8 1 9 9 7
Cash in Escrow - Replacement Reserves
[See Note 5] $ 120,900 $ 117,240
Loan Acquisition Fees - Net of Amortization
of $115,439 and $91,031 at December 31, 1998
and 1997, Respectively 128,656 153,065
Deposits 21,785 20,490
----------- -----------
Totals $ 271,341 $ 290,795
------ =========== ===========
[5] Mortgage Payable
On March 31, 1994, the Partnership refinanced the existing first mortgage loan
held by the Bank of Tokyo. A new loan in the amount of $5,000,000,
collateralized by a first mortgage lien on the project, was obtained from the
Long Beach Bank, FSB, Orange, California. This loan is for a term of ten years
with an interest rate of 9.75% per annum. The loan is repayable in equal monthly
installments of $44,557 for principal and interest with a balloon payment due in
ten years. The new loan requires deposits with the lender for real estate taxes,
insurance premiums, a debt service reserve of one month's payment, as well as
deposits for replacement reserves for the project. These amounts are included in
"cash escrow" and "other assets" on the balance sheet. In June 1995, the loan
was transferred to Bank United of Texas.
Monthly payments and interest rate remained the same.
Page 16
<PAGE>
FJS PROPERTIES FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS, Sheet #3
- ------------------------------------------------------------------------------
[5] Mortgage Payable [Continued]
Annual principal maturities under the total existing mortgage for the next five
years are as follows:
1999 $ 77,641
2000 85,557
2001 94,282
2002 103,897
2003 114,492
Thereafter 4,246,710
----------
Total Mortgage Payable $4,722,579
The fair value of the Partnership's mortgage payable, which is determined by
discounting expected cash flows based on the Partnership's projected current
incremental borrowing rate, is approximately $4,629,000.
[6] Related Party Transactions
The Managing General Partner, pursuant to the Partnership Agreement, has earned
Property Management Fees of $103,806, $101,144 and $95,505 for the years ended
December 31, 1998, 1997 and 1996, respectively, of which $83,045, $80,915 and
$76,404, respectively, was paid to an unaffiliated Florida based management
company. These fees are based on a percentage of net rental income as defined in
the agreement.
Also pursuant to the Partnership Agreement, the Managing General Partner has
earned Partnership Management Fees of $6,673, $3,912 and $1,364 for the years
ended December 31, 1998, 1997 and 1996, respectively, which represents 4% of
adjusted cash flow.
Additionally, in accordance with provisions of the Partnership Agreement, the
Partnership is committed to pay to the Managing General Partner, administrative
service fees. These fees amounted to $24,000 in each of the years ended December
31, 1998, 1997 and 1996
The Managing General Partner received distributions from cash flow of $1,056,
$938 and $319 during the years ended December 31, 1998, 1997 and 1996,
respectively.
[7] Income Taxes
The reconciliation of net losses as reported in the statements of operations and
as would be reported for tax purposes for the years ended December 31, 1998,
1997 and 1996 are as follows:
D e c e m b e r 3 1,
-----------------------------------
1 9 9 8 1 9 9 7 1 9 9 6
------- ------- -------
Net Income [Loss] - Statement of
Operations $ 34,952 $ (50,582)$ (270,996)
Tax depreciation in excess of book
depreciation (71,010) (60,049) (111,588)
----------- ---------- -----------
Net Income [Loss] for Tax Purposes $ 36,058 $ (110,631)$ (382,584)
---------------------------------- =========== =========== ===========
Page 17
<PAGE>
FJS PROPERTIES FUND I, L.P.
NOTES TO FINANCIAL STATEMENTS, Sheet #4
- ------------------------------------------------------------------------------
[8] New Authoritative Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. SFAS No. 133 is not expected to have a material
impact on the Company.
. . . . . . . . . . . .
Page 18
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON
SUPPLEMENTARY SCHEDULE
To the Partners of
FJS Properties Fund I, L.P.
New York, New York
Our report on the financial statements of FJS Properties Fund I,
L.P. is included on page 10 of this Form 10-K. In connection with our audits of
such financial statements, we have also audited the related financial statement
Schedule III.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
MOORE STEPHENS, P.C.
Certified Public Accountants.
Cranford, New Jersey
February 4, 1999
Page 19
<PAGE>
FJS PROPERTIES FUND I, L.P.
- ------------------------------------------------------------------------------
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
- ------------------------------------------------------------------------------
<TABLE>
Gross Amount at Which Life on
Initial Cost to Partnership Carried at Close of Period Which
Costs Depreciation
Capitalized [3] in Latest
Buildings Subsequent to Buildings Accumu- Year Income
and Acquisition and lated of Statement
Improve- Improve- [1] [2] Depreci- Construc- Date is
Description Encumbrances Land ments Improvements Land ments Total ation tion Acquired Computed
Pavilion Apartments,
West Palm Beach,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Florida $4,914,986 $2,296,804 $7,196,789 $1,129,903 $2,296,804 $8,522,135 $10,818,939 $4,772,099 1972 1/85 3-30 yrs.
========== ========== ========== ========== ========== ========== =========== ==========
</TABLE>
1) The aggregate cost for federal income tax purposes is $8,910,196.
2) A reconciliation of the carrying amount of land, buildings and
improvements as of December 31, 1998, 1997 and 1996 is as follows:
C o s t a s o f
----------------------
D e c e m b e r 3 1,
------------------------
1 9 9 8 1 9 9 7 1 9 9 6
------- ------- -------
Balance at Beginning of Years $10,684,294 $10,603,813 $10,593,478
Improvements 134,645 80,481 10,335
----------- ----------- -----------
Balance at End of Years $10,818,939 $10,684,294 $10,603,813
=========== =========== ===========
3) A reconciliation of accumulated depreciation for the years ended
December 31, 1998, 1997 and 1996 is as follows:
Accumulated Depreciation as of
------------------------------
D e c e m b e r 3 1,
--------------- ----
1 9 9 8 1 9 9 7 1 9 9 6
------- ------- -------
Balance at Beginning of Years $4,507,327 $4,262,710 $4,011,823
Depreciation Expense 264,772 244,617 250,887
---------- ---------- ----------
Balance at End of Years $4,772,099 $4,507,327 $4,262,710
========== ========== ==========
Page 20
<PAGE>
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
Registrant has no officers or directors. FJS Properties, Inc., the
General Partner, manages and controls the Registrant's affairs and has general
responsibility and ultimate authority in all matters affecting its business. The
names and ages of, as well as the positions held by, the officers and directors
of the General Partner are as follows:
NAME AGE OFFICES HELD SERVED AS AN OFFICER
AND/OR DIRECTOR SINCE
A Andrew C. Alson 53 President and Director 1/85
Roger Barnett 54 Secretary and Treasurer 1/88
Lawrence E. Bathgate II 59 Director 10/84
Robert E. Brennan 55 Director 10/84
There are no family relationships between any executive officer or
director and any other executive officer or director of the General Partner.
Andrew C. Alson is a director and President of the General Partner.
Until May, 1995, Mr. Alson was a Director of and until January 1, 1993, was
President and Chief Executive Officer of PriMedex Health Systems, Inc. ("PMDX"),
a public company which is principally engaged through its wholly-owned
subsidiary, RadNet Management, Inc. in the healthcare services industry. Until
June 16, 1994, Mr. Alson, as a designee of PMDX, also served as a director of
ImmunoTherapeutics, Inc. ("IMNO"). IMNO is a publicly owned development stage
Minnesota based company which is engaged in the research and development of
immunotherapeutic drugs, primarily for the treatment of cancer. Mr. Alson is an
attorney admitted to the bar of the State of New York, and is a graduate of the
University of Pennsylvania and the Fordham University School of Law.
Roger Barnett is the Secretary/Treasurer of the General Partner. Mr.
Barnett is the president of First Jersey Securities, Inc., a post he assumed in
April 1987. For more than five years prior to such date, Mr. Barnett was
treasurer and chief financial officer of First Jersey. Until May 1995 Mr.
Barnett was a director of, and until May 1994 was Secretary/Treasurer of
Primedex Health Systems, Inc.
Lawrence E. Bathgate, II is a director of the General Partner. Mr.
Bathgate is the senior partner of Bathgate, Wegener & Wolf, P.A., a law firm in
Lakewood, New Jersey. Mr. Bathgate is a graduate of Villanova University,
Villanova, Pennsylvania and Rutgers Law School, Newark, New Jersey. Mr. Bathgate
also engages in extensive real estate and other investment activities. Mr.
Bathgate owns 20% of the common stock of the General Partner. Mr. Bathgate is a
director of Carson, Inc., a publicly held company listed on the New York Stock
Exchange.
Robert E. Brennan is a director of the General Partner. Mr. Brennan
has been principally engaged for the past five years as the sole stockholder
(and until September, 1986, was Chief Executive Officer and Chairman of the
Board) of First Jersey. Until June 10, 1997 he was the sole stockholder and a
director of First Jersey. (See description of appointment of a Trustee below).
He has in the past held several additional corporate positions, including until
November 1995, but not presently, director, Chairman of the Board and Chief
Executive Officer of International Thoroughbred Breeders, Inc. ("ITB"), a
publicly owned commercial breeder of thoroughbred horses and the owner and
operator of Garden State Racetrack in Cherry Hill, New Jersey. Mr. Brennan was,
but is not presently, a principal stockholder of ITB. Mr. Brennan has served
from time to time during the past five years, but not presently, as a member of
the Board of Regents of Seton Hall University. Until the appointment of Mr.
Conway as Trustee, as described below, Mr. Brennan was controlling stockholder
of the General Partner.
Page 21
<PAGE>
On June 19, 1995, Judge Richard Owen, District Judge of the United
States Court for the Southern District of New York issued his opinion and on
July 14, 1995 entered a judgment in a lawsuit commenced in 1985 by the
Securities and Exchange Commission (the "Commission") against Robert E. Brennan
and First Jersey (the "Defendants"). In its opinion and judgment, the court
determined that the Defendants, with respect to sales and resales of the
securities of five issuers (not those of the Partnership), charged excessive
markups and markdowns to First Jersey customers and thereby violated ss.17(a) of
the Securities Act of 1933 (the "Securities Act") and ss.10(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") and violated Rule 10b-5 in that they
engaged in fraud in those transactions. As a result, the court permanently
enjoined the Defendants from further violations of Securities Act ss.17(a),
Exchange Act ss.10(b) and Rule 10b-5.
In addition the court ordered that the Defendants disgorge an
aggregate $22,288,099 of profits together with $49,251,521 of prejudgment
interest (as of December 31, 1994). The court also ordered the appointment of a
special agent to examine the records of First Jersey for the period from
November 1, 1982 through January 31, 1987 for the purpose of determining whether
excessive markups and/or markdowns were charged to First Jersey customers beyond
those proved at trial.
On appeal to the Federal 2nd Circuit Appeals court, this judgment
was upheld with the exception of the appointment of the special agent which was
reversed. A petition for rehearing which was filed with the 2nd Circuit was
denied. As a result of the judgment, on August 7, 1995, Robert E. Brennan and
First Jersey filed voluntary petitions for relief in the United States
Bankruptcy Court for the District of New Jersey under Chapter 11 of the
Bankruptcy Code.
In October 1997, the United States Supreme Court denied Certiorari
in this case, ending all appeals available to Robert E. Brennan and First
Jersey.
On June 10, 1997, United States Bankruptcy Judge Kathryn C. Ferguson
appointed Donald F. Conway, C.P.A. as the Trustee in the Chapter 11 Bankruptcy
Proceeding involving Robert E. Brennan as Debtor, pending in the United States
Bankruptcy Court for the District of New Jersey (Case No 95-35502).
By virtue of his appointment as Trustee, Mr. Conway is empowered to
vote (and with the approval of the Court), to sell Mr. Brennan's Common Stock
and to direct the disposition of the sale proceeds. As a result Mr. Conway, in
his capacity as Trustee, may be deemed a beneficial owner of such shares and a
controlling person of FJS Properties, Inc. and Registrant.
Mr. Conway, age 58, is currently and since 1995 has been a principal
of Druker, Rahl & Fein, Business Consultants and Certified Public Accountants,
with offices in Princeton, New Jersey. From 1988 until 1995, Mr. Conway was the
Senior Manager of the Insolvency and Reorganization and Sports and Entertainment
practice of Withum, Smith & Brown, a Princeton, New Jersey certified public
accounting firm.
On August 9, 1995, the State of New Jersey and the New Jersey Bureau
of Securities instituted a civil action against Brennan, Barnett and others
alleging, inter alia, securities fraud and racketeering activity. The complaint
seeks injunctive relief, restitution and civil monetary penalties. Defendants
deny any violations of law and intend to vigorously defend against this action.
No assurances can be given as to the outcome of this matter.
All of the directors will hold office until the next annual meeting
of the stockholders of the General Partner and until their successors are
elected and qualified.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3 and 4 (17 CFR 249.103 and
249.104) and any amendments thereto furnished to Registrant under Rule 16a-3(d)
(17 CFR 240.16a-3(e) or written representations received by Registrant that no
Forms 5 were required, Registrant believes that other than as hereinafter noted
there were no officers, directors or beneficial owners of more than 10% of any
class of equity securities of Registrant registered pursuant to Section 12, that
failed to file on a timely basis any reports required by Section 16(a) during
the most recent fiscal years. As noted above, as of June 10, 1997, Donald F.
Conway may be deemed a beneficial owner of 80% of the general partner of
Registrant
Page 22
<PAGE>
and a controlling person of FJS Properties, Inc. and Registrant. Mr. Conway has
advised that no filings were required for a one year period after such
appointment, and it would appear that a filing was required to have been made in
June 1998. Registrant has not been advised of any filings by Mr. Conway as of
February 23, 1999.
Item 11. Executive Compensation
The Registrant is not required to pay and did not pay any
remuneration to the officers and directors of the General Partner. See Item 12,
"Certain Relationships and Related Transactions."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The Family Trust, a New Jersey trust, which was established by
Robert Brennan, but as to which Mr. Brennan is neither a Trustee nor a
Beneficiary, owns 1,558 Units (9.28%). No other person was known by Registrant
to own beneficially more than 5% of the outstanding Units of Registrant. No
directors, officers or partners of the General Partner own Units of Registrant
except for the five Units owned by Mr. Bathgate, as the initial limited partner.
Ownership of more than 5% of Registrant:
(2) Name and Address (3) Amount and nature of (4) Percent
(1) Title of Class of Beneficial Owner Beneficial Ownership of Class
- ------------------ ------------------- -------------------- --------
Units of Limited The Family Trust 1,558 Units - legal and 9.28%
Partnership 340 North Avenue beneficial owner
Cranford, NJ 07016
As of March 1, 1999, Robert E. Brennan, Chapter 11 Debtor and
Lawrence E. Bathgate, II were the sole shareholders of the common stock of the
General Partner, owning 80% and 20% respectively. As described above under Item
10, Donald F. Conway, CPA, has been appointed as Trustee in the Chapter 11
Bankruptcy Proceeding involving Robert E. Brennan as Debtor. Mr. Conway is
empowered to vote (and with the approval of the Court), to sell Mr. Brennan's
Common Stock and to direct the disposition of the sale proceeds. As a result Mr.
Conway, in his capacity as Trustee, may be deemed a beneficial owner of such
shares and a controlling person of FJS Properties, Inc. and Registrant.
Page 23
<PAGE>
Item 13. Certain Relationships and Related Transactions
During Registrant's fiscal years ended December 31, 1998, 1997 and,
1996, the General Partner and certain affiliated entities have earned or
received compensation or payments for services from Registrant or its General
Partner as follows:
<TABLE>
Reimbursement/Compensation
Name of Recipient Capacity in Which served or
Payment Received 1998 1997 1996
---- ---- ----
<S> <C> <C> <C> <C>
FJS Properties, Inc. General Partner3 $ 1,056 $ 938 $ 319
Partnership Management Fee $ 6,673 $ 3,912 $ 1,364
Property Management Fee4 $20,760 $20,229 $19,101
Administrative Expenses5 $24,000 $24,000 $24,000
Tender Offer Administrative Fees6 $ 9,000 $ 0 $ 0
Lawrence E. Bathgate II Initial Limited Partner7 $ 31 $ 28 $ 9
Other Officers/Directors
of General Partner Officer/Director of General Partner $ 0 $ 0 $ 0
</TABLE>
In addition, certain officers and directors of the General Partner
receive compensation from the General Partner, First Jersey and/or its
affiliates (but not from Registrant) for services performed for various
affiliated entities, which may include services performed for Registrant.
- --------
3 Represents the General Partner's interest in Adjusted Cash From Operations.
Under Registrant's Partnership Agreement 99% of the Net Income and Net Loss of
Registrant was allocated to the Limited Partners and 1% was allocated to the
General Partner. Pursuant thereto, for the years ended December 31, 1998, 1997,
and 1996, $360, ($1,106), and ($3,826) of the Registrant's taxable income (loss)
was allocated to FJS Properties, Inc. For further information, reference is made
to the material contained in the Prospectus under the heading "MANAGEMENT
COMPENSATION."
4 The following property management fees were applicable to the years 1998,
1997 and 1996:
YEAR Aggregate Retained by Paid to local
Management Fee General Partner unaffiliated
management company
1998 $103,805 $20,760 $83,045
1997 $101,144 $20,229 $80,915
1996 $95,505 $19,101 $76,404
In addition, the local unaffiliated management company received construction
supervision fees of $19,605 during 1996, for supervision of outside construction
work at the Pavilion Apartments.
5 Represents administrative fees for the respective years for preparation of the
annual Forms 10K and quarterly Forms 10Q for Registrant for filing with the
Securities and Exchange Commission. Such charges are in accordance with and
pursuant to ss.10.1.3(b) of the Partnership Agreement of Registrant and do not
exceed 90% of the amount Registrant would be required to pay to independent
parties for comparable administrative services in the same geographic location.
6 Represents administrative fees for review of tender offer filings,
preparation, filing and mailings of required responsive Securities and Exchange
Commission Filings and materials for mailings to Limited Partners. As provided
in the Partnership Agreement of Registrant such fees do not exceed 90% of the
amount Registrant would be required to pay to independent parties for comparable
administrative services in the same geographic location.
7 Represents distribution of Adjusted Cash From Operations attributable to the
five Units Owned by Mr. Bathgate. For the years ended December 31, 1998, 1997,
and 1996, $10.63, ($32.62), and ($112.81) of the Registrant's taxable income
(loss) was allocated to his Units.
Page 24
<PAGE>
PART IV
Item 14. Exhibits Financial Statement Schedules, and Reports On Form 8-K
(a) 1&2 Financial Statements: See Index to Financial Statements in
Item 8.
(a) 3 Exhibits:
3.4 (a) Agreement of Limited Partnership, dated as of April
30, 1985, incorporated by reference to Exhibit A to the
Prospectus of Registrant dated June 10, 1985 included in
Registrant's Registration Statement on Form S-11 (Reg. No.
2-93980).
(b) Amendment to Agreement of Limited Partnership dated as of
October 22, 1985 incorporated by reference to Exhibit 3A.1 to
Registrant's Registration Statement on Form S-11 (Reg. No.
2-93980).
(c) Amendment to Agreement of Limited Partnership dated as of
October 22, 1985, incorporated by reference to Exhibit 3.4(c)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1986 (File No 2-93980).
(d) Amendment to Agreement of Limited Partnership, dated as of
March 24, 1987, incorporated by reference to Exhibit 3.4(d) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987 (File No 2-93980).
(e) Amendment No. 1 to Amended and Restated Certificate of
Limited Partnership, dated as of August 17, 1987, incorporated
by reference to Exhibit 3.4(e) to Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1987 (File
No 2-93980).
10. (a) Acquisition and Disposition Agreement dated as of May
2, 1986 between Registrant and FJS Properties, Inc.,
incorporated by reference to Exhibit 10A to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1986 (File No. 2- 93980).
(b) Management Services Agreement dated as of May 2, 1986
between Registrant and FJS Properties, Inc., incorporated by
reference to Exhibit 10B to Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1986 (File No.
2-93980).
(c) Contract for Sale and Purchase dated December 17, 1984,
between Rockwell Investments, Ltd. and Registrant,
incorporated by reference to Exhibit 10D to Registrant's
Registration Statement on Form S-11 (Reg. No. 2-93980.)
(d) Contract for Sale and Purchase dated December 17, 1984,
between Vinsteve Investments Inc., Jimstein Investments, Ltd.,
Barwell Corporation, N.W. and Registrant, incorporated by
reference to Exhibit 10E to Registrant's Registration
Statement on Form S-11 (Reg. No. 2-93980.)
(e) Mortgage and Security Agreement dated September 9, 1987,
by FJS Properties Fund I, L.P., as mortgagor, and The Bank of
Tokyo, Ltd., Miami Agency, as mortgagee, incorporated by
reference to Exhibit 10(g) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987 (File No
2-93980).
(f) Mortgage Note, dated September 9, 1987, by FJS Properties
Fund I, L.P. as maker to The Bank of Tokyo, Ltd., Miami
Agency, as payee in the principal amount of $5,000,000,
incorporated by reference to Exhibit 10(h) to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1987 (File No 2-93980).
Page 25
<PAGE>
(g) Modification of Note, Mortgage and Assignment Agreement,
dated as of September 9, 1992, between FJS Properties Fund I,
L.P. as Mortgagor, and The Bank Of Tokyo, Ltd., Miami Agency,
as Mortgagee incorporated by reference to Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987 (File No 0-15755).
(h) Modification of Note, Mortgage and Assignment Agreement,
dated as of November 10, 1992, between FJS Properties Fund I,
L.P. as Mortgagor, and The Bank Of Tokyo, Ltd., Miami Agency,
as Mortgagee incorporated by reference to Exhibit 10(h) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987 (File No 0-15755).
(i) Modification of Note, Mortgage and Assignment Agreement,
dated as of March 31, 1993, between FJS Properties Fund I,
L.P. as Mortgagor, and The Bank of Tokyo, Ltd., Miami Agency,
as Mortgagee incorporated by reference to Exhibit 10(i) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987 (File No 0-15755).
(j) Renewal Note, dated March 31, 1993, made by FJS Properties
Fund I, L.P. to the Bank of Tokyo, Ltd incorporated by
reference to Exhibit 10(j) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987 (File No
0-15755).
(k) Property Management Agreement made as of December 1993,
between FJS Properties Fund I, L.P., Owner, and M.L. Property
Management, Inc., Managing Agent, incorporated by reference to
Exhibit 10(k) to Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993 (File No 0-15755).
(l) Third Modification of Note, Mortgage and Assignment
Agreement dated as of February 28, 1994, between FJS
Properties Fund I, L.P. and The Bank of Tokyo, Ltd.,
incorporated by reference to Exhibit 10(l) to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1993 (File No 0-15755).
(m) Multifamily Note, dated March 29, 1994, made by FJS
Properties Fund I, L.P. to Long Beach Bank, FSB, in the
principal amount of $5,000,000, incor porated by reference to
Exhibit 10(m) to Registrant's Annual Report on Form 10- K for
the fiscal year ended December 31, 1993 (File No 0-15755).
(n) Multifamily Mortgage, Assignment of Rents and Security
Agreement and Fixture Filing, dated March 29, 1994, made by
FJS Properties Fund I, L.P. to Long Beach Bank, FSB,
incorporated by reference to Exhibit 10(n) to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1993 (File No 0-15755).
(o) Assignment of Leases, dated March 29, 1994, made by FJS
Properties Fund I, L.P. to Long Beach Bank, FSB, incorporated
by reference to Exhibit 10(o) to Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993 (File No
0-15755).
(p) Operations and Maintenance Agreement dated March 29, 1994,
between FJS Properties Fund I, L.P. and Long Beach Bank, FSB,
incorporated by reference to Exhibit 10(p) to Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1993 (File No 0-15755).
(q) Debt Service Reserve Fund Security Agreement, dated March
29, 1994, between FJS Properties Fund I, L.P. and Long Beach
Bank, FSB, incorporated by reference to Exhibit 10(q) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 (File No 0-15755).
Page 26
<PAGE>
(r) Replacement Reserve and Security Agreement, dated March
29, 1994, between FJS Properties Fund I, L.P. and Long Beach
Bank, FSB, incorporated by reference to Exhibit 10(r) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 (File No 0-15755).
(s) Completion/Repair and Security Agreement, dated March 29,
1994, between FJS Properties Fund I, L.P. and Long Beach Bank,
FSB, incorporated by reference to Exhibit 10(s) to
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993 (File No 0-15755).
(t) Extension of Property Management Agreement dated as of
January 1, 1999, by and between FJS Properties Fund I, L.P.
and ML Property Management Inc.
(b) Reports on Form 8-K filed during the last quarter of the fiscal
year:
None.
Financial Statement Schedules Filed Pursuant to Item 13(B)
See Index to Financial Statements in Item 8.
Page 27
<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.
FJS PROPERTIES FUND I, L.P.
FJS PROPERTIES, INC.
General Partner
Dated: March 30, 1999 By: Andrew C. Alson
---------------------------------------
Andrew C. Alson, President
Pursuant to the requirements of the Securities and 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 Partner) and on
the dates indicated.
Dated: March 30, 1999 By: Robert E. Brennan
------------------------------------
Robert E. Brennan,
Director of the General Partner
Dated: March 30, 1999 By: Lawrence E. Bathgate, II
-----------------------------------
Lawrence E. Bathgate, II,
Director of the General Partner
Dated: March 30, 1999 By: Andrew C. Alson
------------------------------------
Andrew C. Alson, President and
Director of the General Partner
(Principal Executive Officer)
Dated: March 30, 1999 By: Roger Barnett
------------------------------------
Roger Barnett, Secretary and Treasurer
of the General Partner (Principal
Financial and Accounting Officer)
Page S-1
Item 14 - (a)3 Exhibit 10(t)
EXTENSION OF
PROPERTY MANAGEMENT AGREEMENT
THIS AGREEMENT (The Extension Agreement) made as of this 1st day of
January, 1999, by and between FJS PROPERTIES FUND I, L.P., a Delaware Limited
Partnership ("Owner"), and M.L. PROPERTY MANAGEMENT, INC., a Florida Corporation
("Management Company").
WHEREAS, Owner and Management Company have previously entered into that
certain management agreement (the "Management Agreement") dated as of December
1993, for the property management of the garden apartment complex known as the
Pavilion Apartments, West Palm Beach, Florida, and
WHEREAS, the Management Agreement by its term originally expired at the
end of December 1998, and
WHEREAS, the Owner and Management Company desire to further extend the
term of the Management Agreement as herein provided,
NOW THEREFORE, the parties agree as follows:
1. The Management Agreement shall and hereby is extended for an additional
five year period to expire on December 31, 2003, subject to the provisions for
termination prior to the expiration of the term as provided in sections 3.3 of
the Management Agreement.
2. In securing tenants for the Property, the Management Company shall be
authorized to employ on behalf of the Owner, the services of unaffiliated real
estate brokers and other similar tenant referral professionals when the
Management Company deems it reasonably necessary. Commissions paid to any such
brokers or professionals (which shall in no event exceed those reasonably
customary for such services in the locality where the Property is located) for
tenant referrals shall be at Owner's expense.
3. Except as modified herein, all of the terms and provisions of the
Management Agreement shall remain in full force and effect.
4. The mailing address for notices to both Owner and Owner's
Representative is: 264 ROUTE 537 EAST, COLTS NECK, NJ 07722.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals, or caused these presents to be signed by their proper corporate offices
and their proper corporate seal to be affixed hereto, the day and year first
above written.
OWNER FJS PROPERTIES FUND I, L.P.
by: FJS PROPERTIES, INC., general partner
by: Andrew C. Alson
-----------------------------
Andrew C. Alson, president
MANAGEMENT COMPANY:
M.L. PROPERTY MANAGEMENT, INC.
by: Murray Liebowitz
-----------------------------
Murray Liebowitz, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of operations and is
qualified in its entirety by reference to said statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> Dec-31-1998
<CASH> 458,782
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 758,548
<PP&E> 10,818,939
<DEPRECIATION> 4,772,099
<TOTAL-ASSETS> 7,076,729
<CURRENT-LIABILITIES> 341,667
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,065,124
<TOTAL-LIABILITY-AND-EQUITY> 7,076,729
<SALES> 0
<TOTAL-REVENUES> 2,081,901
<CGS> 625,402
<TOTAL-COSTS> 978,624
<OTHER-EXPENSES> 20,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 463,687
<INCOME-PRETAX> 34,952
<INCOME-TAX> 0
<INCOME-CONTINUING> 34,952
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,952
<EPS-PRIMARY> 2.06
<EPS-DILUTED> 2.06
</TABLE>
