INVESTORS FIRST STAGED EQUITY L P, 10KSB, 1999-03-29

INVESTORS FIRST STAGED EQUITY L P
10KSB, 1999-03-29
REAL ESTATE

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FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)

(As last amended by 34-31905, eff. 4/26/93)

(Mark One)
[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 [No Fee Required]

For the fiscal year ended December 31, 1998
or
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 [No Fee Required]

For the transition period from........to.........

Commission file number 0-14470

INVESTORS FIRST-STAGED EQUITY L.P.
(Name of small business issuer in its charter)

Delaware 36-3310965
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)

(864) 239-1000
Issuer's telephone number
Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Units of Limited Partnership Interest
(Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year: $8,554,000

State the aggregate market value of the voting partnership interests held by
non-affiliates computed by reference to the price at which the partnership
interests were sold, or the average bid and asked prices of such partnership
interests, as of December 31, 1998. No market exists for the limited
partnership interests of the Registrant, and, therefore no aggregate market
value can be determined.

DOCUMENTS INCORPORATED BY REFERENCE

NONE

PART I

ITEM 1. DESCRIPTION OF BUSINESS

Investors First-Staged Equity L.P. (the "Partnership" or "Registrant") was
organized as a limited partnership under the Delaware Revised Uniform Limited
Partnership Act in May 1985. Effective January 1, 1986, the General Partner,
VMS Realty Investment (formerly known as VMS Realty Partners) assigned its
interest in future profits, losses, operating cash flow and liquidation proceeds
of the Partnership to VMS Realty Investment II, which subsequently became the
General Partner. VMS Realty Investment II is a general partnership formed to be
the sole general partner of Investors First-Staged Equity L.P. and has the same
constituent partners as VMS Realty Investment, its predecessor. Effective
January 1, 1987, VMS Realty Investment II assigned its beneficial interest in
the Partnership to VMS Realty Investment. Effective January 2, 1998, the General
Partner was replaced by MAERIL, Inc., a wholly-owned subsidiary of MAE GP
Corporation ("MAE GP"). Effective February 25, 1998, MAE GP was merged into
Insignia Properties Trust ("IPT"), which was merged into Apartment Investment
and Management Company ("AIMCO") effective February 26, 1999. Thus, the General
Partner is now a wholly-owned subsidiary of AIMCO. The Partnership Agreement
provides that the Partnership is to terminate on December 31, 2025, unless
terminated prior to such date.

The Partnership raised total equity of $48,802,000 from the sale of Limited
Partnership Interests (the Units) to the public in 1985 pursuant to a
Registration Statement filed with the Securities and Exchange Commission (the
SEC).

A total of 16,511 units were sold to the public at $3,000 per unit as of the
termination date of the offering, December 31, 1985. Limited Partners in the
Partnership paid $1,000 per unit upon subscription and executed a non-recourse
note for the remaining $2,000 per unit. The non-recourse note provided for the
optional payment, without interest, of $1,000 per unit on each of February 15,
1986 and 1987. The Partnership has collected capital contributions totaling
$48,802,000; $16,511,000 pertaining to the payments due in 1985, $16,511,000
pertaining to the payments due in 1986 and the remarketed units sold in 1986 and
$15,780,000 pertaining to the payments due in 1987 and the remarketed units sold
in 1987. As each whole unit represents capital contributions aggregating
$3,000, the final number of units sold was 16,267. At December 31, 1998, the
Partnership has 16,261.152 Units outstanding. The Limited Partners share in the
ownership of the Partnership's real property investments according to the number
of Limited Partnership Units held. Since the 1987 payments, the Registrant has
not received nor are limited partners required to make additional capital
contributions.

The Registrant is engaged in the business of operating and holding real
properties for investment. On October 2, 1985, the Partnership acquired
interests in six (6) real property investments, two of which, Village Green
Apartments and Woodland Meadows Apartments, were sold at foreclosure sales to
parties unaffiliated with the Partnership in May 1990 and June 1991,
respectively. East Bluff Apartments was foreclosed upon by the Federal Deposit
Insurance Corporation ("FDIC"), holder of the second mortgage, on May 23, 1994.
The Registrant continues to own and operate three (3) remaining real property
investments consisting of two residential properties and one commercial property
and are described in "Item 2. Description of Properties." The Partnership
acquired interests in the properties by purchasing the 99.99% interest in lower
tier partnerships that owned the properties.

The Registrant has no employees. Management and administrative services are
provided by the General Partner and by agents retained by the General Partner.
With respect to the partnership's residential properties these services were
provided by affiliates of the General Partner for the years ended December 31,
1998 and 1997. With respect to the Partnership's sole commercial property these
services were provided by affiliates of the General partner for the nine months
ended September 30, 1998 and the year ended December 31, 1997. As of October 1,
1998 the management services only were provided by an unaffiliated party.

Both the income and expenses of operating the remaining properties owned by the
Partnership are subject to factors outside of the Partnership's control, such as
an oversupply of similar properties resulting from overbuilding, increases in
unemployment or population shifts, reduced availability of permanent mortgage
financing, changes in zoning laws, or changes in patterns or needs of users. In
addition, there are risks inherent in owning and operating residential and
commercial properties because such properties are susceptible to the impact of
economic and other conditions outside of the control of the Partnership.

The business in which the Partnership is engaged is highly competitive. There
are other residential and commercial properties within the market area of the
Registrant's properties. The number and quality of competitive properties,
including those which may be managed by an affiliate of the General Partner in
such market area, could have a material effect on the rental market for
apartments or commercial space at the Registrant's properties and the rents that
may be charged for such apartments or space. While the General Partner and its
affiliates are a significant factor in the United States in the apartment
industry, competition for the apartments is local. In addition, various limited
partnerships have been formed by the General Partners and/or affiliates to
engage in business which may be competitive with the Registrant.

There have been, and it is possible there may be other, Federal, state and local
legislation and regulations enacted relating to the protection of the
environment. The Partnership is unable to predict the extent, if any, to which
such new legislation or regulations might occur and the degree to which such
existing or new legislation or regulations might adversely affect the properties
owned by the Partnership.

The Partnership monitors its properties for evidence of pollutants, toxins and
other dangerous substances, including the presence of asbestos. In certain
cases environmental testing has been performed, which resulted in no material
adverse conditions or liabilities. In no case has the Partnership received
notice that it is a potentially responsible party with respect to an
environmental clean up site.

Transfer of Control

Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust
merged into Apartment Investment and Management Company, a publicly traded real
estate investment trust, with AIMCO being the surviving corporation (the
"Insignia Merger"). As a result, AIMCO ultimately acquired a 100% ownership
interest in Insignia Properties Trust ("IPT"), the entity which controls the
General Partner. The General Partner does not believe that this transaction
will have a material effect on the affairs and operations of the Partnership.

ITEM 2. DESCRIPTION OF PROPERTIES:

The following table sets forth the Registrant's investments in properties:

Date of
Property Purchase Type of Ownership (1) Use

Rivercrest Village 10/85 Fee ownership subject Apartment
Apartments to first and second 328 units
Sacramento, California mortgage

Richardson Highlands 10/85 Fee ownership subject Apartment
Apartments to first and second 198 units
Marin City, California mortgage

Serramonte Plaza 10/85 Fee ownership subject Commercial complex
Daly City, to first mortgage of approx. 219,000
California s.f. located on
approx.15.4 acres

(1) All of the properties are held by different Limited Partnerships in which
the Registrant has a 99.99% interest.

SCHEDULE OF PROPERTIES:

Set forth below for each of the Registrant's properties is the gross carrying
value, accumulated depreciation, depreciable life, method of depreciation and
federal tax basis.

Gross

Carrying Accumulated Federal

Property Value Depreciation Rate Method Tax Basis

(in thousands) (in thousands)

Rivercrest Village 5-7 yrs 150% B

Apartments $18,236 $11,648 17-25 yrs S/L $ 4,609

Richardson Highlands 5-7 yrs 150% B

Apartments 17,203 8,154 17-25 yrs S/L 7,867

Serramonte Plaza 5-7 yrs

Office Center 13,027 6,147 20-25 yrs S/L 6,174

$48,466 $25,949 $18,650

See "Note A" of the Consolidated Financial Statements included in "Item 7" for a
description of the Partnership's depreciation policy.

SCHEDULE OF PROPERTY INDEBTEDNESS:

The following table sets forth certain information relating to the loans
encumbering the Registrant's properties.

Principal Principal
Balance At Stated Balance
December 31, Interest Period Maturity Due At
Property 1998 Rate Amortized Date Maturity (2)
(in thousands) (in thousands)

Rivercrest Village
1st Mortgage $11,509 7.348% 30 yrs 01/01/08 $10,053
2nd Mortgage 1,944 10.0% (1) 01/15/00 1,944

Richardson Highlands
1st Mortgage 16,767 7.326% 30 yrs 01/01/05 15,502
2nd Mortgage 929 10.0% (1) 01/15/00 929

Serramonte Plaza
1st Mortgage 11,796 8.67% 25 yrs 07/01/04 10,721

Total $42,945 $41,763

(1) Interest only payments at a 7% rate are required to the extent of surplus
cash.

(2) See Item 7, Financial Statements - Note C for information with respect to
the Registrant's ability to prepay these loans.

In June 1997, the Partnership refinanced the mortgage indebtedness encumbering
Serramonte Plaza. The previous mortgage note of approximately $7,365,000 was
repaid from loan proceeds received from the refinancing. The new mortgage debt
of $12,000,000 carries a stated interest rate of 8.67%, with a balloon payment
due July 1, 2004. An extraordinary loss on early extinguishment of debt of
approximately $1,348,000 was realized during the second quarter of 1997 due to
the payment of approximately $1,102,000 in early payment mortgage fees and a
loss of approximately $246,000 on the write-off of unamortized loan costs. In
conjunction with the refinancing, a capital improvement reserve of approximately
$500,000 was established and approximately $371,000 in loan costs were incurred.

In October 1990, the Partnership defaulted on the Richardson Highlands and
Rivercrest Village subordinate notes payable (the second mortgage loans) due to
the failure to make the required monthly debt service payments. The Partnership
and the lender finalized an agreement on June 22, 1994, retroactive to July 1,
1993, to restructure the debt held on Richardson Highlands and Rivercrest
Village. The junior lien mortgages were restructured to mature on January 15,
2000, and provide for a 10% interest rate (with a 7% pay rate), based on the
"Agreed Valuation Amount", as defined in the restructure agreement. Interest
payments are payable from surplus cash. The second mortgages include a "shadow
debt" portion that is payable only in the event that the mortgages have not been
paid prior to maturity. The shadow debt portion, which is the difference
between the Agreed Valuation Amount and the Note Face Amount, for Richardson
Highlands and Rivercrest Village is approximately $858,000 and $1,307,000,
respectively. The Agreed Valuation Amounts for Richardson Highlands and
Rivercrest Village were approximately $7,268,000 and $7,110,000, respectively.
The Note Face Amount was $8,126,000 for Richardson Highlands and $8,417,000 for
Rivercrest Village. The agreement also allowed the lender to receive fifty
percent of any net proceeds from the sale or refinancing of the properties after
the payment of all mortgage notes payable and subordinated debt.

Prior to the restructuring of the loans, interest accrued under the terms of the
original subordinate notes payable. This accrued interest of $1,732,000 for
Richardson Highlands and $2,327,000 for Rivercrest Village was added to the
carrying amount of the loans at the date of restructure. The debt
restructurings were accounted for as a modification of terms in which total
future cash payments under the restructured loans exceeded the carrying values
of the loans as of the date of restructure. Consequently, the carrying amounts
of the loans were not changed and no gains were recognized on the
restructurings. Interest accrued at an effective interest rate of 6.14% for
Richardson Highlands and 4.37% for Rivercrest Village to equate the present
values of the total future cash payments under the new terms with the carrying
amounts of the loans at the date of restructure.

During the year ended December 31, 1997, excess proceeds from the refinancing of
the first mortgages on Richardson Highlands and Rivercrest Village (as discussed
below) were used to make payments of approximately $8,250,000 and $8,000,000,
respectively, on the properties second mortgages. At December 31, 1997, the
total estimated future cash payments were less than the recorded balance.
Therefore, in compliance with Financial Accounting Standards 15, the Partnership
reduced the carrying balance to the estimated future cash payments of $1,867,000
(Richardson Highlands) and $3,620,000 (Rivercrest Village), recognizing an
extraordinary gain of approximately $1,887,000 on the partial extinguishment of
debt.

During the year ended December 31, 1998, payments of excess cash of $857,000 and
$1,488,000 were made on Richardson Highlands and Rivercrest Village's second
mortgages, respectively. The Partnership reduced the carrying balance to the
estimated future cash payments at December 31, 1998 of $929,000 (Richardson
Highlands) and $1,944,000 (Rivercrest Village), recognizing an extraordinary
gain of $270,000. At December 31, 1998, the Agreed Valuation Amounts are
$52,000 for Richardson Highlands and $574,000 for Rivercrest Village. The Note
Face Amounts are $910,000 for Richardson Highlands and $1,881,000 for Rivercrest
Village.

Subsequent to December 31, 1998, the Partnership made the final mortgage payment
on the second mortgage encumbering the Richardson Highlands property. As a
result of the payment, the Partnership recognized an extraordinary gain of
$874,000 in 1999.

On December 31, 1997, the Richardson Highlands' first mortgage and Rivercrest
Village's first mortgage were refinanced by Lehman Brothers Holdings, Inc.
("LBHI") with the outstanding principal balance being increased to $16,900,000
and $11,600,000, respectively. The old mortgage notes in the amount of
$6,182,000 and $6,137,000 were repaid from loan proceeds received from the
refinancing. The new Richardson Highlands' mortgage note carries a stated
interest rate of 7.326%, with a balloon payment due January, 1, 2005, and
requires monthly principal and interest payments. The new Rivercrest Village's
mortgage note carries a stated interest rate of 7.348%, with a balloon payment
due January 1, 2008, and requires monthly principal and interest payments. An
extraordinary loss on early extinguishment of debt of approximately $32,000 on
Richardson Highlands and $19,000 on Rivercrest Village was realized during the
fourth quarter of 1997 due to prepayment penalties. In conjunction with the
refinancing, a Repair Escrow of approximately $145,000 for Richardson Highlands
and $190,000 for Rivercrest Village was established and loan costs of
approximately $413,000 for Richardson Highlands and $299,000 for Rivercrest
Village were incurred.

RENTAL RATES AND OCCUPANCY:

Average annual rental rate and occupancy for 1998 and 1997 for each property.

Average Annual Average

Rental Rates Occupancy

Property 1998 1997 1998 1997

Rivercrest Village $ 7,841/unit $ 7,509/unit 91% 91%

Richardson Highlands $14,929/unit $13,060/unit 99% 98%

Serramonte Plaza $13.69/sq.ft. $12.82/sq.ft. 97% 88%

The General Partner attributes the increase in occupancy at Serramonte Plaza to
the vacancy of one building during 1997, which accounted for approximately 8% of
the property. This building was sold in 1997. In addition, a good portion of
the vacant space available at the beginning of the year was leased in early
1998.

As noted under "Item 1. Description of Business", the real estate industry is
highly competitive. All of the properties of the Partnership are subject to
competition from other residential apartment complexes and commercial properties
in the area. The General Partner believes that all of the properties are
adequately insured. Two of the properties are apartment complexes which lease
units for lease terms of one year or less. No residential tenant leases 10% or
more of the available rental space. The commercial property leases space for
lease terms ranging from twelve months to ten years. See Notes A and G to the
Financial Statements for a description of the principal terms of the commercial
leases. See below for a description of tenants leasing 10% or more of the
available rental space. All of the properties are in good condition, subject to
normal depreciation and deterioration as is typical for assets of this type and
age.

The following is a schedule of the commercial property lease expirations for the
years 1999-2008:

Number of % of Gross

Expirations Square Feet Annual Rent Annual Rent

(in thousands)

Serramonte Plaza

1999 12 23,421 $463 16%

2000 14 20,457 374 13%

2001 13 22,959 352 12%

2002 8 27,802 492 17%

2003 6 9,776 222 8%

2004 2 19,919 282 10%

2005 1 12,137 214 8%

2006 5 14,619 239 8%

2007 1 48,492 175 6%

2008 2 1,675 44 2%

The following schedule reflects information on tenants occupying 10% or more of
the leasable square feet for Serramonte Plaza, the Partnership's only commercial
property:

Nature of Square Footage Annual Rent Per Lease

Business Leased Square Foot Expiration

Office Space 48,492 $3.61 1/16/07

REAL ESTATE TAXES AND RATES:

Real estate taxes and rates in 1998 for each property were:

1998 1998

Taxes Rate

(in thousands)

Rivercrest Village $ 166 1.09%

Richardson Highlands 206 1.36%

Serramonte Plaza 94 1.11%

CAPITAL IMPROVEMENTS

RIVERCREST VILLAGE APARTMENTS

During 1998, the Partnership completed $235,000 of capital improvements at the
property, consisting primarily of roof, floor covering and appliance
replacements. These improvements were funded primarily from cash flow and
Partnership reserves. Based on a report received from an independent third party
consultant analyzing necessary exterior improvements and estimates made by the
General Partner on interior improvements, it is estimated that the property
requires approximately $365,000 of capital improvements over the near term.
Capital improvements budgeted for, but not limited to, approximately $467,000
are planned for 1999 consisting of clubhouse renovations, carpet replacement and
other interior improvements.

RICHARDSON HIGHLANDS APARTMENTS

During 1998, the Partnership completed $253,000 of capital improvements at the
property, consisting primarily of balcony, roof and floor covering replacements
and other building improvements. These improvements were funded primarily from
cash flow and Partnership reserves. Based on a report received from an
independent third party consultant analyzing necessary exterior improvements and
estimates made by the General Partner on interior improvements, it is estimated
that the property requires approximately $213,000 of capital improvements over
the near term. Capital improvements budgeted for, but not limited to,
approximately $213,000 are planned for 1999 consisting of balcony and stairway
replacement and repairs, carpet, cabinet, countertop and roof replacements,
parking lot repairs and other building improvements.

SERRAMONTE PLAZA

During 1998, the Partnership completed $562,000 of capital improvements at the
property, consisting primarily of air conditioning system unit replacements,
other building and tenant improvements. These improvements were funded
primarily from cash flow and Partnership reserves. Based on a report received
from an independent third party consultant analyzing necessary exterior
improvements and estimates made by the General Partner on interior improvements,
it is estimated that the property requires approximately $1,000,000 of capital
improvements over the near term. Capital improvements budgeted for, but not
limited to, approximately $423,000 are planned for 1999 consisting of door and
entrance way and parking lot repairs and tenant improvements.

The capital improvements planned for 1999 at the Partnership's properties will
be made only to the extent of cash available from operations and Partnership
reserves.

ITEM 3. LEGAL PROCEEDINGS

The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the quarter ended December 31, 1998, no matter was submitted to a vote of
unit holders through the solicitation of proxies or otherwise.

PART II

ITEM 5. MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS

The Partnership, a publicly-held limited partnership sold 16,267 limited
partnership units aggregating $48,802,000. The Partnership currently has 3,011
holders of record owning an aggregate of 16,261.152 units. Affiliates of the
General Partner do not own any units at December 31, 1998. No public trading
market has developed for the Units, and it is not anticipated that such a market
will develop in the future.

The Partnership did not make any cash distributions during the year ended
December 31, 1998 and 1997. Future cash distributions will depend on the levels
of net cash generated from operations, refinancings, property sales, and the
availability of cash reserves. The Partnership's distribution policy is
reviewed on a quarterly basis. There can be no assurance, however, that the
Partnership will generate sufficient funds from operations after anticipated
capital expenditures to permit any distributions to its partners in 1999 or
subsequent periods.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the forward-
looking statements as a result of a number of factors, including those
identified herein.

This item should be read in conjunction with the consolidated financial
statements and other items contained else where in this report.

RESULTS OF OPERATIONS

The Registrant's net income for the year ended December 31, 1998 was $109,000 as
compared to $1,102,000 for the year ended December 31, 1997. (See "Note D" of
the financial statements for a reconciliation of these amounts to the
Registrant's federal taxable income).

The decrease in net income was due to a decrease in total revenues which was
partially offset by a decrease in total expenses. Total revenues decreased as a
result of the fact that no gain on sale was recognized in 1998 but a gain on
sale of investment property was recognized in 1997 due to the sale of buildings
and land at Serramonte Plaza during the second quarter of 1997. Excluding this
gain, total revenues actually increased as a result of an increase in rental
income. This increase in rental income is primarily due to average annual
rental rate increases at all of the Partnership's investment properties along
with the increase in occupancy at Serramonte Plaza.

Total expenses decreased primarily due to a reduction in interest expense and to
a lesser extent, a reduction in operating expense all of which was partially
offset by an increase in loss on disposition of property, general and
administrative and depreciation. Interest expense decreased due to the
refinancing of the first mortgages at all of the Partnership's properties. The
refinancing resulted in a lower interest rate and allowed the paying down of the
second mortgages at Rivercrest Village and Richardson Highlands (see discussion
below). The loss on disposition of property of $49,000 was realized due to the
write off of roofs at Richardson Highlands and Rivercrest Village Apartments.
Operating expenses decreased as a result of the completion in 1997 of major
landscaping at all of the properties along with the completion in 1997 of
various repair projects and painting performed at the properties.

General and administrative expense increased due to an increase in
reimbursements to the General Partner and general costs of the Partnership.
Included in general and administrative expenses at both December 31, 1998 and
1997 are management reimbursements to the General Partner allowed under the
Partnership Agreement. In addition, costs associated with the quarterly and
annual communications with investors and regulatory agencies and the annual
audit required by the Partnership Agreement are also included.

The decrease in net income is also attributable to a decrease in the net gain
recognized on early extinguishment of debt.

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. The sales price for the three buildings and two
parcels of land was approximately $4,778,000 and was determined primarily by
reference to appraised values. The sale resulted in net proceeds of
approximately $4,360,000, after payment of closing costs, and the gain on the
sale amounted to approximately $2,042,000. The proceeds from the sale were used
to reduce the mortgage debt secured by Serramonte Plaza.

As part of the ongoing business plan of the Registrant, 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 Registrant from increases in expense. As part of this
plan, the General Partner attempts to protect the Registrant 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 the General Partner will be
able to sustain such a plan.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1998, the Partnership had cash and cash equivalents of
approximately $1,184,000 versus approximately $2,640,000 at December 31, 1997.
The $1,465,000 decrease in cash and cash equivalents is due to $808,000 of cash
used in investing activities and $2,821,000 of cash used in financing
activities, which was partially offset by $2,173,000 of cash provided by
operations. Cash used in investing activities consisted of property improvement
and replacements which was partially offset by net withdrawals from restricted
escrows. Cash used in financing activities consisted primarily of principal
payments on the mortgage encumbering the Registrant's properties and, to a
lesser extent, the payment of loan costs. The Registrant invests its working
capital reserves in money market accounts.

The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the properties to adequately maintain the physical
assets and other operating needs of the Registrant and to comply with federal,
state, and local legal and regulatory requirements. The Registrant has budgeted
approximately $1,103,000 in capital improvements for all of the Registrant's
properties in 1999. Budgeted capital improvements at Rivercrest Village include
clubhouse renovations, carpet replacement and other interior building
improvements. Budgeted capital improvements at Richardson Highlands include
balcony and stairway replacement repairs, carpet, cabinet, countertop and roof
replacements, parking lot repairs and other building improvements. Budgeted
capital improvements at Serramonte Plaza include tenant improvements and door
and entrance way and parking lot repairs. The capital expenditures will be
incurred only if cash is available from operations or from partnership reserves.
To the extent that such budgeted capital improvements are completed, the
Registrant's distributable cash flow, if any, may be adversely affected at least
in the short term.

The Registrant's current assets are thought to be sufficient for any near-term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $42,945,000, matures from January 2000 until
January 2008, with balloon payments due at maturity, at which time the
properties will either be refinanced or sold. Richardson Highlands and
Rivercrest Village have balloon second mortgages, which include a "shadow debt"
portion, payable only in the event that the mortgage goes to maturity, January
15, 2000 for both properties. The "shadow debt" portion for Richardson
Highlands and Rivercrest Village is approximately $858,000 and $1,307,000,
respectively. On December 31, 1998, the remaining balance on the second
mortgage for Richardson Highlands and Rivercrest Village is approximately
$929,000 and $1,944,000, respectively.

No cash distributions were paid during the year ended December 31, 1998 or 1997.
The Registrant's distribution policy is reviewed on a quarterly basis. There
can be no assurance, however, that the Registrant will generate sufficient funds
from operations after required capital expenditures, to permit distributions to
its partners in 1999 or subsequent periods.

Year 2000 Compliance

General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems

The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the General Partner and its affiliates for management and
administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.

Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.

The Managing Agent's plan to resolve Year 2000 issues involves four Phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.

Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase

Computer Hardware:

During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers and routers
and desktop PCs were analyzed for compliance. The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
December 31, 1998, had completed approximately 75% of this effort.

The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by March
31, 1999.

Computer software:

The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.

During 1998, the Managing Agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and the testing process is
expected to be completed by March 31, 1999.

The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
March 31, 1999.

Operating Equipment:

The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).

The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally. The Managing Agent intends to have a third-party conduct an
audit of these systems and report their findings by March 31, 1999.

Any of the above operating equipment that has been found to be non-compliant to
date has been replaced or repaired. To date, these have consisted only of
security systems and phone systems. As of December 31, 1998 the Managing Agent
has evaluated approximately 86% of the operating equipment for the Year 2000
compliance.

The total cost incurred for all properties managed by the Managing Agent as of
December 31, 1998 to replace or repair the operating equipment was approximately
$400,000. The Managing Agent estimates the cost to replace or repair any
remaining operating equipment is approximately $325,000, which is expected to be
completed by April 30, 1999.

The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within our enterprise.

Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000

The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.

The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.

The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.

Costs to Address Year 2000

The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.

Risks Associated with the Year 2000

The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.

In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.

Contingency Plans Associated with the Year 2000

The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.

ITEM 7.FINANCIAL STATEMENTS

INVESTORS FIRST-STAGED EQUITY L.P.

LIST OF CONSOLIDATED FINANCIAL STATEMENTS

Report of Ernst & Young LLP, Independent Auditors

Consolidated Balance Sheet - December 31, 1998

Consolidated Statements of Operations - Years
ended December 31, 1998 and 1997

Consolidated Statements of Changes in Partners' Deficit - Years
ended December 31, 1998 and 1997

Consolidated Statements of Cash Flows - Years ended
December 31, 1998 and 1997

Notes to Consolidated Financial Statements

Report of Ernst & Young LLP, Independent Auditors

The Partners
Investors First-Staged Equity L.P.

We have audited the accompanying consolidated balance sheet of Investors First-
Staged Equity L.P. as of December 31, 1998, and the related consolidated
statements of operations, changes in partners' deficit and cash flows for each
of the two years in the period ended December 31, 1998. 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 the
Partnership's 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 consolidated financial position of Investors First-
Staged Equity L.P. at December 31, 1998, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.

/s/ ERNST & YOUNG LLP

Greenville, South Carolina
March 3, 1999

INVESTORS FIRST-STAGED EQUITY L.P.

CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1998

Assets

Cash and cash equivalents $ 1,184

Receivables and deposits (Note E) 738

Restricted escrows 524

Other assets 1,518

Investment properties (Notes C, H and I):

Land $ 8,402

Buildings and related improvements 40,064

48,466

Less accumulated depreciation (25,949) 22,517

$ 26,481

Liabilities and Partners' Deficit

Liabilities

Accounts payable $ 79

Accrued interest 392

Tenant security deposit liabilities 468

Other liabilities 110

Advances from affiliates of General Partner 326

Mortgage notes payable (Note C) 42,945

Partners' Deficit

General partner $ (360)

Limited partners (16,261.152 units issued

and outstanding ) (17,479) (17,839)

$ 26,481

See Accompanying Notes to Consolidated Financial Statements

INVESTORS FIRST-STAGED EQUITY L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)

Years Ended December 31,

1998 1997

Revenues:

Rental income $ 8,206 $ 7,361

Other income 348 385

Gain on sale of investment property -- 2,042

Total revenues 8,554 9,788

Expenses:

Operating 2,704 2,795

General and administrative 261 194

Depreciation 1,894 1,844

Interest 3,340 3,884

Property taxes 467 457

Loss on disposition of property 49 --

Total expenses 8,715 9,174

(Loss) income before extraordinary item (161) 614

Extraordinary item - net gain on early

extinguishment of debt (Note C) 270 488

Net income (Note D) $ 109 $ 1,102

Net income allocated to general partners (1%) $ 1 $ 11

Net income allocated to limited partners (99%) 108 1,091

$ 109 $ 1,102

Per limited partnership unit:

Income (loss) before extraordinary item $ (9.80) $ 37.37

Extraordinary item 16.44 29.70

Net income $ 6.64 $ 67.07

See Accompanying Notes to Consolidated Financial Statements

INVESTORS FIRST-STAGED EQUITY L.P.

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
(in thousands, except unit data)

Limited

Partnership General Limited

Units Partners Partners Total

Partners' deficit at

December 31, 1996 16,267 $(372) $(18,678) $(19,050)

Net loss for the year

ended December 31, 1997 -- 11 1,091 1,102

Partner's deficit at

December 31, 1997 16,267 (361) (17,587) (17,948)

Abandonment of units (Note J) (6) -- -- --

Net income for the year

ended December 31, 1998 -- 1 108 109

Partners' deficit at

December 31, 1998 16,261 $(360) $(17,479) $(17,839)

See Accompanying Notes to Consolidated Financial Statements

INVESTORS FIRST-STAGED EQUITY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended December 31,

1998 1997

Cash flows from operating activities:

Net income $ 109 $ 1,102

Adjustments to reconcile net income to

net cash provided by (used in) operating activities:

Depreciation 1,894 1,844

Amortization of loan costs and leasing commissions 199 120

Loss on disposal of property 49 --

Gain on sale of investment property -- (2,042)

Extraordinary gain on early extinguishment of debt (270) (488)

Change in accounts:

Receivables and deposits (26) 114

Other assets (110) (212)

Accounts payable 27 (26)

Accrued interest 215 (416)

Tenant security deposit liabilities 77 (55)

Other liabilities 9 (83)

Net cash provided by (used in) operating activities 2,173 (142)

Cash flows from investing activities:

Proceeds from sale of investment property -- 4,360

Property improvements and replacements (1,050) (652)

Net withdrawals from restricted escrows 242 131

Collections on note receivable -- 44

Net cash (used in) provided by investing activities (808) 3,883

Cash flows from financing activities:

Payment of loan costs (106) (1,083)

Prepayment penalty -- (51)

Payments on mortgage notes payable (2,715) (437)

Payment of mortgage fee -- (1,102)

Payments on advances from affiliates -- (189)

Repayment of mortgage note payable -- (40,296)

Proceeds from refinance of mortgage -- 40,500

Net cash used in financing activities (2,821) (2,658)

Net (decrease) increase in cash and cash equivalents (1,456) 1,083

Cash and cash equivalents at beginning of year 2,640 1,557

Cash and cash equivalents at end of year $ 1,184 $ 2,640

Supplemental disclosure of cash flow information:

Cash paid for interest $ 2,968 $ 5,457

Interest transferred to principal $ -- $ 1,335

See Accompanying Notes to Consolidated Financial Statements

INVESTORS FIRST-STAGED EQUITY L.P.

Notes to Consolidated Financial Statements

December 31, 1998

NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization: Investors First-Staged Equity L.P. (the "Partnership" or
"Registrant") was organized as a limited partnership under the Delaware Revised
Uniform Limited Partnership Act in May 1985, and began operations on October 2,
1985. Effective January 1, 1986, VMS Realty Investment assigned its interest in
future profits, losses, operating cash flow and liquidation proceeds of the
Partnership to VMS Realty Investment II, which subsequently became the General
Partner. VMS Realty Investment II is a general partnership formed to be the
sole general partner of the Partnership and has the same constituent partners as
VMS Realty Investment, its predecessor. Effective January 1, 1987, VMS Realty
Investment II assigned its beneficial interest in the Partnership to VMS Realty
Investment. Effective January 2, 1998, the General Partner was replaced by
MAERIL, Inc., a wholly-owned subsidiary of MAE GP Corporation ("MAE GP").
Effective February 25, 1998, MAE GP was merged into Insignia Properties Trust
("IPT") which was merged into Apartment Investment and Management Company
("AIMCO") effective February 26, 1999. Thus, the General Partner is now a
wholly-owned subsidiary of AIMCO. See "Note B - Transfer of Control". The
directors and officers of the General Partner also serve as executive officers
of AIMCO. The Partnership Agreement provides that the Partnership is to
terminate on December 31, 2025 unless terminated prior to such date. The
Partnership currently owns and operates two residential properties and a
commercial property all of which are located in California.

Principles of Consolidation: The Partnership's consolidated financial
statements include the accounts of its 99.99% limited partnership interests in
Serramonte, LP, VMS Apartments Portfolio II and VMS Apartments Portfolio III.
The General Partner of the consolidated partnership is MAERIL, Inc. MAERIL,
Inc., may be removed by the Registrant; therefore, the consolidated partnership
is controlled and consolidated by the Registrant. All significant
interpartnership balances have been eliminated.

Use of Estimates: The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results could
differ from those estimates.

Allocation of Profits, Gains and Losses: Profits, gains and losses of the
Partnership are allocated between general and limited partners in accordance
with the provisions of the Partnership Agreement.

Profits, not including gains from property dispositions, are allocated as if
they were distributions of net cash from operations.

All losses, including losses attributable to property dispositions, are
allocated 99% to the limited partners and 1% to the general partners.
Accordingly, net income as shown in the statements of operations and changes in
partners' capital for 1998 and 1997 were allocated 99% to the limited partners
and 1% to the general partners. Net income per limited partnership unit for
each such year was computed as 99% of net income divided by the units
outstanding for each year.

Allocation of Cash Distribution: All cash distributions consisting of cash from
operations shall be allocated 99% to the Limited Partners and 1% to the General
Partner.

The net profit of the Partnership from any sale or refinancing of the properties
shall be allocated (with ordinary income being allocated first) as follows: (i)
first, an amount equal to the aggregate deficit balances of the Partners'
capital accounts shall be allocated to each Partner that has a deficit capital
account balance in the same ratio as the deficit balance of such Partner's
capital account bears to the aggregate of the deficit balance of all Partners'
capital accounts; (ii) second, to the Limited Partners in an amount equal to the
excess of their adjusted capital contribution over the balance of their
respective capital accounts after taking into account the allocation provided
for in subparagraph (i) above; (iii) third, to the Limited Partners in an amount
equal to any unpaid preferred cumulative return; (iv) fourth, to the General
Partner in an amount equal to the excess of its adjusted capital contribution
over its capital account balance; and (v) thereafter, 85% to the Limited
Partners and 15% to the General Partner. The net loss to the Partnership from
any sale or other disposition of the properties shall be allocated as follows:
(i) first, in an amount equal to the aggregate positive balances in the
partners' capital accounts, to each partner in the same ratio as the positive
balance in such partner's capital account bears to the aggregate of all such
partners' positive capital accounts; and (ii) thereafter, 99% to the Limited
Partners and 1% to the General Partner.

In general, net proceeds from any sale or refinancing of the properties will be
allocated 85% to the Limited Partners and 15% to the General Partner, after the
Limited Partners have received an amount equal to their original capital
contributions and a cumulative 6% per annum, noncompounded, return on their
adjusted capital contributions from such proceeds.

Advertising: The Partnership expenses the costs of advertising as incurred.
Advertising expense, included in operating expenses, was approximately $78,000
and $75,000 for the years ended December 31, 1998 and 1997, respectively.

Fair Value of Financial Instruments: Statement of Financial Accounting
Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial
Instruments", as amended by SFAS No. 119, "Disclosures about Derivative
Financial Instruments and Fair Value of Financial Instruments", requires
disclosure of fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate fair
value. Fair value is defined in the SFAS as the amount at which the instruments
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. The Partnership believes that the carrying
amount of its financial instruments (except for long term debt) approximates
their fair value due to the short term maturity of these instruments. The fair
value of the Partnership's long term debt, after discounting the scheduled loan
payments to maturity, approximates its carrying balance.

Cash and Cash Equivalents: Includes cash on hand and in banks, money market
funds and certificates of deposit with original maturities of less than ninety
days. At certain times, the amount of cash deposited at a bank may exceed the
limit on insured deposits.

Restricted Escrows:

Capital Improvement Reserve - In connection with the refinancing of
Serramonte Plaza, Richardson Highlands and Rivercrest Village in 1997,
approximately $835,000 of the proceeds were designated as a repair escrow
and capital improvement escrow for the funding of immediately required
capital improvements and repairs as noted in the loan documents. At
December 31, 1998, approximately $46,000 remains in the accounts.

Replacement Reserve - In connection with the refinancing of Richardson
Highlands and Rivercrest Village in 1997, monthly deposits of approximately
$11,000 are required each month during the term of the loan. The December
31, 1998 replacement reserve balance is approximately $478,000.

Depreciation: Depreciation is computed using the following methods and
estimated useful lives:

GAAP BASIS TAX BASIS

Lives Lives

Method (Years) Method (Years)

Buildings and

improvements:

Commercial Straight-line 20-25 Straight-line 18, 19, 31.5

(ACRS & MACRS) and 39

Residential Straight-line 17-25 175% Declining 18, 19 and

Balance (ACRS, 27.5

MACRS)

Personal Property 150% Declining 5 & 7 150% Declining 5 & 7

Balance Balance (ACRS,

and MACRS)

Investment Properties: Investment properties consist of two apartment complexes
and one commercial building and are stated at cost. Acquisition fees are
capitalized as a cost of real estate. In accordance with Financial Accounting
Standards Board 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. Costs of investment properties that have been
permanently impaired have been written down to appraised value. No adjustments
for impairment of value were recorded for the years ended December 31, 1998 or
1997.

Loan Costs: Loan costs, included in other assets on the balance sheet, of
approximately $1,189,000 are being amortized on a straight-line basis over the
lives of the related loans. Current accumulated amortization is approximately
$186,000 and is also included in other assets on the balance sheet.

Lease Commissions: Lease commissions of approximately $310,000, less
accumulated amortization of approximately $177,000, are being amortized using
the straight-line method over the term of the respective leases.

Tenant Security Deposits: The Partnership requires security deposits from all
lessees for the duration of the lease and such deposits are included in
receivables and deposits. Deposits are refunded when the tenant vacates,
provided the tenant has not damaged its space and is current on its rental
payments.

Leases: The Partnership generally leases apartment units at Rivercrest Village
and Richardson Highlands for twelve months or less. The Partnership recognizes
income as earned on its leases. In addition, the General Partner's policy is to
offer rental concessions during particularly slow months or in response to heavy
competition from other similar complexes in the area. Concessions are charged
against rental income as incurred. The Partnership leases certain commercial
space at Serramonte Plaza to tenants under various lease terms. For leases with
fixed rental increases, rents are recognized on a straight-line basis over the
terms of the lease. This straight-line basis recognized approximately $360,000
more in rental income than was collected in 1998 and prior years. This amount
will be collected in future years as cash collections under the terms of the
leases exceed the straight-line basis of revenue recognition.

Segment Reporting: In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Standards No. 131, Disclosure about Segments of an
Enterprise and Related Information ("Statement 131"), which is effective for
years beginning after December 15, 1997. Statement 131 established standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. See "Note K - Segment Reporting" for detailed disclosure.

Reclassifications: Certain reclassifications have been made to the 1997
balances to conform to the 1998 presentation.

NOTE B - TRANSFER OF CONTROL

NOTE C - MORTGAGE NOTES PAYABLE

The principle terms of mortgage notes payable are as follows:

Principal Monthly Principal

Balance At Payment Stated Balance

December 31, Including Interest Maturity Due At

Property 1998 Interest Rate Date Maturity

(in thousands) (in thousands)

Rivercrest Village

1st mortgage $11,509 $ 80 7.348% 01/01/08 $10,053

2nd mortgage 1,944 (1) 10.0% 01/15/00 1,944

Richardson Highlands

1st mortgage 16,767 116 7.326% 01/01/05 15,502

2nd mortgage 929 (1) 10.0% 01/15/00 929

Serramonte Plaza

1st mortgage 11,796 98 8.67% 07/01/04 10,721

Totals $42,945 $41,763

(1) Interest only payments at a 7% rate are made to the extent of surplus cash.

All first mortgage agreements include non-recourse provisions which limit the
lenders' remedies in the event of default to the specific properties
collateralizing each loan.

The second mortgage agreements are collateralized by all the Partnership's
interests in the subtier partnerships that own the related properties.

In June 1997, the Partnership refinanced the mortgage indebtedness encumbering
Serramonte Plaza. The previous mortgage note of approximately $7,365,000 was to
be repaid from loan proceeds received from the refinancing. The new mortgage
debt of $12,000,000 carries a stated interest rate of 8.67%, with a balloon
payment due July 1, 2004. An extraordinary loss on early extinguishment of debt
of approximately $1,348,000 was realized during the second quarter of 1997 due
to the payment of approximately $1,102,000 in early payment mortgage fees and a
loss of approximately $246,000 on the write-off of unamortized loan costs. In
conjunction with the refinancing, a capital improvement reserve of approximately
$500,000 was established and approximately $371,000 in loan costs were incurred.

In October 1990, the Partnership defaulted on the Richardson Highlands and
Rivercrest Village subordinate notes payable (the second mortgage loans) due to
the failure to make the required monthly debt service payments. The Partnership
and the lender finalized an agreement on June 22, 1994, retroactive to July 1,
1993, to restructure the debt held on Richardson Highlands and Rivercrest
Village. The junior lien mortgages were restructured to mature on January 15,
2000, and provide for a 10% interest rate (with a 7% pay rate), based on the
"Agreed Valuation Amount", as defined in the restructure agreement. Interest
payments are payable from surplus cash. The second mortgages include a "shadow
debt" portion that is payable only in the event that the mortgages have not been
paid prior to maturity. The shadow debt portion, which is the difference
between the Agreed Valuation Amount and the Note Face Amount, for Richardson
Highlands and Rivercrest Village is approximately $858,000 and $1,307,000,
respectively. The Agreed Valuation Amounts for Richardson Highlands and
Rivercrest Village were approximately $7,268,000 and $7,110,000, respectively.
A Note Face Amount of $8,126,000 for Richardson Highlands and $8,417,000 for
Rivercrest Village. The agreement also allowed the lender to receive fifty
percent of any net proceeds from the sale or refinancing of the properties after
the payment of all mortgage notes payable and subordinated debt.

On December 31, 1997, the Richardson Highlands' first mortgage and Rivercrest
Village's first mortgage were refinanced by Lehman Brothers Holdings, Inc.
("LBHI") with the outstanding principal balance being increased to $16,900,000
and $11,600,000, respectively. The old mortgage notes in the amount of
$6,182,000 and $6,137,000 were repaid from loan proceeds received from the
refinancing. The new Richardson Highlands' mortgage note carries a stated
interest rate of 7.326%, with a balloon payment due January, 1, 2005, and
requires monthly principal and interest payments. The new Rivercrest Village's
mortgage note carries a stated interest rate of 7.348%, with a balloon payment
due January 1, 2008, and requires monthly principal and interest payments. An
extraordinary loss on early extinguishment of debt of approximately $32,000 on
Richardson Highlands and $19,000 on Rivercrest Village was realized during the
fourth quarter of 1997 due to prepayment penalties. In conjunction with the
refinancing, a Repair Escrow for Richardson Highlands and Rivercrest Village was
established (see "Note A") and loan costs of approximately $460,000 for
Richardson Highlands and $350,000 for Rivercrest Village were incurred.

Scheduled principal payments of mortgage notes payable subsequent to December
31, 1998, are as follows (in thousands):

1999 $ 419

2000 3,319

2001 489

2002 530

2003 573

Thereafter 37,615

$42,945

Shadow debt forgiven in 1999 (see above) (874)

$42,071

NOTE D - INCOME TAXES

The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for Federal income tax purposes.
Accordingly, no provision for income taxes is made in the consolidated financial
statements of the Partnership. Taxable income or loss of the Partnership is
reported in the income tax returns of its partners.

The following is a reconciliation of reported net income and Federal taxable
income (loss) (in thousands, except per unit data):

1998 1997

Net income (loss) as reported $ 109 $ 1,102

Add (deduct)

Sale of property -- 86

Debt forgiveness (270) 524

Depreciation differences 25 44

Deferred expense (127) (234)

Other 213 490

Federal taxable (loss) income $ ( 50) $ 2,012

Federal taxable (loss) income

per limited partnership unit $ 3.05 $ 122.45

The following is a reconciliation between the partnership's reported amounts and
Federal tax basis of net assets and liabilities as of December 31, 1998: (in
thousands)

Net deficit as reported $(17,839)

Land and buildings 6,496

Accumulated depreciation (10,363)

Syndication 6,832

Debt forgiveness 254

Accrued liabilities (360)

Other 242

Net deficit - Federal tax basis $(14,738)

NOTE E - NOTE RECEIVABLE

During 1990, Serramonte Plaza advanced $305,000 for tenant improvements to one
of its tenants as provided for in the related lease documents. The note bears
interest at 12% per annum and is to be repaid over the remaining term of the
lease through monthly additional rent payments of approximately $5,000 from
October 1990 through May 1999. The outstanding balance of the note receivable
was $23,000 at December 31, 1998, and is included in receivables and deposits.

NOTE F - TRANSACTIONS WITH AFFILIATES PARTIES

The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The Partnership Agreement provides for certain payments to affiliates for
services and as reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership.

For the period of January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
General Partner with an insurer unaffiliated with the General Partner. An
affiliate of the General Partner acquired, in the acquisition of a business,
certain financial obligations from an insurance agency which was later acquired
by the agent who placed the master policy. The agent assumed the financial
obligations to the affiliate of the General Partner, which receives payment on
these obligations from the agent. The amount of the Partnership's insurance
premiums accruing to the benefit of the affiliate of the General Partner by
virtue of the agent's obligations is not significant.

During the years ended December 31, 1998 and 1997, affiliates of the General
Partner were entitled to receive 5% of gross receipts from all of the
Registrant's residential properties for providing property management services.
The Registrant paid to such affiliates $216,000 and $239,000 for the years ended
December 31, 1998 and 1997 respectively. For the nine months ended September
30, 1998 and the year ended December 31, 1997, affiliates of the General Partner
were entitled to receive varying percentages of gross receipts from the
Registrant's commercial property for providing property management services.
The Registrant paid to such affiliates $147,000 and $151,000 for the nine months
ended September 30, 1998 and for the year ended December 31, 1997. Effective
October 1, 1998 (the effective date of the Insignia Merger) these services for
the commercial property were provided by an unrelated party.

An affiliate of the General Partner received reimbursements of accountable
administrative expenses amounting to approximately $157,000 and $143,000 for the
years ended December 31, 1998 and 1997, respectively.

During the year ended December 31, 1998 and 1997, the Partnership paid
affiliates of the General Partner approximately $40,000 and $506,000,
respectively, for loan costs which were capitalized and included in other assets
in the accompanying Consolidated Balance Sheet. These loan costs related to the
refinancing of the investment properties.

In prior years the Partnership was advanced funds from a former General Partner
in order to meet its existing obligations. Interest accrues on these advances
at rates agreed to by the partnership and the former General Partners. The
interest rates at December 31, 1998 ranged from 4.70% to 9.50%. The unpaid
balance on these advances at December 31, 1998, and the related accrued interest
is $326,000 and $130,000, respectively.

NOTE G - OPERATING LEASES

The Partnership receives rental income from commercial leases under operating
leases with various terms. Minimum future rentals under operating leases with
terms of one year or more for the Partnership as of December 31, 1998, are as
follows: (in thousands)

1999 $ 2,512

2000 2,280

2001 1,891

2002 1,504

2003 1,110

Thereafter 1,885

$11,182

NOTE H - SALE OF PROPERTY

NOTE I - REAL ESTATE AND ACCUMULATED DEPRECIATION

Investment Properties

Initial Cost

To Partnership

(in thousands)

Buildings,

Leasehold Cost

Interests Capitalized

And Related (Written down)

Personal Subsequent to

Encumbrances Land Property Acquisition

Rivercrest Village

Sacramento, CA $ 13,453 $ 1,230 $ 15,171 $ 1,835

Richardson Highlands

Marin County, CA 17,696 5,196 10,455 1,552

Serramonte Plaza

Daly City, CA 11,796 4,272 20,278 (11,523)

Totals $ 42,945 $ 10,698 $ 45,904 $ (8,136)

Gross Amount At Which Carried

At December 31, 1998

(in thousands)

Buildings

And Related

Personal

Description Land Property Total Depreciation Construction Acquired

Rivercrest Village $1,231 $17,005 $18,236 $11,648 1975 10/85

Richardson Highlands 5,200 12,003 17,203 8,154 1979 10/85

Serramonte Plaza 1,971 11,056 13,027 6,147 1971-1981 10/85

Totals $8,402 $40,064 $48,466 $25,949

</TABLE>

The depreciable lives for the buildings and components are 5 to 25 years. The
depreciable lives for related personal property are 5 to 7 years.

Reconciliation of "Real Estate and Accumulated Depreciation":

Year Ended Year Ended

December 31, December 31,

1998 1997

(in thousands)

Real Estate

Balance at beginning of year $47,572 $51,125

Property improvements 1,050 652

Disposition of Property (156) (4,205)

Balance at End of Year $48,466 $47,572

Accumulated Depreciation

Balance at beginning of year $24,162 $24,213

Additions charged to expense 1,894 1,844

Disposition of property (107) (1,895)

Balance at end of year $25,949 $24,162

The aggregate cost of the real estate for Federal income tax purposes at
December 31, 1998 and 1997, is $54,962,000 and $53,908,000, respectively. The
accumulated depreciation taken for Federal income tax purposes at December 31,
1998 and 1997, is $36,312,000 and $34,443,000, respectively.

NOTE J - ABANDONMENT OF UNITS

In 1998, the number of Limited Partnership Units decreased by six due to limited
partners abandoning these units. In abandoning his or her Limited Partnership
Units, a limited partner relinquishes all right, title and interest in the
Partnership as of the date of abandonment. However, during the year of
abandonment, the limited partner is allocated his or her share of the income or
loss for that year. The net income per limited partnership unit is calculated
based on the number of units outstanding at the beginning of the year.

NOTE K - SEGMENT REPORTING

Description of the types of products and services from which the reportable
segment derives its revenues:

As defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," Investors First-Staged Equity LP has two reportable
segments: residential properties and commercial properties. The Partnership's
residential property segment consists of two apartment complexes located in
California. The Partnership rents apartment units to people for terms that are
typically twelve months or less. The commercial property segment consists of
office space located in Serramonte, California. This property leases space to
management, restaurant, and dental enterprises at terms ranging from month to
month to ten years.

Measurement of segment profit or loss:

The Partnership evaluates performance based on net income. The accounting
policies of the reportable segments are the same as those described in the
summary of significant accounting policies.

Factors management used to identify the enterprise's reportable segment:

The Partnership's reportable segments are investment properties that offer
different products and services. The reportable segments are each managed
separately because they provide distinct services with different types of
products and customers.

Segment information for the years 1998 and 1997 is shown in the tables below.
The "Other" column includes partnership administration related items and income
and expense not allocated to reportable segments.

1998 Residential Commercial Other Totals
Rental income $ 5,102 $ 3,104 $ -- $ 8,206
Other income 247 24 77 348
Interest expense 2,256 1,084 -- 3,340
Depreciation 1,438 456 -- 1,894
General and administrative expenses -- -- 261 261
Loss on disposal of assets (49) -- -- (49)
Gain on extraordinary items 270 -- -- 270
Segment profit (loss) (228) 521 (184) 109
Total assets 17,509 8,348 624 26,481
Capital expenditures 488 562 0 1,050

1997 Residential Commercial Other Totals
Rental income $ 4,705 $ 2,656 $ -- $ 7,361
Other income 188 123 74 385
Interest expense 2,321 1,563 -- 3,884
Depreciation 1,425 419 -- 1,844
General and administrative expenses -- -- 194 194
Gain on disposal of assets -- 2,042 -- 2,042
Gain (loss) on extraordinary items 1,836 (1,348) -- 488
Segment profit (loss) 920 333 (151) 1,102
Total assets 18,632 7,864 2,533 29,029
Capital expenditures 204 448 -- 652

NOTE L - LEGAL PROCEEDINGS

The Partnership is unaware of any pending or outstanding litigation that is not
of a routine nature arising in the ordinary course of business.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The Registrant has no officers or directors. The General Partner manages and
controls the Registrant and has general responsibility and authority in all
matters affecting its business.

The names of the directors and executive officers of MAERIL, Inc. ("MAERIL") the
Partnership's General Partner, their ages and the nature of all positions with
MAERIL presently held by them are set forth below. There are no family
relationships between or among any officers and directors.

Name Age Position

Patrick J. Foye 41 Executive Vice President and Director

Timothy R. Garrick 42 Vice President - Accounting and Director

Patrick J. Foye has been Executive Vice President and Director of the General
Partner since October 1, 1998. Mr. Foye has served as Executive Vice President
of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the
law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was
Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992
through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power
Authority and serves as a member of the New York State Privatization Council.
He received a B.A. from Fordham College and a J.D. from Fordham University Law
School.

Timothy R. Garrick has served as Vice President-Accounting of AIMCO and Vice
President-Accounting and Director of the General Partner since October 1, 1998.
Prior to that date, Mr. Garrick served as Vice President-Accounting Services of
Insignia Financial Group since June of 1997. From 1992 until June of 1997, Mr.
Garrick served as Vice President of Partnership Accounting and from 1990 to 1992
as an Asset Manager for Insignia Financial Group. From 1984 to 1990, Mr.
Garrick served in various capacities with U.S. Shelter Corporation. From 1979
to 1984, Mr. Garrick worked on the audit staff of Ernst & Whinney. Mr. Garrick
received his B.S. Degree from the University of South Carolina and is a
Certified Public Accountant.

ITEM 10. EXECUTIVE COMPENSATION

None of the directors and officers of the General Partner received any
remuneration from the Partnership.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(a) No person or entity owns of record or is known by the Registrant to own
beneficially more than 5% of the outstanding Limited Partnership Units of
the Partnership as of December 31, 1998 and as of the date of this filing.

(b) No officers of the General Partner or its affiliates own any Limited
Partnership Units in the Partnership.

No officer of the General Partner or its affiliates possesses a right to
acquire a beneficial ownership of Limited Partnership Units of the
Partnership.

On October 1, 1998, Insignia Financial Group, Inc. merged into AIMCO, a real
estate investment trust, whose Class A Common Shares are listed on the New York
Stock Exchange. As a result of such merger, AIMCO and AIMCO Properties, L.P., a
Delaware limited partnership and the operating partnership of AIMCO ("AIMCO OP")
acquired indirect control of the General Partner. AIMCO and its affiliates
currently do not own any of the limited partnership interests in the
Partnership. AIMCO is presently considering whether it will engage in an
exchange offer for limited partnership interests in the Partnership. There is a
substantial likelihood that, within a short period of time, AIMCO OP will offer
to acquire limited partnership interests in the Partnership for cash or
preferred units or common units of limited partnerships interests in AIMCO OP.
While such an exchange offer is possible, no definite plans exist as to when or
whether to commence such an exchange offer, or as to the terms of any such
exchange offer, and it is possible that none will occur.

A registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This Form 10-KSB shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to the registration or
qualification under the securities laws of any such state.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

See Exhibit Index

Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.

(b) Reports on Form 8-K filed during the fourth quarter of 1998:

Current Report on Form 8-K dated October 1, 1998 and filed on October
16, 1998 disclosing change in control of Registrant from Insignia
Financial Group, Inc. to AIMCO.

SIGNATURES

In accordance with Section 13 or 15(d) 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,
its General Partner

By: /s/Patrick J. Foye
Patrick J. Foye
Executive Vice President

By: /s/Timothy R. Garrick
Timothy R. Garrick
Vice President - Accounting

Date: March 26, 1999

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

By: /s/Patrick J. Foye Date: March 26, 1999
Patrick J. Foye
Executive Vice President and Director

By: /s/Timothy R. Garrick Date: March 26, 1999
Timothy R. Garrick
Vice President - Accounting
and Director

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION

3 The Partnership Agreement is incorporated by reference to the
Form 10-K dated December 31, 1987 (file number 0-14470).

10A Assignment and Assumption Agreement dated May 23, 1994 between
the Federal Deposit Insurance Corporation, VMS Apartment
Portfolio Associates I, VMS Apartment Portfolio Associates,
Ltd., and Investors First-Staged Equity L.P. related to East
Bluff Apartments is incorporated by reference to the Form 10-
QSB dated June 30, 1994.

10B Contracts related to debt restructure:

a) Restated note dated July 1, 1993 between VMS Apartment Portfolio
Associates Ltd. and the Federal Deposit Insurance Corporation related to
Rivercrest Village is incorporated by reference to the Form 10-QSB dated
June 30, 1994.

b) Modification of Security Agreement between Investors First-Staged Equity,
L.P., VMS Apartment Portfolio Associates, Ltd., and the Federal Deposit
Insurance Corporation dated July 1, 1993 related to Rivercrest Village is
incorporated by reference to the Form 10-QSB dated June 30, 1994.

10C Contracts related to debt restructure:

a) Restated note dated July 1, 1993 between VMS Apartment Portfolio
Associates Ltd. and the Federal Deposit Insurance Corporation related to
Richardson Highlands is incorporated by reference to the Form 10-QSB
dated June 30, 1994.

b) Modification of Security Agreement between Investors First-Staged Equity,
L.P., VMS Apartment Portfolio Associates, Ltd., and the Federal Deposit
Insurance Corporation dated July 1, 1993 related to Richardson Highlands
is incorporated by reference to the Form 10-QSB dated June 30, 1994.

10D Contracts related to sale of buildings and land at Serramonte Plaza:

a) CONTRACT OF SALE executed August 28, 1996, made and entered into by and
between Serramonte Plaza, a California limited partnership, and Daly City
Partners, LLC, a California limited liability company.

b) FIRST AMENDMENT TO CONTRACT OF SALE entered into effective as of
September 27, 1996, by and between Serramonte Plaza, a California limited
partnership, and Daly City Partners, LLC, a California limited liability
company.

c) SECOND AMENDMENT TO CONTRACT OF SALE entered into effective as of October
7, 1996, by and between Serramonte Plaza, a California limited
partnership, and Daly City Partners, LLC, a California limited liability
company.

d) THIRD AMENDMENT TO CONTRACT OF SALE entered into effective as of October
14, 1996, by and between Serramonte Plaza, a California limited
partnership, and Daly City Partners, LLC, a California limited liability
company.

e) FOURTH AMENDMENT TO CONTRACT OF SALE entered into effective as of
November 1996, by and between Serramonte Plaza, a California limited
partnership, and Daly City Partners, LLC, a California limited liability
company.

f) FIFTH AMENDMENT TO CONTRACT OF SALE entered into effective as of January
1997, by and between Serramonte Plaza, a California limited partnership,
and Daly City Partners, LLC, a California limited liability company.

g) SIXTH AMENDMENT TO CONTRACT OF SALE entered into effective as of March
20, 1997, by and between Serramonte Plaza, a California limited
partnership, and Daly City Partners, LLC, a California limited liability
company.

h) ASSIGNMENT AND ASSUMPTION OF LEASES.

i) BLANKET CONVEYANCE, BILL OF SALE AND ASSIGNMENT.

10E Contracts related to debt refinancing of Rivercrest Apartments:

a) Promissory note dated December 31, 1997 between VMS Apartment Portfolio
Associates III and Lehman Brothers Holdings, Inc.

b) Deed of Trust, Security Agreement, Fixture Filing and Assignment of
Leases and Rents by VMS Apartment Portfolio Associates III to
Commonwealth Land Title Insurance Company for the benefit of Lehman
Brothers Holdings, Inc. dated December 31, 1997.

c) Absolute Assignment of Leases and Rents by VMS Apartment Portfolio
Associates III to Lehman Brothers Holdings, Inc. dated December 31, 1997.

10F Contracts related to debt refinancing of Richardson Highlands Apartments.

a) Promissory note dated December 31, 1997 between VMS Apartment Portfolio
Associates II and Lehman Brothers Holdings, Inc.

b) Deed of Trust, Security Agreement, Fixture Filing and Assignment of
Leases and Rents by VMS Apartment Portfolio Associates II to Commonwealth
Land Title Insurance Company for the benefit of Lehman Brothers Holdings,
Inc. dated December 31, 1997.

c) Absolute Assignment of Leases and Rents by VMS Apartment Portfolio
Associates II to Lehman Brothers Holdings, Inc. dated December 31, 1997.

27 Financial Data Schedule

<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Investors
First-Staged Equity L.P. 1998 Year-End 10-KSB and is qualified in its entirety
by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000768834
<NAME> INVESTORS FIRST-STAGED EQUITY L.P.
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,184
<SECURITIES> 0
<RECEIVABLES> 738
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 48,446
<DEPRECIATION> (25,949)
<TOTAL-ASSETS> 26,481
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 42,945
0
0
<COMMON> 0
<OTHER-SE> (17,839)
<TOTAL-LIABILITY-AND-EQUITY> 26,481
<SALES> 0
<TOTAL-REVENUES> 8,554
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,715
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,340
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109
<EPS-PRIMARY> 6.64<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>

</TABLE>