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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
[X] ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1997
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Commission File Number 1-9648
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NATIONAL REALTY, L.P.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 75-2163175
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10670 North Central Expressway, Suite 300, Dallas, Texas 75231
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(Address of Principal Executive Offices) (Zip Code)
(214) 692-4700
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(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Units of Limited Partner Interest American Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
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 at least the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 6, 1998, the Registrant had 6,323,437 units of limited partner
interest outstanding. Of the total units outstanding, 2,584,493 were held by
other than those who may be deemed to be affiliates, for an aggregate value of
$52,336,000 based on the last trade as reported on the American Stock Exchange
on March 6, 1998. The basis of this calculation does not constitute a
determination by the Registrant that all of such persons or entities are
affiliates of the Registrant as defined in Rule 405 of the Securities Act of
1933, as amended.
Documents Incorporated by Reference:
NONE
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This Form 10-K/A Amendment No. 1 amends the Registrant's annual report on Form
10-K for the year ended December 31, 1997 as follows:
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - RESULTS OF OPERATIONS - pages 31 and 36.
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NATIONAL REALTY, L.P.
Signature Page
Pursuant to the requirements of Section 13 or 15(d) 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.
NATIONAL REALTY, L.P.
By its General Partner:
SYNTEK ASSET MANAGEMENT, L.P.
By its General Partners:
SYNTEK ASSET MANAGEMENT, INC.
By: /s/ Randall M. Paulson
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Randall M. Paulson
Director and President
/s/ Gene E. Phillips
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Gene E. Phillips
General Partner of
Syntek Asset Management, L.P.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Syntek Asset
Management, L.P., as General Partner of the Registrant and in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
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<S> <C> <C>
SYNTEK ASSET MANAGEMENT, INC. Managing General Partner of
Syntek Asset Management, L.P.
By: /s/ Randall M. Paulson January 25, 1999
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Randall M. Paulson
Director and President
/s/ Gene E. Phillips General Partner of January 25, 1999
- ------------------------------------ Syntek Asset Management, L.P.
Gene E. Phillips
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (Continued)
The Partnership's principal sources of cash have been and will continue to be
from property operations and externally generated funds. Externally generated
funds include proceeds from the sale of the Partnership's properties and other
assets and proceeds from borrowings secured by the Partnership's properties or
mortgage notes receivable. The Partnership expects that cash flow from property
operations together with externally generated funds will be sufficient to meet
the Partnership's various cash needs in 1998, including, but not limited to, the
payment of distributions, debt service obligations coming due and property
maintenance and improvements, as more fully discussed in the paragraphs below.
Currently, all of the Partnership's properties are encumbered by mortgage debt.
In 1998, mortgage debt totaling $36.5 million comes due. The Partnership intends
to seek to refinance certain mortgages that mature in the next two years or
where there is an interest rate advantage to the Partnership, and use excess
refinancing proceeds for working capital purposes.
The Partnership's cash flow from property operations (rents collected less
payments for property operating expenses) increased from $43.7 million in 1996
to $49.4 million in 1997. Of this increase, $2.6 million is due to the
Partnership's continued success in increasing rental and occupancy rates during
1997 as compared to 1996. Rental rates at the Partnership's apartment complexes,
which account for over 80% of the Partnership's properties, increased an average
of 3% in 1997 as compared to 1996 rental rates and occupancy rates increased an
average of 1% as compared to 1996. At the Partnership's commercial properties,
rental rates increased an average of 1% as compared to 1996 rental rates and
occupancy rates increased an average of 3% as compared to 1996. These increases
are partially offset by a decrease of $750,000 due to properties sold in 1997.
The Partnership's management believes that this trend will continue,
particularly in the Partnership's apartments, if the economy remains stable or
improves.
Interest collected on mortgage notes receivable increased from $3.1 million in
1996 to $3.9 million in 1997. This increase is primarily due to loans funded in
1997 and 1996. Interest is expected to continue to increase as a source of cash
to the Partnership as it originates additional mortgage loans.
Interest paid on the Partnership's notes payable increased from $29.2 million in
1996 to $29.9 million in 1997. The increase is due in part to an increase of
$655,000 from properties financed or refinanced in 1996 and 1997 and an increase
of $266,000 due to an increase in the GCLP line of credit interest rate. These
increases are partially offset by a decrease of $95,000 due to the modification
of the mortgage secured by the Club Mar Apartments and a decrease of $117,000
due to the sale of two commercial properties encumbered by debt in 1997.
General and administrative expenses paid increased from $5.9 million in 1996 to
$8.8 million in 1997. The increase is due to an increase in legal and
consulting fees related to the Southern Palms litigation of $892,000 and an
increase of $1.0 million related to the Partnership's overhead reimbursements to
Basic Capital Management, Inc. ("BCM").
The Partnership was involved in significant investing activities during
1997. The Partnership originated thirteen mortgage or other loans
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations
1997 COMPARED TO 1996. The Partnership reported net income of $8.7 million for
1997 as compared to net loss of $375,000 for 1996. Contributing to the
Partnership's 1997 net income were gains on sale of real estate of $8.4 million.
The primary factors affecting the Partnership's operating results are discussed
in the following paragraphs.
Rents increased from $109.4 million in 1996 to $112.9 million in 1997. This
increase is primarily attributable to a 3.0% increase in average rental rates
combined with a 1.0% increase in average occupancy rates at the Partnership's
apartment complexes and an average 1.0% increase in commercial rental rates
combined with a 3.0% increase in occupancy rates as compared to 1996. These
increases are partially offset by a decrease of $750,000 due to the sale of the
Tollhill East Office Building in April 1997, the Fondren Office Building in June
1997, Crestview Shopping Center in November 1997 and Village Square Apartments
in December 1997. Rents are expected to continue to increase.
Interest income increased from $3.3 million in 1996 to $4.5 million in 1997.
This increase is due to thirteen mortgage and other loans being funded in 1997.
Interest is expected to continue to increase as the Partnership originates
additional loans.
Interest expense increased from $33.8 million in 1996 to $34.2 million in 1997.
Of this increase, $802,000 is due to an increase in interest expense on the
variable rate portion of the blanket mortgage secured by the GCLP properties. An
additional increase of $657,000 is due to mortgage debt which was refinanced in
1996 and 1997. These increases are partially offset by a decrease of $741,000
due to loans paid in full, including the pension notes, and a decrease of
$117,000 due to the sale of the Tollhill East Office Building in April 1997, the
Crestview Shopping Center in November 1997, and the Village Square Apartments in
December 1997. Interest expense is expected to continue to increase.
Depreciation, property taxes and insurance, utilities, property-level payroll
costs, repairs and maintenance, other property operation expenses and property
management fees for 1997 approximated those of 1996.
General and administrative expenses increased from $6.0 million in 1996 to $7.9
million in 1997. This increase is primarily attributable to an increase in legal
and consulting fees related to the Southern Palms Associates litigation of
$892,000, an increase of $151,000 related to insurance deductibles and an
increase of $1.0 million in the Partnership's overhead reimbursements to BCM.
These increases are partially offset by a decrease of $180,000 due to a decrease
in legal fees relating to the Moorman litigation and a decrease of $237,000
related to a decrease in appraisals and other professional fees.
