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, 1997.
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 33-13375
IDS LIFE ACCOUNT RE
OF
IDS LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0823832
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IDS TOWER 10, MINNEAPOLIS, MINNESOTA 55440-0010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 671-3309
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 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
The Registrant is a separate account of IDS Life Insurance Company (IDS Life)
established pursuant to the insurance laws of the State of Minnesota for the
purposes of funding real estate variable annuity contracts. Unless otherwise
specifically noted, the information set forth herein only relates to the
operations of the Registrant (the "Account") and not to the operations
of IDS Life.
<TABLE>
<CAPTION>
PART 1 - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
BALANCE SHEETS
March 31, December 31,
1997 1996
(Unaudited)
------------------ ----------------
Assets:
<S> <C> <C>
Cash $ 166,194 $ 102,737
Investments in securities, at value (Note 1)
(identified cost $10,593,692) 10,593,692 10,254,310
Investments in unconsolidated joint ventures,
at fair value (cost of $36,022,706 and
$36,299,366 at March 31, 1997
and December 31, 1996, respectively) 23,107,946 23,384,605
Other assets -- 4,277
------------------ ----------------
Total assets 33,867,832 33,745,929
================== ================
Liabilities:
Payable to IDS Life for:
Operating expenses 59,191 42,340
Contract terminations 14,474 4,793
Accrued mortality and expense risk fee 65,496 32,991
Accrued asset management fee 81,871 41,239
Liabilities related to wholly-owned
real estate property:
Accounts payable and other liabilities -- 79,090
------------------ ----------------
Total liabilities 221,032 200,453
================== ================
Contract Owners' Equity:
Net assets applicable to Variable Annuity
contracts in accumulation period 33,646,800 33,545,476
================== ================
Accumulation units outstanding 33,678,430 34,144,955
================== ================
Net asset value per accumulation unit 1.00 0.98
================== ================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(unaudited)
For the three months ended
-------------------- ----------------------
March 31, March 31,
1997 1996
-------------------- ----------------------
Income:
<S> <C> <C>
Interest income $ 138,137 $ 67,380
Account's equity in earnings of
unconsolidated joint ventures 598,261 506,771
Rental income -- 641,538
Unrealized depreciation of participation
in mortgage loan -- (127,844)
Other income 54,266 --
-------------------- ----------------------
Total income 790,664 1,087,845
-------------------- ----------------------
Expenses:
Asset management fee 113,414 146,235
Mortality and expense risk fee 90,732 116,988
Amortization of deferred organizational
and borrowing costs -- 6,463
Other operating expenses 23,629 32,651
Operating expenses related to
wholly-owned real estate property:
Interest -- 184,203
Utilities -- 47,264
Repairs and maintenance -- 40,745
Property and other taxes -- 55,846
Salaries -- 48,378
Management fees -- 28,073
Other -- 37,852
-------------------- ----------------------
Total expenses 227,775 744,698
-------------------- ----------------------
Net income $562,889 $343,147
==================== ======================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(unaudited)
For the three months ended
--------------------- ---------------------
March 31, March 31,
1997 1996
--------------------- ---------------------
Cash flows from operating activities:
<S> <C> <C>
Net Income $ 562,889 $ 343,147
Adjustments to reconcile net income to net cash
used in operating activities:
Account's equity in earnings of unconsolidated
joint ventures (598,261) (506,771)
Change in accrued interest on participation
in mortgage loan -- (1,119)
Amortization of organizational and borrowing costs -- 6,463
Change in unrealized depreciation of
participation in mortgage loan -- 127,844
Change in other assets 4,277 2,015
Change in payable to IDS Life for operating expenses 16,851 27,778
Change in accrued mortality and expense risk fee 32,505 (3,128)
Change in accrued asset management fee 40,632 (3,910)
Change in payables and other liabilities related
to wholly-owned real estate property (79,090) (52,681)
--------------------- ---------------------
Total adjustments to net income (583,086) (403,509)
--------------------- ---------------------
Net cash used in operating activities (20,197) (60,362)
--------------------- ---------------------
Cash flows from investing activities:
Net sales (purchases) of short-term securities (339,382) --
Capital improvements to wholly-owned real estate property -- (19,467)
Distributions received from joint ventures 874,920 329,913
--------------------- ---------------------
Net cash provided by investing activities 535,538 310,446
--------------------- ---------------------
Cash flows from financing activities:
Proceeds from sales of contracts 8,426 1,401,464
Payments for contract terminations (460,310) (1,517,724)
Decrease in mortgage payable -- (21,726)
--------------------- ---------------------
Net cash used in financing activities (451,884) (137,986)
--------------------- ---------------------
Net increase in cash 63,457 112,098
Balance of cash at beginning of year 102,737 586,729
--------------------- ---------------------
Balance of cash at end of period 166,194 698,827
Supplemental cash flow disclosure:
Cash paid for mortgage interest & revolving loan -- 184,203
===================== =====================
See accompanying notes to financial statements.
</TABLE>
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
March 31, 1997
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. GENERAL
In the opinion of the management of IDS Life, the accompanying
unaudited financial statements for IDS Life Account RE (the "Account")
contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly its balance sheets as
of March 31, 1997 and December 31, 1996; statements of operations for
the three months ended March 31, 1997 and 1996; and the statements of
cash flows for the three months ended March 31, 1997 and 1996. These
statements are condensed and therefore do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statement disclosure. The statements
should be read in conjunction with the Account's financial statements
as of and for the year ended December 31, 1996 and the notes thereto
contained in the Account's prospectus dated April 30, 1997. The
results of operations for the three months ended March 31, 1997 are
not necessarily indicative of the results expected for the full year.
2. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
Unconsolidated Joint Ventures - Summary Information
Summary information for the Account of its investments in
unconsolidated joint ventures for the three months ended
March 31, 1997 and 1996 is as follows:
For the three months ended
March 31
1997 1996
Account's share of net
investment income from
unconsolidated joint ventures $ 598,261 $ 506,771
Total net investment income of
unconsolidated joint ventures $ 7,276,612 $ 6,653,028
Total income of unconsolidated
joint ventures $11,293,000 $11,391,000
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Financial Condition and Results of Operations
For the Three Months Ended March 31, 1997 Compared to the
Three Months Ended March 31, 1996 -
Net assets increased from $33,545,476 at December 31, 1996 to $33,646,800 at
March 31, 1997. During this same time period, the accumulation unit value
increased from $.98 to $1.00. The Account experienced net terminations
amounting to $451,884 for the three months ended March 31,1997 compared to
net terminations of $116,260 for the three months ended March 31, 1996. The net
terminations for the three months ended March 31, 1996 included approximately
$1,100,000 for accumulation units purchased by IDS Life, which have been used
to pay for contract surrenders, as discussed more fully below. In the three
months endeded March 31, 1997, IDS Life had not purchased any accumulation
units.
Recorded net income for the three months ended March 31, 1997 was $562,889
compared to $343,147 for the three months ended March 31, 1996.
Interest income represents income earned in 1997 on the Account's investment in
short-term securities. Interest generated from short-term investments of
$138,137 for the three months ended March 31, 1997 is due primarily to an
increase in short term investments. The increase in short term investments is
due primarily to cash received as a result of (i) the payoff of the
Riverpoint mortgage loan receivable in December 1996 and (ii) the sale of the
West Springfield apartments in September 1996.
Interest income for the three months ended March 31, 1996 primarily represented
income earned on the Account's investment in the participation in a mortgage
loan (Riverpoint Shopping Center). For the three months ended March 31, 1996,
the Account recognized net unrealized depreciation of participation in mortgage
loan of $127,844 as a result of lower effective rents achieved upon
releasing the center.
For the three months ended March 31, 1997, the Account's recorded equity in
earnings of its unconsolidated joint ventures (N/S Associates, Monmouth
Associates and 1225 Connecticut) was $598,261, compared to $506,771 for the
three months ended March 31, 1996. The increase is due primarily to
(i) an increase in interest income earned by Monmouth Associates. The increase
in earnings was partially offset by lower rental income achieved at Southridge
and Northridge Malls due to lower effective rents.
In addition, the Account recorded rental income of $0 for the three months
ended March 31, 1997 from its wholly-owned real estate investment, West
Springfield Terrace Apartments, compared to $641,538 for the three months ended
March 31, 1996, due to the sale of its wholly-owned real estate investment in
September 1996. Expenses related to the wholly-owned real estate investment
totaled $0 for the three months ended March 31, 1997 compared to $442,361 for
the corresponding period in 1996.
Northridge Mall continues to be adversely affected by the perception that it is
an unsafe place to shop. This perception has resulted in declining sales and
occupancy over a three-year period. Compounding the problem of declining sales
are the high operating costs for tenants at the mall. Occupancy has also been
affected by tenant bankruptcies over the past years. As of March 31, 1997,
occupancy of the mall shops was approximately 73%, including temporary tenants
under short term leases.
To counter the negative perception of Northridge Mall, N/S Associates has
implemented certain capital improvements and operational programs to improve
the shopping center's safety and appearance, as well as instituted certain
marketing and public relation efforts to enhance its image. Certain recent
positive sales trends appear to indicate a modest improvement; however,
elimination of the negative perception is expected to take some time. In
addition, N/S Associates is seeking to increase occupancy at the shopping
center by aggressively marketing space for new and renewal tenants through
leasing incentives, as well as continuing to cooperate with existing tenants
who need short-term rent reductions in order to retain occupancy of their
space. Part of the leasing strategy includes targeting certain
well-recognized retailers as a group that would become tenants at the shopping
center. It is expected that the draw of this group of tenants would help the
shopping center gain leasing momentum and aid in future leasing efforts.
During the first quarter of 1997 occupancy increased 19%. In addition,
comparable sales for the year have also increased approximately 3%. As of
March 31, 1997, occupancy of Southridge Mall which is owned by N/S Associates
was approximately 95%, including temporary tenants under short-term leases.
The Account paid asset management and mortality expense risk fees of $204,146
and $263,223 for the three months ended March 31, 1997 and 1996, respectively.
Liquidity and Capital Resources
For the Three Months Ended March 31, 1997 Compared to the Three Months Ended
March 31, 1996 -
At March 31, 1997, the Account had cash of approximately $166,000 as compared
to approximately $103,000 at December 31, 1996. The Account had experienced net
contract terminations in 14 consecutive quarters with net sales (including
accumulation units purchased by IDS Life) in three of the last four quarters.
The liquidity requirements of the Account have generally been met by funds
provided from the Account's short-term investments, cash distributions from
unconsolidated joint ventures, operating cash flow, interest income, proceeds
from the sale of West Springfield Terrace apartments, the loan repayment from
Riverpoint Center, proceeds from sales of contracts, and borrowings under the
line of credit from IDS Life and purchases of accumulation units by IDS Life
discussed below. The primary uses of funds currently are expected to be for
asset management and mortality and expense risk fees and payments for contract
terminations and redemption units held by IDS Life.
Effective May 1, 1995, new contract sales of the Account were discontinued.
Additional purchase payments continue to be accepted for existing contracts in
amounts specified in the Account's prospectus, whether by means of the
previously established bank authorizations or otherwise. Existing contracts
also continue to be serviced and surrender requests will be honored.
IDS Life has purchased accumulation units in order to maintain the Account and
its liquidity. IDS Life made these payments so that no contract holder would be
disadvantaged because sales of new contracts have been discontinued. The
initial payments for accumulation units that IDS Life made into the Account
were used to pay off the amount that the Account had borrowed under its
revolving line of credit. As of March 31, 1997, IDS Life had purchased
approximately 26,700,000 accumulation units.
By purchasing accumulation units, IDS Life has an ownership interest in the
Account. Since IDS Life does not purchase a contract, it is not subject to
surrender charges. However, IDS Life, as holder of accumulation units,
participates in the increase or decrease in the value of the Account's
investments just as other owners of accumulation units do. IDS Life may
realize a gain or loss on its accumulation units when redeemed.
IDS Life currently expects to hold the accumulation units it purchases until
the surrender of all outstanding contracts or until the Account's liquidity
improves (through, for example, one or more sales of real estate related
investments) thereby permitting the Account to satisfy its anticipated contract
obligations. Because IDS Life may purchase a significant amount of
accumulation units, IDS Life may be subject to certain conflicts of interest it
would not otherwise have if it had not purchased such accumulation units,
including, among other things, a conflict in approving periodic valuations of
real estate investments made by the Investment Adviser.
Since the Account has experienced substantial net contract terminations over
the past several years, the Account does not intend to acquire additional real
estate related investments. During 1996, the Account liquidated two real estate
related investments. Further, the Account intends to liquidate the real estate
related investments that it currently holds when it becomes advantageous or
necessary to do so. To the extent funds of the Account are not used to pay
obligations of the Account, including those under existing contracts, or the
redemption of accumulation units purchased by IDS Life, such funds will be
invested in short-term debt instruments and possibly intermediate-term bonds
with maturities of up to five years.
Through March 31, 1997, Monmouth Associates had funded approximately
$23,750,000 of the renovation loan (which excludes $1.3 million of construction
loan interest) for Monmouth Mall. Fundings of principal on the loan have been
made from cash reserves held by Monmouth Associates, cash flow from interest
and ground rent payments received from the borrower/lessee and capital
contributions made to Monmouth Associates by its partners pro rata based upon
their respective interests. The aggregate amount of capital contributions to
finance the loan is approximately $9,830,000. The Account's share of these
capital contributions is approximately $685,000. The aggregate amount of the
renovation loan, including accrued and deferred interest of approximately
$1,300,000, is currently expected to be approximately $26,989,000. Remaining
fundings for the renovation loan are expected to be made from cash flow and
funds currently held by Monmouth Associates. Monmouth Associates may also be
required to make certain additional loans to pay a portion of the costs of
certain tenant improvements or other ordinary capital expenditures. In
addition, Monmouth Associates may provide additional financing to the
borrower/lessee in order to pay costs to be incurred in connection with the
replacement of a department store tenant at Monmouth Mall. However, it is not
currently expected that this would occur during 1997.
The renovation is nearing completion with tenant improvement work for one of
the larger tenants and retainage work remaining. The occupancy of mall shops
and outparcel space at the shopping center as of March 31, 1997 was
approximately 84%. However, the mall shops and outparcel space are
approximately 86% leased. Leasing and occupancy at the shopping center have
been adversely affected by tenant bankruptcies occurring over the past several
years.
N/S Associates currently expects that it will incur approximately $2,090,000
in 1997 for tenant improvement, asbestos removal and other capital items at
Northridge and Southridge Malls. Actual amounts expended in 1997 may vary
depending on a number of factors, including actual leasing activity, results
of property operations, liquidity considerations and market conditions over the
course of the year. N/S Associates undertakes asbestos removal from time to
time at portions of the Northridge and Southridge Malls as tenant spaces are
vacated and prior to occupancy by new tenants. The cost of tenant
improvements, asbestos removal and other capital items generally will be
provided out of cash flows from the properties. N/S Associates expended
approximately $2,236,000 for tenant improvements, asbestos removal and other
capital projects in 1996.
At March 31, 1997, real property investments (through two unconsolidated joint
ventures, N/S Associates and 1225 Connecticut), land sale-leaseback investments
(through an unconsolidated joint venture, Monmouth Associates) and short-term
investments represented 42.5 percent, 25.7 percent and 31.3 percent
of total assets, respectively. At March 31, 1996, real property investments,
mortgage loan and land sale-leaseback investments and short-term investments
represented 71 percent, 28 percent and 2 percent of total assets, respectively.
PART II. OTHER INFORMATION
---------------------------
Item 1. LEGAL PROCEEDINGS
There are no material current or pending legal proceedings which the
Registrant is a party to, or to which the Registrant's assets are
subject.
Item 2. CHANGES IN SECURITIES
Not applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
4.1 Form of Deferred Variable Annuity Contract is hereby
incorporated herein by reference to Exhibit
4 to the Account's Form S-1 (as amended), File
Number 33-13375, filed July 17, 1987.
4.2 Copy of mortgage loan documents relating to West
Springfield Terrace Apartments is hereby incorporated
herein by reference to Exhibit 4.2 to the Account's Form S-1
(as amended), File Number 33-13375, filed April 12, 1990.
4.3 Copy of the line of credit agreement, dated
March 30, 1994 between IDS Life and the Account (including a
copy of the executed promissory note, dated March 30, 1994) is
hereby incorporated by reference to Exhibit 4.3 to the
Account's Form 10-K Report for the year ended December 31,
1993, File Number 33-13375, filed April 5, 1994.
10.1 Copy of Investment Advisory Agreement between IDS Life and JMB
Annuity Advisors is hereby incorporated herein by reference to
Exhibit 10.1 to the Account's Form S-1 (as amended), File Number
33-13375, filed April 29, 1988.
10.2 Copy of N/S Associates Joint Venture Agreement together with
certain documents relating to the purchase of an interest in
Northridge Mall is hereby incorporated herein by reference to
Exhibit 10.2 to the Account's Form S-1 (as amended), File
Number 33-13375, filed April 29, 1988.
10.2.1 Copy of Second Amended and Restated Articles of Partnership of
N/S Associates hereby incorporated herein by reference to
Exhibit 10.2.1 to the Account's Form S-1 (as amended), File
Number 33-13375, filed April 20, 1989.
10.3 Copy of N/S Associates Joint Venture Agreement together with
certain documents relating to the purchase of an interest in
Southridge Mall is hereby incorporated herein by reference to
Exhibit 10.3 to Form S-1 (as amended), File Number 33-13375,
filed April 29, 1988.
10.4 Copy of Commitment Letter relating to the funding
of a participating mortgage loan secured by Riverpoint
Center is hereby incorporated herein by reference to Exhibit
10.4 to Form S-1 (as amended), File Number 33-13375, filed
October 11, 1988.
10.5 Copy of Amended and Restated Articles of Partnership of
Monmouth Associates are hereby incorporated herein by reference
to Exhibit 10.5 to the Account's Form S-1 (as amended), File
Number 33-13375, filed April 12, 1990.
10.6 Copy of Agreement together with certain other documents
relating to the purchase of West Springfield Terrace Apartments
is hereby incorporated herein by reference to Exhibit 10.6
to Form S-1 (as amended), File Number 33-13375, filed
October 16, 1989.
10.7 Copy of Agreement together with certain documents relating to
the purchase of an interest in 1225 Connecticut Avenue is
hereby incorporated herein by reference to the Account's Form
S-1 (as amended), File Number 33-13375, filed June 29, 1990.
10.8 Copy of Purchase Agreement for the sale of the West
Springfield Terrace Apartment is hereby
incorporated herein by reference to the Accounts
Report on Form 10-Q (File No. 33-13375) for
September 30, 1996 dated November 14, 1996.
27.1 Financial Data Schedule of the Account for the period ended
March 31, 1997 is filed herewith.
(B) Report on Form 8-K
No reports on Form 8-K were required to be filed by the Registrant
for the three months ended March 31, 1997
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.
IDS LIFE ACCOUNT RE
of
IDS LIFE INSURANCE COMPANY
(Registrant)
Date: May 13, 1997 /S/ Melinda Urion
Melinda S. Urion
Executive Vice President
and Controller
IDS Life Account RE
File No. 33-13375
EXHIBIT INDEX
Exhibit 27.1: Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE REGISTRANT'S FORM 10-Q FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS INCLUDED IN
SUCH REPORT.
</LEGEND>
<MULTIPLIER>1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 166194
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<RECEIVABLES> 10593692
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10759886
<PP&E> 0
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<TOTAL-ASSETS> 33867832
<CURRENT-LIABILITIES> 221031
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0
0
<OTHER-SE> 33646801
<TOTAL-LIABILITY-AND-EQUITY> 33867832
<SALES> 54266
<TOTAL-REVENUES> 790664
<CGS> 0
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<OTHER-EXPENSES> 90732
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</TABLE>
