<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended JUNE 30, 1997
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
Indicate by check mark whether the registrant (1) has filed all documents and
reports required to be filed 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
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
<TABLE>
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, June 30, 1997 and December 31, 1996.........................1
Statements of Operations,
Six and Three Months Ended June 30, 1997 and 1996...................2
Statement of Partners' Equity (Deficiency),
Six Months Ended June 30, 1997......................................3
Statements of Cash Flows
Six Months Ended June 30, 1997 and 1996............................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..........................................................12
Item 6. Exhibits and Reports on Form 8-K .........................................12
Signatures.........................................................................13
</TABLE>
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
(Unaudited) (Audited)
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<S> <C> <C> <C>
ASSETS (Note 1) $ -- $ --
========== ==========
LIABILITIES AND PARTNERS' EQUITY
---------- ----------
LIABILITIES -- --
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 3)
PARTNERS' EQUITY -- --
---------- ----------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ -- $ --
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, June 30, June 30, June 30,
1997 1997 1996 1996
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
RENTAL OPERATIONS:
Revenues
Rental income $ -- $ -- $ 246,417 $ 62,817
Other income -- -- 7,050 1,672
--------- ----------- ----------- -----------
-- -- 253,467 64,489
--------- ----------- ----------- -----------
Expenses
Operating expenses -- -- 178,621 53,221
Management fees -- -- 8,871 2,257
Depreciation -- -- 34,872 --
General and administrative expenses -- -- 12,180 2,211
Interest expense -- -- 360,093 128,905
--------- ----------- ----------- -----------
-- -- 594,637 186,594
--------- ----------- ----------- -----------
Loss from rental operations -- -- (341,170) (122,105)
--------- ----------- ----------- -----------
PARTNERSHIPS OPERATIONS:
Interest income -- -- 119,825 24,465
--------- ----------- ----------- -----------
Expenses
General and administrative expenses -- -- 12,110 3,941
Professional fees -- -- 99,366 (18,115)
--------- ----------- ----------- -----------
-- -- 111,476 (14,174)
--------- ----------- ----------- -----------
Income from partnership operations -- -- 8,349 38,639
--------- ----------- ----------- -----------
GAIN ON SALE OF RENTAL PROPERTIES -- -- 2,280,983 2,280,983
--------- ----------- ----------- -----------
NET INCOME $ -- $ -- $ 1,948,162 $ 2,197,517
========= =========== =========== ===========
NET INCOME PER LIMITED PARTNERSHIP
INTEREST (Note 1) $ -- $ -- $ 91 $ 102
========= =========== =========== ===========
</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)
SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------- ---------- ----------
<S> <C> <C> <C>
EQUITY (DEFICIENCY), January 1, 1996 $ -- $ -- $ --
Net loss for the six months
ended June 30, 1997 -- -- --
-------- ---------- ----------
EQUITY (DEFICIENCY), June 30, 1997 $ -- $ -- $ --
======== ========== ==========
</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
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ -- $ 1,948,162
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation -- 34,872
Gain on sale of rental properties -- (2,280,983)
Changes in operating assets and liabilities:
Decrease in:
Due from affiliated rental agent -- 114,728
Other receivables and prepaid expenses -- 10,331
Decrease in:
Accounts payable and accrued expenses -- (403,683)
Accrued interest payable -- (1,226,835)
Tenant security deposit -- (31,028)
---------- ------------
Net cash used in operating activities -- (1,834,436)
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in restricted cash -- 5,236,780
Decrease in liability for earthquake loss -- (5,363,547)
Proceeds from sale of rental properties -- 13,181,236
---------- ------------
Net cash provided by investing activities -- 13,054,469
---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage notes -- (9,649,180)
---------- ------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS -- 1,570,853
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD -- 442,803
---------- ------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ -- $ 2,013,656
========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest $ -- $ 56,446
========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
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, 1996 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 National Partnership Investments Corp. ("NAPICO"), a
California corporation, 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 June 30, 1997, and the results of operations
for the six and three months then ended and changes in cash flows for
the six months then ended.
ORGANIZATION
The Partnership was formed under the California Limited Partnership
Act on March 9, 1984. The general partners are NAPICO, and Real Estate
Services XIII Inc. ("RES XIII"), a Delaware corporation. Casden
Investment Corporation owns 100 percent of NAPICO's stock. LB I Group
Inc. owns 100 percent of the stock of RES XIII. The Partnership was
formed to invest in a diversified portfolio of apartment complexes.
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.
The Partnership originally invested in five apartment buildings. Two
of such buildings were contributed to a separate limited partnership
in exchange for a subordinated limited partner interest therein,
which, in turn, exchanged the buildings for an interest in a publicly
traded Real Estate Investment Trust ("REIT"). The Partnership sold the
REIT stock it received as a result of that exchange in November 1996
for $890,371. One building was foreclosed upon by the lender in June
1993 and one building was substantially destroyed in the January 17,
1994 earthquake in the Los Angeles area and was sold in May 1996. The
other building was sold in April 1996. Distributions of $2,823,700
were paid to the limited partners during 1996. Accordingly, since the
Partnership's primary assets at December 31, 1996 consisted of cash of
approximately $345,000 and certain short-term receivables and other
claims, the Partnership was dissolved effective December 31, 1996.
5
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NAPICO was appointed the liquidation agent for the Partnership
pursuant to a Liquidation Agreement, made as of December 1, 1996,
among the Partnership, NAPICO, and RES XIII. Under the terms of the
Liquidation Agreement, the liquidation agent will pursue collection of
the Partnership's outstanding receivables and other non-liquid assets
and, subject to the approval of RES XIII, cause the Partnership's
final tax returns and reports to be filed. Upon collection and
liquidation of the Partnership's remaining assets, the liquidation
agent will cause the final distribution(s) to be paid to the partners
in accordance with the terms of the Amended and Restated Agreement of
Limited Partnership of the Partnership. The liquidation agent shall be
entitled to (a) utilize its reasonable discretion in liquidating the
Partnership's remaining assets and (b) reimbursement for all
reasonable costs and expenses incurred in conforming its duties under
the Liquidation Agreement. As of December 31, 1996, the Partnership's
remaining assets consisted of cash of approximately $345,000 and
certain short-term receivables and other claims, and its remaining
liabilities consisted of approximately $112,000 of accounts payable.
The Partnership's remaining assets and liabilities were assigned to
NAPICO as the liquidation agent under the Liquidation Agreement, and
were reflected as a net distribution of approximately $233,000 to the
limited partners, which is due from NAPICO, subject to the payment of
costs and expenses of the liquidation. During the six months ended
June 30, 1997, NAPICO incurred net expenses of $50,897 on behalf of
the Partnership.
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
There are no remaining rental properties owned by the Partnership,
therefore no rental property cost and accumulated depreciation are
included in the June 30, 1997 and December 31, 1996 financial
statements.
NET INCOME PER LIMITED PARTNERSHIP INTEREST
Net income per limited partnership interest was computed by dividing
the limited partners' share of net income by 21,500, the number of
limited partnership interests outstanding for the periods presented.
6
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Partnership adopted Statement of Financial Accounting Standards
No. 121, Accounting for the Improvement of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of as of January 1, 1996 without a
significant effect on its financial statements. The Partnership
reviews long-lived assets to determine if there has been any permanent
impairment whenever events or changes in circumstances indicate that
the carrying amount of the asset may not be recoverable. If the sum of
the expected future cash flows is less than the carrying amount of the
assets, the Partnership recognizes an impairment loss.
NOTE 2 - 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 3 - CONTINGENCIES
NAPICO is involved in various lawsuits arising from transactions in
the ordinary course of business. In the opinion of NAPICO, the claims
will not result in any material liability to the Partnership.
7
<PAGE> 10
REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1997
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 inception, one of which
was foreclosed by the lender in 1993. In 1992, two of the Partnership's
properties (the "Del Coronado Properties") were contributed to 843 South
Longmore Limited Partnership, an unaffiliated limited partnership, and such
buildings were thereafter sold by said partnership for REIT shares in August of
1995. The remaining two apartment complexes of West Colonial and Northridge were
sold in 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. Of the net proceeds, the Partnership received an
allocation equivalent to 23,524 shares, which were converted to REIT stock. The
Partnership sold the REIT stock in November 1996 for $891,000 and recognized a
gain in that amount because the investment was being carried at a zero balance.
RESULTS OF OPERATIONS
Rental operations consisted primarily of rental income and depreciation expense,
debt service, and normal operating expenses to maintain the properties.
Depreciation was provided on the straight-line method over the estimated useful
lives of the buildings and equipment. Substantially all of the rental units were
leased on a month-to-month basis.
Partnership operations consisted primarily of interest income earned on
certificates of deposit and other temporary investment of funds. Operating
expenses of the Partnership consist substantially of recurring general and
administrative expenses and professional fees for services rendered to the
Partnership.
8
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1997
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
NAPICO is involved in various lawsuits. None of these suits were related to the
Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of item 601 of
regulation S-K
9
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REAL AMERICAN PROPERTIES
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1997
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.
------------------------------------------
a General Partner
-----------------------------------------
Bruce Nelson
President
Date: ________________________________________
-----------------------------------------
Charles H. Boxenbaum
Chief Executive Officer
Date: ________________________________________
10
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
