FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-14470
INVESTORS FIRST-STAGED EQUITY L.P.
(Exact name of small business issuer as specified in its charter)
Delaware 36-3310965
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
630 Dundee Road, Suite 220
Northbrook, Illinois 60062
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (847) 714-9600
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) INVESTORS FIRST-STAGED EQUITY L.P.
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
(Unaudited)
March 31, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 2,006
Restricted-tenant security deposits 447
Accounts receivable, net of allowance
for doubtful accounts of $47 52
Note receivable 109
Escrows for taxes and insurance 239
Restricted escrows 910
Other assets 674
Investment properties:
Land $ 9,088
Buildings and related improvements 42,099
51,187
Less accumulated depreciation (24,690) 26,497
$ 30,934
Liabilities and Partners' Deficit
Liabilities
Accounts payable $ 93
Accrued interest 2,421
Tenant security deposits 436
Accrued property taxes 39
Other liabilities 376
Advances from affiliates of the
General Partner 479
Mortgage notes payable 46,619
Partners' Deficit
General partner $ (377)
Limited partners (16,267 units
issued and outstanding) (19,152) (19,529)
$ 30,934
See Accompanying Notes to Consolidated Financial Statements
b) INVESTORS FIRST-STAGED EQUITY L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
(Unaudited)
Three Months Ended
March 31,
1997 1996
Revenues:
Rental income $ 1,840 $ 1,829
Other income 73 60
Total revenues 1,913 1,889
Expenses:
Operating 486 426
General and administrative 53 54
Maintenance 176 171
Depreciation 476 473
Interest 1,076 869
Property taxes 125 119
Total expenses 2,392 2,112
Net loss $ (479) $ (223)
Net loss allocated to general partner (1%) $ (5) $ (2)
Net loss allocated to limited partners (99%) (474) (221)
$ (479) $ (223)
Net loss per limited partnership unit $(29.14) $(13.59)
See Accompanying Notes to Consolidated Financial Statements
c) INVESTORS FIRST-STAGED EQUITY L.P.
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(in thousands, except unit data)
(Unaudited)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Partners' deficit at
December 31, 1996 16,267 $ (372) $ (18,678) $ (19,050)
Net loss for the three months
ended March 31, 1997 -- (5) (474) (479)
Partners' deficit at
March 31, 1997 16,267 $ (377) $ (19,152) $ (19,529)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) INVESTORS FIRST-STAGED EQUITY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (479) $ (223)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 476 473
Amortization of loan costs and leasing commissions 40 11
Change in accounts:
Restricted cash -- (68)
Note receivable 11 10
Accounts receivable 15 (41)
Escrows for taxes and insurance (2) 317
Other assets (134) (82)
Accounts payable 15 (50)
Accrued interest 487 497
Tenant security deposit liabilities (10) (5)
Property taxes 39 23
Other liabilities 162 5
Net cash provided by operating activities 620 867
Cash flows from investing activities:
Property improvements and replacements (62) (22)
Receipts from restricted escrows 5 --
Deposits to restricted escrows (18) (13)
Net cash used in investing activities (75) (35)
Cash flows from financing activities:
Payments on mortgage notes payable (96) (168)
Net cash used in financing activities (96) (168)
Net increase in cash and cash equivalents 449 664
Cash and cash equivalents at beginning of period 1,557 2,807
Cash and cash equivalents at end of period $ 2,006 $ 3,471
Supplemental disclosure of cash flow information:
Cash paid for interest $ 542 $ 356
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e) INVESTORS FIRST-STAGED EQUITY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Investors First-
Staged Equity L.P. (the "Partnership") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of VMS Realty Investment II ("General Partner"), all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 1997, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1997. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Partnership's annual report on Form 10-KSB for the fiscal year ended
December 31, 1996.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 presentation.
NOTE B - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
The Partnership has no employees and is dependent on the General Partner or its
affiliates for the management and administration of all partnership activities.
The General Partner or its affiliates may be reimbursed for direct expenses
relating to the Partnership's administration and other costs charged on behalf
of the Partnership.
Pursuant to an agreement dated July 14, 1994, a transaction is pending in which
the current General Partner would be replaced by MAERIL, Inc., an affiliate of
Insignia Financial Group, Inc. ("Insignia"). The substitution of MAERIL, Inc.
as the General Partner is expected, but there is no assurance that the
transaction will be consummated.
The Partnership has engaged affiliates of Insignia to provide day-to-day
management of the Partnership's properties. These affiliates received
approximately $99,000 and $98,000 of such fees for the three months ended March
31, 1997 and 1996, respectively. An affiliate of Insignia also provided
partnership administration and management services for the Partnership.
Reimbursements for direct expenses relating to these services totaled
approximately $38,000 for the three months ended March 31, 1997, and $36,000 for
the three months ended March 31, 1996. At March 31, 1997, approximately
$120,000 of the 1996 and 1997 reimbursements remain unpaid and are included in
other liabilities.
NOTE C - SUBSEQUENT EVENTS
On April 10, 1997, the Partnership sold three buildings and two parcels of land
associated with Serramonte Plaza located in Daly City, California to an
unaffiliated party, Daly City Partners, LLC, a California limited liability
company. The property was sold in an effort to maximize the Partnership's
return on its investment. Total cash received for the three buildings and two
parcels of land was approximately $4,778,000 and was determined primarily by
reference to appraised values.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of two apartment complexes and
one commercial property. The following table sets forth the average occupancy
for these properties for the three months ended March 31, 1997 and 1996:
Average
Occupancy
1997 1996
Rivercrest Village Apartments 95% 93%
Sacramento, California
Richardson Highlands Apartments
Marin City, California 98% 97%
Serramonte Plaza
Daly City, California 79% 90%
The decrease in occupancy at Serramonte Plaza was primarily due to the vacancy
of one building accounting for approximately 8% of the property. This building
was sold in April of 1997.
RESULTS OF OPERATIONS
The Partnership realized a net loss of approximately $479,000 for the three
months ended March 31, 1997, compared to a net loss of approximately $223,000
for the three months ended March 31, 1996. The increase in net loss is primarily
attributable to an increase in interest expense. Interest expense increased as
a result of the accrual of the additional interest which is related to the June
1996 refinancing of the Serramonte Plaza first mortgage. This additional
interest is being accrued over the term of the loan and at the maturity date of
the loan will equal approximately $1,680,000. Also, net loss increased due to
increased operating expenses resulting from increased utility costs at
Rivercrest Apartments.
Subsequent to March 31, 1997, the Partnership sold three buildings and two
parcels of land associated with Serramonte Plaza located in Daly City,
California to an unaffiliated party, Daly City Partners, LLC, a California
limited liability company. The property was sold in an effort to maximize the
Partnership's return on its investment. Total cash received for the three
buildings and two parcels of land was approximately $4,778,000 and was
determined primarily by reference to appraised values.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each of its investment properties to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels and protecting the Partnership from increases in expenses. As part of
this plan, the General Partner attempts to protect the Partnership from the
burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
General Partner will be able to sustain such a plan.
LIQUIDITY AND CAPITAL RESOURCES
The Partnership held cash and cash equivalents of approximately $2,006,000 at
March 31, 1997, compared to cash and cash equivalents of approximately
$3,471,000 at March 31, 1996. Net cash provided by operating activities
decreased primarily due to the increased net loss as described above and a
decrease of approximately $315,000 in receipts from tax and insurance escrows.
The receipts from tax and insurance escrows at March 31, 1996, were related to
the Breuner building sale in late 1995. Partially offsetting the decreases in
cash flows provided by operating activities was the receipt of a $150,000
advance on the purchase price from the buyer of the three buildings and two
parcels of land at Serramonte Plaza to perform maintenance work on one of the
buildings prior to the consummation of the sale on April 10, 1997.
Approximately, $90,000 of this advance remains at March 31, 1997, and is
included in other liabilities. The remaining advance was spent on readying the
property for sale in April of 1997. Net cash used in investing activities
increased due to increased property improvements and replacements related to
tenant improvements at Serramonte Plaza used as incentives for prospective
tenants. Net cash used in financing activities decreased due to decreased
mortgage principal payments on the Serramonte Plaza first mortgage. As a result
of the refinancing of the Serramonte Plaza first mortgage in 1996, principal
payments became a function of cash flow of the property. Serramonte Plaza did
not generate the necessary cash flow throughout the three months ended March 31,
1997 to allow monthly principal payments. When sufficient cash flows are not
achieved to provide for the monthly principal payment, interest only payments
are made.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no new material developments or changes from "Part I, Item 3" of
the Partnership's report on the Form 10-KSB for the year ended December 31,
1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Partnership did not submit any matter to a vote of its holders of Limited
Partnership Interests during the three months ended March 31, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended March 31, 1997.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INVESTORS FIRST-STAGED EQUITY L.P.
(Registrant)
By: VMS Realty Investment II,
General Partner
By: JAS Realty Corporation
Date: May 15, 1997 By: /s/ Joel A. Stone
Joel A. Stone
President
Date: May 15, 1997 By: /s/ Thomas A. Gatti
Thomas A. Gatti, Senior Vice-President
and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Investors
First Staged Equity L.P. 1997 First Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000768834
<NAME> INVESTORS FIRST STAGED EQUITY L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,006
<SECURITIES> 0
<RECEIVABLES> 99
<ALLOWANCES> 47
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 51,187
<DEPRECIATION> 24,690
<TOTAL-ASSETS> 30,934
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 46,619
0
0
<COMMON> 0
<OTHER-SE> (19,529)
<TOTAL-LIABILITY-AND-EQUITY> 30,934
<SALES> 0
<TOTAL-REVENUES> 1,913
<CGS> 0
<TOTAL-COSTS> 2,392
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,076
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (479)
<EPS-PRIMARY> (29.14)<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
