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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-16861
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
- ---------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 94-3028296
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(State or other jurisdiction of I.R.S. Employer Identification No.)
incorporation or organization)
1341 West Robinhood, B-9, Stockton, CA 95207
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (209) 478-0140
N/A
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Former name, former address and former fiscal year, if changed since
last report
Indicate by check CK whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days. Yes _CK_ No__
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TABLE OF CONTENTS
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Part I. Financial Information
Item 1: Balance Sheets - March 31, 1998 and
December 31, 1997 . . . . . . . . . . . . . . . . . 3
Statements of operations for the three months ended
March 31, 1998 and 1997 . . . . . . . . . . . . . . 4
Statement of changes in partners' equity (deficit)
for the three months ended March 31, 1998 . . . . . 5
Statements of cash flows for the three months
ended March 31, 1998 and 1997 . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . 7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . 12
Part II. Other Information . . . . . . . . . . . . . . . . . 13
</TABLE>
2
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PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
(A Limited Partnership)
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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<S> <C> <C>
ASSETS
Property, net $67,468,768 $68,176,821
Cash and cash equivalents 5,772,949 5,323,329
Accounts receivable, affiliate 163,476 163,476
Other assets 222,251 230,760
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$73,627,444 $73,894,386
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LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Mortgage loans payable $57,675,946 $57,927,235
Accounts payable 510,152 449,811
Accounts payable, affiliate 200,651 203,626
Accrued distributions 412,373 412,373
Accrued interest 404,061 409,443
Accrued property taxes 472,197 453,016
Unearned rent and tenant deposits 513,078 520,212
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60,188,458 60,375,716
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Partners' equity (deficit):
Limited partners' equity (64,660 units
authorized and outstanding) 7,587,098 7,665,188
Special limited partners' equity (7,749.5 units
authorized and outstanding) 6,862,188 6,862,188
General partners' deficit (1,010,300) (1,008,706)
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13,438,986 13,518,670
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$73,627,444 $73,894,386
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
3
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PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Revenues:
Rental $ 4,010,138 $ 3,819,725
Land/Lease rentals from affiliates 165,000 165,000
Interest 49,972 42,875
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4,225,110 4,027,600
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Expenses:
Property operating expenses 1,327,624 1,413,809
Property taxes 311,297 335,595
Property management fees to affiliates 120,422 114,549
General and administrative expense 74,602 67,955
Interest expense 1,190,017 1,198,696
Management fees to affiliates 160,406 152,790
Depreciation 708,053 708,053
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3,892,421 3,991,447
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Net income $ 332,689 $ 36,153
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Net income allocated to General Partners $ 6,654 $ 723
---------- ----------
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Net income allocated to Limited Partners $ 326,035 $ 35,430
---------- ----------
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Net income allocated to Special Limited
Partners $ -0- $ -0-
---------- ----------
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Net income per unit of limited
partnership interest $ 5.04 $ 0.55
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</TABLE>
See notes to financial statements.
4
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PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
For the three months ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Special
Limited Limited General
Total Partners Partners Partners
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Partners' equity
(deficit)-
December 31, 1997 $13,518,670 $ 7,665,188 $ 6,862,188 $(1,008,706)
Net income 332,689 326,035 -0- 6,654
Distributions (412,373) (404,125) -0- (8,248)
---------- ---------- ---------- ----------
Partners' equity
(deficit)-
March 31, 1998 $13,438,986 $ 7,587,098 $ 6,862,188 $(1,010,300)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements.
5
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PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS L.P., I
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 332,689 $ 36,153
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 708,053 708,053
Change in other assets 8,509 44,029
Change in accounts payable, affiliate (2,975) 1,823
Change in accrued liabilities 74,140 (23,234)
Change in unearned rent and tenant deposits (7,134) 18,819
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Total adjustments 780,593 749,490
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Net cash provided by operating activities 1,113,282 785,643
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Cash flows from financing activities:
Mortgage loan principal amortization (251,289) (236,827)
Distributions to partners (412,373) (412,373)
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Net cash used in financing activities (663,662) (649,200)
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Net increase in cash and cash equivalents 449,620 136,443
Cash and cash equivalents, beginning of period 5,323,329 4,997,867
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Cash and cash equivalents, end of period $ 5,772,949 $ 5,134,310
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</TABLE>
See notes to financial statements.
6
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PRUDENTIAL-BACHE/A. G. SPANOS GENESIS INCOME PARTNERS L.P., I
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE A - FINANCIAL STATEMENT PREPARATION
The March 31, 1998 financial statements have been prepared without audit.
In the opinion of management, the financial statements contain all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the Partnership's financial position, results of operations and cash
flows. The operating results for the three months ended March 31, 1998 may
not necessarily be indicative of the results expected for the full year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These financial statements must
be read in conjunction with the financial statements and notes thereto
included in the Partnership's annual report for the year ended December 31,
1997.
NOTE B - PROPERTY
Property is comprised of the following:
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<CAPTION>
March 31, 1998 December 31, 1997
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<S> <C> <C>
Apartment buildings $ 77,245,362 $ 77,245,362
Equipment 4,937,209 4,937,209
Land 17,147,732 17,147,732
Land held for lease 2,479,098 2,479,098
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101,809,401 101,809,401
Less: Accumulated depreciation (34,340,633) (33,632,580)
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$ 67,468,768 $ 68,176,821
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</TABLE>
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NOTE C - RELATED PARTY TRANSACTIONS
Set forth below are the fees and other amounts relating to transactions
between the Partnership and the General Partners and their affiliates for
the three months ended March 31, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
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<S> <C> <C>
Expensed to the General Partners:
Supervisory management fee $ 80,203 $ 76,395
Special distribution 68,453 64,645
Administrative expense reimbursements 11,750 11,750
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$160,406 $152,790
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Expensed to A.G. Spanos Management, Inc.:
Property management fees $120,422 $114,549
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------- -------
Accrued to the Partnership:
Ground rent on Land/Leases $165,000 $165,000
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</TABLE>
Accruals of $160,406 and $161,414 for the supervisory management fee,
special distribution and administrative expense reimbursements and $40,245
and $42,212 for property management fees were outstanding at March 31, 1998
and December 31, 1997, respectively. Ground rent of $163,476 was
receivable from affiliates of the Spanos General Partner at March 31, 1998
and December 31, 1997. General Partners' capital account deficit for
financial accounting purposes exceeds the amount the General Partners would
be obligated to restore if the Partnership were to dissolve.
Prudential Securities Incorporated ("PSI"), an affiliate of the Bache
General Partner, owned 1,920 Units at March 31, 1998.
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NOTE D - CONTINGENCIES
On or about October 18, 1993, a putative class action captioned Kinnes et
al. v. Prudential Securities Group Inc. et al. (93 Civ. 654) was filed in
the United States District Court for the District of Arizona, purportedly
on behalf of investors in the Partnership against the Partnership, the
Bache General Partner, PSI and a number of other defendants. On or about
November 16, 1993, a putative class action captioned Connelly et al. v.
Prudential-Bache Securities Inc. et al. (93 Civ. 713) was filed in the
United States District Court for the District of Arizona, purportedly on
behalf of investors in the Partnership against the Partnership, the Bache
General Partner, PSI and a number of other defendants. On or about
November 9, 1993, a putative class action entitled Bottner v. A.G. Spanos
Residential Partners-86 et al. (93 Civ. 7708) was filed in the United
States District Court for the Southern District of New York, purportedly on
behalf of investors in the Partnership against the General Partners, PSI,
Prudential Insurance Company of America and certain of their affiliates and
officers. On or about February 13, 1995, an individual action captioned
Estate of Jean Adams v. Prudential Securities, Inc. et al. (Case No. 1995
CV 00265) was filed in the Court of Common Pleas in Stark County, Ohio
against PSI, The Prudential, the General Partners, the Partnership and
affiliates of the Spanos General Partner. The action was removed to the
United States District Court for the Northern District of Ohio (Eastern
Division) on March 15, 1995. Plaintiff alleged misrepresentations, breach
of fiduciary duties and civil conspiracy by defendants in connection with
the sale of units of the Partnership. Plaintiff sought unspecified damages,
including punitive damages.
By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, the Kinnes and Bottner cases, by order dated June 8, 1994, the
Connelly case, and by order dated April 7, 1995, the Adams case, were
transferred to a single judge of the United States District Court for the
Southern District of New York and consolidated for pretrial proceedings
under the caption In re Prudential Securities Incorporated Limited
Partnerships Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs in
the transferred cases filed a complaint that consolidated the previously
filed complaints and named as defendants, among others, PSI, certain of its
present and former employees and the General Partners. The Partnership is
not named a defendant in the consolidated complaint, but the name of the
Partnership is listed as being among the limited partnerships at issue in
the case. The consolidated complaint alleges violations of the federal and
New Jersey Racketeer Influenced and Corrupt Organizations Act ("RICO")
statutes, fraud, negligent misrepresentation, breach of fiduciary duties,
breach of third- party beneficiary contracts and breach of implied
covenants in connection with the marketing and sales of limited partnership
interests. Plaintiffs request relief in the nature of rescission of the
purchase of securities and recovery of all consideration and expenses in
connection therewith, as well as compensation for lost use of money
invested less cash distributions; compensatory damages; consequential
damages; treble damages for defendants' RICO violations (both federal and
New Jersey); general damages for all injuries resulting from negligence,
9<PAGE>
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fraud, breaches of contract, and breaches of duty in an amount to be
determined at trial; disgorgement and restitution of all earnings, profits,
benefits, and compensation received by defendants as a result of their
unlawful acts; and costs and disbursements of the action. On November 28,
1994 the transferee court deemed each of the complaints in the constituent
actions (including Kinnes and Bottner) amended to conform to the
allegations of the consolidated complaint. On August 9, 1995 the Bache
General Partner, PSI and other Prudential defendants entered into a
Stipulation and Agreement of Partial Compromise and Settlement with legal
counsel representing plaintiffs in the consolidated actions. On November
20, 1995, the court gave final approval to the settlement, dismissed the
Kinnes and Bottner actions, certified a class of purchasers of specific
limited partnerships, including the Partnership, released all settled
claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing
or prosecuting any settled claim against the released parties. By orders
entered August 12, 1996 and October 25, 1996, respectively, the Adams and
Connelly cases were dismissed as to the Bache General Partner, PSI and the
other Prudential defendants. The full amount due under the settlement
agreement has been paid. The consolidated action as well as the Adams and
Connelly cases remain pending against nonsettling defendants, including the
Spanos General Partner and certain of its affiliates. The Partnership is
not named a defendant in the consolidated complaint and the action is not
expected to have a material effect on the Partnership's financial
statements; accordingly, no provision for any loss that may result upon
resolution of this matter has been made in the accompanying financial
statements.
On May 12, 1997, the Spanos General Partner and certain of its affiliates
entered into a Stipulation of Settlement with legal counsel representing
the plaintiff class in the consolidated actions. The settlement
contemplated, among other things, the sale of all of the Partnership
Properties at public auction and the subsequent liquidation and dissolution
of the Partnership. The settlement agreement was preliminarily approved by
the Court on August 28, 1997. Pursuant to the settlement, detailed
information about the proposed auction sale and other terms of the
settlement will be sent to the Limited Partners with proxy solicitation
materials seeking the Limited Partners' consent to the auction sale. The
Spanos General Partner expects to mail such information in May 1998. The
settlement agreement contains numerous conditions and must be finally
approved by the Court at a fairness hearing at which Limited Partners and
other interested parties will have an opportunity to be heard. There can
be no assurance that the conditions to implementation of the settlement
will be satisfied.
On or about April 15, 1994, a multiparty petition entitled Schreiber et al.
v. Prudential Securities, Inc., et al. (Cause No. 94-17696) was filed in
the 189th Judicial District Court of Harris County, Texas, purportedly on
behalf of investors in the Partnership against the Partnership, the General
Partners, PSI, The Prudential Insurance Company of America and a number of
other defendants. The Petition alleges common law fraud, fraud in the
10
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inducement and negligent misrepresentation in connection with the offering
of limited partnership interests and negligence, breach of fiduciary duty,
civil conspiracy, and violations of the federal Securities Act of 1933
(sections 11 and 12) and of the Texas Securities and Deceptive Trade
Practices statutes. The suit seeks, among other things, compensatory and
punitive damages, costs and attorney's fees. Most of the plaintiffs have
released their claims against the defendants in exchange for monetary
payments by PSI. It is expected that the remaining claims will be resolved
by PSI at no cost to the Partnership. Accordingly, no provision for any
loss that may result upon resolution of this matter has been made in the
accompanying financial statements.
NOTE E - SUBSEQUENT EVENT
The Partnership paid first quarter cash distributions of $404,125 to the
Unitholders and $8,248 to the General Partners in May 1998.
11
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Capital Resources and Liquidity
The Partnership had cash of $5,773,000 at March 31, 1998. There are no
proposed programs for renovation, improvement or development of the
Properties other than maintenance and repairs (including major repairs) in
the ordinary course which will be paid from operations, and the
Partnership's liquidity position is considered satisfactory.
The Partnership's operating activities provided cash of $1,113,000 in the
first quarter of 1998, of which $72,000 reflects timing differences related
to current assets and liabilities. Of the balance, $251,000 was applied to
scheduled principal amortization on the Partnership's mortgage debt,
$412,000 was paid in cash distributions, and $378,000 was retained.
On May 12, 1997, the Spanos General Partner and certain of its affiliates
entered into a Stipulation of Settlement with legal counsel representing
the plaintiff class in the consolidated actions. The settlement
contemplated, among other things, the sale of all of the Partnership
Properties at public auction and the subsequent liquidation and dissolution
of the Partnership. The settlement agreement was preliminarily approved by
the Court on August 28, 1997. Pursuant to the settlement, detailed
information about the proposed auction sale and other terms of the
settlement will be sent to the Limited Partners with proxy solicitation
materials seeking the Limited Partners' consent to the auction sale. The
Spanos General Partner expects to mail such information in May 1998. The
settlement agreement contains numerous conditions and must be finally
approved by the Court at a fairness hearing at which Limited Partners and
other interested parties will have an opportunity to be heard. There can
be no assurance that the conditions to implementation of the settlement
will be satisfied.
Results of Operations
Rental revenue was $4,010,000 for the first three months of 1998, an
increase of 5% compared to the same period last year, primarily due to
increased occupancy and effective rental rates at MacArthur Park, Cypress
Pointe and Mission Trails. The average occupancy of the seven Apartment
Projects was 94.8% for the first three months of 1998 compared to 94.5% for
the first three months of 1997.
Property operating expenses decreased $86,000 compared to the first three
months of 1997, principally because of a $61,000 decrease in major repairs.
Property taxes declined $24,000, principally due to a lower assessment at
Chelsea Park. Property management fees, which are 3% of property revenue,
increased with the increase in revenue.
12
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
This information is incorporated by reference to Note D to the financial
statements filed herewith in Item 1 of Part I of the Registrant's
Quarterly Report.
Item 2. Changes in Securities
(None)
Item 3. Defaults Upon Senior Securities
(None)
Item 4. Submission of Matters to a Vote of Security Holders
(None)
Item 5. Other Information
(None)
Item 6. Exhibits and Reports on Form 8-K
Exhibits
4(a) Certificate of Limited Partnership of Registrant as filed
with the Secretary of State of Delaware, incorporated by
reference to Exhibit 4(a) to Amendment No. 1 to
Registration Statement on Form S-11, File No. 33-9139,
filed with the Securities and Exchange Commission on
January 28, 1987.
4(b) Amendment to Certificate of Limited Partnership of
Registrant as filed with the Secretary of State of
Delaware, incorporated by reference to Exhibit 4(b) to
Amendment No. 2 to Registration Statement on Form S-11,
File No. 33-9139, filed with the Securities and Exchange
Commission on February 20, 1987.
4(c) Amended and Restated Agreement of Limited Partnership of
Registrant, incorporated by reference to Exhibit 4(c) to
Amendment No. 2 to Registration Statement on Form S-11,
File No. 33-9139, filed with the Securities and Exchange
Commission on February 20, 1987.
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4(d) Amendments No. 1 through 6 dated June 3, July 2, August 3
and 20, September 10 and October 2, 1987, respectively, to
the Amended and Restated Agreement of Limited Partnership
of Registrant, incorporated by reference to Exhibit 4(d)
to Post-Effective Amendment No. 1 to Registration
Statement on Form S-11, File No. 33-9139, filed with the
Securities and Exchange Commission on November 12, 1987.
4(e) Amendments No. 7 through 13 dated December 4 and 18, 1987
and February 1, March 8 and 25, April 27 and August 12,
1988, respectively, to the Amended and Restated Agreement
of Limited Partnership of Registrant, incorporated by
reference to Exhibit 4(e) of the Annual Report on Form
10-K dated December 31, 1988, File No. 33-9139.
27 Financial Data Schedule (filed herewith)
Reports on Form 8-K
(None)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRUDENTIAL-BACHE/A.G. SPANOS GENESIS INCOME PARTNERS, L.P., I (Registrant)
By: A.G. Spanos Residential Partners-86, General Partner
By: AGS Financial Corporation, a general partner
By: /s/Arthur J. Cole Date: May 15, 1998
---------------------------------
Arthur J. Cole
President and Chief Accounting Officer
By: A.G. Spanos Realty, Inc., a general partner
By: /s/Arthur J. Cole Date: May 15, 1998
---------------------------------
Arthur J. Cole
Vice President and Chief Accounting Officer
15
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<ARTICLE> 5
<LEGEND> The Schedule contains summary financial
information extracted from the financial
statements for Prudential-Bache/A.G. Spanos
Genesis Income Partners L.P., I, and is
qualified entirely by reference to such
financial statements.
</LEGEND>
<RESTATED>
<CIK> 000803399
<NAME> Prudential-Bache/AG Spanos Genesis Income Partners LP I
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-1-1998
<PERIOD-END> Mar-31-1998
<PERIOD-TYPE> 3-Mos
<CASH> 5772949
<SECURITIES> 0
<RECEIVABLES> 385727
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6158676
<PP&E> 101809401
<DEPRECIATION> 34340633
<TOTAL-ASSETS> 73627444
<CURRENT-LIABILITIES> 2512512
<BONDS> 57675946
0
0
<COMMON> 0
<OTHER-SE> 13438986
<TOTAL-LIABILITY-AND-EQUITY> 73627444
<SALES> 4175138
<TOTAL-REVENUES> 4225110
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2702404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1190017
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 332689
<EPS-PRIMARY> 5.04
<EPS-DILUTED> 0
</TABLE>
