SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1996
Commission file: #0-14453
National Real Estate Limited Partnership
Income Properties
(Exact name of registrant as specified in its charter)
Wisconsin
(State or other jurisdiction of incorporation or
organization)
39-1503893
(I.R.S. Employer Identification No.)
9800 West Bluemound Road,
Milwaukee, Wisconsin 53226-4353
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code:
(414) 453-3498
Securities registered pursuant to Section 12(b) of the
Act:
Names of Each Exchange
on Which Registered
None
Title of Each Class
None
Securities registered pursuant to Section 12(g) of the
Act:
Limited Partnership Interests
(Title of Class)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Sections 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. (X) Yes ( ) No
State the aggregate market value of the securities held
by non-affiliates of the Registrant as of February 28,
1997: indeterminate value as there is no market.*
*For purposes of this disclosure only.
The number of Limited Partnership interests outstanding
as of February 28, 1997: 9004.15
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual report to the Partners for the
year ended December 31, 1996 are incorporated by
reference into Parts I, II, III, and IV.
Definitive Prospectus dated January 31, 1985, as
amended to date, is incorporated by reference into Part
IV.
<PAGE>
TABLE OF CONTENTS
Item No. Page No.
PART I
1. Business 3
2. Properties 3
3. Legal Proceedings 3
4. Submission of Matters to a Vote of Security
Holders 3
PART II
5. Market for Partnership's Securities and
Related
Security Holder Matters 4
6. Selected Financial Data 5
7. Management's Discussion and Analysis of
Financial
Condition and Results of Operations 5
8. Financial Statements and Supplementary Data 5
9. Disagreements on Accounting and Financial
Disclosure 5
PART III
10. Directors and Executive Officers of the
Partnership 6
11. Executive Compensation 9
12. Security Ownership of Certain Beneficial
Owners and
Management10
13. Certain Relationships and Related
Transactions10
PART IV
14. Exhibits, Financial Statements, Schedules,
and Reports
on Form 8-K1 1
<PAGE>
PART I
Item 1. Business
"Business" on pages 1 and 2 of the Partnership's annual
report to Partners for the year ended December 31, 1996
is incorporated herein by reference.
Item 2. Properties
"Properties" on pages 2 through 3 of the Partnership's
annual report to Partners for the year ended December
31, 1996 is incorporated herein by reference.
Item 3. Legal Proceedings
"Legal Proceedings" on page 3 of the Partnership's
annual report to Partners for the year ended December
31, 1996 is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security
Holders for the Quarter Ended December 31, 1996
No matters have been submitted to a vote of security
holders during the fourth quarter ended December 31,
1996.
By virtue of its organization as a limited partnership,
the Limited Partnership Interests do not possess
traditional voting rights. However, as provided in
Article 15 of the Limited Partnership Agreement,
Limited Partners have voting rights for, among other
things, the removal of the General Partners, the
approval of the sale of substantially all of the assets
under certain circumstances, and the initiation of the
dissolution of the Partnership.
<PAGE>
PART II
Item 5. Market for the Partnership's Securities and
Related Security Holder Matters
a) Market Information
The Partnership's only authorized equity securities are
Limited Partnership Interests ("Interests"). As of
December 18, 1986, the Partnership concluded its
offering of Interests and 9,034.01 Interests had been
sold to the public at a price of $1,000 per Interest.
Management is not aware of a public trading market
having been developed for the Interests. The
Partnership does provide a repurchase pool whereby the
limited partners may tender their limited partnership
interests back to the Partnership at a specified price.
Tenders are accepted semi-annually if they meet the
criteria established by the General Partners. As of
December 31, 1996, 29.86 Interests have been
repurchased and are held in Treasury.
b) Security Holders
Title of Class
Limited Partnership Interests
Number of Record Holders (as of February 28, 1997)
1,155
Number of Interests (as of February 28, 1997)
9,004.15
c) Dividends or Similar Distributions
Cash distributions to Limited Partners depend upon
attaining and thereafter maintaining operating income
and expenses of the Partnership at levels permitting
distributions. Distributions of cash, if any, will be
made from: (i) Cash Available for Distribution; (ii)
cash from property sales; and (iii) cash from
Partnership reserve accounts.
"Cash Available for Distribution" is defined in the
Partnership Agreement to include Cash Flow from the
Partnership less amounts set aside for Reserves plus,
through 1987, the amount of any General Partner Loan
for such period. "Cash Flow" is defined as the
Partnership's cash funds provided from operations and
Reserves, including lease payments on net leases from
builders and sellers, without deductions for
depreciation, but after deducting cash funds used to
pay all Operating Expenses, deferred fees, other
expenses, debt payments, capital improvements and
replacements. Mr. Vishnevsky, as Individual General
Partner was required to loan funds to the Partnership
quarterly to the extent necessary to make Cash
Available for Distribution to Limited Partners equal to
8% in 1985, 8.25% in 1986, and 8.5% in 1987, up to a
maximum loan of 3% of the gross proceeds of the
offering. Through December 31, 1995, the Individual
General Partner loaned $271,020 to the Partnership
under this commitment, which is the maximum amount
under the commitment. This commitment expired December
31, 1987. The Individual General Partner shall be
repaid with interest equal to 12% or the prime rate
plus two percentage points, whichever is lower, solely
from sale proceeds. The Partnership continued cash
distributions in 1996 with an aggregate of $180,084 and
$5,568 to its Limited Partners and General Partners,
respectively. Distributions for 1996 were at a rate
that equaled 2.0% on the Limited Partners' capital
investment. The General Partners anticipate that the
Partnership will continue to make cash distributions to
its Limited Partners in 1997, though the level of such
cash distributions will be dependent upon the results
of property operations and there can be no assurance as
to the amount, if any, that may be distributed.
<PAGE>
Cash available for distribution, as defined in the
Agreement, will be distributed 97% to the Limited
Partners and 3% to the General Partners. After the
repayment of any General Partner loans, sales proceeds
will be distributed as follows: (1) 97% to the Limited
Partners and 3% to the General Partners until the
Limited Partners have received (A) 100% of their
initial capital investment and (B) cumulative,
non-compounded distributions of sales proceeds, in
excess of the amount required in (A), and cash
available for distribution equal to 6% per annum on
their initial capital investment, with the 3% to the
General Partners subordinated to payment of the amounts
in (A) and (B) to the Limited Partners; (2) to an
affiliate of the General Partners, an amount equal to
its subordinated real estate commission (up to 3% of
the aggregate selling price of all properties); (3) 88%
to the Limited Partners and 12% to the General
Partners, with such payments to the General Partners
subordinated to a total return to the Limited Partners
of (A) 100% of their initial capital investment plus
(B) a cumulative preference of 10% per annum on their
initial capital investment.
If the General Partners should at any time determine
that the Reserves of the Partnership are in excess of
the amount reasonably necessary under the
circumstances, such Reserves may be reduced and the
amount of such reduction may, in the sole discretion of
the General Partners, be used for payment of expenses,
distributions to the Limited Partners, or investment in
additional properties.
Item 6. Selected Financial Data
"Selected Financial Data" on page 4 of the
Partnership's annual report to Partners for the year
ended December 31, 1996 is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 5 through
7 of the Partnership's annual report to Partners for
the year ended December 31, 1996 is incorporated herein
by reference.
Item 8. Financial Statements and Supplementary Data
The financial statements included on pages 8 through 19
of the Partnership's annual report to Partners for the
year ended December 31, 1996 are incorporated herein by
reference. The Partnership is not required to report
quarterly results of operations or supplementary
information on the effects of changing prices.
Item 9. Disagreements on Accounting and Financial
Disclosure
There were no disagreements with Ernst and Young LLP on
any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or
procedure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the
Partnership
(a-b) Identification of Directors and Executive
Officers
The Partnership has no directors or officers. The
General Partners of the Partnership are John
Vishnevsky; National Development and Investment, Inc.
("NDII"), a Wisconsin corporation of which Mr.
Vishnevsky is the majority stockholder; and EC Corp., a
Wisconsin corporation of which Stephen P. Kotecki is
the majority stockholder. The address of Mr. Vishnevsky
and NDII is 9800 West Bluemound Road, Milwaukee,
Wisconsin, 53226-4353, telephone (414) 453-3498. The
address of EC Corp. is 9800 West Bluemound Road,
Milwaukee, Wisconsin, 53226-4353, telephone (414)
453-6764.
The General Partners manage and control the affairs of
the Partnership and have responsibility and ultimate
authority in all matters affecting its business. The
names of the directors and executive officers of NDII
and EC Corp. are as follows:
Name
Office
Term Held Office (since)
NDII:
John Vishnevsky
President, Director
09/30/74
Stephen P. Kotecki
Vice President, Secretary, Treasurer, and Director
04/12/91
EC Corp.:
Stephen P. Kotecki
President, Treasurer, Director
10/30/92
Thomas Rielly
Vice President, Secretary, Director
12/17/92
Officers of the corporations are elected by their
respective Boards of Directors annually. There is no
arrangement or understanding between or among any of
said directors or officers and any other person
pursuant to which such individual was selected as a
director or officer.
(c) Identification of Certain Significant Persons
The General Partners, in conjunction with their
affiliates, believe that they have sufficient personnel
to fully discharge their responsibilities to the
Partnership. The Partnership employs various
individuals to oversee the Partnership's affairs and
report to the General Partners, but, the Partnership
relies directly on the General Partners for the
management and control of the Partnership's affairs.
See Item 10, Subsection (e), for a description of the
business experience of officers, directors, and
personnel of the General Partners and affiliates.
There are four other organizations which are or were
affiliated with the Individual or Corporate General
Partners whose services are utilized by the
Partnership: National Realty Management, Inc. ("NRMI"),
which provides property and partnership management,
real estate acquisition and real estate brokerage
through delegation of duties agreements with NDII;
Victor Construction, Inc., which has and may in the
future serve as general contractor and perform other
services in connection with renovation and remodeling
work of the Partnership's properties; National Selected
Securities Corp. (formerly NDII Securities Corp.),
which acted as the Managing Dealer for the offering of
Interests in the Partnership; and The John Vishnevsky
Company ("JVCO"), which has provided consulting
services in the areas of real estate investments, joint
ventures, financing, systems, accounting, and internal
controls.
<PAGE>
RELATIONSHIP OF GENERAL PARTNERS
AND THEIR AFFILIATES
The following diagram shows the relationship of the
Partnership to various prior or current affiliates:
NATIONAL REAL ESTATE LIMITED
PARTNERSHIP INCOME PROPERTIES
(1)
EC CORP
Corporate General Partner
JOHN VISHNEVSKY
Individual General Partner 100%
NATIONAL DEVELOPMENT AND INVESTMENT, INC.
Corporate General Partner
100%
JOHN VISHNEVSKY COMPANY
Financial and Real Estate Consulting and Services
100%
NATIONAL SELECTED SECURITIES CORP.
Security Sales
(2)
NRMI
Partnership and Property Management Acquisition &
Brokerage
(3)
VICTOR CONSTRUCTION INC.
Building Contractor
(1) The ownership of EC Corp. is held by Mr. Stephen
P. Kotecki (100%).
(2) The ownership of NRMI is held by Mr. Edward Carow
(51%), Ms. Stasia Vishnevsky (25%), and Mr.
Jeffrey Wussow (24%). It is anticipated that the
services of NRMI will continue to be available to
the Partnership under the terms and conditions
described in the Prospectus.
(3) The ownership of Victor Construction, Inc. is held
by Mr. Edward J. Bushman (89%), Mr. Mark Clements
(9%), and Mr. Mark Bruechel (2%). It is
anticipated that the services of Victor will
continue to be available to the Partnership under
the terms and conditions described in the
Prospectus.
<PAGE>
(d) Family Relationships
Ms. Stasia Vishnevsky, part owner and Secretary of
NRMI, is the daughter of John Vishnevsky and is married
to Jeffrey Wussow, part owner and Vice President of
NRMI.
(e) Business Experience
The experience of the officers and directors of the
Corporate General Partners includes the following:
John Vishnevsky, President and Director of NDII, (age
73) is a graduate of Marquette University. For over 38
years he has been involved in real estate related
activities such as land development, residential,
apartment, and commercial construction, property
management, and the structuring of limited
partnerships. Mr. Vishnevsky has directed companies
that have developed or constructed projects with a
current market value of over $100 million. He,
corporate entities he controls, or both, act as general
partner for all NDII limited partnerships. These
partnerships have sold in excess of $160 million of
limited partnership interests. Mr. Vishnevsky is
licensed as an insurance broker, a real estate broker,
and a securities principal and he has lectured
frequently and has taught courses in real estate at the
University of Wisconsin-Milwaukee. He has appeared as a
guest on television and radio programs related to real
estate investments. Mr. Vishnevsky is author of the
books: The Art of Financial Independence, The Phantom
Yield of Real Estate Investment, The Great Real Estate
Disaster... The Greatest Real Estate Opportunity,
Getting to Know You, Releasing Your Creativity, and
Principles.
Stephen P. Kotecki, Vice President and Director of
NDII, and President, Treasurer, and Director of EC
Corp. (age 46) is a General Securities Registered
Representative, multi-line licensed insurance agent and
entrepreneur. He is the sole stockholder of EC Corp.
Mr. Kotecki holds a Bachelor of Science Degree with a
major in Political Science from the University of
Wisconsin-Whitewater, and a Master of Science Degree in
Urban Affairs from the University of
Wisconsin-Milwaukee. Mr. Kotecki directed research for
the American Federation of State, County and Municipal
Employees' District Council in Milwaukee County for
over four years. Mr. Kotecki further has experience as
a Regional Criminal Justice Planner and as a Housing
Evaluation Specialist. As a college instructor Mr.
Kotecki lectured courses in Business and Industrial
Relations, Marketing and Investments for over three
years.
Thomas P. Rielly, Vice President, Secretary and
Director of EC Corp., (age 49) is a licensed general
securities principal and a financial and operations
principal. Mr. Rielly has been an active participant in
the financial services industry for 23 years. His
diverse financial services experience includes
professional assignments in the areas of venture
capital, business planning and venture formation,
investment banking, asset management and securities
placement. Mr. Rielly has been associated with National
Development and Investment, Inc., related companies,
and Mr. Vishnevsky for over 10 years.
Other personnel of the General Partners, affiliates, or
other entities who were significantly involved in the
Partnership's affairs include the following:
Edward Carow, President of NRMI, (age 37) has over 18
years experience and an extensive background in
property management, acquisitions, partnership
management, loan workouts, refinancing, and property
sales. Mr. Carow is a licensed real estate broker and
holds the CPM (Certified Property Manager) designation.
Mr. Carow attended the University of Wisconsin for
business, the Waukesha County Technical College for
real estate and he continues to attend trade
conferences and lectures. He has taught courses in
property management and real estate investments for
Milwaukee Area Technical College. He is a member of the
Executive Council of the Institute of Real Estate
Management and was the 1992 President. Some of his
current other commitments include the International
Affairs Committee of the Institute of Real Estate
Management, the Publishing Committee of the Institute
of Real Estate Management and the Advisory Board at the
Waukesha County Technical College.
<PAGE>
Stasia Vishnevsky, Secretary and Media Director of
NRMI, (age 31) supervises marketing, public relations,
and advertising for NRMI-managed properties. Ms.
Vishnevsky also produces corporate training and
operations manuals, newsletters, and training seminars.
She attended Elmhurst College for English, and
Marquette University for Broadcast Communications.
Joan Jenstead, Director of Property Operations, (age
62) has been involved in the management of over ten
thousand apartment units in addition to commercial and
condominium management nationwide. She is a Certified
Property Manager and a Wisconsin licensed real estate
broker. Ms. Jenstead attended the University of North
Dakota, majoring in Business. In 1984, she was
responsible for the recognition of NRMI as an
Accredited Management Organization (AMO) by the
National Institute of Real Estate Management, (IREM).
In 1988, she served as President of the Institute of
Real Estate Management. She is also a member of the
national faculty of IREM, a faculty member of the
Milwaukee Area Technical College, and a past President
of the Board of Directors for the state of Wisconsin
Technical College Trustee Association. In 1990, Ms.
Jenstead was recognized for her accomplishments in
higher education in "Profiles in Success" published by
the National Center for Higher Education. In 1994 she
was elected to a three year term as a director on the
National Board of the Association of Community College
Trustees.
John Vishnevsky is or was the Individual General
Partner of National Real Estate Limited Partnership-II
(NRELP-II), National Real Estate Limited
Partnership-III (NRELP-III), National Real Estate
Limited Partnership-IV (NRELP-IV), National Real Estate
Limited Partnership-V (NRELP-V), National Real Estate
Limited Partnership-VI (NRELP-VI), National Real Estate
Limited Partnership Income Properties-II (NRELP-IP-II)
and the Partnership, among others. NDII is or was the
corporate general partner of NRELP-IV, NRELP-V,
NRELP-VI, NRELP-IP-II, and the Partnership, among
others. EC Corp. is or was the corporate general
partner of NRELP-VI, NRELP-IP-II and the Partnership,
among others. The Boards of Directors of the
Partnership's Corporate General Partners, NDII and EC
Corp., may be deemed to be interlocking.
Item 11. Executive Compensation
As stated above, the Partnership has no officers or
directors. The officers and directors of the Corporate
General Partners receive no current or proposed direct
remuneration in such capacities, pursuant to any
standard arrangement or otherwise, from either the
Corporate General Partners or from the Partnership,
with the exception of those directors which are not
employees of NDII, EC Corp. and affiliates, to whom an
annual director's fee of $50 per director is paid by
NDII.
Pursuant to the terms of the Limited Partnership
Agreement, net profits and losses from operations and
Cash Available for Distribution are allocated 97% to
the Limited Partners and 3% to the General Partners.
For such 3% interest, the General Partners contributed
$6,000 to the Partnership. For the fiscal period ended
December 3l, 1996, this interest resulted in net
taxable income to the Individual General Partner in the
amount of approximately $4,327. Cash distributions of
$5,568 were made to the Individual General Partner.
Cash available for distribution, as defined in the
Agreement, will be distributed 97% to the Limited
Partners and 3% to the General Partners. After the
repayment of any General Partner loans, sales proceeds
will be distributed as follows: (1) 97% to the Limited
Partners and 3% to the General Partners until the
Limited Partners have received (A) 100% of their
initial capital investment and (B) cumulative,
non-compounded distributions of sales proceeds, in
excess of the amount required in (A), and cash
available for distribution equal to 6% per annum on
their initial capital investment, with the 3% to the
General Partners subordinated to payment of the amounts
in (A) and (B) to the Limited Partners; (2) to an
affiliate of the General Partners, an amount equal to
its subordinated real estate commission (up to 3% of
the aggregate selling price of all properties); (3) 88%
to the Limited Partners and 12% to the General
Partners, with such payments to the General Partners
subordinated to a total return to the Limited Partners
of (A) 100% of their initial capital investment plus
(B) a cumulative preference of 10% per annum on their
initial capital investment.
The Partnership is engaged in various transactions
involving affiliates of the General Partners, as
described in the Prospectus. Notes 2 and 6 of the
Partnership's financial statements of the annual
report to Partners for the year ended December 31, 1996
is incorporated herein by reference.
The contracts between the Partnership and affiliates
provide that the compensation, price, or fee must be
comparable and competitive with the compensation,
price, or fee of any other person whose services could
reasonably be made available to the Partnership. The
General Partners believe compensation to affiliates for
services to the Partnership was on terms no less
favorable to the Partnership than would have been
available through arm's-length negotiations for similar
services from unrelated parties.
Item 12. Security Ownership of Certain Beneficial
Owners and Management
(a) Persons or groups known by the Partnership to own
beneficially more than 5% of the outstanding Interests
of the Partnership are indicated below:
Title of Class
Limited Partnership Interests
Name of Beneficial Owner
Thea J. Peterson
Amount and Nature of Benefiial Ownership
500 Interests
Sole and Joint Investment Power
Percent of Class
5.55%
(b) By virtue of its organization as a limited
partnership, the Partnership has no officers or
directors. The General Partners are responsible for
management of the Partnership, subject to certain
limited democracy rights of the Limited Partners
described in the Limited Partnership Agreement. Persons
or entities performing functions similar to those of
officers and directors of the Partnership, beneficially
own, in the aggregate, the following Interests of the
Partnership as of February 28, 1997.
Title of Class
Limited Partnership Interests
Name of Beneficial Owner
John Vishnevsky
Amount and Nature of Beneficial Ownership
29.56 Interests
Sole Investment Power
Percent of Class
0.33%
Title of Class
Limited Partnership Interests
Name of Beneficial Owner
Stephen P. Kotecki
Amount and Nature of Beneficial Ownership
4 Interests
Sole Investment Power
Percent of Class
0.04%
(c) There is no arrangement known to the Partnership
which may, at a subsequent date, result in a change in
control of the Partnership.
Item 13. Certain Relationships and Related Transactions
Neither the General Partners nor their affiliates were
indebted to the Partnership during the year ended
December 31, 1996.
There were no transactions with management other than
the Partnership's transactions with the General
Partners and affiliates, as described in this report at
Items 10 and 11.
<PAGE>
PART IV
14. Exhibits, Financial Statements, Schedules, and
Reports on Form 8-K
(A) 1. Financial Statements.
a) Financial Statements and Report of Independent
Auditors (incorporated by reference from pages 8
through 19 of the Partnership's annual report to
Partners for the year ended December 31, 1996).
(i) Report of Independent Auditors
(ii) Balance Sheets, December 31, 1996 and 1995
(iii) Statements of Income, Years Ended December
31, 1996, 1995, and 1994
(iv) Statements of Partners' Capital, Years Ended
December 31, 1996, 1995, and 1994
(v) Statements of Cash Flows, Years Ended December 31,
1996, 1995, and 1994
(vi) Notes to Financial Statements
2. Financial Statement Schedules
All schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions, are inapplicable, or the information is
presented in the financial statements or related notes,
and therefore such schedules have been omitted.
3. Exhibits
See attached exhibit list which is incorporated by
reference.
(B) Reports on Form 8-K for the Quarter ended December
31, 1996
There were no reports on Form 8-K filed during the
fourth quarter ending December 31, 1996.
<PAGE>
(C) Exhibits
3(a) Limited Partnership Agreement, incorporated by
reference from Prospectus previously filed with
Registration Statement 2-95072 on Form S-11
effective January 31, 1985.
3(b) Certificate of Limited Partnership incorporated by
reference from Exhibit 3B Registration Statement
2-95072 on Form S-11 filed December 20, 1984.
4 Subscription Agreement Evidencing Ownership of a
Partnership Interest, incorporated by reference
from Prospectus previously filed with Registration
Statement 2-95072 on Form S-11 effective January
31, 1985.
10(a) Consulting Fee Agreement between the
Partnership and NDII dated January 31, 1985,
incorporated by reference from 1985 10-K
filed March 28, 1986.
10(b) Property Management Agreements between
Partnership and NRMI and between NRMI and
Equity Management Corporation Lock-It Lockers
Tucson, incorporated by reference from 1985
10-K filed March 28, 1986.
10(c) Acquisition Agreement between the Partnership
and NDII dated January 31, 1985, incorporated
by reference from 1985 10-K filed March 28,
1986.
10(d) Organization Expense Agreement between the
Partnership and NDII dated January 31, 1985,
incorporated by reference from 1985 10-K
filed March 28, 1986.
10(e) Contracts for Acquisition of Assets
(1) With respect to Lock-It Lockers Mini-Warehouse,
Tucson, Arizona: Incorporated by reference from Exhibit
2-1 to periodic report on Form 8-K dated May 7, 1985;
July 9, 1985; August 9, 1985; and September 13, 1985.
(2) With respect to Lock-It Lockers Mini-Warehouse,
Phoenix, Arizona: Incorporated by reference from
Exhibit 2-1 to periodic report on Form 8-K dated
January 1, 1986; February 1, 1986; and April 2, 1986.
(3) With respect to Cave Creek Mini-Warehouses,
Phoenix, Arizona: Incorporated by reference Exhibit 2-1
to periodic report on Form 8-K dated April 30, 1987.
(4) With respect to Northridge Commons Shopping
Center, Milwaukee, Wisconsin: Incorporated by reference
Exhibit 2-1 to periodic report on Form 8-K dated May
28, 1987.
10(f) Escrow Agreement dated January 31, 1985,
incorporated by reference from Exhibit 10 to
Amendment No. 1 to Registration Statement
2-95072 effective January 31, 1985.
10(g) Property Management Agreement between
Partnership and NRMI and between NRMI and
Equity Management Corporation, Lock It
Lockers, Phoenix, Arizona: Incorporated by
reference from 1986 10-K filed March 28,
1987.
10(h) Management Consulting Delegation of Duties
Agreement between General Partners and NRMI
dated May 28, 1991. Incorporated by reference
from the 1991 10-K filed March 27, 1992.
10(i) Co-General Partner Agreement incorporated by
reference from Exhibit 5-1 to periodic
reports on 8-K dated July 26, 1991.
10(j) Property Management Agreement between
Partnership and NRMI, dated July 1, 1991.
Incorporated by reference from the 1991 10-K
filed March 27, 1992.
11 Not applicable, see Item 6 of this report.
12 Not applicable
*13 National Real Estate Limited Partnership Income
Properties 1996 annual report to Partners is
included as an exhibit hereto for those portions
of such annual report specifically incorporated by
reference elsewhere herein. Such annual report is
deemed not to be filed as part of this Report.
18 Not applicable
19 Not applicable
22 Not applicable
23 Not applicable
*24 Consent of Independent Auditors filed with this
report.
25 Not applicable
(D) Financial Statement Schedules There are no
schedules to be included herein.
* Filed with this Report.
<PAGE>
Exhibit 24
CONSENT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
We consent to the incorporation by reference in this
Annual Report (Form 10-K) of National Real Estate
Limited Partnership Income Properties of our report
dated January 17, 1997, included in the 1996 Annual
Report to Partners of National Real Estate Limited
Partnership Income Properties.
/S/ ERNST & YOUNG LLP
Milwaukee, Wisconsin
March 24, 1997
<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.
NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROPERTIES
(Registrant)
Dated: March 7, 1997
By: /S/ John Vishnevsky
________________________________
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Dated: March 7, 1997
By: /S/ John Vishnevsky
__________________________________
John Vishnevsky
Chief Financial and Accounting Officer
National Development and Investment, Inc.
Corporate General Partner
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report is signed below by the
following persons on behalf of the Registrant and in
the capacities* and on the dates indicated:
/S/ John Vishnevsky
John Vishnevsky
President and Director
National Development and Investment, Inc.
March 7, 1997
(dated)
/S/ Stephen P. Kotecki
Stephen P. Kotecki
Vice President, Secretary,Treasurer and Director
National Development and Investment, Inc.
March 7, 1997
(dated)
/S/ Stephen P. Kotecki
Stephen P. Kotecki
President, Treasurer and Director
EC Corp.
March 7, 1997
(dated)
/S/ Thomas Rielly
Thomas Rielly
Vice President, Secretary and Director
EC Corp
March 7, 1997
(dated)
* The indicated positions are held in the Corporate
General Partners of the Registrant.
B:\NIP-ANNL.EL6
<PAGE>
NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROPERTIES
Business
The Registrant, National Real Estate Limited
Partnership Income Properties (the "Partnership"), is a
limited partnership organized under the Wisconsin
Revised Uniform Limited Partnership Act pursuant to a
Certificate and an Agreement of Limited Partnership,
each dated December 18, 1984. As of December 31, 1996,
the Partnership consisted of an Individual and two
Corporate General Partners and 1,158 Limited Partners
owning 9,004.15 limited partnership interests (the
"Interests") acquired at a public offering price of
$1,000 per Interest ($9,024,556 net of affiliate
discounts). The Interests were sold commencing
January 31, 1985, pursuant to a Registration Statement
on Form S-11 under the Securities Act of 1933
(Registration #2-95072) as amended. The offering of
interests was concluded on December 18, 1986. The
Individual General Partner is John Vishnevsky and the
Corporate General Partners are National Development and
Investment, Inc. ("NDII"), a Wisconsin corporation and
EC Corp., a Wisconsin corporation. All management
decisions are the responsibility of the General
Partners.
The Partnership's primary objective was to acquire
existing commercial space, such as office buildings,
shopping centers, and mini-warehouses, though it was
also permitted to acquire existing residential
properties from non-affiliated sellers. Although the
Partnership intended to acquire existing properties, it
was permitted to acquire properties which were recently
completed. The Partnership's principal investment
objectives are to invest in real estate properties
which will:
1) preserve and protect the Limited Partners' capital
investment;
2) provide quarterly distributions of cash from
operations, commencing December 31, 1985; and
3) provide capital appreciation through increases in
the value of the Partnership's real estate assets.
The Partnership will continue in existence until
December 31, 2004, unless terminated earlier by
disposition of all of its assets or certain other
events. The Partnership will commence to liquidate its
properties as soon as feasibly possible, depending
upon, among other factors, whether the Partnership's
objectives are met, potential capital appreciation,
cash flow, and federal income tax consequences to its
limited partners.
The Partnership owns and operates four investment
properties. During the fiscal year ended December 31,
1985, the Partnership acquired Lock-It Lockers
Mini-Warehouse, a self storage mini-warehouse rental
complex located in Tucson, Arizona ("Tucson Lock-It
Lockers"). Tucson Lock-It Lockers was acquired in four
separate Parcels as follows: Parcel I (21,670 net
rentable square feet) effective May 1, 1985; Parcel II
(15,575 net rentable square feet) effective July 1,
1985; Parcel III (6,845 net rentable square feet)
effective August 1, 1985; and Parcel IV (5,795 net
rentable square feet) effective September 1, 1985. In
1986, the Partnership continued its investment in
properties by acquiring an additional Lock-It Lockers
Mini-Warehouse located in Phoenix, Arizona ("Phoenix
Lock-It Lockers"), in three separate parcels, as
follows: Parcel I (18,600 net rentable square feet)
effective January 1, 1986; Parcel II (17,625 net
rentable square feet) effective February 1, 1986; and
Parcel III (22,541 net rentable square feet including
8,000 net rentable square feet for recreational vehicle
storage) effective April 1, 1986. The Partnership
completed its investment in properties during the
fiscal year ended December 31, 1987, when it purchased
the two following investment properties, a parcel of
land containing one building plus part of a second
building out of a total of five buildings of Cave Creek
Mini Warehouses in Phoenix, Arizona and Northridge
Commons Shopping Center, a community shopping center
located in Milwaukee, Wisconsin. These properties are
described more fully in this report at Properties. Cave
Creek was managed by Enterprise Growth Group ("EGG")
from the time the property was purchased through
October, 1991. As of November 1, 1991, National Realty
Management, Inc. ("NRMI") took over management of the
property. All other Partnership properties were managed
by NRMI since their purchase.
The real estate investment business is highly
competitive. The Partnership's properties are in
competition for tenants with numerous other alternative
sources for storage or shopping center space.
The Partnership is not dependent upon any single tenant
for its operating success except at Northridge Commons
where one tenant occupied 32.7% of the total rentable
square footage and a new tenant will rent 42.3%. The
Partnership does not foresee any events or market
trends which would have a materially adverse affect
upon the Partnership's revenues, except for increased
competition for tenants, which is discussed in the
section entitled Results of Operations of this report.
During 1996, the Partnership employed three full-time
and eight part-time on-site personnel in the following
capacities: four managers, three rental agents and four
cleaning/maintenance persons. In addition, due to the
centralized nature of the Partnership's accounting and
management systems, another 22 employees provided
various accounting and management services to this and
other partnerships. These persons worked an average of
approximately each 2.0 hours per week for this
Partnership. Detailed time records of all personnel are
maintained which form the basis for charges to the
Partnership. All on-site and partnership employees are
supervised by NRMI under its Management Consulting
Delegation of Duties and Property Management Agreements
with the Partnership.
The Partnership is engaged solely in the business of
investing in and managing real estate. Its business is
believed by management to fall entirely within a single
industry segment. The business of the Partnership is
not seasonal, although the Partnership's properties may
experience cyclical fluctuations in occupancy levels in
the rental markets where they are located.
The General Partners are general partners for other
limited partnerships that have invested in real estate
which may be competitive with the Partnership.
There may be conflicts of interest between the
Partnership and the General Partners at such time as
the Partnership attempts to sell its properties or may
compete for tenants with the Partnership's investments.
If properties are being sold, the General Partners will
attempt to give equal exposure to competing properties
and will sell solely on the basis of purchaser
preference. The General Partners will establish asking
price based upon market conditions. The General
Partners will follow a policy of renting first on the
basis of the tenants' preference and then on the basis
of greatest vacancy. In the hiring of resident building
mangers, the General Partners will follow a policy of
filling the oldest vacancy first.
The Partnership, by virtue of its ownership in real
estate, is subject to federal and state laws and
regulations covering various environmental issues. The
General Partners are not aware of any potential
liability related to environmental issues or conditions
that would be material to the Partnership.
Properties
The properties in which the Partnership has invested
are owned in fee simple, described more fully at Notes
to Financial Statements (Note 3). The principal factors
which the General Partners believe affect rental rates
and occupancy levels include location, ease of access,
amenities, and the quality of property management.
<PAGE>
Tucson Lock-It Lockers
Tucson Lock-It Lockers is located on 2.057 fully
improved acres at 6560 East Tanque Verde Road, Tucson,
Arizona. Tucson Lock-It Lockers consists of seven
single-story buildings which were constructed in 1976.
Tucson Lock-It Lockers has an aggregate of 49,885 net
rentable square feet (57,710 gross) with a unit mix
that varies. Management has the ability to subdivide
some of the larger units in accordance with market
demand. Features of Tucson Lock-It Lockers include fire
walls and exterior passage doors constructed of
solid-core steel hinged in steel frames. Security at
Tucson Lock-It Lockers is provided by a resident
manager and a fenced perimeter with single-gate access.
In addition to the seven warehouse buildings, there is
an on-site office/apartment, and limited customer
parking spaces are available.
Phoenix Lock-It Lockers
Phoenix Lock-It Lockers is located on 3.1 fully
improved acres at 10250 North 19th Avenue, Phoenix,
Arizona. The complex consists of three single-story
buildings containing a total of 593 units and 30
outside RV spaces which were constructed in 1976.
Phoenix Lock-It Lockers has an aggregate of 62,016 net
rentable square feet (66,200 gross) with a unit mix
that varies. Management has the ability to subdivide
some of the larger units according to market demand.
Features of the complex include fire walls and exterior
passage doors constructed of solid-core steel hinged in
steel frames. Security in the complex is provided by
electronic surveillance cameras with a motion detector
that provides the resident manager with the ability to
monitor the property during the day and night. There is
also a fenced perimeter with a single-gate access to
the property which provides additional security. In
addition to the three warehouse buildings, there is an
on-site office/apartment, and customer parking spaces
are available.
Cave Creek Mini-Warehouse
Cave Creek Mini-Warehouse is located at 1201 East
Cinnabar Avenue, Phoenix, Arizona, on approximately 1.7
acres (the "Complex"). The 747 unit complex consists of
three individual one story and two individual two story
buildings. The Partnership's acquisition consists of
one one-story building and part of one two-story
building of the Project, of which construction was
completed in 1985. The Partnership has an interest in
the remaining portions of the Project for access and
use of the business office facilities. National Real
Estate Limited Partnerships Income Properties II,
another limited partnership of which the General
Partners are general partners, owns the other portion.
Security in the Project is provided by a resident
manager and a fenced perimeter with single-gate access.
The Project has an aggregate of approximately 46,028
net rentable square feet. The Partnership's property
contains approximately 8,236 net rentable square feet,
or approximately 18% of the total net rentable square
feet of the Project. Units can be subdivided, if
appropriate, in light of current demand; therefore, the
total unit count may fluctuate. At the time of
purchase, the Partnership's property was divided into
91 units.
Northridge Commons
Northridge Commons is a community shopping center
located at 8310-8360 West Brown Deer Road, Milwaukee,
Wisconsin, on an outparcel at a major entrance to
Northridge Mall, a 1,100,000 square foot regional mall,
making Northridge Commons part of a shopping cluster.
Constructed in 1981, Northridge Commons is a masonry
building consisting of 7 retail service outlets. Most
of the building is 100 feet deep, creating store
dimensions of 20'x100' and 25'x100'. Northridge Commons
has an aggregate of approximately 20,780 net rentable
square feet. All current tenant leases are "triple net"
agreements. Asking rents are $8.00 per square foot
triple net leases, which is in line with the
competition.
The Tucson, Phoenix, and Milwaukee real estate rental
markets are highly competitive. For a further
discussion of occupancy rates, see Management's
Discussion and Analysis of Financial Condition and
Results of Operations contained in this report.
Additional mini-warehouse projects and shopping malls
may be built within the Tucson, Phoenix, and Milwaukee
areas, which may compete directly with the
Partnership's properties.
The General Partners feel that the Partnerships is
adequately covered by insurance on the properties.
Legal Proceedings
The Partnership is not a party to any material pending
legal proceedings.
Selected Financial Data
As of and for the Year Ended December 31
Selected Statement Data: 1996 1995
1994 1993 1992
Operating Revenues $994,793 $944,538
$812,522 $790,615 $762,349
Operating Expenses 901,269 879,266
772,026 771,343 761,310
Income from Operation 93,524 65,272
40,496 19,272 1,039
Other Income 35,053 26,473
12,256 6,958 5,058
Provision for Impairment
loss on investment
property (785,000)
Net Income $(656,423) $ 91,745
$ 52,752 $ 26,230 $ 6,097
General Partners' Share
of Net Income $ (19,693) $ 2,752
$ 1,583 $ 787 $ 183
Limited Partners' Share
of Net Income (636,730) 88,993
$51,169 25,443 5,914
Net Income per Limited
Partnership Interest (70.74) 9.88
5.66 2.82 .66
Distribution per Limited
Partnership Interest 20.00 15.50
14.00 14.00 14.00
Selected Balance
Sheet Data:
Total Assets $5,202,355 $5,972,760
$5,968,526 $5,999,173 $6,045,501
Notes & Accrued
Interest to the
General Partner $780,464 $704,591
$632,374 $577,903 $533,566
Partners' Capital $4,301,952 $5,144,027
$5,196,163 $5,273,368 $5,377,095
Number of Properties 4 4
4 4 4
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Liquidity and Capital Resources
The Partnership commenced an offering to the public on
January 31, 1985, of up to 15,000 Interests at $1,000
per Interest pursuant to a Registration Statement on
Form S-11 under the Securities Act of 1933. A total of
3,767.26 Interests were sold in 1985 ($3,760,356). From
January 1, 1986, to December 18, 1986, at which time
the offering was concluded, an additional 5,266.75
Interests were sold ($5,264,200). After deducting
offering costs, the Partnership had $8,026,434 with
which to purchase the investment properties, described
in this report at Properties, to pay costs related to
purchasing such properties and to meet capital
requirements for operations.
The Partnership does not have any permanent, long-term
financing nor any other financing on its investment
properties and does not intend to incur any during the
Partnership's life. The Partnership plans capital
expenditures for roof replacement and repairs for
Northridge Commons and Phoenix Lock-it-Lockers in 1997.
Painting is planned at Cave Creek and Phoenix Lock-It
Lockers. Asphalt work is scheduled to be done at Cave
Creek and Tucson Lock-It Lockers. These expenditures
will cost approximately $50,000 and will be funded from
the cash flow of operations. The Partnership does not
have any other present or planned material commitments
for ordinary maintenance.
The General Partners committed to make loans to the
Partnership to the extent necessary for the Partnership
to make cash distributions to the Limited Partners
equal to 8% in 1985, 8.25% in 1986, and 8.5% in 1987.
However, the maximum the General Partner was required
to loan was equal to 3% of the gross offering proceeds.
Through December 31, 1996, the Individual General
Partner loaned $271,020 to the Partnership under this
commitment, which is the maximum amount under the
commitment. The General Partners' loan shall be repaid
with interest equal to 12% or the prime rate plus two
percentage points, whichever is lower, solely from sale
proceeds of the investment properties. As of December
31, 1996, $509,444 of interest had accrued on the
General Partners' loan. During 1995, the Partnership
continued distributions with a total of $180,084 to its
Limited Partners and $5,568 to the General Partners.
The distributions for 1996 equalled 2% of the Limited
Partners investment. The pay rates prior to 1988 were
supplemented by the General Partner Loans, as described
above, and the operating results of the properties have
not advanced as originally projected. The Partnership's
ability to maintain and or increase distributions or to
pay the loan during 1997 is dependent upon the results
of property operations or sales of properties and
therefore no assurance as to the distribution amount,
if any, or the loan payment can be made.
Cash generated by the Partnership's investment
properties and the sale of such properties are expected
to provide funds for the Partnership liquidity needs
and any cash distributions to the Limited Partners.
Results of Operations
The Partnership operated four investment properties
during 1996. The Partnership began operations in 1985
and made additional property purchases in 1986 and
1987.
Rental rates at Tucson Lock-It Lockers ranged from $25
to $155 in 1996, depending on the size of the unit,
compared to $19 to $150 in 1995 and $13 to $143 in
1994. Occupancy during December 1996 at Tucson Lock-It
Lockers was 94.4%, which is comparable to December 1995
at 97.3% and December 1994 at 97.9%. Average occupancy
at Tucson Lock-It Lockers was 95.48% during 1996,
compared to 98.9% in 1995 and 98.7% in 1994. Marketing
efforts are directed primarily toward Yellow Pages
advertising.
Rental rates are based on unit size at Phoenix Lock-It
Lockers and ranged from $11 to $235 in 1996, from $11
to $225 in 1995, and $13 to $235 in 1994. December
occupancy in 1996 was 95.8%, while in 1995 and 1994 it
was 98% and 97% respectively. Average annual occupancy
at the property has increased with rates of 97%, 99%
and 98% in 1996, 1995 and 1994, respectively.
Management uses the Yellow Pages for advertising. The
staff also visits local businesses.
At Cave Creek Lock-It Lockers asking rents as of
December 31, 1996 ranged from $15 to $135, based on
unit size compared to $10 to $165 in 1995 and $9 to
$165 in 1994. December occupancy in 1996 was 96.2%,
96.2% in 1995, and 98.5% in 1994. Average annual
occupancy was 94%, 98%, and 98% in 1996, 1995, and 1994
respectively. Marketing efforts are directed primarily
through the use of Yellow Pages advertising.
Northridge Commons experienced average annual occupancy
of 91.8% during 1996, compared to 86% in 1995, and 60%
in 1994. Occupancy for December 1996 was 67.2%. This
compares to the December rate of 100.0% in 1995 and 64%
in 1994. Average occupancy in the immediate area for
1996 was 65%. There has been an increase of crime in
the area. Northridge Commons had remained relatively
fully occupied until the fourth quarter when Talbot's,
the anchor tenant, lease ended. Due to the vacancy in
the area and the loss of Talbot's, the General Partners
determined that an impairment to the property has
occurred. Accordingly a provision for impairment loss
of approximately $785,000 has been charged to operation
in 1996. For further discussion see Note 4 of the
Partnership's Audited financial statements for the year
ended 1996.
Revenues for Tucson Lock-It-Lockers increased in 1996
compared to 1995 due to higher rental rates. Expenses
increased mostly due to garage door replacement and
lintel replacements. Revenues for Tucson
Lock-It-Lockers increased in 1995 compared to 1994
because of higher rental rates and improved collection.
Expenses increased due to higher personnel,
administrative, and real estate taxes. Overall 1995 net
operating income was higher than 1994.
1996 net operating income at Phoenix Lock-It Lockers
has increased compared to 1995 as rental rates were
increased. 1996 operating expenses rose compared to
1995 due to increased renovations and maintenance
expenses. In 1995, net operating income of Phoenix
Lock-It-Lockers was higher in comparison to 1994 due to
an increase in rental rates. In 1995, operating
expenses rose compared to 1994 due to increased
renovations and personnel expenses.
1996 net operating income at Cave Creek remained in
line with 1995. Overall operating expenses have
increased compared to 1995 due to increases in
administrative expense. In 1995, net operating income
of Cave Creek Lock-It-Lockers increased over 1994 as
rental rates increased. 1995 operating expenses
increased compared to 1994 due to increased maintenance
expense.
Northridge Common's revenues in 1996 increased slightly
over 1995. Operating expenses in 1996 were lower than
1995 expenses due to a decreases in property taxes,
renovation costs and administrative expense. Revenues
increased in 1995 compared to 1994 due to increased
occupancy. Expenses rose due to commissions paid to
commercial real estate brokers and a general increase
in personnel expense.
Reference is made to Notes 2 and 6 of the Partnership's
financial statements for a discussion of various fees
charged to the Partnership and the amounts charged to
the Partnership by affiliates in 1996.
Inflation
The General Partners believe the Partnership's ability
to increase rental rates would offset any adverse
effects from inflation on the Partnership's cost of
operations. Inflation may also tend to cause capital
appreciation of the Partnership's properties over a
period of time as rental rates and replacement costs of
properties continue to increase. However, the effects
of inflation in real estate may be influenced by
general or local economic conditions. Future results
are subject to uncertainty and the ability of the
Partnership to achieve certain results is largely
beyond the control of the General Partners and their
affiliates.
Impact of Recently Issued Accounting Standards
See Note 4 of the Partnership Audited financial
statement for the year ended 1996.
<PAGE>
Report of Independent Auditors
The Partners
National Real Estate Limited Partnership
Income Properties
We have audited the accompanying balance sheets of
National Real Estate Limited Partnership Income
Properties (the Partnership) as of December 31, 1996
and 1995, and the related statements of operations,
partners' capital and cash flows for each of the three
years in the period ended December 31, 1996. These
financial statements are the responsibility of the
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 the Partnership at December 31,
1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the
period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/S/ ERNST & YOUNG LLP
January 17, 1997
<PAGE>
National Real Estate Limited Partnership
Income Properties
Balance Sheets
December 31
1996 1995
Assets
Cash and cash equivalents
$ 769,494 $ 599,315
Escrow deposits and other assets
15,592 10,032
Investment properties, at cost:
Land
1,047,695 1,267,695
Buildings and improvements
5,497,533 6,018,410
6,545,228 7,286,105
Accumulated depreciation
2,127,959 1,922,692
4,417,269 5,363,413
$5,202,355 $5,972,760
Liabilities and partners' capital
Liabilities:
Tenant security deposits
$ 5,454 $ 5,454
Deferred rent
26,624 32,343
Accrued interest payable to Individual General
Partner509,444 433,471
Accrued expenses and other liabilities
87,861 86,345
Note payable to Individual General Partner
271,020 271,020
900,403 828,733
Partners' capital:
General Partners (deficit)
(111,076) (85,815)
Limited Partners (authorized 10,000 interests;
issued 9,034.01 interests)
4,434,699 5,251,513
Less cost of Limited Partner interests held in Treasury
(29.86 interests)
(21,671) (21,671)
4,413,028 5,229,842
4,301,952 5,144,027
$5,202,355 $5,972,760
See accompanying notes.
<PAGE>
National Real Estate Limited Partnership
Income Properties
Statement of Operations
Year ended December 31
1996 1995 1994
Operating revenues:
Rentals $ 865,822 $892,562 $764,437
Other 128,971 51,976 48,085
994,793 944,538 812,522
Operating expenses:
Operating 219,870 206,817 172,709
Administrative 173,818 177,046 162,799
Maintenance 84,239 79,903 46,138
Depreciation 205,267 204,545 202,311
Interest 75,873 72,217 54,558
Property taxes 122,246 126,779 121,355
Advertising 19,956 11,959 12,156
901,269 879,266 772,026
Income from operation
93,524 65,272 40,496
Interest income
35,053 26,473 12,256
Provision for impairment loss on investment
property (Note 4)
(785,000) - -
Net income (loss)
$(656,423) $ 91,745 $ 52,752
Net income (loss) attributale to General
Partners (3%) $ (19,693)$ 2,752 $ 1,583
Net income (loss) attributable to Limited
Partners (97%) (636,730) 88,993 51,169
$(656,423) $ 91,745 $ 52,752
Net income per Limited Partnership Interest
$(70.74) $9.88 $5.66
See accompanying notes.
<PAGE>
National Real Estate Limited Partnership
Income Properties
Statements of Partners' Capital
General Partners
Limited Partners
Cost of Limited Partners'Interests
Held in Treasury
Total
Balance at January 1, 1994
$ (81,938)
$5,376,977
$(21,671)
$5,273,368
Distributions to Partners
(3,897)
(126,060)
-
(129,957)
Net income for the year
1,583
51,169
0
52,752
Balances at December 31, 1994
(84,252)
5,302,086
(21,671)
5,196,163
Distributions to Partners
(4,315)
(139,566)
-
(143,881)
Net income for the year
2,752
88,993
-
91,745
Balances at December 31, 1995
(85,815)
5,251,513
(21,671)
5,144,027
Distributions to Partners
(5,568)
(180,084)
0
(185,652)
Net loss for the year
(19,693)
(636,730)
-
(656,423)
Balances at December 31, 1996
$(111,076)
$4,434,699
$(21,671)
$4,301,952
( ) Denotes deficit or deduction
See accompanying notes
<PAGE>
National Real Estate Limited Partnership
Income Properties
Statement of Cash Flows
Year ended December 31
1996 1995 1994
Operating activities:
Net income (loss) for the year
$(656,423) $ 91,745 $ 52,752
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for impairment loss on
investment property
785,000 - -
Depreciation
205,267 204,519 202,311
Changes in operating assets and liabilities:
Escrow deposits and other assets
(5,560) 7,388 (1,860)
Tenant security deposits
- (2,369) 565
Deferred rent
(5,719) 813 (4,388)
Accrued expenses and other liabilities
77,389 57,926 50,381
Net cash provided by operating activities
399,954 360,022 299,761
Investing activity
Additions to investment properties
(44,123) (26,334) (65,141)
Financing activity
Distributions to Partners
(185,652) (143,881) (129,957)
Increase in cash and cash equivalents
170,179 189,807 104,663
Cash and cash equivalents at beginning of year
599,315 409,508 304,845
Cash and cash equivalents at end of year
$ 769,494 $ 599,315 $409,508
See accompanying notes.
<PAGE>
1. Organization and Basis of Accounting
Organization
National Real Estate Limited Partnership Income
Properties (the Partnership) was organized as a limited
partnership under the laws of the State of Wisconsin
pursuant to a Certificate and an Agreement of Limited
Partnership (the Agreement) dated December 18, 1984,
for the purpose of investing primarily in commercial
real property and began operations in May 1985. The
Partnership is to be dissolved on or before December
31, 2004.
The Partnership consists of three General Partners,
National Development and Investment, Inc., John
Vishnevsky, and EC Corp., and 1,157 Limited Partners at
December 31, 1996. Mr. Vishnevsky is the president and
majority stockholder of National Development and
Investment, Inc. EC Corp. was admitted to the
Partnership effective July 26, 1991, as approved by the
Limited Partners.
Basis of Accounting
The Partnership records are maintained on the basis of
accounting utilized for federal income tax reporting
purposes. The accompanying financial statements have
been prepared from such records adjusted to the
generally accepted accounting principles (GAAP) basis
of accounting, including adjustments for differences in
depreciation methods. Certain accrual and tax basis
amounts are summarized as follows:
1996
GAAP Basis Tax Basis
1995
GAAP Basis Tax Basis
1994
GAAP Basis Tax Basis
(In Thousands)
Total assets
$5,202 $5,897
$5,973 $5,943
$5,969 $6,000
Partners' capital:
General Partners (deficit)
(111) (103)
(86) (102)
(84) (101)
Limited Partners
4,413 5,598
5,230 5,638
5,280 5,678
Net income (loss):
General Partners
(19) 4
3 3
2 1
Limited Partners
(637) 140
89 99
51 41
<PAGE>
2. Significant Accounting Policies
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 amounts reported in the financial statements
and accompanying notes. Actual results could differ
from those estimates.
Cash and Cash Equivalents
The Partnership considers all short-term investments
which have original maturities of three months or less
when purchased to be cash equivalents.
Depreciation
Depreciation is computed by the straight-line method
using estimated useful lives of 10 to 30 years for the
buildings and improvements and 5 to 10 years for
related equipment.
Fees to Affiliates
Acquisition fees and property management fees are
payable to the General Partners or affiliates of the
General Partners. These amounts are capitalized or
charged to expense as follows:
Acquisition Fees
Real estate acquisition fees for selection,
negotiation, and purchase of Partnership properties
have been capitalized and allocated to land and
buildings and improvements based on appraised values.
The portions allocated to buildings and improvements
are being depreciated over the respective useful lives
of the buildings and improvements.
Property Management Fees
Fees for property management and rental services are
being charged to expense over the period property
management services are being performed.
<PAGE>
2. Significant Accounting Policies (continued)
Allocations and Distributions
Pursuant to the Agreement, net income and loss from
operations (exclusive of those from the sale or
disposition of Partnership properties) are to be
allocated 97% to the Limited Partners and 3% to the
General Partners. Any gains from the sale or
disposition of Partnership properties are to be
allocated first to the General Partners and Limited
Partners with deficit net capital accounts; then to the
Limited Partners in an amount equal to their initial
capital investment plus any amount remaining to be paid
and paid under their cumulative preference; then to the
General Partners in an amount equal to the proceeds of
such sale distributed to them; and all remaining
amounts are to be allocated to the Limited Partners
provided that at least 3% of the gain from sale or
disposition would be allocated to the General Partners.
Losses from the sale or other disposition of
Partnership properties are to be allocated 97% to the
Limited Partners and 3% to the General Partners.
Cash available for distribution, as defined in the
Agreement, will be distributed 97% to the Limited
Partners and 3% to the General Partners. After the
repayment of any General Partner loans, sales proceeds
will be distributed as follows: (1) 97% to the Limited
Partners and 3% to the General Partners until the
Limited Partners have received (A) 100% of their
initial capital investment and (B) cumulative,
noncompounded distributions of sales proceeds, in
excess of the amount required in (A), and cash
available for distribution equal to 6% per annum on
their initial capital investment, with the 3% to the
General Partners subordinated to payment of the amounts
in (A) and (B) to the Limited Partners; (2) to an
affiliate of the General Partners, an amount equal to
its subordinated real estate commission (up to 3% of
the aggregate selling price of all properties); (3) 88%
to the Limited Partners and 12% to the General
Partners, with such payments to the General Partners
subordinated to a total return to the Limited Partners
of (A) 100% of their initial capital investment plus
(B) a cumulative preference of 10% per annum of their
initial capital investment.
Net Income Per Limited Partnership Interest
Net income per Limited Partnership interest is based on
97% of net income as allocated to the Limited Partners
divided by the weighted average number of interests
outstanding during the year.
<PAGE>
3. Investment Properties
Investment properties consist of the following at
December 31, 1996:
Description
Initial Cost to Partnership
Land Buildings and Improvements
Costs Capitalized Subsequent to Acquisition of
Buildings andImprovements
(In Thousands)
Lock-It-Lockers Mini-Warehouses
Tucson, Arizona $ 253 $1,748
$137
Lock-It-Lockers Mini-Warehouses
Phoenix, Arizona
222 1,999
90
Northridge Commons Shopping Center
Milwaukee, Wisconsin
699 1,747
37
Cave Creek - Phase I Mini-Warehouses
Phoenix, Arizona
94 301
1
$1,268 $5,795
$265
Description
Gross Amount at Which Carried
Land
Buildings and Improvements
Total
Accumulated Depreciation
(In Thousands)
Lock-It-Lockers Mini-Warehouses
Tucson, Arizona
$ 253
$1,885
$2,138
$ 701
Lock-It-Lockers Mini-Warehouses
Phoenix, Arizona
222
2,089
2,311
755
Northridge Commons Shopping Center
Milwaukee, Wisconsin
479
1,220
1,699
573
Cave Creek-Phase I Mini-Warehouses
Phoenix, Arizona
94
303
397
99
$1,048
$5,497
$6,545
$2,128
<PAGE>
3. Investment Properties (continued)
Description
Date of Construction Date Acquired
Lock-It-Lockers Mini-Warehouses Tucson, Arizona
1976 May 1985
Lock-It-Lockers Mini-Warehouses Phoenix, Arizona
1976 January 1986
Northridge Commons Shopping Center Milwaukee, Wisconsin
1981 May 1987
Cave Creek - Phase I Mini-Warehouses Phoenix, Arizona
1985 April 1987
There were no encumbrances on the investment properties
at December 31, 1996. The accumulated depreciation
reported for federal income tax purposes is $3,216,331
at December 31, 1996.
A reconciliation of the cost and accumulated
depreciation of the investment properties for financial
reporting purposes follows:
Year ended December 31
1996 1995 1994
(In Thousands)
Cost:
Balance at beginning of year
$7,286 $7,260 $7,195
Additions to investment properties
44 26 65
Provision for impairment of assets
(785)
Balance at end of year
$6,545 $7,286 $7,260
Accumulated depreciation:
Balance at beginning of year
$1,923 $1,718 $1,516
Provision for the year
205 205 202
Balance at end of year
$2,128 $1,923 $1,718
<PAGE>
4. Impairment of Assets
In accordance with FASB Statement No. 121, "Accounting
for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," the Partnership
records impairment losses on long-lived assets used in
operations when events and circumstances indicate that
the assets might be impaired and the undiscounted cash
flows estimated to be generated by those assets are
less than the carrying amounts of those assets. During
1996, the Partnership determined that an impairment to
the asset value of a retail shopping center known as
Northridge Commons had occurred, resulting from the
loss of a significant anchor tenant and deterioriating
market conditions caused by an economically depressed
area where the property is located. Based on these
factors, the Partnership wrote down assets with a
carrying value of approximately $1,880,000 by $785,000
to their estimated fair value. Fair value was based on
estimated future cash flows to be generated from the
property, discounted at a market rate of interest.
5. Income Taxes
The Partnership pays no income taxes. Partnership
losses or income and taxes attributable thereto will be
the responsibility of the various Partners.
Differences between the net income as reported herein
and the net income (loss) reported for federal income
tax purposes arise primarily from timing differences
related to depreciation and other GAAP basis
adjustments. The following is a reconciliation of the
reported net income and the net income (loss) reported
for federal income tax purposes:
Year ended December 31
1996 1995 1994
Net income (loss) as reported in the financial
statements
$(656,423) $ 91,745 $52,752
Add (deduct):
Depreciation
(60,218) (61,580) (64,547)
GAAP basis adjustments
75,873 72,322 54,471
Provision for impairment of assets
785,000
Net income reported for federal income tax
purposes
$ 144,232 $102,487 $42,676
<PAGE>
6. Leases
The Partnership is the lessor of a shopping center
under operating leases expiring in various years to
2000. Certain of the shopping center leases provide for
contingent rentals based on specified percentages of
gross sales of the tenants. Contingent rentals from
operating leases amounted to $17,093 in 1996, $11,468
in 1995 and $10,345 in 1994.
At December 31, 1996, future minimum lease payments
receivable under noncancellable operating leases with
remaining terms of one year or more are as follows:
1997 $83,000
1998 69,000
1999 69,000
2000 27,000
$248,000
7. Transactions with Affiliated Parties
The General Partners are general partners for other
limited partnerships which have invested in real
estate. The Partnership reimburses affiliates of the
General Partner for the actual cost of goods and
materials used by or for the Partnership in the course
of performing the general functions of the Partnership.
These general functions include certain management,
accounting and other expenses. The Partnership has
executed contracts providing for the following fees
payable to such entities:
National Realty Management, Inc. (NRMI)
NRMI charged the Partnership for property management
fees ($53,770-1996; $50,026-1995; $45,220-1994).
Monthly fees represent 6% of gross receipts from the
Lock-It-Lockers Mini-Warehouses in Tucson and Phoenix
and Cave Creek Mini-Warehouse, and 3% of gross receipts
from Northridge Commons Shopping Center.
The Partnership also paid $52,534, $45,184 and $48,315
in 1996, 1995 and 1994, respectively, for the
reimbursement of accounting and administrative expenses
incurred by NRMI on behalf of the Partnership.
<PAGE>
7. Transactions with Affiliated Parties (continued)
National Development and Investment, Inc.
The Partnership paid National Development and
Investment, Inc. (NDII) for the reimbursement of
expenses totaling $86,993, $80,617 and $79,014 in 1996,
1995 and 1994, respectively, for administrative
expenses incurred on behalf of the Partnership.
Individual General Partner
The note payable to Individual General Partner is
payable from proceeds from sale or other disposition of
investment properties, with interest payable monthly at
a bank s prime rate plus 2% (10.25% at December 31,
1996) or 12%, whichever is lower. The Partnership
incurred interest ($75,873 1996; $72,217 1995;
$54,471 1994) in connection with this note and no
interest was paid in any year with respect to the note
payable to Individual General Partner.
8. Fair Values of Financial Instruments
Cash, Cash Equivalents and Debt
The carrying amount reported in the balance sheet for
cash, cash equivalents and debt approximates its fair
value.
9. Significant Fourth Quarter Adjustment (unaudited)
The Partnership recorded a $785,000 provision for
impairment loss on one of its investment properties
during the fourth quarter of 1996.
<PAGE>
NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROPERTIES
John Vishnevsky
Chief Operating and Executive Officer
John Vishnevsky
Chief Financial and Accounting Officer
General Partners:
John Vishnevsky
National Development and Investment, Inc.
John Vishnevsky
President and Director
Stephen P. Kotecki
Vice President, Secretary, Treasurer and Director
EC Corp.
Stephen P. Kotecki
President, Treasurer and Director
Thomas Rielly
Vice President, Secretary and Director
Of the above officers and directors of the Corporate
General Partner, Mr. Thomas Rielly is the only person
not an employee of National Development and Investment,
Inc., its affiliates, or EC Corp.
The Partnership Form 10-K for 1996 which is filed with
the Securities and Exchange Commission, will be
furnished at no charge to partners upon written request
directed to: National Development and Investment, Inc.,
Attn: Partnership Management, 9800 West Bluemound Road,
Milwaukee, WI 53226-4353.
B:\NIP-ANNL.EL6
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 785086
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 785086
<PP&E> 6545228
<DEPRECIATION> 2127959
<TOTAL-ASSETS> 5202355
<CURRENT-LIABILITIES> 900403
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4413028<F1>
<TOTAL-LIABILITY-AND-EQUITY> 5202355
<SALES> 994793
<TOTAL-REVENUES> 994793
<CGS> 825396
<TOTAL-COSTS> 825396
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75873
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (656423)
<EPS-PRIMARY> (70.74)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Refers to General Partners' and Linited Partners' capital.
<F2>97% Limited Partners - Interest outstanding=9004.15
</FN>
</TABLE>
