FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 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 33-11013
ASSOCIATED PLANNERS REALTY INCOME FUND
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4120092
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5933 W. CENTURY BLVD., SUITE 900
LOS ANGELES, CALIFORNIA 90045
(Address of principal executive offices)
(Zip Code)
(310) 670-0800
(Registrant's telephone number, including area code)
___________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark 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 for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 1. FINANCIAL STATEMENTS
In the opinion of the Co-General Partner (West Coast Realty Advisors,
Inc.) of Associated Planners Realty Income Fund (the "Partnership"), all
adjustments necessary for a fair presentation of the Partnership's results for
the three and nine months ended September 30, 1998 and 1997, have been made in
the following financial statements which are normal and recurring in nature.
However, such financial statements are unaudited and are subject to any year-
end adjustments that may be necessary.
<CAPTION>
BALANCE SHEETS
SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
SEPTEMBER 30, 1998 December 31, 1997
<S> <C> <C>
ASSETS
Rental real estate, less accumulated
Depreciation (Note 2) $3,631,335 $4,058,189
Cash and cash equivalents 217,779 230,503
Other assets 9,940 14,486
TOTAL ASSETS $3,859,054 $4,303,178
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES
Accounts payable:
Trade $ 4,554 $ 4,609
Related party (Note 3) 9,486 8,421
Security deposits 29,400 29,400
TOTAL LIABILITIES 43,440 42,430
PARTNERS' EQUITY (NOTE 6)
Limited partners:
$1,000 stated value per unit _ authorized
12,000 units; issued and outstanding 5,096 3,805,343 4,212,880
General partners 10,271 47,868
TOTAL PARTNERS' EQUITY 3,815,614 4,260,748
TOTAL LIABILITIES AND PARTNERS' EQUITY $3,859,054 $4,303,178
</TABLE>
[FN]
See accompanying notes to financial statements.
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<TABLE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<CAPTION>
LIMITED PARTNERS GENERAL
TOTAL UNITS AMOUNT PARTNER
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997 $4,260,748 5,096 $4,212,880 $47,868
Net (loss) (156,360) -- (147,641) (8,719)
Distributions to limited partners (259,896) -- (259,896) --
Distributions to general partner (28,878) -- -- (28,878)
BALANCE AT SEPTEMBER 30, 1998 $3,815,614 5,096 $3,805,343 $10,271
</TABLE>
<TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<CAPTION>
LIMITED PARTNERS GENERAL
TOTAL UNITS AMOUNT PARTNER
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 $4,242,067 5,096 $4,205,288 $36,779
Net income 140,671 -- 119,688 20,983
Distributions to limited partners (157,976) -- (157,976) --
Distributions to general partner (17,552) -- -- (17,552)
BALANCE AT SEPTEMBER 30, 1997 $4,207,210 5,096 $4,167,000 $40,210
</TABLE>
[FN]
See accompanying notes to financial statements.
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ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF INCOME
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<CAPTION>
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
30, 1998 30, 1997 30, 1998 30, 1997
<S> <C> <C> <C> <C>
REVENUES:
Rental $129,510 $106,885 $336,228 $314,956
Interest 3,018 1,353 8,408 2,417
132,528 108,238 344,636 317,373
COSTS AND EXPENSES:
Operating 11,182 12,058 28,391 41,750
Property taxes 1,506 5,045 2,994 15,136
Property management fees 6,485 5,660 16,345 15,646
General and administrative 3,889 8,839 26,412 27,330
Depreciation and amortization 25,618 25,613 76,854 76,840
Impairment in value 350,000 --- 350,000 ---
398,680 57,215 500,996 176,702
NET INCOME (LOSS) $(266,152) $51,023 $(156,360) $140,671
NET INCOME PER
LIMITED PARTNERSHIP UNIT $(47.46) $8.56 $(28.97) $23.49
</TABLE>
[FN]
See accompanying notes to financial statements.
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<TABLE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
<CAPTION>
NINE NINE
MONTHS MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
INCREASE (DECREASE) IN CASH AND CASH 1998 1997
EQUIVALENTS
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(156,360) $140,671
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 76,854 76,840
Impairment loss (Note 2) 350,000 ---
Increase (decrease) from changes in:
Other assets 4,546 14,818
Accounts payable 1,010 2,622
Security deposits and prepaid rents --- 1,775
NET CASH PROVIDED BY OPERATING ACTIVITIES 276,050 236,726
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to limited partners (259,896) (157,976)
Distributions to general partners (28,878) (17,552)
NET CASH (USED IN) FINANCING ACTIVITIES (288,774) (175,528)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (12,724) 61,198
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 230,503 72,207
CASH AND CASH EQUIVALENTS, END OF PERIOD $217,779 $133,405
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
BUSINESS
Associated Planners Realty Income Fund (the "Partnership), a California
limited partnership, was formed on December 23, 1986 under the Revised Limited
Partnership Act of the State of California for the purpose of developing or
acquiring, managing and operating unleveraged income producing real estate.
The Partnership met its minimum funding of $1,200,000 on February 26, 1988 and
terminated its offering on September 5, 1989. The Partnership was formed to
acquire income-producing real property throughout the United States with
emphasis on properties located in California and southwestern states. The
Partnership purchases such properties on an all cash basis and originally
intended on owning and operating such properties for investment over an
anticipated holding period of approximately five to ten years.
BASIS OF PRESENTATION
The financial statements do not give effect to any assets that the partners
may have outside of their interest in the partnership, nor to any personal
obligations, including income taxes, of the partners.
RENTAL REAL ESTATE AND ESTATE AND DEPRECIATION
Assets are stated at cost. Depreciation is computed using the straight-line
method over estimated useful lives ranging from 31.5 to 40 years for financial
reporting and income tax reporting purposes.
In the event that facts and circumstances indicate that the cost of an asset
may be impaired, an evaluation of recoverability would be performed. If an
evaluation is required, the estimated future undiscounted cash flows
associated with the asset would be compared to the carrying amount to
determine if a write-down to market value is required.
LEASE COMMISSIONS
Lease commissions which are paid to real estate brokers for locating tenants
are capitalized and amortized over the life of the lease.
RENTAL REVENUE
Rental revenue is recognized when the amount is due and payable under the
terms of a lease agreement.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Partnership considers cash
in the bank and all highly-liquid investments purchased with original
maturities of three months or less to be cash and cash equivalents.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
EARNINGS (LOSS) PER UNIT
On March 3, 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Unit" (SFAS 128). This pronouncement provides a
different method of calculating earnings per unit than is currently used in
accordance with APB 15, "Earnings Per Unit". SFAS 128 provides for the
calculation of Basic and Diluted earnings per unit. Basic earnings per unit
includes no dilution and is computed by dividing income available to common
unitholders by the weighted average number of common units outstanding for the
period. Diluted earnings per unit reflects the potential dilution of
securities that could unit in the earnings of the entity, similar to fully
diluted earnings per unit. Except where the provisions of the Securities and
Exchange Commission's Staff Accounting Bulletin No. 98 are applicable, common
unit equivalents have been excluded in all years presented in the Statements
of Operations when the effect of their inclusion would be anti-dillutive. SFAS
128 is effective for fiscal years and interim periods after December 15,
1997. The Partnership has adopted this pronouncement during the fiscal year
ended December 31, 1997. The adoption of SFAS 128 did not effect earnings
per unit for fiscal year ended December 31, 1997 and prior years.
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 130 (SFAS No. 130) "Reporting
Comprehensive Income," issued by the Financial Accounting Standards Board is
effective for financial statements with fiscal years beginning after December
15, 1997. Earlier application is permitted. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. The Partnership has
not determined the effect on its financial position or results of operations,
is any, from the adoption of this statement.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS (CONT.)
Statement of Financial Accounting Standards No. 131 (SFAS No. 131),
"Disclosure about Segments of an Enterprise and Related Information," issued
by the Financial Accounting Standards Board is effective for financial
statements with fiscal years beginning after December 15, 1997. The new
standard requires that public business enterprises report certain information
about operating segments in complete sets of financial statements of the
enterprises and in condensed financial statements of interim periods issued to
shareholders. It also requires that public business enterprises report certain
information about their products and services, the geographic areas in which
they operate and their major customers. The Partnership has not determined
the effect on its financial position or results of operations, if any, from the
adoption of this statement.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1997
NOTE 1 - NATURE OF PARTNERSHIP BUSINESS
Associated Planners Realty Income Fund, a California limited partnership (the
"Fund"), was formed on December 23, 1986 under the Revised Limited Partnership
Act of the State of California for the purpose of acquiring, managing, and
operating income-producing real estate.
The Partnership began accepting subscriptions in October 1987 and closed the
offering on September 5, 1989. The Partnership began operations in March
1988.
Under the terms of the partnership agreement, the General Partners (West Coast
Realty Advisors, Inc. and W. Thomas Maudlin Jr.) are entitled to cash
distributions from 10% to 15%. The General Partners are also entitled to net
income (loss) allocations varying from 1% to 15% and 1% of depreciation and
amortization in accordance with the partnership agreement. Further, the
General Partners receive acquisition fees for locating and negotiating the
purchase of rental real estate, management fees for operating the Partnership
and a commission on the sale of the partnership properties.
NOTE 2 - RENTAL REAL ESTATE
The Partnership owns the following two rental real estate properties:
Acquisition
Location (Property Name) Date Purchased Cost
Chino, California (Yorba Center) $ 1,882,283
Less: Yorba Center Property Impairment October 25, 1988 (350,000)
Revised Yorba Center Property Value 1,532,283
San Marcos, California (90%) January 9, 1990 2,816,904
San Marcos, California (10%) November 1, 1996 188,001
The major categories of rental real estate:
September 30, 1998 December 31, 1997
Land $1,332,861 $1,332,861
Building and improvements 3,554,327 3,554,327
4,887,188 4,887,188
Less: Impairment loss 350,000 ---
Less: Accumulated depreciation 905,853 828,999
Net rental real estate 3,631,335 4,058,189
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1997 (CONTINUED)
NOTE 2 - RENTAL REAL ESTATE (CONTINUED)
A significant portion of the Partnership's rental revenue was earned from
tenants whose individual rents represented more than 10% of total rental
revenue. Specifically:
One tenant accounted for 58% of total rental revenue in 1998
One tenant accounted for 58% of total rental revenue in 1997
One tenant accounted for 48% of total rental revenue in 1996
During the quarter ending September 30, 1998, the Partnership determined that
the total expected future cash flows from disposition of the Yorba Center
property located in Chino, California are less than the carrying value of the
property. Therefore, the Yorba Center property was deemed to be impaired.
As a result, an impairment loss of $350,000 was recorded, measured as the
amount by which the carrying amount of the asset exceeded its fair value less
cost to sell. Fair value was determined based on a negotiated sales contract
with an unrelated buyer of the property (See Note 5).
On November 1, 1996, Associated Planners Realty Income Fund ("Income Fund")
purchased the remaining real estate asset from Associated Planners Realty
Growth Fund ("Growth Fund"). This asset consisted of the 10% interest that
Income Fund had not already owned in an office building located in San Marcos,
California.
Income Fund paid $185,968 on November 2, 1996 for the 10% interest in the San
Marcos property. This amount consisted of $188,001 for the property itself,
less $2,032 for the share of a cash security deposit from the current tenant
that Growth Fund retained. There is no debt in connection with the property.
NOTE 3 - RELATED PARTY TRANSACTIONS
(a) For Partnership management services rendered to the Partnership, the
General Partner is entitled to receive 10% of all distributions of Cash from
Operations. These amounts totaled $16,987 for the quarter ended September 30,
1998 and $5,945 for the quarter ended September 30, 1997, and $28,878 for the
nine months ended September 30, 1998 and $17,552 for the nine months ended
September 30, 1997.
(b) For administrative services provided to the Partnership, the General
Partner, in accordance with the partnership agreement, is entitled to
reimbursement for the cost of certain personnel and relevant expenses. These
amounts totaled $9,000 for the nine months ended September 30, 1998 and
September 30, 1997 and $3,000 for the quarters ending September 30, 1998 and
1997.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1997 (CONTINUED)
NOTE 3 - RELATED PARTY TRANSACTIONS (CONT.)
(c) Property management fees incurred in accordance with the Partnership
Agreement to West Coast Realty Management, Inc., an affiliate of the corporate
General Partner, totaled $6,485 for the quarter ended September 30, 1998, and
$5,660 for the quarter ended September 30, 1997, and $16,345 for the nine
months ended September 30, 1998 and $15,646 for the nine months ended
September 30, 1997.
NOTE 4 - NET INCOME AND CASH DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT
The Net Income per Limited Partnership Unit was computed in accordance with
the partnership agreement on the basis of the weighted average number of
outstanding Limited Partnership Units of 5,096 for 1998 and 1997.
The Limited Partner cash distributions, computed in accordance with the
Partnership Agreement, were as follows:
Record Date Outstanding Amount Total
Units Per Unit Distribution
June 30, 1998 5,096 $30.00 $152,880
December 31, 1997 5,096 21.00 107,016
June 30, 1997 5,096 10.50 53,508
March 31, 1997 5,096 10.50 53,508
December 31, 1996 5,096 10.00 50,960
Total $417,872
The Partnership began paying distributions on a semi-annual basis with the
first record date and payment date being December 31, 1997 and
February 6, 1998, respectively. This change will permit the Partnership to
operate more efficiently with lower Partnership operating expenses. These
semi-annual distributions will include cash distributions for the previous six
months of operations.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 (UNAUDITED)
AND YEAR ENDED DECEMBER 31, 1997 (CONTINUED)
NOTE 5 - SUBSEQUENT EVENTS
The Partnership has negotiated contracts for the sale of the Partnerships
properties. The sales prices for the properties are as follows:
Yorba Shopping Center in Chino, CA $1,250,000
San Marcos Industrial Building in San Marcos, CA 2,700,000
Sales prices listed above are before sales commissions, 5-6% of the sales
prices, and before title insurance and escrow closing costs. Buyers have due
diligence periods in which to determine their satisfaction with the property
and the availability of financing. Consequently, until buyers waive
contingencies, these sales are contingent.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in the Management Discussion and Analysis constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). Such forward-looking
statements involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance or achievements of the
Partnership to be materially different from any future results, performance or
achievements, expressed of implied by such forward-looking statements.
INTRODUCTION
The Partnership began offering for sale limited partnership units on October
20, 1987. On February 26, 1988, the Partnership reached its minimum offer
level of $1,200,000. The Partnership sold units throughout the remainder of
the year, and had raised $3,891,000 in gross proceeds or $3,483,788 net of
syndication costs and sales commissions as of December 31, 1988. During
1989, the Partnership continued to raise funds through the sale of Units and
had raised $5,106,000 in gross proceeds or $4,594,101 net of syndication costs
and sales commissions as of September 5, 1989, the day the Partnership
terminated its offering of limited partnership units.
The Partnership was organized for the purpose of investing in, holding, and
managing improved, leveraged income-producing property, such as residential
property, office buildings, commercial buildings, industrial properties, and
shopping centers. The Partnership originally intended on owning and operating
such properties for investment over an anticipated holding period of
approximately five to ten years.
The Partnership's principal investment objectives are to invest in rental
real estate properties which will:
(1) Preserve and protect the Partnership's invested capital;
(2) Provide for cash distributions from operations;
(3) Provide gains through potential appreciation; and
(4) Generate Federal income tax deductions so that during the early
years of property operations, a portion of cash distributions may be
treated as a return of capital for tax purposes and, therefore, may
not represent taxable income to the limited partners.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The ownership and operation of any income-producing real estate is subject to
those risks inherent in all real estate investments, including national and
local economic conditions, the supply and demand for similar types of
properties, competitive marketing conditions, zoning changes, possible
casualty losses, increases in real estate taxes, assessments, and operating
expenses, as well as others.
The Partnership is operated by West Coast Realty Advisors, Inc. ("WCRA") (the
corporate General Partner) and Mr. W. Thomas Maudlin Jr. (an individual
General Partner), collectively the "General Partner," subject to the terms of
the Amended and Restated Agreement of Limited Partnership. The Partnership
has no employees, and all administrative services are provided by WCRA, the
corporate General Partner.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. NINE MONTHS
ENDED SEPTEMBER 30, 1997
Operations for the nine months ended September 30, 1998 reflect an entire
period of operations for the two properties owned by the Partnership.
Rental revenue increased $21,272 (6.8%) during the nine months ended September
30, 1998 compared to the nine months ended September 30, 1997 due primarily to
higher rent collected from the San Marcos property. Interest income increased
$5,991 (248%) for the nine months ended September 30, 1998 as compared to the
nine months ended September 30, 1997. This increase is primarily due to a
large amount of funds held from approximately January 1, 1998 to August 10,
1998 as a result of the Partnership electing to pay distributions semiannually
instead of quarterly.
The Partnership's overall costs and expenses increased for the nine months
ended September 30, 1998 compared to the nine months ended September 30,
1997. Total expenses increased from $176,702 as of September 30, 1997 to
$500,996 as of September 30, 1998, a $342,294 (183.5%) increase. This
increase was the result of the Partnership recording a $350,000 impairment
loss on the Yorba Center property during the quarter ending September 30,
1998, plus increases in property management fees and depreciation expense,
offset by decreases in operating expenses, property taxes and general and
administrative expenses.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. NINE MONTHS
ENDED SEPTEMBER 30, 1997 (CONT.)
During the quarter ending September 30, 1998, the Partnership determined that
the total expected future cash flows from disposition of the Yorba Center
property located in Chino, California are less than the carrying value of the
property. Therefore, the Yorba Center property was deemed to be impaired. As
a result, an impairment loss of $350,000 was recorded, measured as the amount
by which the carrying amount of the asset exceeded its fair value less cost to
sell. Fair value was determined based on a negotiated sales contract with a
buyer of the property.
Property management fees increased $699 (4.5%) as a result of higher rental
revenue collected from the San Marcos property during the nine months ended
September 30, 1998 compared to the nine months ended September 30, 1997.
Depreciation expense increased $14 as a result of timing differences from the
nine months ended September 30, 1997. Operating expenses decreased 13,359
(32%) as a result lower leasing commissions, common area maintenance,
utilities and property insurance during the nine months ended September 30,
1998 compared to the nine months ended September 30, 1997. Property taxes
decreased $12,142 (85%) primarily as a result of the elimination of a
one-time prior year property tax assessment imposed by the County of San
Bernardino for the Yorba Center property. General and administrative
expenses decreased $918 (3.4%) primarily due to lower legal and accounting
fees paid during the nine months ended September 30, 1998 compared to the
nine months ended September 30, 1997.
Net loss for the nine months ended September 30, 1998 was $156,360 or $297,031
(211.1%) less than the $140,671 in net income for the nine months ended
September 30, 1997. This decrease in net income can be attributed to the
Partnership recording a $350,000 impairment loss on the Yorba Center property
during the quarter ending September 30, 1998, offset by lower overall costs
and expenses and increases in total rental revenue and interest income.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1998 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1997
Operations for the quarter ended September 30, 1998 reflect an entire period
of operations for the two properties owned by the Partnership.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1998 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1997 (CONT.)
Rental revenue increased $22,625 (21.2%) during the quarter ended September
30, 1998 compared to the quarter ended September 30, 1997 due primarily to
higher rent collected from the San Marcos property. Interest income
increased $1,665 (123%) for the quarter September 30, 1998 as compared to the
quarter ended September 30, 1997. This increase is primarily due to a large
amount of funds held from approximately January 1, 1998 to August 10, 1998 as
a result of the Partnership electing to pay distributions semiannually
instead of quarterly.
The Partnership's overall costs and expenses increased for the quarter ended
September 30, 1998 compared to the quarter ended September 30, 1997. Total
expenses increased from $57,215 as of September 30, 1997 to $398,680 as of
September 30, 1998, a $341,465 (596.8%) increase. This increase was the
result of the Partnership recording a $350,000 impairment loss on the Yorba
Center property during the quarter ending September 30, 1998 plus increases
in property management fees and depreciation expense, offset by decreases in
general and administrative expenses, property taxes and operating expenses.
During the quarter ending September 30, 1998, the Partnership determined that
the total expected future cash flows from disposition of the Yorba Center
property located in Chino, California are less than the carrying value of the
property. Therefore, the Yorba Center property was deemed to be impaired. As
a result, an impairment loss of $350,000 was recorded, measured as the amount
by which the carrying amount of the asset exceeded its fair value less cost
to sell. Fair value was determined based on a negotiated sales contract with
a buyer of the property.
Property management fees increased $825 (14.6%) as a result of higher rental
revenue collected during the quarter September 30, 1998 compared to the
quarter ended September 30, 1997. Depreciation expense increased $5 as a
result of timing differences from the quarter ended September 30, 1997.
General and administrative expenses decreased $4,950 (56%) due primarily to
lower legal and accounting and general business insurance. Property taxes
decreased $3,539 (70%) primarily as a result of the elimination of a one-time
prior year property tax assessment imposed by the County of San Bernardino
for the Yorba Center property. Operating expenses decreased $876 (7.3%) as a
result lower leasing commissions, common area maintenance, and property
insurance during the quarter September 30, 1998 compared to the quarter
September 30, 1997.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1998 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1997 (CONT.)
Net loss for the quarter ended September 30, 1998 was $266,152 or $317,175
(621.6%) less than the net income of $51,023 for the quarter ended September
30, 1997. This decrease in net income can be attributed to the Partnership
recording a $350,000 impairment loss on the Yorba Center property during the
quarter ending September 30, 1998, offset by lower overall costs and expenses
and increases in total rental revenue and interest income.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended September 30, 1998, the Partnership made
distributions to the general and limited partners totaling $118,907 and
$169,867 (for the record dates of December 31, 1997 and June 30, 1998,
respectively), of which approximately $74,375 constituted a return of
capital. Distributions of $118,907 and $169,867 compared favorably to the
$155,789 and $279,494 in cash generated from property operations (net income
plus depreciation expense) for the six months ended December 31, 1997 and
June 30, 1998 on which such distributions were based. On February 6, 1998
and on August 10, 1998, the Partnership made distributions to the limited
partners totaling $107,016 and $152,880, respectively. Additionally, the
partnership distributed $11,891 and $16,987 to the general partner during the
nine months ended September 30, 1998 for the record dates of December 31,
1997 and June 30, 1998, respectively. Distributions are determined by
management based on cash flow and the liquidity position of the Partnership
and anticipated occupancy of the properties. It is the intention of
management to make semi-annual distributions of cash, subject to maintenance
of reasonable reserves.
Management uses cash as its primary measure of a partnership's liquidity. The
amount of cash that represents adequate liquidity for a real estate limited
partnership depends on several factors. Among them are:
1. Relative risk of the partnership;
2. Condition of the partnership's properties;
3. Stage in the partnership's life cycle (e.g., money-raising,
acquisition, operating or disposition phase); and
4. Distribution to partners
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONT.)
The Partnership has adequate liquidity based upon the above four factors. The
first factor refers to the approximately 1% property reserve requirement of
capital funds raised that the Partnership currently has; this relatively low
reserve level is appropriate since all Partnership properties are acquired
without the use of debt financing. The 1% property reserve requirement is the
minimum guideline that is disclosed in the Partnership's prospectus; the
Partnership had more than enough funds to meet this requirement as of
September 30, 1998. The second factor relates to the condition of the
Partnership's properties. Since the properties are in good condition, no
unusual maintenance and repair expenditures are anticipated. The third
factor is relevant to the Partnership because after the January 1990 purchase
of the San Marcos property, the Partnership had effectively completed its
acquisition phase, and entered the operating phase. The subsequent purchase
of the remaining 10% interest in San Marcos property was achieved utilizing a
combination of reserves and undistributed operating profits that were held
back for the purpose of facilitating the acquisition. The fourth factor
relates to partner distributions. The Partnership makes semi-annual
distributions from the results of operations. Such distributions are subject
to payments of Partnership expenses and reasonable reserves for expenses,
maintenance, and replacements.
During the nine months ended September 30, 1998, the Partnership paid the
General Partner a partnership management fee of $28,878. The partnership
management fee distribution to the general partner was calculated and paid in
accordance with the Partnership Agreement.
The Tax Reform Acts of 1986 and 1987 and the Revenue Reconciliation Acts of
1990 and 1993 did not have a material impact on the Partnership's operations.
The effects of the economy, inflation and changing prices have not had a
material impact on the Partnership's revenues and income from operations.
During the years of the Partnership's existence, inflationary pressures in
the U.S. economy have been minimal, and this has been consistent with the
experience of the Partnership in operating rental real estate in California.
The Partnership has several clauses in the leases with its properties' tenants
that would help alleviate much of the negative impact of inflation.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
CASH FLOWS - NINE MONTHS ENDED SEPTEMBER 30, 1998 VS. NINE MONTHS ENDED
SEPTEMBER 30, 1997
Cash and cash equivalents decreased $12,724 for the nine months ended
September 30, 1998 compared to a $61,198 increase for the nine months ended
September 30, 1997. Cash provided from operating activities amounted to
$276,050 for the nine months ended September 30, 1998, with the largest
contributor being $270,494 in cash basis net income. In contrast, during the
nine months ended September 30, 1997, cash provided from operating activities
amounted to $236,726 with the largest contributor being $217,511 in cash basis
net income. There were no investing activities during the nine months ended
September 30, 1998 and September 30, 1997. Cash used for financing activities
amounted to $288,774 during the nine months ended September 30, 1998 due to
distributions to the limited and general partners. In contrast, cash used
for financing activities for the nine months ended September 30, 1997
amounted to $175,528 due to distributions to the limited and general partners.
PENDING PROPERTY DISPOSITIONS
The Partnership has negotiated contracts for the sale of the Partnerships
properties. The sales prices for the properties are as follows:
Yorba Shopping Center in Chino, CA $1,250,000
San Marcos Industrial Building in San Marcos, CA 2,700,000
Sales prices listed above are before sales commissions, 5-6% of the sales
prices, and before title insurance and escrow closing costs. Buyers have due
diligence periods in which to determine their satisfaction with the property
and the availability of financing. Consequently, until buyers waive
contingencies, these sales are contingent.
During the quarter ending September 30, 1998, the Partnership determined that
the total expected future cash flows from disposition of the Yorba Center
property located in Chino, California are less than the carrying value of the
property. Therefore, the Yorba Center property was deemed to be impaired.
As a result, an impairment loss of $350,000 was recorded, measured as the
amount by which the carrying amount of the asset exceeded its fair value less
cost to sell. Fair value was determined based on a negotiated sales contract
with a buyer of the property.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 130 (SFAS No. 130) "Reporting
Comprehensive Income," issued by the Financial Accounting Standards Board is
effective for financial statements with fiscal years beginning after December
15, 1997. Earlier application is permitted. SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements. The Partnership has
not determined the effect on its financial position or results of operations,
is any, from the adoption of this statement.
Statement of Financial Accounting Standards No. 131 (SFAS No. 131),
"Disclosure about Segments of an Enterprise and Related Information," issued
by the Financial Accounting Standards Board is effective for financial
statements with fiscal years beginning after December 15, 1997. The new
standard requires that public business enterprises report certain information
about operating segments in complete sets of financial statements of the
enterprises and in condensed financial statements of interim periods issued to
shareholders. It also requires that public business enterprises report
certain information about their products and services, the geographic areas in
which they operate and their major customers. The Partnership has not
determined the effect on its financial position or results of operations, if
any, from the adoption of this statement.
IMPACT OF YEAR 2000
Many existing computer systems and applications, and other control devices,
use only two digits to identify a year in the date field, without considering
the impact of the upcoming change in the century. As a result, such systems
and applications could fail or create erroneous results unless corrected so
that they can process data related to the year 2000. The Partnership relies on
its systems, applications and devices in operating and monitoring all major
aspects of its business, including financial systems (such as general ledger,
accounts receivable, accounts payable and shareholder servicing), and embedded
computer chips, networks and telecommunications equipment and end products.
The Partnership also relies, directly and indirectly, on external systems of
business enterprises such as its advisor, lessees, suppliers, creditors,
financial organizations, and of governmental entities for accurate exchange
of data. The Partnership's current estimate is that the costs associated with
the year 2000 issue will not have a material adverse effect on the results of
operations or financial position of the Partnership. However, despite the
Partnership's efforts to address the year 2000 impact on its internal systems,
the Partnership may not have fully identified such impact or whether it can
resolve it without disruption of its business and without incurring
significant expense. In addition, even if the internal systems of the
Partnership are not materially affected by the year 2000 issue, the
Partnership could be affected through disruption in the operations of the
enterprises with which the Partnership interacts.
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
PART II
O T H E R I N F O R M A T I O N
ITEM 1. LEGAL PROCEEDINGS
None
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. EXHIBIT AND REPORTS ON FORM 8-K
(a) Information required under this section has been included in
the financial statements.
(b) Reports on Form 8-K
None
<PAGE>
ASSOCIATED PLANNERS REALTY INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
S I G N A T U R E S
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.
ASSOCIATED PLANNERS REALTY INCOME FUND
A California Limited Partnership
(Registrant)
November 10, 1998 By: WEST COAST REALTY ADVISORS, INC.
A California Corporation,
A General Partner
W. Thomas Maudlin, Jr.
President
November 10, 1998
John R. Lindsey
Vice President/Treasurer
<PAGE>
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<CIK> 0000808420
<NAME> ASSOCIATED PLANNERS REALTY INCOME FUND L.P.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 217,779
<SECURITIES> 3,652
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 227,720
<PP&E> 4,537,188
<DEPRECIATION> (905,853)
<TOTAL-ASSETS> 3,859,054
<CURRENT-LIABILITIES> 43,440
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,815,614
<TOTAL-LIABILITY-AND-EQUITY> 3,859,054
<SALES> 336,228
<TOTAL-REVENUES> 344,636
<CGS> 150,996
<TOTAL-COSTS> 150,996
<OTHER-EXPENSES> 350,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (156,360)
<INCOME-TAX> 0
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (156,360)
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<EPS-DILUTED> (28.97)
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