<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 0-14271
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP, A California Limited
Partnership
- - --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 94-2949474
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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
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 214-1016
N/A
- - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _CK_ No __
<PAGE>
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
September 30, October 31,
1995 1994
- - -----------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
ASSETS
Investment in property:
Land $ 10,870 $ 10,870
Buildings, improvements and equipment 39,569 39,113
Less: Accumulated depreciation (17,427) (15,889)
Allowance for loss on impairment of assets (500) (500)
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Net investment in property 32,512 33,594
Cash and cash equivalents 980 1,219
Prepaid expenses and other assets, net 1,285 1,297
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Total assets $ 34,777 $ 36,110
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LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Notes payable $ 26,681 $ 26,917
Due to affiliates 689 697
Accounts payable and accrued liabilities 307 501
Security deposits and deferred revenue 232 260
Real estate taxes payable 153 110
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Total liabilities 28,062 28,485
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Contingencies
Partners' capital
Unitholders (68,795 depositary units issued and outstanding) 6,956 7,857
General partners (241) (232)
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Total partners' capital 6,715 7,625
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Total liabilities and partners' capital $ 34,777 $ 36,110
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------------- -----------
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The accompanying notes are an integral part of these statements
</TABLE>
2
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PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended For the three months ended
September 30, July 31, September 30, July 31,
1995 1994 1995 1994
- - --------------------------------------------------------------------------------------------------------
(in thousands, except for depositary unit amounts)
<S> <C> <C> <C> <C>
REVENUES
Operating $ 4,456 $4,469 $ 1,364 $1,521
Recovery of expenses 429 384 186 129
-------------- ------------ ------------- ------------
4,885 4,853 1,550 1,650
-------------- ------------ ------------- ------------
EXPENSES
Property operating 2,128 1,894 753 619
Interest 1,798 1,758 613 569
Depreciation and amortization 1,421 1,415 461 444
General and administrative 326 271 90 90
-------------- ------------ ------------- ------------
5,673 5,338 1,917 1,722
-------------- ------------ ------------- ------------
Net loss $ (788) $ (485) $ (367) $ (72)
-------------- ------------ ------------- ------------
-------------- ------------ ------------- ------------
ALLOCATION OF NET LOSS
Unitholders $ (780) $ (480) $ (363) $ (71)
-------------- ------------ ------------- ------------
-------------- ------------ ------------- ------------
General partners $ (8) $ (5) $ (4) $ (1)
-------------- ------------ ------------- ------------
-------------- ------------ ------------- ------------
Net loss per depositary unit $ (11.34) $(6.98) $ (5.28) $(1.03)
-------------- ------------ ------------- ------------
-------------- ------------ ------------- ------------
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</TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(Unaudited)
<TABLE>
<CAPTION>
GENERAL
UNITHOLDERS PARTNERS TOTAL
<S> <C> <C> <C>
- - ---------------------------------------------------------------------------------------------------
Partners' capital (deficit)--October 31, 1994 $7,857 $ (232) $7,625
Net loss (121) (1) (122)
-------------- -------- ------
Partners' capital (deficit)--December 31, 1994 7,736 (233) 7,503
Net loss (780) (8) (788)
-------------- -------- ------
Partners' capital (deficit)--September 30, 1995 $6,956 $ (241) $6,715
-------------- -------- ------
-------------- -------- ------
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The accompanying notes are an integral part of these statements
</TABLE>
3
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine For the nine
months ended months ended
September 30, July 31,
1995 1994
- - ---------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (788) $ (485)
------------- ------------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 1,421 1,415
Lease concessions-effective rents 53 119
Leasing commissions paid (215) (45)
Changes in:
Prepaid expenses and other assets (11) (168)
Due to affiliates (18) 7
Accounts payable and accrued liabilities 14 (127)
Security deposits and deferred revenue (30) (30)
Real estate taxes payable 43 (45)
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Total adjustments 1,257 1,126
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Net cash provided by operating activities 469 641
CASH FLOWS FROM INVESTING ACTIVITIES
Building improvements (426) (158)
CASH FLOWS FROM FINANCING ACTIVITIES
Note principal payments (181) (359)
------------- ------------
Net increase (decrease) in cash and cash equivalents (138) 124
Cash and cash equivalents at beginning of period 1,118 1,055
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Cash and cash equivalents at end of period $ 980 $1,179
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 1,933 $1,763
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The accompanying notes are an integral part of these statements
</TABLE>
4
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
A. General
These financial statements have been prepared without audit. In the opinion
of Prudential-Bache Properties, Inc. (``PBP'') and Glenborough Realty
Corporation and Robert Batinovich (together, ``Glenborough'') (collectively, the
``General Partners''), the financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of Prudential-Bache/Equitec Real Estate Partnership, A
California Limited Partnership (the ``Partnership'') as of September 30, 1995,
and the results of its operations for the nine and three months ended September
30, 1995 and July 31, 1994 and its cash flows for the nine months ended
September 30, 1995 and July 31, 1994. However, the operating results for the
interim periods may not be indicative of the results expected for the full year.
On November 21, 1994, the General Partners approved a change in the
Partnership's fiscal year for financial reporting purposes from October 31 to
December 31, commencing with the year ending December 31, 1995.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended October 31, 1994.
B. 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; property management;
investor communications; printing and other administrative services. The General
Partners and their affiliates receive reimbursements for costs incurred in
connection with these services, the amount of which is limited by the provisions
of the Partnership Agreement. The costs and expenses were:
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
September 30, 1995 July 31, 1994*
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(in thousands)
<S> <C> <C>
PBP and affiliates:
General and administrative $ 98 $ 95
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Glenborough and affiliates:
Property management fee and expenses 485 104
Leasing commissions 109 7
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594 111
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$692 $206
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</TABLE>
5
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<TABLE>
<CAPTION>
Three months Three months
ended ended
September 30, 1995 July 31, 1994*
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(in thousands)
<S> <C> <C>
PBP and affiliates:
General and administrative $ 32 $ 35
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Glenborough and affiliates:
Property management fee and expenses 165 104
Leasing commissions 97 7
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262 111
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$294 $146
------ ------
------ ------
</TABLE>
- - ---------------
* Glenborough replaced Equitec Financial Group, Inc.(``EFG'') as co-General
Partner in May 1994; therefore, prior fiscal year balances include costs
incurred June 1 through July 31, 1994 only.
The Partnership maintains an account with the Prudential Institutional
Liquidity Portfolio Fund, an affiliate of PBP, for investment of its available
cash in short-term instruments pursuant to the guidelines established by the
Partnership Agreement.
Prudential Securities Incorporated (``PSI''), an affiliate of PBP, owns 180
depositary units at September 30, 1995.
C. Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes et
al. v. Prudential Securities Group Inc. et al. (CV-93-654), was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership and against the Partnership, PBP, PSI and a
number of other defendants. Defendants filed a motion to dismiss on December 22,
1993.
On or about November 16, 1993, a putative class action captioned Connelly et
al. v. Prudential-Bache Securities Inc. et al. (CIV-93-713) was filed in the
United States District Court for the District of Arizona, purportedly on behalf
of investors in the Partnership and against the Partnership, PBP, PSI and a
number of other defendants. Plaintiffs subsequently filed a motion to
consolidate this action with the Kinnes case.
By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, the Kinnes case, and by order dated June 8, 1994, the Connelly case,
together with a number of other actions, on each occasion not involving the
Partnership, were transferred to a single judge of the United States District
Court for the Southern District of New York and consolidated for pretrial
proceedings under the caption In re Prudential Securities Incorporated Limited
Partnerships Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs in the
transferred cases filed a complaint that consolidated the previously filed
complaints and named as defendants, among others, PSI, certain of its present
and former employees, PBP and EFG. The Partnership is not named as a defendant
in the consolidated complaint, but the name of the Partnership is listed as
being among the limited partnerships at issue in the case. The consolidated
complaint alleges violations of the federal and New Jersey Racketeer Influenced
and Corrupt Organizations Act of 1970 (``RICO'') statutes, fraud, negligent
misrepresentation, breach of fiduciary duties, breach of third-party beneficiary
contracts and breach of implied covenants in connection with the marketing and
sales of limited partnership interests. Plaintiffs request relief in the nature
of rescission of the purchase of securities and recovery of all consideration
and expenses in connection therewith, as well as compensation for lost use of
money invested less cash distributions; compensatory damages; consequential
damages; treble damages for defendants' RICO violations (both federal and New
Jersey); general damages for all injuries resulting from negligence, fraud,
breaches of contract, and breaches of duty in an amount to be determined at
trial; disgorgement and restitution of all earnings, profits, benefits and
compensation received by defendants as a result of their unlawful acts; cost and
disbursements of the action; reasonable attorneys' fees; and such other and
further relief as the court deems just and proper.
On November 28, 1994 the transferee court deemed each of the complaints in
the constituent actions (including Kinnes) amended to conform to the allegations
of the consolidated complaint. PSI and PBP, along with various other defendants,
filed a motion to dismiss the consolidated complaint on December 20, 1994. By
order dated August 29, 1995, the transferee court granted plaintiffs' motion for
temporary class certifica-
6
<PAGE>
tion, preliminarily approved a settlement entered into between plaintiffs and
PBP and PSI, scheduled a fairness hearing for November 17, 1995, approved the
form and content of notice to be provided to class members and directed that it
be provided to class members. The full amount due under the settlement agreement
has been paid by PSI.
7
<PAGE>
PRUDENTIAL-BACHE/EQUITEC REAL ESTATE PARTNERSHIP,
A California Limited Partnership
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Totem Valley, Montrose Office Park, Gateway and Park Plaza generated cash
flow from operations after debt service during the nine months ended September
30, 1995. Poplar Towers operated at break-even during this period. The aggregate
cash flow from property operations after debt service was approximately $692,000
for the nine months ended September 30, 1995.
During the nine months ended September 30, 1995, the Partnership disbursed
approximately $426,000 for building and tenant improvements, primarily related
to the Park Plaza and Montrose Office Park properties. In order to keep the
properties competitive, building and tenant improvements will continue to be
required.
The Partnership had cash of approximately $980,000 at September 30, 1995;
however, PBP is not being reimbursed for its general and administrative expenses
(other than printing) on a current basis. A payment for past due amounts of
$100,000 was made in the first quarter of 1995. At September 30, 1995, the total
liability outstanding (including printing) to PBP was approximately $689,000.
Cash on hand and any cash generated from operations may not be sufficient in the
future to fund building and tenant improvements and to pay deferred general and
administrative expenses.
The General Partners continue to evaluate the properties' prospects for
eventual sale or other disposition. It is unlikely that investors will be
returned a significant portion of their original investment upon the sale of the
properties and ultimate dissolution of the Partnership.
Results of Operations
The Partnership has changed its fiscal year from October 31 to December 31
commencing with the year ending December 31, 1995. The Partnership has not
created comparative September 30, 1994 periods because operations during those
periods and the July 31, 1994 periods remained generally consistent.
The Partnership's net loss increased by approximately $303,000 and $295,000
for the nine and three months ended September 30, 1995 as compared to the nine
and three months ended July 31, 1994.
Property operating revenues decreased by approximately $13,000 and $157,000
due to higher vacancies during the nine and three months ended September 30,
1995 as compared to the nine and three months ended July 31, 1994. Property
operating expenses increased by approximately $234,000 and $134,000 for the nine
and three month periods ended September 30, 1995 as compared to the
corresponding periods in 1994 due to higher repairs and maintenance expenses and
increased contract costs. The increase in property operating expenses was also
due to additional costs incurred to generate increases in recovery of expenses
from tenants. The increases in recovery of expenses of approximately $45,000 and
$57,000 for the nine and three months ended September 30, 1995 as compared to
the nine and three months ended July 31, 1994 was primarily due to increased
tenant services reimbursements.
General and administrative expenses for the nine months ended September 30,
1995 increased by approximately $55,000 as compared to the nine months ended
July 31, 1994 primarily due to professional fees incurred to evaluate the
saleability and to determine the appraised value of the Partnership's properties
and, to a lesser extent, the timing of certain accruals from year to year.
8
<PAGE>
PART II. OTHER INFORMATION
<TABLE>
<S> <C>
Item 1. Legal Proceedings--Incorporated by reference to Note C to the financial statements
filed herewith in Item 1 of Part I of the Registrant's Quarterly Report.
Item 2. Changes in Securities--None
Item 3. Defaults Upon Senior Securities--None
Item 4. Submission of Matters to a Vote of Security Holders--None
Item 5. Other Information--None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3 and 4 Amended and Restated Limited Partnership Agreement of Registrant dated
February 11, 1985 (incorporated by reference to Amendment No. 1 to the Registrant's
Form S-11 Registration Statement filed on February 14, 1985) and Amendment
No. 1 thereto dated April 18, 1985 (incorporated by reference to Form 8-A
filed on February 28, 1986), as amended on March 25, 1994 (incorporated by
reference to Registrant's 1994 Annual Report on Form 10-K)
Amended and Restated Agreement between General Partners dated December 28, 1990
(incorporated by reference to the Registrant's 1990 Annual Report filed
on Form 10-K)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K: None
</TABLE>
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Prudential-Bache/Equitec Real Estate Partnership,
A California Limited Partnership
<TABLE>
<S> <C>
By: Prudential-Bache Properties, Inc.
A Delaware corporation, Managing General Partner
By: /s/ Eugene D. Burak Date: November 14, 1995
- - --------------------------------------------------------
Eugene D. Burak
Vice President
Chief Accounting Officer for the Registrant
</TABLE>
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Prudential-Bache/Equitec
Real Estate Partnership and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<RESTATED>
<CIK> 0000757191
<NAME> Prudential-Bache/Equitec Real Estate Partnership
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-1-1995
<PERIOD-END> Sep-30-1995
<PERIOD-TYPE> 9-mos
<CASH> 980,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,285,000
<PP&E> 32,512,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,777,000
<CURRENT-LIABILITIES> 28,062,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,715,000
<TOTAL-LIABILITY-AND-EQUITY> 34,777,000
<SALES> 0
<TOTAL-REVENUES> 4,885,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,875,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,798,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (788,000)
<EPS-PRIMARY> (11.34)
<EPS-DILUTED> 0
</TABLE>
