<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR QUARTER ENDED MARCH 31, 1996
COMMISSION FILE NUMBER 2-94725
REAL AMERICAN PROPERTIES
A CALIFORNIA LIMITED PARTNERSHIP
I.R.S. EMPLOYER IDENTIFICATION NO. 95-3906164
9090 Wilshire Blvd., Suite 201
Beverly Hills, Calif. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Securities Registered Pursuant to
Section 12(b) or 12(g) of the Act
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed with the Commission by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding twelve 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
----- -----
<PAGE> 2
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
PART I. FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
Item 1. Financial Statements
Balance Sheets, March 31, 1996 and December 31, 1995............................................. 1
Statements of Operations,
Three Months Ended March 31, 1996 and 1995............................................... 2
Statement of Partners' Equity (Deficiency),
Three Months Ended March 31, 1996........................................................ 3
Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995............................................... 4
Notes to Financial Statements.................................................................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ....................................................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................................ 13
Item 6. Exhibits and Reports on Form 8-K ............................................................... 14
Signatures .............................................................................................. 15
</TABLE>
<PAGE> 3
REAL AMERICAN PROPERTIES
(a California limited partnership)
BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
RENTAL PROPERTY, at cost (Notes 1 and 3)
Land $ 2,170,920 $ 2,170,920
Buildings 12,360,101 12,360,101
Furniture and equipment 835,000 835,000
----------- -----------
15,366,021 15,366,021
Less accumulated depreciation (4,465,768) (4,430,896)
----------- -----------
10,900,253 10,935,125
----------- -----------
CASH AND CASH EQUIVALENTS (Note 1) 392,212 442,803
----------- -----------
RESTRICTED CASH (Note 1) 5,231,589 5,236,780
----------- -----------
INVESTMENT IN LIMITED PARTNERSHIP (Note 2)
OTHER ASSETS:
Due from rental agent, including restricted
cash held for security deposits and reserves
of $68,163 at March 31, 1996 and December
31, 1995 118,167 114,728
Other receivables and prepaid expenses (Note 5) 154,876 96,525
----------- -----------
273,043 211,253
----------- -----------
TOTAL ASSETS $16,797,097 $16,825,961
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Mortgage notes payable (Note 3) $ 9,639,890 $ 9,649,180
Accounts payable and accrued expenses (Notes 1 and 5) 494,934 406,383
Accrued interest payable (Note 1) 1,373,256 1,226,835
Liability for earthquake loss (Note 1 ) 5,358,356 5,363,547
Tenant security deposits 31,028 31,028
----------- -----------
16,897,464 16,676,973
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 5 and 6)
PARTNERS' EQUITY (100,367) 148,988
----------- -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $16,797,097 $16,825,961
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
REAL AMERICAN PROPERTIES
(a California limited partnership)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
RENTAL OPERATIONS:
Revenues
Rental income $ 183,600 $ 164,078
Other income 5,378 8,975
--------- ---------
188,978 173,053
--------- ---------
Expenses
Operating expenses 125,400 153,253
Management fees - affiliate in 1995 (Note 5) 6,614 18,724
Depreciation 34,872 34,871
General and administrative expenses 9,969 9,261
Interest expense (Notes 1 and 3) 231,189 234,500
--------- ---------
408,044 450,609
--------- ---------
Loss from rental operations (219,066) (277,556)
--------- ---------
PARTNERSHIPS OPERATIONS:
Interest income (Note 5) 95,360 748
--------- ---------
Expenses
General and administrative expenses 58,168 9,930
Professional fees (Note 5) 67,481 14,910
Amortization of loan fees (Note 1) 0 560
--------- ---------
125,649 25,400
--------- ---------
Loss from partnership operations (30,289) (24,652)
--------- ---------
NET LOSS $(249,355) $(302,208)
========= =========
NET LOSS PER LIMITED PARTNERSHIP
INTEREST (Note 5) $ (12) $ (14)
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
REAL AMERICAN PROPERTIES
(a California limited partnership)
STATEMENT OF PARTNERS' EQUITY (DEFICIENCY)
THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
---------- ---------- ---------
<S> <C> <C> <C>
PARTNERSHIP INTERESTS,
March 31, 1996 1 21,500 21,501
========= ========= =========
EQUITY (DEFICIENCY), January 1, 1996 $(184,571) $ 333,559 $ 148,988
Net loss for the three months
ended March 31, 1996 (2,494) (246,861) (249,355)
--------- --------- ---------
EQUITY (DEFICIENCY), March 31, 1996 $(187,065) $ 86,698 $(100,367)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
REAL AMERICAN PROPERTIES
(a California limited partnership)
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(249,355) $(302,208)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 34,872 34,871
Provisions for earthquake loss - 4,935
Changes in operating assets and liabilities:
(Increase) decrease in:
Due from affiliated rental agent (3,439) 13,872
Other receivables and prepaid expenses (58,351) 560
Increase in:
Accounts payable and accrued expenses 88,551 156,195
Accrued interest payable 146,421 -
--------- --------
Net cash used in operating activities (41,301) (91,775)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in restricted cash 5,191 (12,309)
Decrease in liability for earthquake loss (5,191) -
--------- --------
Net cash used in investing activities - (12,309)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage notes (9,290) (10,044)
--------- --------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (50,591) (114,128)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 442,803 659,440
--------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 392,212 $ 545,312
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest $ 56,446 $ 85,934
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the annual
audited financial statements; accordingly, the financial statements
included herein should be reviewed in conjunction with the financial
statements and related notes thereto contained in the annual report for
the year ended December 31, 1995 of REAL American Properties (the
"Partnership"). Accounting measurements at interim dates inherently
involve greater reliance on estimates than at year end. The results of
operations for the interim periods presented are not necessarily
indicative of the results for the entire year.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting primarily of normal
recurring accruals) necessary to present fairly the financial position
of the Partnership as of March 31, 1996, and the results of operations
and changes in cash flow for the three months then ended.
ORGANIZATION
The Partnership was formed under the California Limited Partnership Act
on March 9, 1984. The Partnership was formed to invest in a diversified
portfolio of five residential apartment projects, one of which was
foreclosed on by the lender in 1993. Two of the remaining buildings
were contributed to a separate unaffiliated limited partnership in
1992, and were subsequently sold by such limited partnership in 1995 as
more particularly described in Note 2. The remaining two apartment
complexes were sold in April and May 1996. Accordingly, the
Partnership's sole assets as of May 17, 1996 consist of cash, a
contingent note receivable from the purchaser of the Partnership's
Northridge property, and an interest in a publicly traded real estate
investment trust described below. After the interest in the real estate
investment trust [and the contingent note?] is converted to cash (Note
2), the managing General partner intends to cause the Partnership to
dissolve in accordance with the Partnership Agreement. The general
partners are National Partnership Investments Corp. ("NAPICO"), a
California corporation, and Real Estate Services XIII Inc. ("Real
Estate"), a Delaware corporation. Casden Investment Corporation owns
100 percent of NAPICO's stock. LBI Group Inc. owns 100 percent of the
stock of Real Estate Services XIII Inc.
The Partnership offered 45,000 limited partnership interests ("Units")
at $1,000 each, of which 21,500 were sold through a public offering.
The terms of the Partnership's Amended and Restated Certificate and
Agreement of Limited Partnership (the "Partnership Agreement") provide,
among other things, for allocation to the partners of profits, losses
and any special allocations with respect thereto. Under the terms of
the Partnership Agreement, cash available for distribution is allocated
90 percent to the limited partners as a group and 10 percent to the
general partners.
Net proceeds from sale or refinancing are distributed 100 percent to
the limited partners until they have received an amount equal to the
aggregate adjusted capital values, as defined, plus a cumulative
non-compounded 8 percent annual return. The balance is distributed 85
percent to the limited partners and 15 percent to the general partners.
5
<PAGE> 8
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
RENTAL PROPERTY AND DEPRECIATION
Rental property is stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the buildings
and equipment.
<TABLE>
<CAPTION>
Asset Estimated Useful Lives
----- ----------------------
<S> <C>
Buildings 30 years
Furniture and equipment 5 years
</TABLE>
On January 17, 1994, the Partnership's property located in Northridge,
California sustained major damage due to the severe earthquake in the
Los Angeles area. The operations of the property were severely
affected since the Los Angeles County building inspectors
declared the building unsafe for habitation. Accordingly, the entire
property was vacated and has remained vacant since the earthquake.
The property insurance coverage, which covers to a limited extent,
among other things, property damage and loss of rental income. In
August 1994, a partial settlement for property damage in the amount
of approximately $3,909,000 was allocated to the Partnership under
a master umbrella insurance policy, covering earthquake damage for
this and other properties managed by an affiliate of NAPICO.
In May 1995, the Partnership received from the insurance company the
final settlement payment of $1,368,000 related to the earthquake loss.
This amount is being held in an escrow account by the Northridge
property lender. All insurance proceeds have been included in
restricted cash and liability for earthquake loss at March 31, 1996 and
December 31, 1995.
Interest relating to the first and second mortgages on the Northridge
property in the approximate amount of $1,345,000 and $1,199,000 as of
March 31, 1996 and December 31, 1995, respectively, was accrued
and is included in accrued interest payable (See Note 3). In addition,
unpaid property taxes of approximately $391,000 and $354,000 related to
the Northridge property were accrued as of March 31, 1996 and
December 31, 1995, respectively.
The first mortgage lender had demanded that the Partnership turn over
to it the insurance proceeds currently held by the Partnership.
Pursuant to the terms of the loan documents between the Partnership and
the lender, the lender had a security interest in and other rights to
the insurance proceeds.
6
<PAGE> 9
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RENTAL PROPERTY AND DEPRECIATION (CONTINUED)
On May 15, 1996, the Partnership sold the Northridge property. The
Partnership realized net proceeds of approximately $900,000, which
approximates the cash the Partnership was able to retain from the
restricted cash account. Pursuant to a contingent note delivered
by the purchaser at the closing, the Partnership is entitled to
additional proceeds under certain conditions.
On April 19, 1996, the Partnership sold West Colonial Apartments for
$4,070,000 and realized and a gain of approximately $400,000.
NET LOSS PER LIMITED PARTNERSHIP INTEREST
Net loss per limited partnership interest was computed by dividing the
limited partners' share of net loss by 21,500, the number of limited
partnership interests outstanding for the periods presented.
AMORTIZATION OF LOAN FEES
Loan fees are being amortized on the straight-line method over a
fifteen-year period.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and bank certificates of
deposit, with an original maturity of three months or less.
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIP
In September 1992, the Partnership completed an exchange transaction
involving the Del Coronado I and II properties. The Partnership
transferred the Del Coronado properties to an unaffiliated Arizona
limited partnership, 843 South Longmore Limited Partnership, in
exchange for a subordinated 20 percent limited partnership interest in
843 South Longmore Limited Partnership. In August 1995, the Del
Coronado properties were sold by 843 South Longmore Limited Partnership
to a publicly held Real Estate Investment Trust ("REIT"). The net
proceeds of $5,682,262 paid to 843 South Longmore Limited Partnership
was in the form of limited partnership interests in the operating
partnership controlled by the REIT, which are convertible to cash or
REIT stock, at the option of the REIT. Of the net proceeds, the
Partnership received an allocation of 23,524 shares, with an
approximate value of $735,000, as of March 31, 1996. The amount
realized by the Partnership is subject to change due to stock market
fluctuations, since the limited partnership shares cannot be redeemed
for cash or REIT stock until August 1996. The Partnership intends to
redeem the limited partnership shares for cash upon expiration of the
redemption period, however, the REIT may elect to redeem the units for
REIT shares, in which event the Partnership intends to cause the shares
to be registered and sold in accordance with applicable laws. The
investment in the 843 South Longmore Limited Partnership is being
carried at a zero balance, and no gain will be recognized until the
limited partnership interest is converted to cash.
7
<PAGE> 10
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
NOTE 3 - MORTGAGE NOTES PAYABLE
The Partnership had three notes payable separately secured by its two
remaining properties as of March 31, 1996, as follows:
a. The Northridge property was encumbered as of March 31, 1996 by a
first deed of trust securing a note in the approximate principal
balance of $6,073,000, and a second deed of trust in the
approximate principal balance of $410,000. The first note bore
interest at 9.25% per annum and was payable in monthly
installments of approximately $53,500. The entire balance of the
note was due and payable on or before August 1, 1996. The
Northridge second note bears interest at 10% per annum and was
payable in monthly installments of approximately $3,400. The
entire balance of the Northridge second note matured on November
15, 1995. In February 1994, the Partnership ceased making
payments to both of the lenders with respect to the Northridge
property. The loans were repaid at less than 100% upon sale of
the property on May 15, 1996.
b. The West Colonial Apartments was encumbered by a first deed of
trust securing a note in the approximate principal balance of
$3,157,000 as of March 31, 1996. The note bore interest at 10.7%
per annum and was payable in monthly installments of
approximately $32,000. The entire balance of the note was due and
payable on or before July 31, 1996. The loan was repaid upon sale
of the property on April 19, 1996.
NOTE 4 - INCOME TAXES
No provision has been made for income taxes in the accompanying
financial statements as such taxes, if any, are the liability of the
individual partners.
NOTE 5 - RELATED PARTY TRANSACTIONS
a. The Partnership had entered into agreements with an affiliate of
NAPICO to manage the operations of the West Colonial and
Northridge rental properties owned by the Partnership. The
agreements were on a month-to-month basis and provided, among
other things, for a management fee equal to 5% of gross revenue
for West Colonial through July 23, 1995 and approximately $2,450
per month, as compensation for continuing property management
services and reconstruction oversight at the Northridge property
damaged by the earthquake. Management fees charged by the NAPICO
affiliate under these agreements were approximately $7,400 and
$19,000 for the three months ended March 31, 1996 and 1995,
respectively. Included in these management fees is approximately
$7,400 for the three months ended March 31, 1996 which was
included in earthquake costs. On July 24, 1995, management of
West Colonial was transferred to an independent property
management firm. The management agreement was on a month-to-month
basis and provided for a management fee of 3.5% of gross revenue,
equal to $6,614 for the three months ended March 31, 1996.
Included in other receivables and prepaid expenses at March 31,
1996 and December 31, 1995, is $86,194 due from the affiliated
company of NAPICO that served as the rental agent for a
property that was owned by the Partnership.
8
<PAGE> 11
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1996
NOTE 5 - RELATED PARTY TRANSACTIONS
b. The Partnership reimburses NAPICO for certain expenses. The
reimbursement to NAPICO was $2,098 and $3,146 for the three
months ended March 31, 1996 and 1995, respectively and is
included in the Partnership's operating expenses.
c. Under the terms of the Partnership Agreement, the Partnership may
be obligated to pay the general partners or their affiliates a
liquidation fee equal to 15% of the net proceeds from sale or
refinancing of a project. No part of such fee shall be paid
unless the limited partners have first received certain amounts
as stated in the Partnership Agreement.
d. Certain other fees may be payable to the general partners, under
certain circumstances, as stated in the Partnership Agreement.
e. Pursuant to the Memorandum of Understanding entered into on
August 11, 1995, the affiliated company, that served as the
management company for properties owned by the Partnership, paid
to the Partnership $66,706 in interest on May 1, 1996. The
interest relates to Partnership funds maintained in a master
disbursement account by the management company. The interest is
included in income for the three months ended March 31, 1996 and
in other receivables and prepaid expenses at March 31, 1996.
In addition, the Partnership on May 1, 1996 reimbursed Real
Estate Services XIII Inc. $50,000 for professional fees, which
were estimated to have been paid on behalf of the Partnership in
connection with issues raised in the Memorandum of Understanding.
The amount is included in professional fees for the three months
ended March 31, 1996 and in accounts payable and accrued expenses
at March 31, 1996.
NOTE 6 - LITIGATION
NAPICO is a plaintiff in various lawsuits and has also been named as
defendant in other lawsuits arising from transactions in the ordinary
course of business. In the opinion of management and NAPICO, the claims
will not result in any material liability to the Partnership.
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of fair value
information about financial instruments. The carrying amount of assets
and liabilities reported on the balance sheets that require such
disclosure approximates fair value due to their short-term maturity.
9
<PAGE> 12
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Partnership received a total of $10,750,000 in subscriptions for units of
limited partnership interests (at $1,000 per unit) during the period September
12, 1985 to February 28, 1986, pursuant to a registration statement on Form
S-11. $10,750,000 in subscriptions were received pursuant to the exercise of
warrants and the sale of additional limited partnership interests from April 1,
1986 to May 31, 1986.
The Partnership's primary sources of funds are income from rental operations and
interest income on money market funds and certificates of deposit.
The Partnership acquired five apartment complexes since its inception, one of
which was foreclosed by the lender in 1993. In 1992, two of the remaining
buildings (the Del Coronado Properties) were contributed to 843 South Longmore
Limited Partnership, an unaffiliated limited partnership, and such liability
were thereafter sold by said partnership for REIT shares in August of 1995. The
partnerships remaining two apartment complexes (Northridge and West Colonial)
were sold subsequent to March 31, 1996.
In August 1995, the Del Coronado properties were sold by 843 South Longmore
Limited Partnership to a publicly held Real Estate Investment Trust ("REIT").
The net proceeds of $5,682,262 paid to 843 South Longmore Limited Partnership
was in the form of limited partnership interests in the operating partnership
controlled by the REIT, which are convertible to cash or REIT stock, at the
option of REIT. Of the net proceeds, the Partnership received an allocation of
23,524 units, with an approximate value of $735,000 as of March 31, 1996. The
amount realized by the Partnership is subject to change due to stock market
fluctuations, since the limited partnership units cannot be redeemed for cash or
REIT stock until August 1996. The Partnership intends to redeem the limited
partnership shares for cash; however, the REIT may elect to redeem the units for
REIT shares, in which event the Partnership intends to cause such shares to be
registered and sold in accordance with applicable laws. The investment in 843
South Longmore Limited Partnership is being carried at a zero balance, and no
gain will be recognized until the limited partnership interest is converted to
cash.
In 1995, the Partnership advanced funds to partially cover the operating
deficits of the West Colonial property in the amount of $73,000. Such advances
have been funded from the Partnership's working capital reserve.
RESULTS OF OPERATIONS
Rental operations consist primarily of rental income and depreciation expense,
debt service, and normal operating expenses to maintain the properties.
Depreciation is provided on the straight-line method over the estimated useful
lives of the buildings and equipment. Substantially all of the rental units in
the West Colonial apartment project are leased on a month-to-month basis.
On January 17, 1994, the Northridge rental property sustained major damage due
to the severe earthquake in the Los Angeles area. The current operations of the
property were materially affected since the Los Angeles County building
inspectors declared the building unsafe for habitation. Accordingly, the entire
property was vacated and has remained vacant since the earthquake. The property
insurance covered, to a limited extent, among other things, property damage and
loss of rentals as a result of the earthquake. In August 1994, a partial
settlement for property damage in the amount of approximately $3,909,000 was
allocated to the Partnership under a master umbrella insurance policy, covering
earthquake damage for this and other properties managed by a related party.
10
<PAGE> 13
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
In May 1995, the Partnership received from the insurance company the final
settlement payment of $1,368,000 related to the earthquake loss. This amount is
being held in an escrow account by the Northridge property lender. All insurance
proceeds have been included in restricted cash and liability for earthquake loss
at March 31, 1996 and December 31, 1995.
Interest relating to the first and second mortgages on the Northridge property
in the approximate amount of $1,345,000 and $1,199,000 as of March 31, 1996 and
December 31, 1995, respectively, was accrued and is included in accrued interest
payable. In addition, unpaid property taxes of approximately $391,000 and
$354,000 related to the Northridge property were accrued as of March 31, 1996
and December 31, 1995, respectively. As compensation for continuing property
management services, the managing agent, which is an affiliate of NAPICO, was
paid $2,450 per month.
The first mortgage lender had demanded that the Partnership turn over to it the
insurance proceeds held by the Partnership. Pursuant to the terms of the loan
documents between the Partnership and the lender, the lender had a security
interest in and other rights to the insurance proceeds.
On May 15, 1996, the Partnership sold the Northridge property. The Partnership
realized net proceeds of approximately $900,000, approximates the cash the
Partnership was able to retain from the restricted cash account. The Partnership
is entitled to additional proceeds under certain conditions.
On April 19, 1996, the Partnership sold West Colonial Apartments for $4,070,000
and realized gain of approximately $400,000.
Partnership operations consist primarily of interest income earned on
certificates of deposit and other temporary investment of funds not required for
investment in projects. Included in interest income for the three months ended
March 31, 1996 is $66,706 in interest related to funds maintained in the master
disbursement account and received on May 1, 1996, in accordance with the
Memorandum of Understanding (see "Legal Proceedings"). Operating expenses of the
Partnership consist substantially of recurring general and administrative
expenses and professional fees for services rendered to the Partnership.
Included in professional fees for the three months ended March 31, 1996 is
$50,000 payable to Real Estate Services XIII Inc. for professional fees paid on
behalf of the Partnership in connection with issues raised in the Memorandum of
Understanding (see "Legal Proceedings").
The Partnership did not make cash distributions during the first three months of
1996.
11
<PAGE> 14
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1996
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
As of December 31, 1995, NAPICO was a plaintiff or a defendant in several
lawsuits. None of these suits were related to the Partnership.
Real Estate Services XIII Inc., a General Partner of the Partnership, and
certain of its affiliates, on their own behalf and on behalf of the Partnership
and certain other partnerships with which they are associated (collectively, the
"Plaintiff Partnerships"), and NAPICO, and certain of its affiliates, have
entered into a Memorandum of Understanding dated August 11, 1995 and a
Supplement to Memorandum of Understanding dated April 30, 1996 collectively the
("MOU"). In addition to establishing certain Partnership controls, the MOU
resolves and settles various management and control issues which were under
discussion for some time and various claims which were raised in a lawsuit filed
in the Los Angeles Superior Court on June 9, 1995 by Real Estate Services XIII
Inc., the Partnership and others against, among others, NAPICO ("the Lawsuit").
All parties entered into the MOU without any admission of wrongdoing or
liability by any defendant as to any claim in the Lawsuit, in a desire to avoid
continued litigation that would be expensive, time consuming and complex.
By virtue of the MOU, the parties thereto have agreed, among other things, to
the following:
1. An analysis was prepared of the books and records of the Partnership
including an analysis of the books and records of the master
disbursement account maintained by the Partnership's property
management company, Mayer Management, Inc. ("MMI"), an affiliate of
NAPICO. Based on the analysis, on May 1, 1996, MMI paid to the
Partnership $66,706 in interest related to funds it maintained in the
master disbursement account.
2. The property management agreement for the Northridge property by and
between the Partnership and MMI, was extended until the earlier of the
commencement of reconstruction of the building or the sale of the
property to an unaffiliated third party, subject to certain agreed-upon
amendments. Since the property was sold on May 15, 1996, such
management agreement in no longer in effect.
3. On May 1, 1996, the Partnership reimbursed Real Estate Services XIII
Inc. $50,000 for professional fees, which were estimated to have been
paid on behalf of the Partnership in connection with issues raised in
the MOU.
4. The Partnership has engaged an independent Cash Manager, designated by
Real Estate Services XIII Inc. and approved by NAPICO, to perform cash
management services, including maintenance of the Partnership's bank
accounts and reserves, payment of property management fees and other
accounts payable, payments to affiliates of NAPICO, and payment of cash
distributions, if any, to the Limited Partners. NAPICO has agreed to
prepare detailed annual budgets to be approved by Real Estate Services
XIII Inc. and thereafter used by the Cash Manager as a guide and
control over Partnership operations.
12
<PAGE> 15
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1996
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (CONTINUED):
5. Upon the uncured breach of certain provisions of the MOU, or upon a
future breach of NAPICO's fiduciary duties, Real Estate Services XIII
Inc. may cause NAPICO to resign as a general partner of the Partnership
and become a limited partner thereof.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of item 601 of regulation
S-K
13
<PAGE> 16
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
MARCH 31, 1996
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REAL AMERICAN PROPERTIES
(a California limited partnership)
By: National Partnership Investments Corp.
General Partner
Date:
_____________________________________
By: ______________________________________
Charles Boxenbaum
Chairman of the Board
Date: ____________________________________
By: ______________________________________
Shawn Horwitz
Executive Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PARTNERSHIP'S STATEMENTS OF EARNINGS AND BALANCE SHEETS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,623,801
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,896,844
<PP&E> 15,366,021
<DEPRECIATION> 4,465,768
<TOTAL-ASSETS> 16,797,097
<CURRENT-LIABILITIES> 494,934
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (100,637)
<TOTAL-LIABILITY-AND-EQUITY> 16,797,097
<SALES> 0
<TOTAL-REVENUES> 284,338
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 302,504
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231,189
<INCOME-PRETAX> (249,355)
<INCOME-TAX> 0
<INCOME-CONTINUING> (249,355)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (249,355)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
