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 June 30, 1995
-------------
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 1-9516
------
AMERICAN REAL ESTATE PARTNERS, L.P.
-----------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3398766
-------- ----------
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer
Identification No.)
90 SOUTH BEDFORD ROAD, MT. KISCO, NY 10549
- ------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (914)242-7700
------------
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_____
-----
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
INDEX
-------
PART I. FINANCIAL INFORMATION PAGE NO.
- ------------------------------ --------
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994........................1-2
Consolidated Statements of Earnings -
Three Months Ended June 30, 1995 and 1994..................3
Consolidated Statements of Earnings -
Six Months Ended June 30, 1995 and 1994....................4
Consolidated Statement of Partners' Equity -
Six Months Ended June 30, 1995.............................5
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994....................6-7
Notes to Consolidated
Financial Statements.......................................8-13
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.................................13-18
PART II. OTHER INFORMATION...............................18-19
- ---------------------------
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
PART I. FINANCIAL INFORMATION
-----------------------------
The financial information contained herein is unaudited; however,
in the opinion of management, all adjustments necessary for a fair
presentation of such financial information have been included. All
such
adjustments are of a normal recurring nature.
<TABLE>
CONSOLIDATED BALANCE SHEETS
---------------------------
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
----------- ------------
(unaudited)
<C> <C>
<S>
ASSETS
Real estate leased to others:
Accounted for under the financing
method $287,159,406 $314,260,786
Accounted for under the operating
method, net of
accumulated depreciation 123,736,090 123,438,444
Cash and cash equivalents 152,549,464 18,615,572
Hotel operating properties,
net of accumulated depreciation 13,426,673 13,654,442
Mortgages receivable 7,801,161 8,301,090
Construction in progress 10,847,598 6,681,333
Receivables and other assets 4,958,305 5,373,553
Debt placement costs,
net of accumulated amortization 1,897,602 2,130,003
Property held for sale 344,050 412,717
------------ ------------
TOTAL $602,720,349 $492,867,940
============ ============
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
CONSOLIDATED BALANCE SHEETS - CONTINUED
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
----------- ------------
(unaudited)
<C> <C>
<S>
LIABILITIES
Mortgages payable $160,210,995 $174,095,697
Senior indebtedness 33,923,329 45,231,106
Accounts payable, accrued expenses
and other liabilities 6,959,952 6,496,410
Deferred income 3,526,296 3,637,398
Construction loans payable 9,654,697 2,393,954
Distributions payable 1,714,739 1,776,482
------------- ------------
Total liabilities 215,990,008 233,631,047
------------- ------------
Commitments and Contingencies
(Notes 1 and 3)
PARTNERS' EQUITY
Limited partners:
Preferred units, $10 liquidation
preference, 5% cumulative pay-in-
kind redeemable; 4,200,000
authorized, 1,975,640 issued and
outstanding 20,003,355 -
Depositary units; 26,850,000
authorized; 25,666,640 and
13,812,800 outstanding
as of June 30, 1995 and
December 31, 1994 369,992,354 265,039,380
General partner 7,918,497 5,381,378
Treasury units at cost:
1,037,200 depositary units as
of June 30, 1995 and
December 31, 1994 (11,183,865) (11,183,865)
Total partners' equity (Note 8) 386,730,341 259,236,893
TOTAL $602,720,349 $492,867,940
============ ============
</TABLE>
See notes to consolidated financial statements
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
-----------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED JUNE 30,
----------------------------
1995 1994
----------- ------------
<C> <C>
<S>
Revenues:
Interest income:
Financing leases $7,663,377 $ 7,971,236
Other 2,112,900 407,554
Rental income 4,840,488 4,807,483
Hotel operating income 2,268,040 1,969,583
Other income 348,977 -
---------- ------------
17,233,782 15,155,856
========== ============
Expenses:
Interest expense 5,088,209 5,744,006
Depreciation and amortization 1,308,913 1,152,138
General and administrative
expenses 659,630 654,616
Property expenses 980,013 904,063
Hotel operating expenses 1,860,847 1,671,351
---------- -----------
9,897,612 10,126,174
---------- -----------
Earnings before property
transactions 7,336,170 5,029,682
Provision for loss on real estate - (237,000)
(Loss) gain on sales and
disposition of real estate (84,791) 2,235,836
---------- ----------
NET EARNINGS $ 7,251,379 $ 7,028,518
=========== ===========
Net earnings attributable to:
Limited partners $ 7,107,077 $ 6,888,650
General partner 144,302 139,868
----------- -----------
$ 7,251,379 $ 7,028,518
=========== ===========
Net earnings per limited
partnership unit (Note 9) $ .25 $ .50
=========== ===========
Weighted average limited partnership
units and equivalent partnership
units outstanding 28,191,069 13,812,800
=========== ===========
</TABLE>
See notes to consolidated financial statements
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF EARNINGS
-----------------------------------
(UNAUDITED)
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1995 1994
----------- ------------
<C> <C>
<S>
Revenues:
Interest income:
Financing leases $15,399,250 $16,231,440
Other 2,711,809 812,899
Rental income 9,521,069 9,232,751
Hotel operating income 5,451,592 4,821,702
Other income 348,977 -
33,432,697 31,098,792
Expenses:
Interest expense 10,344,562 11,829,880
Depreciation and amortization 2,560,881 2,313,039
General and administrative
expenses 1,314,808 1,271,781
Property expenses 1,930,988 1,862,125
Hotel operating expenses 3,790,954 3,561,701
---------- ----------
19,942,193 20,838,526
---------- ----------
Earnings before property
transactions 13,490,504 10,260,266
Provision for loss on real estate - (312,000)
Gain on sales and
disposition of real estate 4,236,502 3,600,157
---------- ----------
NET EARNINGS $17,727,006 $13,548,423
=========== ===========
Net earnings attributable to:
Limited partners $17,374,239 $13,278,809
General partner 352,767 269,614
----------- -----------
$17,727,006 $13,548,423
=========== ===========
Net earnings per limited
partnership unit (Note 9) $ .73 $ .96
Weighted average limited
partnership units and equivalent
partnership units outstanding
and subscribed 26,782,521 13,812,800
=========== ==========
</TABLE>
See notes to consolidated financial statements
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
<TABLE>
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
Six Months Ended June 30, 1995
(unaudited)
<CAPTION>
GENERAL LIMITED PARTNERS' EQUITY
------------------------
PARTNER'S DEPOSITARY PREFERRED
EQUITY UNITS UNITS
--------- ---------- ---------
<C> <C> <C>
<S>
Balance -
December 31, 1994 $5,381,378 $265,039,380 $ -
Net earnings 352,767 17,374,239 -
Rights offering - 88,903,800 19,756,400
Expenses of
Rights Offering (21,890) (1,078,110) -
Capital contribution 2,206,242 - -
Pay-in-kind
distribution - (246,955) 246,955
---------- ---------- ----------
Balance -
June 30, 1995 $7,918,497 $369,992,354 $20,003,355
(CONTINUED)
<CAPTION>
DEPOSITARY TOTAL
UNITS HELD PARTNERS'
IN TREASURY EQUITY
----------- ---------
<C> <C>
<S>
Balance -
December 31, 1994 $(11,183,865) $386,730,341
Net earnings - 17,727,006
Rights offering - 108,660,200
Expenses of
Rights Offering - (1,100,000)
Capital
contribution - 2,206,242
Pay-in-kind
distribution - -
----------- -----------
$(11,183,865) $259,236,893
</TABLE>
See notes to consolidated financial statements
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
[CAPTION]
SIX MONTHS ENDED JUNE 30,
----------------------------
1995 1994
----------- ------------
[C] [C]
[S]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 17,727,006 $13,548,423
Adjustments to reconcile earnings
to net cash provided by operating
activities:
Depreciation and amortization 2,560,881 2,313,039
Amortization of deferred income (13,109) (13,109)
Gain on sales and
disposition of real estate (4,236,502) (3,600,157)
Provision for loss on real estate - 312,000
Changes in:
Decrease in deferred income (1,820) -
(Increase) decrease in
receivables and other assets (208,661) 45,375
Increase (decrease) in
accounts payable and accrued
expenses 431,127 (215,693)
-------- -----------
Net cash provided by
operating activities 16,258,922 12,389,878
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from the sale and
disposition of real estate 17,372,390 9,072,666
Principal payments received on
leases accounted for under the
financing method 3,628,412 3,283,092
Principal receipts on mortgages
receivable 147,264 134,646
Property acquisitions (3,043,889) -
Capitalized expenditures for
real estate (446,877) (320,986)
Construction in progress (8,567,596) (3,658,556)
Balloon payment of mortgage
receivable - 1,392,650
----------- ----------
Net cash provided by
investing activities 9,089,704 9,903,512
CASH FLOWS FROM FINANCING ACTIVITIES:
Partners' equity:
Proceeds from Rights Offering 110,866,442 -
Expenses of the Rights Offering (463,885) -
Distributions to partners (61,743) (1,794,741)
Mortgages payable:
Increase in mortgages payable 9,800,000 82,931
Periodic principal payments (4,581,232) (4,577,348)
Balloon payments (2,935,835) (5,294,884)
Increase in construction loans
payable 7,260,743 -
Debt placement costs 8,553 (244,302)
Senior debt principal payment (11,307,777) (10,000,000)
----------- ------------
Net cash provided by (used in)
financing activities 108,585,266 (21,828,344)
----------- ------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS 133,933,892 465,046
CASH AND CASH EQUIVALENTS,
beginning of period 18,615,572 14,932,560
CASH AND CASH EQUIVALENTS, end of
period $152,549,464 $15,397,606
============ ===========
Continued.....
<PAGE>
<TABLE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) - Continued
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1995 1994
----------- ------------
<C> <C>
<S>
SUPPLEMENTAL INFORMATION:
Cash payments for interest $ 10,437,943 $11,909,648
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING ACTIVITIES:
Property acquired in satisfaction
of mortgages:
Addition to property accounted
for under the operating method $ 256,492 $ 6,660,065
Addition to property held for sale - 300,530
Decrease in mortgages receivable (365,774) (9,083,588)
Decrease in deferred income 109,282 2,122,993
------------ ------------
$ - $ -
=========== ===========
Reclassification of real estate:
From property accounted for
under the financing method $ - $(2,436,929)
To property held for sale - 2,678,177
From construction in progress (4,195,158) -
To operating lease 4,195,158 -
From operating lease - (241,248)
------------ ------------
$ - $ -
=========== ===========
Reclassification - Other:
From receivables and
other assets $ (544,761) $ -
To expenses of Rights Offering 544,761 -
------------ ----------
$ - $ -
============ ==========
</TABLE>
See notes to consolidated financial statements
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. GENERAL
- ----------
The accompanying consolidated financial statements, footnotes and
discussions should be read in conjunction with the consolidated
financial statements, related footnotes and discussions contained
in the Company's annual report on Form 10-K for the year ended
December 31, 1994.
The results of operations for the six months ended June 30, 1995
are not necessarily indicative of the results to be expected for
the full year.
2. CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
- ----------------------------------------------------------------
a. From the commencement of the Exchange through June 30, 1995, the
Company (i) sold or disposed of an aggregate of 131 properties of
the Predecessor Partnerships for an aggregate amount of
approximately $66,175,000 net of associated indebtedness which
encumbered such properties at the consummation of the Exchange and
(ii) refinanced 25 Predecessor Partnerships' properties with an
aggregate appraised value, net of the amount of the refinanced
debt, of approximately $44,431,000 for a sum total of approximately
$110,606,000. Aggregate appraised values attributable to such
properties for purposes of the Exchange were approximately
$101,652,000. Sixteen acquisitions have been made since the
commencement of the Exchange, including two joint ventures entered
into in 1994 to develop two apartment complexes, for an aggregate
investment of approximately $56,000,000. Reinvestment incentive
fees of approximately $354,000 have previously been paid to the
General Partner, and approximately $110,000 are payable to the
General Partner for the 1994 acquisitions (two joint venture
investments) upon completion of the projects (see note 5). One
property has been acquired in 1995. A reinvestment incentive fee
of approximately $15,000 may be payable to the General Partner with
respect to this property. The General Partner will be entitled to
receive this fee plus similar fees with respect to other properties
acquired during the remainder of 1995 provided that the
subordination requirements that are presently being met, are met as
of December 31, 1995 (see note 5).
b. The Company and certain affiliates entered into an agreement
with the third-party landlord of its leased executive office space.
The agreement provides for the Company and these affiliates to
relocate their offices to an adjacent building also owned by the
landlord.
Subject to certain conditions, it is anticipated that the Company
will enter into a lease, expiring in 2001, for approximately 8,000
square feet of office space, at an annual rental of $153,000. The
Company anticipates subletting a portion of such space to certain
affiliates subject to approval by the Audit Committee.
The current lease, which will be terminated, also expires in 2001,
and provides for approximately 6,900 square feet at an annual
rental of $155,000.
In addition, if certain scheduling requirements are met by the
Company and these affiliates, the landlord will make a relocation
payment of $350,000, which will be allocated between the Company
and these affiliates, subject to approval by the Audit Committee.
3. COMMITMENTS AND CONTINGENCIES
- -----------------------------------
a. On July 31, 1992, Chipwich, Inc. ("Chipwich") parent of Peltz
Food Corporation, a tenant in a property owned by the Company,
filed a voluntary petition for reorganization pursuant to the
provisions of Chapter 11 of the Federal Bankruptcy Code. Chipwich
then filed a motion for rejection of the lease and pursuant to an
order of the Bankruptcy Court, the
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
lease was rejected on September 29, 1992. There is a guarantor of
the lease and the Company has reached an agreement in principle to
settle its claim against the guarantor. The guarantor has agreed,
subject to entering into a written agreement, to pay the Company
$2,200,000 in full satisfaction of its leasehold obligation. Upon
completion of the agreement and receipt of the settlement funds, a
net gain of approximately $1,000,000 will be recognized. At June
30, 1995, the property has a carrying value of approximately
$920,000 and is encumbered by a nonrecourse mortgage payable of
approximately $302,000.
b. On January 26, 1993, Be-Mac Transport Company, Inc. ("Be-
Mac"), a tenant in a property owned by the Company, filed a
voluntary petition for reorganization pursuant to the provisions of
Chapter 11 of the Federal Bankruptcy Code. Be-Mac then filed a
motion for rejection of the lease and pursuant to an order of the
Bankruptcy Court, the lease was rejected on February 24, 1993.
There was a guarantor of the lease and the Company settled its
unsecured proof of claim for $377,000. As a result, $377,000 of
"Other income" was recognized in the three and six month periods
ended June 30, 1995. The Company re-let the property effective
March 1, 1994 at an annual rental of $120,000. At June 30, 1995,
the property has a carrying value of approximately $938,000 and is
unencumbered by any mortgage.
c. On June 30, 1995, the Company held a mortgage note receivable
in the principal amount of approximately $258,000 which is in
default. The mortgage encumbers one property together with a
collateral assignment of the ground lease and rent. The property
is tenanted by Gino's. The mortgage had been taken back by a
Predecessor Partnership in connection with the sale of this
property. The tenant remained current in its lease obligations.
As of June 30, 1995, the Company has commenced foreclosure action
on this property located in Pennsylvania. No gain or loss is
anticipated upon foreclosure because the estimated fair value of
the property exceeds its carrying value.
During the three months ended June 30, 1995, the Company completed
foreclosure actions on three properties (one in Pennsylvania and
two in New Jersey), tenanted by Gino's and Foodarama. As a result,
real estate with a carrying value of approximately $256,000 was
recorded. No gain or loss was incurred upon foreclosure as the
estimated fair value of the properties exceeds their carrying
value.
d. Lockheed Missile & Space Company, Inc. ("Lockheed"), a tenant
of the Company's leasehold property in Palo Alto, California, has
entered into a consent decree with the California Department of
Toxic Substances Control ("CDTS") to undertake certain
environmental remediation at this property. Lockheed has estimated
that the environmental remediation costs may be up to approximately
$14,000,000. In a non-binding determination by the CDTS, Lockheed
was found responsible for approximately 75% of such costs and the
balance was allocated to other parties. The Company was allocated
no responsibility for any such costs.
Lockheed has served a notice that it may exercise its statutory
right to have its liability reassessed in a binding arbitration
proceeding. In connection with this notice, Lockheed has stated
that it will attempt to have allocated to the Company and to the
Company's ground-lessor (which may claim a right of indemnity
against the Company) approximately 9% and 17%, respectively, of the
total remediation costs. The Company believes that it has no
liability for any of such costs and in any proceeding in which such
liability is asserted against it, the Company will vigorously
contest such liability. In the event any of such liability is
allocated to the Company, it will seek indemnification from
Lockheed in accordance with its lease.
e. On January 25, 1995, the Grand Union Company, a tenant leasing
eight properties owned by the Company, filed a prepackaged
voluntary petition for reorganization pursuant to the provisions of
Chapter 11 of the Federal Bankruptcy Code. These eight properties'
annual rentals total approximately $1,450,000 (including two
properties which are sub-let, representing
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
approximately $58,000 in annual rentals). The tenant is current in
its obligations under the leases with the exception of
approximately $43,000 representing pre-petition real estate taxes
on four of the eight properties. The Company anticipates being
reimbursed for such amount. The tenant rejected the lease on one
property located in Waterford, NY effective July 31, 1995 by
order of the Bankruptcy Court on June 6, 1995. The annual rent for
this property is approximately $103,000, its carrying value at June
30, 1995 is approximately $1,045,000 and it is unencumbered by any
mortgage. In June 1995, the tenant emerged from Bankruptcy. The
tenant affirmed five of the seven remaining leases and allowed the
two sub-let properties' leases to remain in effect. At June 30,
1995, the carrying value of these seven properties is approximately
$11,337,000. One of these properties is encumbered by a
nonrecourse mortgage payable of approximately $4,716,000. The
Company has filed a proof of claim with the Bankruptcy Court for
the rejected lease.
f. On June 23, 1995, Bradlees Stores, Inc., a tenant leasing four
properties owned by the Company, filed a voluntary petition for
reorganization pursuant to the provisions of Chapter 11 of the
Federal Bankruptcy Code. The annual rentals for these four
properties is approximately $1,320,000. The tenant is current in
its obligations under the leases. The tenant has not yet
determined whether it will exercise its right to reject or affirm
the leases which will require an order of the Bankruptcy Court.
There are existing assignors who are still obligated to fulfill all
of the terms and conditions of the leases.
At June 30, 1995, the carrying value of these four properties is
approximately $7,703,000. Two of the properties are encumbered by
nonrecourse mortgages payable of approximately $2,169,000.
4. PROPERTY HELD FOR SALE
- -------------------------
At June 30, 1995, the Company owned three properties that were
being actively marketed for sale. At June 30, 1995, these
properties have been stated at the lower of their carrying value or
net realizable value. The aggregate net realizable value of the
properties is estimated to be approximately $344,000.
5. SIGNIFICANT PROPERTY TRANSACTIONS
- ------------------------------------
a. The Company entered into two joint ventures in June 1994 with
unaffiliated co-venturers for the purpose of developing luxury
garden apartment complexes. Both of these joint ventures have been
consolidated in the accompanying financial statements.
1. The first joint venture, formed as an Alabama Limited
Liability Company, is developing a 240 unit multi-family project
situated on approximately twenty acres, currently owned by the
joint venture, located in Hoover, Alabama, a suburb of Birmingham.
The Company, which owns a seventy percent (70%) majority interest
in the joint venture, contributed $1,750,000 in June 1994 and the
co-venturer contributed $250,000. As of June 30, 1995, $250,000
representing the minority interest of the co-venturer has been
included in "Accounts payable, accrued expenses, and other
liabilities" in the accompanying financial statements. The co-
venturer will be credited with $500,000 of additional capital in
lieu of receiving a general contractor's fee. Distributions will
be made in proportion to ownership interests. Construction
financing has been obtained by the joint venture in the amount of
$8,760,000, which can be increased by $100,000, and is guaranteed
by the co-venturer and personally by its principals. The Company
has approved approximately $290,000 of additional improvements and
upgrades. Such additional costs will be funded by partners'
capital contributions in accordance with their pro rata partnership
interests. As of June 30, 1995, approximately $140,000 has been
funded by the Company. The development costs are expected to total
approximately $11,650,000. As of June 30, 1995, approximately
$9,929,000 of development costs have been incurred, including the
acquisition of land valued at approximately $1,138,000.
Construction loan funding at June 30, 1995 is approximately
$6,858,000. As of June 30, 1995, 152 rental units were completed
and
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
available for occupancy with 110 of these units leased. Project
completion is scheduled for September 1995. An affiliate of the
Company's co-venturer is managing the property. Net rental
operations to date have resulted in a loss of approximately
$103,000 including approximately $72,000 of depreciation before
consideration of the co-venturer's minority interest in such loss
of approximately $31,000.
A reinvestment incentive fee of approximately $40,000 will be due
the general partner upon completion of the project (see note 2).
2. The second joint venture, a Delaware limited partnership,
is developing a 288 unit multi-family project situated on
approximately thirty-three acres in Cary, North Carolina (Raleigh-
Durham area). The Company, which owns a ninety percent (90%)
majority interest in the partnership, has contributed approximately
$4,022,000 as of June 30, 1995 and is a limited partner. The
Company has fulfilled its contribution obligation. The co-venturer
is the general partner and has a limited partner interest. The
Company is entitled to a cumulative annual preferred return of 12%
on its investment before cash distributions are made in proportion
to ownership interests. Construction financing has been obtained
by the joint venture in the amount of $12,205,000 and is guaranteed
by the joint venture general partner and personally by its
principals. The development costs are expected to total
approximately $16,100,000. As of June 30, 1995, approximately
$7,532,000 of development costs have been incurred, including the
acquisition of land valued at $1,600,000. Construction loan funding
at June 30, 1995 is approximately $2,797,000. The first units are
expected to be available for occupancy on or about September 1995
and project completion is presently scheduled for May 1996. An
affiliate of the Company's co-venturer will manage the property.
A reinvestment incentive fee of approximately $70,000 will be due
the Company's general partner upon completion of the project (see
note 2).
b. On February 1, 1995, the Penske Corp. exercised its purchase
option on three properties leased from the Company (two in New
Jersey and one in New York). The selling price was approximately
$4,535,000 and a gain of approximately $1,011,000 was recognized in
the six months ended June 30, 1995. Each property was encumbered
by first and second mortgages which totalled approximately
$1,162,000 and which were paid from the sales proceeds.
c. On March 24, 1995, the Company sold the property tenanted by
Pace Membership Warehouse, Inc. in Taylor, Michigan. The selling
price was $9,300,000 and a gain of approximately $3,310,000 was
recognized in the six months ended June 30, 1995. The property was
encumbered by a nonrecourse mortgage payable of approximately
$4,346,000 which the purchaser assumed.
d. On May 18, 1995, the Company purchased approximately 248 acres
of partially improved land located in Armonk, New York. The
purchase price was approximately $3,044,000. The Company intends
to construct approximately 45 to 50 single-family detached luxury
homes subject to subdivision and other required approvals. No
material development costs have yet been incurred.
A reinvestment incentive fee of approximately $15,000 may be due
the Company's general partner (see note 2).
e. On June 28, 1995, General Signal Technology Corporation, a
tenant of a property located in Andover, Massachusetts exercised
its rights under the lease to purchase the property. The selling
price was approximately $19,857,000 and a loss of approximately
$125,000 was recognized in the three and six months ended June 30,
1995. The property was encumbered by two nonrecourse mortgages
payable which totalled approximately $10,718,000 and were paid from
the sales proceeds.
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
6. MORTGAGES PAYABLE
- --------------------
On July 25, 1994 the Company obtained financing on the two
apartment complexes located in Lexington, Kentucky. The two
nonrecourse mortgage loans in the amount of $5,500,000 and
$4,500,000 for Stoney Falls and Stoney Brooke Apartments,
respectively, bear interest at 8.375% and mature in ten years when
balloon payments totalling approximately $8,150,000 will be due.
Under the terms of the loans, $100,000 was initially funded on each
loan with the balance funded in January 1995. Debt placement costs
of approximately $250,000 have been incurred. Annual debt service
on the two loans is approximately $956,000.
7. DISTRIBUTIONS PAYABLE
- ------------------------
Distributions payable represent amounts accrued and unpaid due to
non-consenting investors ("Non-consents"). Non-consents are those
investors who have not yet exchanged their limited partnership
interests in the various Predecessor Partnerships for limited
partnership units of American Real Estate Partners, L.P.
8. RIGHTS OFFERING
- ------------------
A registration statement on Form S-3 relating to the Rights
Offering (Registration No. 33-54767) was filed with the Securities
and Exchange Commission and declared effective February 23, 1995.
On March 1, 1995, the Company issued to record holders of its
Depositary Units one transferable subscription right (a "Right"),
for each seven Depositary Units of the Company held on February 24,
1995, the record date. The Rights entitled the holders thereof
(the "Rights Holders") to acquire during the subscription period at
a subscription price of $55, six Depositary Units and one 5%
cumulative pay-in-kind redeemable preferred unit representing a
limited partner interest ("Preferred Units"). The subscription
period commenced on March 1, 1995 and expired at the close of
business on March 30, 1995.
The Preferred Units have certain rights and designations, generally
as follows. Each Preferred Unit will have a liquidation preference
of $10.00 and will entitle the holder thereof to receive
distributions thereon, payable solely in additional Preferred
Units, at the rate of $.50 per Preferred Unit per annum (which is
equal to a rate of 5% of the liquidation preference thereof),
payable annually on March 31 of each year (each, a "Payment Date"),
commencing March 31, 1996. On any Payment Date commencing with the
Payment Date on March 31, 2000, the Company, with the approval of
the Audit Committee of the Board of Directors of the General
Partner may opt to redeem all, but not less than all, of the
Preferred Units for a price, payable either in all cash or by
issuance of additional Depositary Units, equal to the liquidation
preference of the Preferred Units, plus any accrued but unpaid
distributions thereon. On March 31, 2010, the Company must redeem
all, but not less than all, of the Preferred Units on the same
terms as any optional redemption.
1,975,640 Rights were issued in the Rights Offering of which
418,307 were exercised. 190,554 Depositary Units and 31,759
Preferred Units were subscribed for through the exercise of the
Over-Subscription Privilege by Rights Holders other than High Coast
Limited Partnership ("High Coast"), a Delaware limited partnership.
High Coast acted as guarantor for the Rights Offering and is an
affiliate of Carl C. Icahn, ("Icahn"), the Chairman of American
Property Investors, Inc., ("API"), the general partner of the
Company. API is also the general partner of the guarantor and the
two limited partners are affiliates of and are controlled by Icahn.
Pursuant to its subscription guaranty, High Coast oversubscribed
for a total of 9,343,998 Depositary Units and 1,557,333 Preferred
Units. As a result, the Rights Offering was fully subscribed. The
proceeds received by the Company, after
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
deduction of expenses of approximately $1.1 million incurred by the
Company in connection with the Rights Offering, were approximately
$107.6 million.
In addition, in accordance with the terms of the Company's and its
subsidiary's partnership agreements, API was required to contribute
$2,206,242 in order to maintain its aggregate 1.99% general
partnership interest.
On April 12, 1995, the Company received $108,660,200, the gross
proceeds of the Rights Offering, from its subscription agent and
$2,206,242 from API. The Company issued 1,975,640 Preferred Units
and an additional 11,853,840 Depositary Units. Trading in the
Preferred Units commenced March 31, 1995 on the New York Stock
Exchange ("NYSE") under the symbol "ACP PR". The Depositary Units
trade on the NYSE under the symbol "ACP".
As of August 8, 1995 High Coast owns 1,720,688 Preferred Units and
11,731,196 Depositary Units.
9. EARNINGS PER SHARE
- ---------------------
Net earnings per limited partnership unit and equivalent
partnership units are computed using the weighted average number of
units and equivalent units outstanding during the period. The
earnings per share calculation for the six months ended June 30,
1995 assumes the Depositary and Preferred Units subscribed for in
the Rights Offering were outstanding at the beginning of the year.
Also with respect to the six months ended June 30, 1995
calculation, net income has been increased by approximately
$2,100,000, in accordance with the modified treasury stock method.
The dilutive effect of preferred units and the pro rata quarterly
portion of the annual pay-in-kind distribution to preferred
unitholders have been included in the earnings per share
calculation, as calculated under the effective yield method, as
equivalent depositary units. (See note 8).
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
- -------
Historically, substantially all of the Company's real estate assets
have been net leased to single corporate tenants under long-term
leases. With certain exceptions, these tenants are required to pay
all expenses relating to the leased property and therefore the
Company is not typically responsible for payment of expenses, such
as maintenance, utilities, taxes and insurance associated with such
properties. The Company has experienced an increase in its
property expenses in recent years, due principally to tenant
bankruptcies and defaults as well as the acquisition of operating
properties.
Economic conditions in recent years led the General Partner to
reexamine the Company's cash needs and investment opportunities.
Tenant defaults and lease expirations caused rental revenues to
decrease and property management and operating expenses to increase
and led to expenditures to re-let. In addition, the availability
of acceptable financing to refinance maturing debt obligations
including the Company's Senior Unsecured Debt became increasingly
scarce. Consequently the General Partner determined it was
necessary to conserve cash and establish reserves from time to
time. As a result, there was insufficient cash flow from
operations to pay distributions to unitholders and such
distributions were reduced and finally suspended.
By the end of the year 2000, net leases representing approximately
26% of the Company's net annual rentals from its portfolio will be
due for renewal, and by the end of the year 2002, net leases
representing approximately 40% of the Company's net annual rentals
will be due for renewal. Since most of the Company's properties are
net-leased to single, corporate tenants, it is expected that it may
be difficult and time-consuming to re-lease or sell those
properties
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
that existing tenants decline to re-let or purchase and the Company
may be required to incur expenditures to renovate such properties
for new tenants. In addition, the Company may become responsible
for the payment of certain operating expenses, including
maintenance, utilities, taxes, insurance and environmental
compliance costs associated with such properties, which are
presently the responsibility of the tenant. As a result, the
Company could experience an adverse impact on net cash flow from
such properties.
As a consequence of the foregoing, the Company decided to raise
funds through the Rights Offering to increase its assets available
for investment, take advantage of real estate investment
opportunities, further diversify its portfolio and mitigate against
the impact of potential lease expirations. The Rights Offering was
successfully completed during April 1995 and net proceeds of
approximately $107.6 million were raised for investment purposes.
In order to enhance the Company's investment portfolio (and
ultimately its asset values and cash flow prospects), the Company
is seeking to acquire investments in undervalued properties,
including commercial properties, land parcels, residential
development projects and non-performing loans. Such properties may
not be generating a positive cash flow in the near term; however,
the General Partner believes that the acquisition of properties
requiring some degree of management or development activity have
the greatest potential for growth, both in terms of capital
appreciation and the generation of cash flow.
Expenses relating to environmental clean-up have not had a material
effect on the earnings, capital expenditures, or competitive
position of the Company. Management believes that substantially
all such costs would be the responsibility of the tenants pursuant
to lease terms. While most tenants have assumed responsibility for
the environmental conditions existing on their leased property,
there can be no assurance that the Company will not be deemed to be
a responsible party or that the tenant will bear the costs of
remediation. Also, as the Company acquires more operating
properties, its exposure to environmental clean-up costs may
increase. The Company recently has undertaken to have certain of
its properties subjected to Phase I Environmental Site Assessments
by a third-party consultant. Based on the results of these Phase
I Environmental Site Assessments, the environmental consultant has
recommended that limited Phase II Environmental Site Investigations
be conducted. At the conclusion of the Company's Phase I
Environmental Site Assessments, the Company will seek to coordinate
with the tenants to attempt to ensure that they undertake any
required investigation and/or remediation. As no Phase II
Environmental Site Investigations have been conducted by the
consultant, there can be no accurate estimation of the need for or
extent of any required remediation, or the costs thereof.
RESULTS OF OPERATIONS
- ---------------------
- ---------------------
THREE MONTHS ENDED JUNE 30, 1995 COMPARED TO THREE MONTHS ENDED
JUNE 30, 1994
Gross revenues increased by approximately $2,078,000, or 13.7%,
during the three months ended June 30, 1995 as compared to the same
period in 1994. This increase reflects approximate increases of
$1,705,000, or 418.4%, in other interest income, $349,000, in other
income, $299,000, or 15.2%, in hotel operating income, and $33,000
in rental income partially offset by a decrease of approximately
$308,000, or 3.9%, in financing lease income. The increase in
other interest income is primarily due to an increase in the
Company's short-term cash investments as a result of the receipt of
the Rights Offering proceeds. The increase in other income is
primarily due to the settlement of the Be-Mac bankruptcy claim.
The hotel operating revenues were generated by two hotels formerly
leased to Integra, A Hotel and Restaurant Company. The Company has
been operating these hotel properties through a third party
management company since August 7, 1992. The decrease in financing
lease income is primarily attributable to normal lease amortization
and property sales. Due to the seasonal nature of the hotel
properties, the hotel revenues for the three months ended June 30,
1995 are not necessarily indicative of subsequent quarterly
results.
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
Expenses decreased by approximately $229,000, or 2.3%, during the
three months ended June 30, 1995 compared to the same period in
1994. This decrease reflects a decrease of approximately $656,000,
or 11.4%, in interest expense, partially offset by increases of
approximately $189,000, or 11.3%, in hotel operating expenses,
$76,000, or 8.4%, in property expenses and $157,000, or 13.6%, in
depreciation and amortization. The decrease in interest expense is
primarily attributable to normal loan amortization and reductions
due to certain loan refinancings and repayments of maturing balloon
debt obligations, including the Senior Unsecured Debt. The hotel
expenses were generated from the hotels mentioned previously.
Earnings before property transactions increased during the three
months ended June 30, 1995 by approximately $2,306,000 primarily
due to increased interest income earned on the Rights Offering
proceeds and decreased interest expense due to refinancings and
repayments of maturing debt obligations.
Gain on property transactions decreased by approximately $2,321,000
during the three months ended June 30, 1995 as compared to the same
period in 1994, due to the size and number of transactions.
During the three months ended June 30, 1995, the Company did not
record a provision for loss on real estate as compared to a
$237,000 provision in the comparable period of 1994.
Net earnings for the three months ended June 30, 1995 increased by
approximately $223,000 as compared to the three months ended June
30, 1994. This increase was primarily due to increased interest
income and decreased interest expense, largely offset by the
decrease in gain from the sale of real estate. Due to the seasonal
nature of the Company's two hotel properties previously mentioned,
results of hotel operations for the three months ended June 30,
1995 are not necessarily indicative of subsequent quarterly
results.
SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS ENDED JUNE
30, 1994
Gross revenues increased by approximately $2,334,000, or 7.5%,
during the six months ended June 30, 1995 as compared to the same
period in 1994. This increase reflects approximate increases of
$1,899,000, or 233.6%, in other interest income, $630,000, or
13.1%, in hotel operating income, $349,000 in other income, and
$288,000, or 3.1%, in rental income, partially offset by a decrease
of approximately $832,000, or 5.1%, in financing lease income. The
increase in other interest income is primarily due to an increase
in the Company's short-term cash investments as a result of the
receipt of the Rights Offering proceeds. The hotel operating
revenues were generated by two hotels formerly leased to Integra,
A Hotel and Restaurant Company. The Company has been operating
these hotel properties through a third party management company
since August 7, 1992. The increase in other income is primarily
due to the settlement of the Be-Mac bankruptcy claim. The decrease
in financing lease income is primarily attributable to normal lease
amortization and property sales. Due to the seasonal nature of the
hotel properties, the hotel revenues for the six months ended June
30, 1995 are disproportionately higher than those expected for the
remainder of 1995.
Expenses decreased by approximately $896,000, or 4.3%, during the
six months ended June 30, 1995 compared to the same period in 1994.
This decrease reflects a decrease of approximately $1,485,000, or
12.6%, in interest expense, partially offset by increases of
approximately $248,000, or 10.7%, in depreciation and amortization,
$229,000, or 6.4%, in hotel operating expenses, $69,000, or 3.7%,
in property expenses and $43,000, or 3.4%, in general and
administrative expenses. The decrease in interest expense is
primarily attributable to normal loan amortization and reductions
due to certain loan refinancings and repayments of maturing balloon
debt obligations, including the Senior Unsecured Debt. The hotel
expenses were generated from the hotels mentioned previously.
Earnings before property transactions increased during the six
months ended June 30, 1995 by
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
approximately $3,230,000 primarily due to increased interest income
earned on the Rights Offering proceeds and decreased interest
expense due to refinancings and repayments of maturing debt
obligations.
Gain on property transactions increased by approximately $636,000
during the six months ended June 30, 1995 as compared to the same
period in 1994, due to the size and number of transactions.
During the six months ended June 30, 1995, the Company did not
record a provision for loss on real estate as compared to a
$312,000 provision in the comparable period of 1994.
Net earnings for the six months ended June 30, 1995 increased by
approximately $4,179,000 as compared to the six months ended June
30, 1994. This increase was primarily due to increased interest
income and gains from the sale of real estate and decreased
interest expense and provision for loss on real estate. Due to the
seasonal nature of the Company's two hotel properties previously
mentioned, results of hotel operations for the six months ended
June 30, 1995 are expected to be significantly higher than the
remainder of 1995.
CAPITAL RESOURCES AND LIQUIDITY
Generally, the cash needs of the Company for day-to-day operations
have been satisfied from cash flow generated from current
operations. The cash flow generated from day-to-day operations
(before payment of maturing debt obligations) has decreased in
recent years, although it improved in 1994 and is continuing to
improve in 1995 due to among other things the acquisition and
foreclosure of certain operating properties and the repayment of
debt. The Company has had to apply a larger portion of its cash
flow to the repayment of maturing debt obligations. Cash flow from
day-to-day operations represents net cash provided by operating
activities (excluding working capital changes and non-recurring
other income) plus principal payments received on financing leases
as well as principal receipts on mortgages receivable reduced by
periodic principal payments on mortgage debt.
The Company may not be able to re-let certain of its properties at
current rentals. As previously discussed, net leases representing
approximately 40% of the Company's net annual rentals will be due
for renewal by the end of the year 2002. In 1995, seventeen leases
covering twenty-six properties and representing approximately
$996,000 in annual rentals are scheduled to expire. The Company
anticipates that thirteen of these twenty-six properties originally
representing approximately $656,000 in annual rental income have
been or will be re-let or renewed for approximately $671,000 in
annual rentals. Twelve properties, with an approximate annual
rental income of $318,000, will be marketed for sale or lease when
the current lease terms expire. One property with an annual rental
of approximately $22,000 was sold in 1995.
There were no distributions due to Unitholders for the six months
ended June 30, 1995. Distributions paid during the six months
ended June 30, 1995 totalled approximately $62,000, representing
distributions due to Unitholders who exchanged their limited
partner interests during 1995. There were no distributions due to
Unitholders for the six months ended June 30, 1994. Distributions
paid during the six months ended June 30, 1994 totalled
approximately $1.8 million, representing distributions due to
Unitholders for the fourth quarter of 1993 and to Unitholders who
exchanged their limited partner interests during 1994.
During the six months ended June 30, 1995 the Company generated
approximately $14.8 million in cash flow from day-to-day operations
which includes approximately $1.5 million in interest earned on the
Rights Offering proceeds which will be retained for future
acquisitions. During the comparable period of 1994, the Company
generated approximately $11.4 million in cash flow from day-to-day
operations.
<PAGE>
Capital expenditures for real estate, excluding new acquisitions,
were approximately $447,000 during the six months ended June 30,
1995. During the comparable period of 1994, there were
approximately $321,000 of such expenditures.
In 1995 and 1996, the Company has approximately $11.3 million of
principal payments due each year on its Senior Unsecured Debt and
approximately $5.7 million and $16.9 million of maturing balloon
mortgages due, respectively. During the six months ended June 30,
1995, approximately $14.2 million of balloon mortgages were repaid
out of the Company's cash flow, including the scheduled payment
due on the Company's Senior Unsecured Debt. During the comparable
period of 1994, approximately $15.3 million of balloon mortgages
were repaid out of the Company's cash flow, including the scheduled
payment due on the Company's Senior Unsecured Debt. The Company
will seek to refinance a portion of these maturing mortgages,
although it does not expect to refinance all of them and may be
required to repay them from cash flow and increase reserves from
time to time, thereby reducing cash flow otherwise available for
other uses. During the six months ended June 30, 1995, net cash
flow after payment of maturing debt obligations and capital
expenditures was negative by approximately $1.5 million excluding
the $1.5 million of interest earned on the Rights Offering proceeds
which will be retained for acquisitions. The Company's operating
cash reserves are approximately $11.5 million at June 30, 1995.
Due to certain timing issues and payments due on maturing debt
obligations, including the Company's annual installment on the
Senior Unsecured Debt, cash flow for the second quarter of 1995 was
negative, thereby requiring the use of reserves. As a result, the
Company does not anticipate the payment of cash distributions to
holders of Depositary Units in the near future. Rights Offering
proceeds and related interest income will be invested in
undervalued properties, including commercial properties, land
parcels, residential development projects and non-performing loans.
The Company has significant maturing debt requirements under the
Note Agreements. As of June 30, 1995, the Company has $33,923,330
of Senior Unsecured Debt outstanding. Pursuant to the Note
Agreements, the Company is required to make semi-annual interest
payments and annual principal payments. The interest rate charged
on the Senior Unsecured Debt is 9.6% per
annum. Under the terms of the Note Agreements, the Company
deferred and capitalized 2% annually of its interest payment
through May 1993. In May 1994 and 1995, the Company repaid $10
million and $11.3 million, respectively, of its outstanding Senior
Unsecured Debt under the Note Agreements and principal payments of
approximately $11,308,000 are due annually from 1996 through the
final payment date of May 27, 1998. As of June 30, 1995, the
Company was in compliance with the terms of the Note Agreements.
The Note Agreements contain certain covenants restricting the
activities of the Company. Under the Note Agreements, the Company
must maintain a specified level of net annual rentals from
unencumbered properties (as defined in the Note Agreements) and is
restricted, in certain respects, in its ability to create liens and
incur debts. Investment by the Company in certain types of assets
that may be regarded as non-income producing, such as land or non-
performing loans, is restricted under the Note Agreements. The
holders of the Senior Unsecured Debt have agreed, however, to waive
this restriction with respect to any capital raised by the Company
in the Rights Offering.
The Note Agreements contain certain prepayment penalties which the
Company would be required to pay if it extinguishes any portion of
the outstanding principal prior to its annual due date. The Note
Agreements require that such prepayment consist of 100% of the
principal amount to be prepaid plus a premium based on a formula
described therein. As of August 1, 1995 the premium required in
order to prepay the Note Agreement in full would have been
approximately $2,360,000. Subject to negotiating favorable terms
the Company may prepay in full the Senior Unsecured Debt.
Prepayment would release the Company from certain covenants which
restrict its operating and investment activities, including, among
others, covenants relating to the level
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
of net annual rentals from unencumbered properties and the ability
to create liens and incur additional debt.
Sales proceeds from the sale or disposal of portfolio properties
totalled approximately $17.4 million in the six months ended June
30, 1995. During the comparable period of 1994, sales proceeds
totalled approximately $10.4 million, including $1.4 million of net
proceeds from a balloon payment of a mortgage receivable. During
the six months ended June 30, 1995, the Company received $9.8
million of mortgage proceeds from the financing of its two
apartment complexes located in Lexington, Kentucky. The Company
intends to use property sales, financing and refinancing proceeds
for new investments. In addition, the Company successfully
completed its Rights Offering in April 1995 and net proceeds of
approximately $107.6 million were raised for investment purposes.
The Company entered into two joint ventures with unaffiliated co-
venturers in June 1994 for the purpose of developing luxury garden
apartment complexes in Hoover, Alabama, and Cary, North Carolina.
In the year ended December 31, 1994, the Company invested
approximately $5,500,000 in these joint ventures. During the six
months ended June 30, 1995, the Company invested approximately an
additional $470,000. In May 1995, the Company acquired
approximately 248 acres of land for approximately $3,044,000. The
company intends to develop and construct 45 to 50 single-family
detached luxury homes on this land.
The Company's cash and cash equivalents increased by approximately
$133.9 million during the six months ended June 30, 1995, primarily
due to rights offering proceeds, and the interest earned thereon,
of $112.4 million, sales proceeds net of property acquisitions of
approximately $14 million, financing proceeds of approximately $9.8
million, partially offset by the negative net cash flow of
approximately $1.5 million for the six months ended June 30, 1995.
These funds are being retained for investment in undervalued
properties including commercial properties, land parcels,
residential development projects and non-performing loans.
The Company announced in 1987 its intention to purchase up to one
million Units. On June 16, 1993 the Company announced it had
increased the unit repurchase program to 1,250,000 units. As of
June 30, 1995, the Company had purchased 1,037,200 Units at an
aggregate cost of approximately $11,184,000, and the Company may
from time to time acquire additional Units.
Part II. Other information
-------
Item 1. Legal Proceedings
-----------------
In August 1994, three class action complaints against the Company
were filed with the Delaware Court of Chancery, New Castle County,
in connection with the Rights Offering, Allan Haymes, I.R.A v.
American Real Estate Partners, L.P., American Property Investors,
Inc. and Carl C. Icahn and Steven Yavers v. American Real Estate
Partners, L.P., American Property Investors, Inc. and Carl C. Icahn
and Wilbert Schoomer v. American Real Estate Partners, L.P,
American Property Investors, Inc. and Carl C. Icahn (the
"Complaints"). The Complaints have all been consolidated. The
Complaints claim defendants have breached fiduciary and common law
duties owed to plaintiffs and plaintiffs' class by self dealing and
failing to disclose all relevant facts regarding the Rights
Offering, and seek declaratory and injunctive relief declaring the
action is properly maintainable as a class action, declaring the
defendants have breached their fiduciary and other duties,
enjoining the Rights Offering, ordering defendants to account for
all damages suffered by the class for alleged acts and transactions
and awarding further relief as the court deems appropriate. On
April 7, 1995, defendants moved to dismiss the consolidated
complaint as moot. On July 28, 1995, the parties submitted a
stipulation of dismissal agreeing to dismiss the action as moot.
The plaintiffs have reserved their right to make application to the
Court for fees and expenses.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Financial Data Schedule is attached hereto as Exhibit EX-
27
EXHIBIT INDEX
Exhibit Description
------- -----------
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
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.
AMERICAN REAL ESTATE PARTNERS, L.P.
By: American Property Investors, Inc.
General Partner
-------------------------------
John P. Saldarelli
Treasurer
(Principal Financial Officer
and Principal Accounting
Officer)
Date: August 9, 1995
<PAGE>
AMERICAN REAL ESTATE PARTNERS, L.P. - FORM 10-Q - JUNE 30, 1995
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.
American Real Estate Partners, L.P.
By: American Property Investors, Inc.
General Partner
/s/ John P. Saldarelli
John P. Saldarelli
Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
Date: August 9, 1995
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