SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CLOVER APPRECIATION PROPERTIES I, L.P.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Units of Limited Partnership Interest ("Units")
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(2) Aggregate number of securities to which transaction applies:
3,591 Units
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined): Calculated by dividing the
aggregate value of the transaction set forth under (4) below ($540,000) by the
aggregate number of Units outstanding on November 2, 1996 ($150).
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(4) The proposed maximum aggregate value of the transaction: $540,000
estimated solely for the purpose of calculating the filing fee required by Rule
0-11 and computed by adding (a) $465,000, the amount expected to be received by
the Registrant as a result of the Sale described in the accompanying Proxy
Statement which will subsequently be distributed to the Limited Partners, and
(b) $75,000, the amount of cash currently held by the Partnership which is
expected to be distributed to the Limited Partners in the liquidation of the
Partnership (excluding $47,000 in estimated reserves). The proposed maximum
aggregate value represents the maximum amount under the two Proposals presented
in the Proxy Statement.
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(5) Total fee paid: $108, equal to 1/50th of 1% of the proposed maximum
aggregate value of the transaction set forth under (4) above.
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[ ] Fee paid previously.
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[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $72
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(2) Form, Schedule or Registration Statement No.:
Preliminary Schedule 14A
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(3) Filing Party: Clover Appreciation Properties I, L.P.
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(4) Date Filed: October 3, 1996
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[CLOVER APPRECIATION PROPERTIES I, L.P. Letterhead]
November 2, 1996
To the Limited Partners of
Clover Appreciation Properties I, L.P.:
Dear Limited Partner:
You are cordially invited to attend a special meeting (the "Special
Meeting") of limited partners (the "Limited Partners") of Clover Appreciation
Properties I, L.P. (the "Partnership"), called by the general partner of the
Partnership, Crown Management Corporation, a New Jersey corporation (the
"General Partner"), to be held at 23 West Park Avenue, Merchantville, New Jersey
08109, on November 27, 1996 at 10:00 a.m., local time, and at any adjournment
thereof.
At this Special Meeting, you will be asked to consider and vote upon two
separate proposals which concern the sale of The Royal Wood Apartments (the
"Royal Wood Apartments"). The first proposal is to approve a specific sale of
the Royal Wood Apartments to Strand Inc. (the "Buyer"), pursuant to the terms of
an Agreement of Sale between the Partnership and the Buyer which is expected to
be entered into on or about November 15, 1996, for a purchase price of
$7,800,000 (the "Sale"). The General Partner will distribute the net Sale
proceeds and remaining cash (after reserves) to the Limited Partners. If the
Sale is approved and certain other conditions are satisfied, the Sale will be
completed and the Partnership will be terminated and dissolved. Therefore,
approval of the Sale will also be deemed a consent to the termination and
dissolution of the Partnership (upon the completion of the Sale).
At the Special Meeting, you will also be asked to consider a second
proposal which will authorize the sale of the Royal Wood Apartments to another
buyer ("Alternative Sale"), if approved by the General Partner. An Alternative
Sale only will be authorized if the Sale is approved, but is not completed for
any reason. In addition, an Alternative Sale will have to be completed prior to
December 31, 1999 for a purchase price not less than the fair market value of
the Royal Wood Apartments (as set forth in an appraisal dated within nine months
of the execution of an Alternative Sale agreement), and the purchaser in such
transaction cannot be an affiliate of the General Partner. Approval of an
Alternative Sale will also be a consent to the termination and dissolution of
the Partnership (upon the completion of an Alternative Sale). No additional vote
of the Limited Partners will be sought with respect to any particular
Alternative Sale.
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Each of the proposals requires approval by the holders of more than 50% of
the outstanding units of limited partnership interests ("Units") in the
Partnership.
Attached hereto is a Proxy Statement, dated November 2, 1996, which
contains information relating to the two proposals, together with a Proxy which
authorizes the General Partner to vote Units with respect to the two proposals
at the meeting and any adjournment thereof. In view of the importance of both
proposals, you are urged to review the enclosed Proxy Statement promptly and
carefully, and to discuss it with your financial, legal and tax advisors.
Regardless of whether you expect to be present at the Special Meeting in
person, please complete and promptly return the enclosed Proxy in the
accompanying envelope so that your Unit(s) may be represented and voted at the
Special Meeting. Proxies in the form enclosed, properly executed and duly
returned, will be voted in accordance with the instructions thereon.
Additionally, the Proxy delegates discretionary authority to the General Partner
with respect to any other business which may properly come before the Special
Meeting or any adjournment or postponement thereof, including, without
limitation, any proposal to adjourn or postpone the Special Meeting. A Limited
Partner who has given a Proxy may revoke it by filing an instrument revoking it,
by submitting a duly executed Proxy bearing a later date or by voting in person
at the Special Meeting. Properly executed Proxies that are returned, but in
which no direction on a proposal is given, will be voted for the proposal and in
the discretion of the General Partner upon such other matters as may properly
come before the Special Meeting.
Please return the enclosed Proxy in the pre-addressed and stamped envelope
as promptly as possible. Questions and requests for assistance may be directed
to Beacon Hill Partners, Inc., a proxy solicitation firm, at 800-253-3814.
Very truly yours,
CROWN MANAGEMENT CORPORATION,
General Partner of Clover
Appreciation Properties I, L.P.
By: /s/ Donald N. Love
------------------------------
Donald N. Love
President
Merchantville, New Jersey
Dated: November 2, 1996
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CLOVER APPRECIATION PROPERTIES I, L.P.
NOTICE OF SPECIAL MEETING OF LIMITED PARTNERS
OF CLOVER APPRECIATION PROPERTIES I, L.P.
TO BE HELD NOVEMBER 27, 1996
NOTICE IS HEREBY GIVEN, that a special meeting ("Special Meeting") of the
limited partners (the "Limited Partners") of Clover Appreciation Properties I,
L.P. (the "Partnership") called by the general partner of the Partnership, Crown
Management Corporation (the "General Partner"), will be held at 23 West Park
Avenue, Merchantville, New Jersey 08109, on November 27, 1996 at 10:00 a.m.,
local time, for the following purposes:
1. To approve the proposed sale (the "Sale Proposal") of The Royal Wood
Apartments (the "Royal Wood Apartments") by the Partnership. The
General Partner proposes that the Royal Wood Apartments be sold to
Strand Inc. (the "Buyer"), pursuant to the terms of an Agreement of
Sale between the Partnership and the Buyer which the parties expect to
execute on or about November 15, 1996 (the "Sale Agreement"), for a
purchase price of $7,800,000 (the "Sale"), and that the General
Partner be authorized to negotiate any final changes to the Sale
Agreement prior to execution and to agree on behalf of the Partnership
to modifications, amendments and waivers to the final Sale Agreement
which the General Partner determines to be necessary or appropriate,
including changes in the amount and type of consideration to be
received by the Partnership. As a consequence thereof, you are being
asked to authorize the Partnership to sell all of the Partnership's
interest in the Royal Wood Apartments. The Sale Proposal requires
approval by the holders of more than 50% of the outstanding units of
limited partnership interests (each a "Unit") in the Partnership
("Majority Vote"). The General Partner will distribute the net Sale
proceeds and remaining cash (after reserves) to the Limited Partners.
If the Sale Proposal is approved by a Majority Vote of the Limited
Partners, and the other conditions to the closing have been met, the
Sale will be completed and the Partnership will be terminated and
dissolved. Therefore, approval of the Sale Proposal will also be
deemed to be a consent to the termination and dissolution of the
Partnership (upon the completion of the Sale).
2. To approve a second proposal (the "Alternative Sale Proposal") which
would authorize the sale of the Royal Wood Apartments by the
Partnership to another buyer
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("Alternative Sale"), if approved by the General Partner. However, an
Alternative Sale only would be authorized if (i) the Sale Proposal is
approved by a Majority Vote, but the Sale is not completed for any
reason, (ii) the Alternative Sale is completed by December 31, 1999
for cash consideration not less than the fair market value of the
Royal Wood Apartments (as set forth in an appraisal dated within nine
months of the execution of an Alternative Sale agreement) and
(iii) the buyer in the Alternative Sale is not an affiliate of the
General Partner. The Alternative Sale Proposal must be approved by a
Majority Vote. If the Sale to the Buyer does not close for any reason
and an Alternative Sale is completed, the Partnership will be
terminated and dissolved. Therefore, approval of the Alternative Sale
Proposal will also be deemed to be a consent to the termination and
dissolution of the Partnership (upon the completion of an Alternative
Sale). No additional vote of the Limited Partners will be sought with
respect to any particular Alternative Sale.
Matters incidental to the conduct of the Special Meeting which are properly
brought before the Special Meeting may also be voted upon at the Special
Meeting. The General Partner has fixed the close of business on October 30, 1996
as the record date for determination of the Limited Partners entitled to notice
of and to vote at the Special Meeting. The presence in person or by proxy of
holders of a majority of the Units will constitute a quorum at the Special
Meeting. Abstentions will be counted in determining whether a quorum is present.
Whether or not a quorum is present or represented at the Special Meeting, the
holders of a majority of the Units present or represented by proxy may adjourn
the Special Meeting from time to time without further notice to the Limited
Partners.
THE GENERAL PARTNER RECOMMENDS THAT YOU VOTE FOR BOTH OF THE ABOVE
PROPOSALS AND URGES YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS
POSSIBLE. THE PROXY SHOULD BE RETURNED IN THE ENCLOSED ENVELOPE. IT IS IMPORTANT
THAT YOUR UNITS BE REPRESENTED AT THE SPECIAL MEETING. EVEN IF YOU PLAN TO
ATTEND THE SPECIAL MEETING, THE GENERAL PARTNER REQUESTS THAT YOU PROMPTLY SIGN,
DATE AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROXIES IN THE FORM
ENCLOSED, PROPERLY EXECUTED AND DULY RETURNED, WILL BE VOTED IN ACCORDANCE WITH
THE INSTRUCTIONS THEREON. ADDITIONALLY, THE PROXY DELEGATES DISCRETIONARY
AUTHORITY TO THE GENERAL PARTNER WITH RESPECT TO ANY OTHER BUSINESS WHICH MAY
PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF, INCLUDING, WITHOUT LIMITATION, ANY PROPOSAL TO ADJOURN OR POSTPONE THE
SPECIAL MEETING. A LIMITED PARTNER WHO HAS GIVEN A PROXY MAY REVOKE IT BY FILING
AN INSTRUMENT REVOKING IT, BY SUBMITTING A DULY EXECUTED PROXY BEARING A LATER
DATE OR BY VOTING IN PERSON AT THE SPECIAL MEETING. PROPERLY EXECUTED PROXIES
THAT ARE RETURNED, BUT IN WHICH NO DIRECTION ON A PROPOSAL IS GIVEN, WILL BE
VOTED FOR THE
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PROPOSAL AND IN THE DISCRETION OF THE GENERAL PARTNER UPON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
A complete list of Limited Partners entitled to vote at the Special Meeting
will be open to the examination of any Limited Partner, upon reasonable request
and notice, during ordinary business hours at the executive offices of the
General Partner, located at 23 West Park Avenue, Merchantville, New Jersey
08109.
Information concerning the matters to be acted upon at the Special Meeting
is set forth in the accompanying Proxy Statement.
CROWN MANAGEMENT CORPORATION,
General Partner of Clover
Appreciation Properties I, L.P.
By: /s/ Donald N. Love
------------------------------
Donald N. Love
President
Merchantville, New Jersey
Dated: November 2, 1996
<PAGE>
CLOVER APPRECIATION PROPERTIES I, L.P.
23 West Park Avenue
Merchantville, New Jersey 08109
PROXY STATEMENT
FOR
SPECIAL MEETING OF LIMITED PARTNERS
OF
CLOVER APPRECIATION PROPERTIES I, L.P.
TO BE HELD NOVEMBER 27, 1996
This Proxy Statement and the accompanying Notice of Special Meeting of
Limited Partners and form of Proxy are first being mailed to limited partners
(each a "Limited Partner", and collectively, the "Limited Partners") of Clover
Appreciation Properties I, L.P. (the "Partnership"), a limited partnership
formed in June 1988 under the Revised Uniform Limited Partnership Act of the
State of Delaware ("Delaware Act"), on or about November 2, 1996. A special
meeting of Limited Partners ("Special Meeting") will be held at 23 West Park
Avenue, Merchantville, New Jersey 08109, on November 27, 1996, at 10:00 a.m.,
local time, to consider two proposals concerning the sale of The Royal Wood
Apartments (the "Royal Wood Apartments" or the "Property").
INTRODUCTION
In the first proposal (the "Sale Proposal"), the General Partner proposes
that the Royal Wood Apartments be sold to Strand Inc. (the "Buyer"), pursuant to
the terms of an Agreement of Sale between the Partnership and the Buyer which is
expected to be entered into on or about November 15, 1996 (the "Sale
Agreement"), for a purchase price (the "Purchase Price") of $7,800,000 (the
"Sale"). The Buyer is not an affiliate of the General Partner. As a consequence
thereof, you are being asked to authorize the Partnership to sell all of the
Partnership's interest in the Royal Wood Apartments. The Sale Proposal requires
the approval by the holders of more than 50% of the outstanding units of limited
partnership interests (each a "Unit") in the Partnership ("Majority Vote"). If
the Sale Proposal is approved by a Majority Vote of the Limited Partners, and
the other conditions to the closing have been met (as set forth in the Sale
Agreement and discussed in this Proxy Statement), the Sale will be completed and
the Partnership will be terminated and dissolved. Therefore, approval of the
Sale Proposal will also be deemed a consent to the termination and dissolution
of the Partnership (upon the completion of the Sale). The Partnership will
distribute the net proceeds and remaining cash (after
<PAGE>
reserves) to the Limited Partners, estimated to amount to $150 per
Unit.
At the Special Meeting, you will be asked to consider a second proposal
("Alternative Sale Proposal") which will authorize a sale of the Royal Wood
Apartments by the Partnership to another buyer ("Alternative Sale"), if approved
by the General Partner. However, an Alternative Sale only will be authorized if
(i) the Sale Proposal is approved by a Majority Vote, but the Sale is not
completed for any reason, (ii) the Alternative Sale is completed by December 31,
1999 for cash consideration not less than the fair market value of the Royal
Wood Apartments (as set forth in an appraisal dated within nine months of the
execution of an Alternative Sale agreement) and (iii) the buyer in an
Alternative Sale is not an affiliate of the General Partner. The Alternative
Sale Proposal must be approved by a Majority Vote. If the Sale to the Buyer does
not close for any reason and an Alternative Sale is completed, the Partnership
will be terminated and dissolved. Therefore, approval of the Alternative Sale
Proposal will also be deemed to be a consent to the termination and dissolution
of the Partnership (upon the completion of an Alternative Sale).
In considering and voting upon the proposals, Limited Partners should
carefully consider that, even if the Sale Proposal and the Alternative Sale
Proposal (collectively, the "Proposals") are adopted:
1. There can be no assurance that the Sale will be completed on the terms
set forth in the Sale Agreement, or at all, or that the distribution
per Unit estimated to result therefrom will be received.
2. Approval of the Sale Agreement and the transactions contemplated
thereby by a Majority Vote will also authorize the General Partner,
without further Limited Partner notice and approval, to agree on
behalf of the Partnership to any modifications, amendments and waivers
to the current version and final executed copy of the Sale Agreement
which the General Partner determines to be necessary or appropriate,
including changes in the amount and type of consideration to be
received by the Partnership.
3. If the Sale is not completed, the General Partner will not, by virtue
of the Alternative Sale Proposal or otherwise, be under any obligation
to obtain and complete an Alternative Sale.
4. There can be no assurance that an Alternative Sale will be obtained or
completed, or that the terms (including price) of any Alternative Sale
will be as favorable to the Partnership as those of the Sale.
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5. A specific Alternative Sale will not require or be submitted for
Limited Partners' approval at a later date.
The accompanying Proxy is solicited on behalf of the General Partner to be
voted at the Special Meeting. In addition to the original solicitation by mail,
the proxies may be solicited in person or by telephone. All expenses of this
solicitation, including the cost of preparing and mailing this Proxy Statement,
will be paid by the Partnership.
Proxies in the form enclosed, properly executed and duly returned, will be
voted in accordance with the instructions thereon. Additionally, the Proxy
delegates discretionary authority to the General Partner with respect to any
other business which may properly come before the Special Meeting or any
adjournment or postponement thereof, including, without limitation, any proposal
to adjourn or postpone the Special Meeting. A Limited Partner who has given a
Proxy may revoke it by filing an instrument revoking it, by submitting a duly
executed Proxy bearing a later date or by voting in person at the Special
Meeting. Properly executed Proxies that are returned, but in which no direction
on a Proposal is given, will be voted for the Proposal, and in the discretion of
the General Partner, for such other matters as may properly come before the
Special Meeting.
The Partnership has only one class of limited partners and no Limited
Partner has a right of priority over any other Limited Partner. The
participation of the Limited Partners is divided into Units, and each Limited
Partner owns one Unit for each $1,000 of capital contributed by such Limited
Partner to the Partnership. Each of the Proposals will be adopted only if
approved by a Majority Vote. Each Unit is entitled to one vote on each of the
Proposals.
As of October 30, 1996 (the "Record Date"), the Partnership had 3,591 Units
outstanding, held by 351 holders. There is no established trading market for the
Units. The Partnership is not aware of any person or group of persons who owns
more than 5% of the outstanding Units. Only Limited Partners on the Record Date
will be entitled to notice of and to vote at the Special Meeting.
THE GENERAL PARTNER BELIEVES THAT THE SALE OF THE PROPERTY IS IN THE BEST
INTERESTS OF THE LIMITED PARTNERS AND RECOMMENDS THAT THE LIMITED PARTNERS VOTE
FOR THE SALE TO THE BUYER AND VOTE FOR AN ALTERNATIVE SALE TO ANOTHER BUYER, IF
THE SALE PROPOSAL IS APPROVED, BUT FOR ANY REASON THE SALE IS NOT COMPLETED.
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TABLE OF CONTENTS
Page
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INTRODUCTION............................................................ i
PROXY STATEMENT SUMMARY................................................ 1
The Special Meeting............................................ 1
Matters to be Considered....................................... 1
Sale Proposal.................................................. 1
Structure of the Sale.......................................... 2
Alternative Sale Proposal...................................... 2
Dissenters' or Appraisal Rights................................ 2
Recommendation of the General Partner.......................... 3
Material Factors to be Considered.............................. 3
Voting Requirements ........................................... 4
Consequences if Proposals Not Approved......................... 4
Income Tax Consequences........................................ 5
SPECIAL MEETING OF LIMITED PARTNERS..................................... 7
Meeting Information Regarding Proxies.......................... 7
Procedures for Completing Proxies.............................. 8
Voting Requirements............................................ 8
Dissenters' or Appraisal Rights................................ 9
THE PARTNERSHIP......................................................... 10
Business of the Partnership.................................... 10
Outstanding Real Estate Note............................................ 10
Property of the Partnership.................................... 11
Security Ownership of Directors and Officers of the
General Partner................................................ 13
BACKGROUND AND REASONS FOR THE PROPOSED SALE ........................... 14
The Buyer...................................................... 14
Background of the Sale......................................... 14
Material Factors to be Considered in Connection with
the Sale Proposal and the Alternative Sale
Proposal ...................................................... 14
DESCRIPTION OF THE PROPOSALS............................................ 17
General Discussion of Proposed Sale and the Proposed
Alternative Sale............................................... 17
Regulatory Compliance.......................................... 19
Consequences If Proposals Are Not Approved..................... 19
DISTRIBUTIONS TO LIMITED PARTNERS....................................... 19
Sale........................................................... 19
Alternative Sale............................................... 21
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Page
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ACCOUNTING TREATMENT.................................................... 22
INCOME TAX CONSEQUENCES................................................. 23
Sale Proposal.................................................. 23
Alternative Sale Proposal...................................... 26
OTHER RELEVANT INFORMATION.............................................. 27
SELECTED HISTORICAL FINANCIAL DATA INFORMATION.......................... 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................................... 29
INDEX TO FINANCIAL STATEMENTS........................................... 32
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<PAGE>
PROXY STATEMENT SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS PROXY STATEMENT AND DOES NOT PURPORT TO BE COMPLETE. THIS SUMMARY IS
QUALIFIED IN ALL RESPECTS BY THE REMAINDER OF THIS PROXY STATEMENT, WHICH SHOULD
BE READ IN ITS ENTIRETY.
The Special
Meeting The Special Meeting will be held on November 27,
1996, commencing at 10:00 a.m., at 23 West Park
Avenue, Merchantville, New Jersey 08109. Holders of
Units at the close of business on the Record Date are
entitled to notice of and to vote at the
Special Meeting.
Each Unit entitles the holder thereof to one vote. On
the Record Date, 3,591 Units were outstanding, held
by 351 holders.
Matters to be
Considered At the Special Meeting, Limited Partners will be
asked to consider and vote upon the two Proposals
which involve the sale of the Royal Wood Apartments
by the Partnership.
Sale
Proposal The General Partner proposes that the Royal Wood
Apartments be sold by the Partnership to the Buyer
pursuant to the terms of the Sale Agreement for a
purchase price of $7,800,000, and that the General
Partner be authorized to negotiate any final
changes to the Sale Agreement prior to execution
and to agree on behalf of the Partnership to
modifications, amendments and waivers to the Sale
Agreement which the General Partner determines to
be necessary or appropriate, including changes in
the amount and type of consideration to be received
by the Partnership. As a consequence thereof, you
are being asked to authorize the Partnership to
sell all of the Partnership's interest in the Royal
Wood Apartments. If the Sale Proposal is approved
by a Majority Vote, and the other conditions to the
closing have been met (as set forth in the Sale
Agreement and discussed in this Proxy Statement),
the Sale will be completed and the Partnership will
be terminated and dissolved. Therefore, approval
of the Sale Proposal will also be deemed a consent
to the termination and dissolution of the
Partnership (upon the completion of the Sale).
<PAGE>
Structure of
the Sale The Sale is structured as an all cash "as is" sale
of the Royal Wood Apartments, which constitutes all
of the assets of the Partnership. The Sale will
allow the Limited Partners to obtain a cash
distribution (after satisfaction of certain
expenses arising out of the Sale and an outstanding
Real Estate Note discussed further below) based
upon the current value of the Royal Wood
Apartments, which cash can be invested in
alternative investments, and will eliminate the
further expense of operating the Partnership as a
publicly-held entity.
Alternative
Sale
Proposal At the Special Meeting, you will also be asked to
consider the Alternative Sale Proposal, which would
authorize the sale of the Royal Wood Apartments by
the Partnership to another buyer, if approved by
the General Partner. The Alternative Sale
transaction only will be authorized if (i) the Sale
Proposal is approved by a Majority Vote, but the
Sale is not completed for any reason, (ii) the
Alternative Sale is completed by December 31, 1999
for cash consideration not less than the fair
market value of the Royal Wood Apartments (as set
forth in an appraisal dated within nine months of
the execution of an Alternative Sale agreement) and
(iii) the buyer in an Alternative Sale is not an
affiliate of the General Partner. The Alternative
Sale Proposal must be approved by a Majority Vote.
If the Sale to the Buyer does not close for any
reason and an Alternative Sale is completed, the
Partnership will be terminated and dissolved.
Therefore, approval of this Alternative Sale
Proposal will also be deemed a consent to the
termination and dissolution of the Partnership
(upon the completion of an Alternative Sale). No
additional vote of the Limited Partners will be
sought with respect to any particular Alternative
Sale.
Dissenters'
or Appraisal
Rights Limited Partners who vote against either of the
Proposals will not be entitled to dissenters' or
appraisal rights under Delaware law or under the
Partnership Agreement between the General Partner and
the Limited Partners, dated June 1988, as amended and
restated (the "Partnership Agreement").
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<PAGE>
Recommendation
of the General
Partner The General Partner is soliciting proxies from the
Limited Partners to be used at the Special Meeting,
and at any adjournments thereof.
After reviewing all relevant information, the General
Partner believes that the terms of the two Proposals
are fair and reasonable to the Partnership and the
Limited Partners, and is recommending that the
Limited Partners vote for both Proposals.
Material
Factors to be
Considered The General Partner considered the following
material factors that weigh in favor of the Sale
Proposal and the Alternative Sale Proposal: (1) the
possibility that the Partnership will not have
adequate cash to repay the Real Estate Note (as
amended, the "Note") held by Aetna Life Insurance
Company (the "Lender") when it becomes due on July
1, 1997, and the potential foreclosure on the Royal
Wood Apartments if the Lender is unwilling to
negotiate an extension of the maturity date or if
the Partnership is unable to obtain alternate
financing to satisfy the Note; (2) the potential
for increased operating and maintenance expenses
required in future years as the Royal Wood
Apartments age; (3) certain risks applicable to the
ownership of apartment complexes, including
competition from other rental apartment and
townhouse developments in the Atlanta/Stone
Mountain area, and adverse local market conditions
due to changes in the economic conditions in the
Atlanta/Stone Mountain region or nationally;
(4) the administrative costs necessary to operate the
Partnership as a public entity; (5) the potential for
Limited Partners to realize higher returns on the
cash distributed from the Sale than they otherwise
would receive if the Royal Wood Apartments were not
sold; (6) the lack of an established trading market
for the Units; and (7) the tax return requirements
and associated expenses as a result of owning the
Units.
The General Partner considered the following material
factors that weigh against the Sale Proposal and the
Alternative Sale Proposal: (1) the possibility that
future rental income could more than offset future
operating and maintenance costs and, as a result,
cash flow distributions to
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the Limited Partners could thereby resume; and
(2) the possibility of eventually obtaining a higher
purchase price for the Royal Wood Apartments if it is
not sold in the foreseeable future.
The General Partner has concluded that, on balance,
the sale of the Property is in the best interests of
the Limited Partners, and therefore recommends that
the Limited Partners consent to the Sale Proposal and
the Alternative Sale Proposal.
Voting
Requirements A Majority Vote of the Limited Partners is required
to approve each of the Proposals. Abstentions with
respect to any Proposal will have the same effect
as votes against the Proposal, because approval
requires a vote in favor of the Proposal. Approval
of the Alternative Sale Proposal is conditioned
upon a Majority Vote in favor of the Sale Proposal.
Limited Partners at the close of business on the
Record Date are entitled to notice of the Special
Meeting and to vote with respect to both Proposals.
The presence at the Special Meeting in person or by
proxy of at least a majority of the Units is
necessary to constitute a quorum. Abstentions will be
counted in determining whether a quorum is present.
Whether or not a quorum is present or represented at
the Special Meeting, the holders of a majority of the
Units present or represented by proxy may adjourn the
Special Meeting from time to time without further
notice to the Limited Partners.
Consequences if
Proposals Not
Approved If the Proposals are not approved by a Majority
Vote, the Partnership would continue to operate the
Royal Wood Apartments and the General Partner would
consider other sale opportunities if and as they
became available. In addition, the General Partner
would be required to solicit the approval of the
Limited Partners with respect to any subsequent
sale of the Royal Wood Apartments and to incur the
additional costs necessary to solicit the approval
of the Limited Partners at such later point in
time.
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<PAGE>
Also, if the Proposals are not approved and the Royal
Wood Apartments are not sold prior to July 1, 1997,
the Partnership may not be able to satisfy the Note
on July 1, 1997 as required, and if it is unable to
negotiate an extension of the Note or obtain
alternate financing at that time, the Lender may
foreclose on the Property which may result in the
Partnership filing for bankruptcy.
Income Tax
Consequences If the Sale is completed, the General Partner
anticipates that the Partnership will report a loss
from the Sale, which will be allocated to the
Limited Partners. Since the Royal Wood Apartments
are real property used in a trade or business, the
character of the loss on the Sale is determined
under Section 1231 ("Section 1231") of the Internal
Revenue Code of 1986, as amended (the "Code"). A
taxpayer's gains and losses from all property
subject to the provisions of Section 1231 in any
taxable year are combined and, in general, a net
gain is treated as a capital gain while a net loss
is treated as an ordinary loss. The loss realized
from the Sale would be treated as a passive
activity loss subject to the provisions of Section
469 of the Code.
In addition to the loss on the Sale, the General
Partner anticipates that the Partnership will report
income from operations in the year of the Sale. This
income will also be allocated to the Limited Partners
and will be treated as passive activity income
subject to the provisions of Section 469 of the Code.
The Sale by the Partnership and the subsequent
distribution by the Partnership of the net proceeds
of the Sale and the liquidation of the Partnership
will constitute a complete disposition by a Limited
Partner of his interest in the Partnership (unless he
has elected to aggregate his limited partnership
interest with other similar interests). Consequently,
the excess of (1) the sum of any loss from the
Partnership for the taxable year in which the Sale
occurs (including losses carried over from prior
years, if any) plus any losses realized on the Sale,
over (2) a Limited Partner's net income or gain for
such taxable year from all passive activities
(including income or gain from the Partnership or
resulting from the Sale or
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<PAGE>
dissolution of the Partnership) may be deducted by
a Limited Partner against nonpassive income.
If a cash distribution from a liquidation and
dissolution exceeds a Limited Partner's adjusted tax
basis in his Units, such excess will be treated as a
gain realized by the Limited Partner on the Sale of
his Unit. Similarly, the excess of a Limited
Partner's adjusted tax basis in his Unit over the
amount distributed to the Limited Partner will be
treated as a loss realized by the Limited Partner on
the Sale of his Unit. Such gains or losses will be
treated as long term capital gains or losses in the
cases of Units held for more than 12 months; provided
that the Limited Partner is not considered to be a
"Dealer" with respect to the Units. A "Dealer" is one
who holds property, primarily for sale to customers
in the ordinary course of business. Gains or losses
on the liquidation of the Partnership in respect of a
Unit must be reported separately by each Limited
Partner and will depend upon each Limited Partner's
basis in his own Units.
Based on the complexities of the federal income tax
laws and because the tax consequences may vary
depending upon a holder's individual circumstances
or tax status, it is recommended that each Limited
Partner consult his tax advisor concerning the
Federal (and any applicable state, local or other)
tax consequences of the liquidation and dissolution
of the Partnership pursuant to a Sale or
Alternative Sale. See "Income Tax Consequences."
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<PAGE>
SPECIAL MEETING OF LIMITED PARTNERS
Meeting Information Regarding Proxies
This Proxy Statement is being furnished to the Limited Partners on the
Record Date in connection with both Proposals described herein.
Accompanying this Proxy Statement is a Proxy solicited by and on behalf of
the General Partner for use at the Special Meeting of Limited Partners to be
held on November 27, 1996, at 23 West Park Avenue, Merchantville, New Jersey
08109, at 10:00 a.m., local time, and at any adjournments thereof. Even those
Limited Partners intending to attend are requested to complete and return their
Proxies promptly. All Limited Partners are invited to attend the Special
Meeting. Proxies in the form enclosed, properly executed and duly returned, will
be voted in accordance with the instructions thereon. Additionally, the Proxy
delegates discretionary authority to the General Partner with respect to any
other business which may properly come before the Special Meeting or any
adjournment or postponement thereof, including, without limitation, any proposal
to adjourn or postpone the Special Meeting.
All questions as to the form of documents and the validity of Proxies will
be determined by the General Partner, which determinations will be final and
binding. The General Partner reserves the right to waive any defects or
irregularities in any Proxy. The Limited Partners will be notified promptly in
writing before the Special Meeting of any material changes in the terms of the
Proposals that are made after the date of this Proxy Statement.
Questions and requests for assistance or for additional copies of the Proxy
Statement and Proxy may be directed to Beacon Hill Partners, Inc., a proxy
solicitation firm, at 800-253-3814. In addition to soliciting Proxies by mail,
Proxies may be solicited in person and by telephone. The anticipated fees to be
paid by the Partnership on behalf of the Partnership to Beacon Hill Partners,
Inc. are $2,600 plus reasonable out of pocket expenses, estimated to approximate
$2,400. Beacon Hill Partners, Inc.'s responsibilities shall include contacting
Limited Partners by telephone to solicit proxies and providing the General
Partner with statistical results of votes.
BDO Seidman, LLP is the Partnership's independent auditor. Representatives
of BDO Seidman, LLP are expected to be available for the Special Meeting. Such
representatives will have the opportunity to make a statement if they desire to
do so and are expected to be available to respond to appropriate questions.
-7-
<PAGE>
Procedures for Completing Proxies
Limited Partners are requested to complete and return their Proxy as soon
as possible. If Units stand in the names of two or more persons, all such
persons must sign the Proxy. A Limited Partner who has given a Proxy may revoke
it by filing an instrument revoking it, by submitting a duly executed Proxy
bearing a later date or by voting in person at the Special Meeting. Properly
executed Proxies that are returned, but in which no direction on a Proposal is
given, will be voted for the Proposal and in the discretion of the General
Partner upon such other matters as may properly come before the Special Meeting.
A Proxy or its revocation will be deemed to have been submitted to the
Partnership on the date it is either given personally or mailed to the General
Partner at the following address:
Clover Appreciation Properties I, L.P.
c/o IFGP Corporation
P.O. Box 2347
Greenville, S.C. 29602
Attention: Paula C. Krause
Voting Requirements
If a Majority Vote in favor of the Sale Proposal is received and certain
other conditions are satisfied, the Sale will be completed. In the event that a
Majority Vote is obtained in support of the Sale Proposal, but the Sale to the
Buyer does not close for any reason, and a Majority Vote is received in favor of
the Alternative Sale Proposal, the Royal Wood Apartments may be sold to another
buyer. Upon the completion of the Sale or an Alternative Sale, the Partnership
will be terminated and dissolved.
The Record Date for determining the Limited Partners entitled to notice of
and to vote at the Special Meeting is October 30, 1996. On the Record Date, the
Partnership had 3,591 Units outstanding, held by 351 holders.
The presence at the Special Meeting in person or by proxy of at least a
majority of the Units is necessary to constitute a quorum. Abstentions will be
counted in determining whether a quorum is present. Whether or not a quorum is
present or represented at the Special Meeting, the holders of a majority of the
Units present or represented by proxy may adjourn the Special Meeting from time
to time without further notice to the Limited Partners. Abstentions with respect
to any Proposal will have the same effect as a vote against such Proposal.
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<PAGE>
Dissenters' or Appraisal Rights
Limited Partners who vote against any of the Proposals will not be entitled
to dissenters' or appraisal rights under Delaware law or under the Partnership
Agreement.
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<PAGE>
THE PARTNERSHIP
Business of the Partnership
The Partnership is a limited partnership formed in June 1988 under the
Delaware Act, to invest in existing income-producing residential real estate
properties. Crown Management Corporation, a New Jersey corporation which is a
wholly-owned subsidiary of Clover Financial Corporation, a New Jersey
corporation ("Clover Financial"), is the General Partner of the Partnership. The
Partnership sold $3,588,130 of Units in a public offering, which amount reflects
purchases by officers, directors and employees of the Partnership and its
affiliates net of selling commissions and purchases by certain subscribers with
reduced commissions.
On January 25, 1989, the Partnership acquired the Royal Wood Apartments, a
256-unit mid-rise residential apartment complex located in Stone Mountain
(Atlanta), Georgia, which it acquired from an unaffiliated seller (the
"Seller"), for a purchase price of $10,400,000. The Partnership also incurred
costs of $45,805 in connection with acquisition, and paid an acquisition fee of
$197,505 to the General Partner upon the closing of the offering of Units. The
Partnership financed the acquisition by assuming the existing Note in the
principal amount of $8,000,000 and by obtaining interim bank financing in the
amount of $2,750,000. On January 26, 1989, the Partnership sold back to the
Seller an undeveloped parcel of land (approximately 15 acres) (the "Parcel") at
the Royal Wood Apartments for a cash price of $800,000, of which $200,000 was
used to prepay a portion of the Note, and the balance was retained by the
Partnership as working capital reserves. The $2,750,000 interim bank loan was
subsequently refinanced with a $2,750,000 loan from an affiliate of the
Partnership. The affiliate loan was repaid in full on October 1, 1990 from the
net proceeds of the offering of the Units.
Outstanding Real Estate Note
The Partnership acquired title to the Royal Wood Apartments subject to a
certain Deed to Secure Debt, Assignment of Rents and Security Agreement dated
June 24, 1986 previously made by the predecessor in interest to the property,
Royal Wood Associates, a Montana limited partnership, in favor of Lender, (as
amended on January 25, 1989 and May 1, 1992, the "Security Deed") which Security
Deed secures the Note. In addition to the Note and Security Deed, the
Partnership also acquired the Royal Wood Apartments subject to an Assignment of
Rents and Leases, dated June 24, 1986.
-10-
<PAGE>
The maturity date of the Note was extended to July 1, 1997 in the First
Modification of Real Estate Note dated as of May 1, 1992 (the "First
Modification"). Pursuant to the terms of the First Modification, the Partnership
agreed to enter into an Escrow & Security Agreement (the "Escrow Agreement"),
also dated as of May 1, 1992. The Escrow Agreement provides for the collection
of certain funds by First Fidelity Mortgage Corporation (the "Escrowholder") to
cover the taxes on the Royal Wood Apartments and for the annual collection by
the Escrowholder of all operating income of the Partnership excluding certain
approved expenses (i.e.; customary day-to-day expenses paid to Borrower relating
to the operation, management or ownership of the Property).
The First Modification provides that the Partnership will be subject to a
pre-payment penalty (the "Pre-Payment Penalty") if the Note is pre-paid prior to
March 24, 1997 which would result in a penalty of approximately $100,000.
The original principal amount of the Note was $8,000,000. On the estimated
closing date of the Sale, December 31, 1996, the outstanding principal on the
Note will be approximately $7,320,000. The outstanding principal on the Note
will be paid from the proceeds of a Sale or Alternative Sale.
In connection with the Sale, the General Partner has negotiated with the
Lender to pay-off the Note in a discounted amount of $7,143,000 so long as the
Note is paid-off on or before March 31, 1997. In addition, the Lender has agreed
to waive the Pre-Payment Penalty.
Property of the Partnership
The Property, located at 200 Summit Lake Drive, Atlanta, Georgia, was built
in 1979 and consists of 256 apartment units in 28 two story buildings on 21.483
acres of land. The Property includes 455 parking spaces and the unit mix is as
follows:
Number Total
of Units Type Sq. Ft. Sq. Ft.
- -------- ---- ------- -------
32 1 BR/1 Bath Garden 544 17,408
88 1 BR/1 Bath Garden 776 68,288
64 1 BR/1-1/2 Bath 972 62,208
Townhouse
72 2 BR/2 Bath Garden 1,158 83,376
- --- -------
256 231,280
The average occupancy rates at the Royal Wood Apartments for the five years
ended December 31, 1991, 1992, 1993, 1994 and 1995
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<PAGE>
were 91.9%, 90.6%, 92.9%, 93.9% and 95.0%, respectively, and the average
effective annual rentals per unit for those five years were $5,096, $5,498,
$5,650, $5,824 and $6,177, respectively. The average effective rental rates per
unit for the six month and three month periods ended June 30, 1996 were $3,320
and $1,664, respectively, compared to $2,980 and $1,494 for the corresponding
periods of 1995. The average occupancy for the six and three months ended June
30, 1996 was 95% and 94%, respectively, compared to 96% for each of the
corresponding periods of 1995. The realty tax rates for the Royal Wood
Apartments for the periods ended June 30, 1994, June 30, 1995 and June 30, 1996
were $41.51 per $1,000 of assessed value, resulting in annual taxes of $116,344,
$126,220 and $122,870, respectively. The General Partner believes that the
Property is adequately covered by insurance.
Major projects planned for 1997 (all of which are subject to the prior
written consent of the Lender), at an estimated total cost of $268,000, include
exterior wood repairs and painting, carpeting and replacement of certain
appliances. Funding for these projects is expected to be provided by the
Property's operating cash flow.
Effective February 21, 1995, the General Partner and certain of its
affiliates entered into an agreement with NPI-CL Management L.P. ("NPI"), an
entity unaffiliated with the Partnership or its General Partner, pursuant to
which NPI began providing day-to-day asset management services for the
Partnership as well as property management services for the Partnership. NPI
replaced Allstate Management Corp. ("Allstate"), an affiliate of the General
Partner. The Partnership remains indebted to Allstate for accrued and unpaid
property management fees and reimbursable costs of approximately $487,600, and
to Clover Financial for advances to the Partnership of approximately $321,300.
The amounts owed to Allstate and Clover Financial will be waived and forgiven
upon the occurrence of a Sale or Alternative Sale.
In January 1996, NPI was acquired by an affiliate of Insignia Financial
Group, Inc. ("Insignia"). According to Commercial Property News and the National
Multi-Housing Council, Insignia is the largest property manager in the United
States. The General Partner does not believe this transaction will have a
significant impact on the Partnership.
As a result of the acquisition of NPI, Insignia now prepares quarterly and
annual reports for the Partnership, responds to questions pertaining to property
and investment performance, maintains the investor data base and serves as the
transfer agent for the Partnership. The Loan Agreement restricts the
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<PAGE>
Partnership's ability to pay Insignia for its services and, consequently, no
fees are paid to Insignia by the Partnership, nor are any accruing.
Security Ownership of Directors and Officers of the General Partner
As of the Record Date, the Partnership had 3,591 Units outstanding, held by
351 holders. There is no established trading market for the Units. The
Partnership is not aware of any person or group of persons who owns more than 5%
of the outstanding Units.
The General Partner has the sole right to manage the business of the
Partnership and make any and all decisions with respect thereto. The Limited
Partners are allowed to vote or consent only in limited circumstances as
permitted by the Delaware Act and as specifically set forth in the Partnership
Agreement. The General Partner has ultimate authority in all Partnership
business decisions.
The General Partner has the right to delegate management functions. Limited
Partners have no right to participate in the management of the Partnership.
As of September 30, 1996, the directors and officers of the General Partner
individually and as a group beneficially owned the following number of Units of
the Partnership:
Amount and Nature
of Beneficial Percentage
Name Ownership of Units Interest
- ---- ------------------ --------
Donald N. Love 6 *
Diane P. Duggan 6 *
All directors and
officers as a group
(4 persons) 12 *
- ------------------------
* Less than one percent
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<PAGE>
BACKGROUND AND REASONS FOR THE
PROPOSED SALE
The Buyer
The principal executive offices of Strand Inc. are located at Vancouver
Centre, 650 West Georgia Street, 21st Floor, Vancouver, British Columbia V6B 4N7
and its telephone number is (604) 687-1919.
Since 1976, the Buyer has acquired, developed and financed a portfolio of
real estate assets with a combined value of more than $1.8 billion. While the
Buyer's primary focus has been the acquisition of multi-family properties
throughout North America, the Buyer has also been actively involved in a number
of other sectors, including: the development of multi-family garden style and
highrise apartments and condominium projects; single family lot development; the
development of multi-unit warehouse projects; and, the provision of mortgage
financing to developers for residential and commercial developments. The Buyer
is not affiliated with the Partnership or the General Partner.
Background of the Sale
On September 10, 1996, the Buyer and the Partnership agreed to enter into
an Agreement of Sale, which the parties are currently negotiating and expect to
finalize on or about November 15, 1996. The Partnership also considered a sale
of the Royal Wood Apartments to other potential buyers, none of which offered a
purchase price as high as the Purchase Price offered by the Buyer.
The General Partner considered, but rejected as not in the best interests
of the Limited Partners, retaining its interest in the Royal Wood Apartments for
the foreseeable future with the expectation of achieving greater capital
appreciation. This alternative was rejected because of the factors discussed
below.
Material Factors to be Considered in Connection with the Sale
Proposal and the Alternative Sale Proposal
In order to assist the Limited Partners in determining whether to consent
to the Sale Proposal and the Alternative Sale Proposal, this Proxy Statement
contains information relating to the business and financial history of the
Partnership, and certain tax considerations if a sale of the Property is
completed. Although no attempt has been made to discuss herein all factors which
might be considered in reviewing such information, the General Partner believes
that the principal
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<PAGE>
factors discussed below should be considered by each Limited Partner.
The General Partner considered the following material factors that weigh in
favor of the Sale Proposal and the Alternative Sale Proposal: (1) the
possibility that the Partnership will not have adequate cash to repay the Note
when it becomes due on July 1, 1997, and the potential foreclosure on the Royal
Wood Apartments if the Lender is unwilling to negotiate an extension of the
maturity date or if the Partnership is unable to obtain alternate financing to
satisfy the Note; (2) the potential for increased operating and maintenance
expenses required in future years as the Royal Wood Apartments age; (3) certain
risks applicable to the ownership of apartment complexes, including competition
from other rental apartment and townhouse developments in the Atlanta/Stone
Mountain area, and adverse local market conditions due to changes in the
economic conditions in the Atlanta/Stone Mountain region or nationally; (4) the
administrative costs necessary to operate the Partnership as a public entity;
(5) the potential for Limited Partners to realize higher returns on the cash
distributed from the Sale than they otherwise would receive if the Royal Wood
Apartments were not sold; (6) the lack of an established trading market for the
Units; and (7) the tax return requirements and associated expenses as a result
of owning the Units.
The General Partner considered the following material factors that weigh
against the Sale Proposal and the Alternative Sale Proposal: (1) the possibility
that future rental income could more than offset future operating and
maintenance costs and, as a result, cash flow distributions to the Limited
Partners could thereby resume; and (2) the possibility of eventually obtaining a
higher purchase price for the Royal Wood Apartments if it is not sold in the
foreseeable future.
Generally, in the initial years after the construction of an apartment
complex, maintenance costs are low. As an apartment property ages, maintenance
costs increase in order to preserve the physical quality of the property and to
compete with newer or newly renovated complexes. The Property is approximately
17 years in age. Although the General Partner believes there are currently no
structural maintenance concerns at the Property, the General Partner expects
that the Property will require, through 2001, substantial maintenance and
improvement expenditures which will be necessary to maintain the competitive
position of the Property, which expenditures are estimated to be between
$800,000 and $1.1 million. There are no assurances that the actual costs of
completing the repair and replacement projects discussed above will not be more
or less than the estimate provided or that additional maintenance expenses will
not be required.
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<PAGE>
With respect to the Sale Proposal, the General Partner also considered the
fairness of the Purchase Price. Based on its experience in the real estate
industry and on the Partnership's consideration of the sale of the Royal Wood
Apartments to other prospective buyers, the General Partner believes that the
Purchase Price represents a fair price to the Partnership.
With respect to the Alternative Sale Proposal, the General Partner believes
that the conditions that must be satisfied in connection with an Alternative
Sale ensure that such a transaction will be fair to the Limited Partners. The
General Partner also considered that, if the Sale is not completed, approval of
the Alternative Sale Proposal will enable the Royal Wood Apartments to be sold
without the time and cost involved in soliciting the approval of the Limited
Partners to a specific Alternative Sale.
Balancing all of the material factors listed above, but without attaching
relative weight to them, the General Partner determined that both the Sale
Proposal and the Alternative Sale Proposal are fair and in the best interests of
the Limited Partners.
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<PAGE>
DESCRIPTION OF THE PROPOSALS
General Discussion of Proposed Sale and the Proposed Alternative Sale
The Buyer has agreed to pay to the Partnership a cash payment of $7,800,000
for the Royal Wood Apartments. Upon execution of the Sale Agreement, the Buyer
has agreed that it will deposit into escrow a total of $100,000 (the "Deposit").
In addition, the Buyer will be responsible for title insurance and survey
expenses. The Seller will be responsible for transfer taxes associated with the
Sale. In addition, the Buyer will be solely responsible for the payment of a
commission to The Apartment Group, the broker in the Sale transaction, pursuant
to a separate agreement.
The Sale Agreement will provide that certain items are to be apportioned
pro rata between the Partnership and the Buyer including: current collected
rents and prepaid rents; real estate taxes; water and sewer charges; amounts due
on service contracts assigned by the Partnership to Buyer pursuant to the Sale
Agreement; and any other current charges incurred in connection with the normal
operation of the Royal Wood Apartments.
It is anticipated that the closing of the Sale (the "Closing") will take
place by the end of 1996 or early in 1997 (the "Closing Date"). The Buyer's
obligation to close under the Sale Agreement will be subject to and conditioned
upon, among other things, the receipt of any and all approvals and consents
necessary for the Partnership to complete the Sale. The Partnership is required
to use its best efforts to endeavor to obtain all approvals and consents. If all
approvals and consents are not received within 15 days after execution of the
Sale Agreement, the Sale Agreement (unless it is amended or extended) will
automatically terminate and the Deposit delivered by the Buyer and interest
thereon will be returned to the Buyer and neither party shall have further
obligations to the other hereunder.
In addition, Buyer will have the right, at its sole discretion, to
terminate the Sale Agreement for a period of thirty (30) days following the
execution of the Sale Agreement (the "Due Diligence Period") for any reason. At
the end of the Due Diligence Period, Buyer shall be required to advance an
additional deposit of $50,000 to the Partnership.
The Sale Agreement will require the Partnership, at its own expense, to
make certain repairs, including the replacement of six roofs, asphalt repair,
seal coat and stripping of parking
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<PAGE>
lots, and concrete repairs to the walkways; such repairs are expected to be paid
from the Partnership's operating cash flows.
The Partnership will have the right to terminate the Sale Agreement in the
event the Buyer fails to comply with or otherwise defaults in any of the
provisions of the Sale Agreement (in which case all Deposit money delivered by
the Buyer to the Partnership pursuant to the Sale Agreement, will be retained by
the Partnership as liquidated damages). The Buyer will have the right to
terminate the Sale Agreement if the Partnership is unable to deliver title to
the Property in accordance with the Sale Agreement.
In addition, the Sale Agreement will provide that the Buyer has the right
to terminate the Sale Agreement upon the occurrence of the events summarized
below:
o The Property is damaged by fire or other casualty and
the cost of restoration exceeds five percent of the
Purchase Price; or
o A material portion of the Property is taken pursuant to
a condemnation proceeding.
Because the Closing will be subject to contingencies set forth in the Sale
Agreement, there can be no assurance that the proposed Sale will occur. If all
conditions precedent to the Buyer's obligation to close are not satisfied by the
Closing, the Buyer's obligation to purchase the Royal Wood Apartments will
terminate and all Deposit money will be returned, unless the Buyer and the
Partnership agree to extend the date of the Closing.
In addition, by voting in favor of the Sale Proposal, the Limited Partners
authorize the General Partner to agree on behalf of the Partnership to any
modifications, amendments and waivers to the Sale Agreement which the General
Partner determines to be necessary or appropriate, including changes in the
amount and type of consideration to be received by the Partnership.
Although the terms of an Alternative Sale transaction may be similar to the
terms of the Sale Agreement set forth above, the General Partner will be
authorized to agree on behalf of the Partnership to any modifications or
variations to the terms of the Sale Agreement in negotiating an Alternative Sale
which the General Partner determines to be necessary or appropriate, including
changes in the amount and type of consideration to be received by the
Partnership.
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<PAGE>
Regulatory Compliance
Other than the applicable rules and regulations of the Securities and
Exchange Commission, the General Partner knows of no other Federal or State
regulatory requirements with which the Partnership or the Buyer must comply in
order to complete the Sale or an Alternative Sale. However, the Partnership will
be required to comply with certain filing requirements under Delaware law in
order to effect the termination and dissolution of the Partnership subsequent to
a Sale or an Alternative Sale.
Consequences If Proposals Are Not Approved
If the Sale Proposal is not approved by a Majority Vote, (i) the Sale will
not be completed and (ii) an Alternative Sale will not be authorized. If the
Sale Proposal is approved by a Majority Vote but is not completed for any reason
and the Alternative Sale Proposal is approved by Majority Vote, the Partnership
will be authorized to sell the Royal Wood Apartments to another buyer without
further approval from the Limited Partners pursuant to the terms of the
Alternative Sale Proposal.
If the Proposals are not approved by a Majority Vote, the Partnership would
continue to operate the Royal Wood Apartments and the General Partner would
consider other sale opportunities if and as they became available. In addition,
the General Partner would be required to solicit the approval of the Limited
Partners with respect to any subsequent sale of the Royal Wood Apartments and to
incur the additional costs necessary to solicit the approval of the Limited
Partners at such later point in time.
Also, if the Proposals are not approved and the Royal Wood Apartments are
not sold prior to July 1, 1997, the Partnership may not be able to satisfy the
Note on July 1, 1997 as required, and if it is unable to negotiate an extension
of the Note or obtain alternate financing at that time, the Lender may foreclose
on the Property which may result in the Partnership filing for bankruptcy.
DISTRIBUTIONS TO LIMITED PARTNERS
Sale
If the Sale is completed, the Partnership will terminate and dissolve. The
General Partner will distribute the net Sale proceeds and the Partnership's
existing cash in accordance with the terms of the Partnership Agreement.
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<PAGE>
The Partnership Agreement provides that upon the sale of all of the
Partnership's interests in real property or upon any other event resulting in
the termination, winding up and liquidation of the Partnership, all proceeds
from a sale and all other amounts available for distribution are to be
distributed to the General Partner and the Limited Partners in accordance with
their positive capital account balances, as determined after taking into account
all capital account adjustments for the taxable year of the Partnership during
which such liquidation occurs. Since the General Partner will have a negative
capital account balance on the Closing Date, it will not receive any of the
proceeds from the Sale.
All Limited Partners are encouraged to review carefully the following chart
which summarizes the calculation of the estimated distribution per Unit in
connection with the proposed Sale. The calculations in this chart are based upon
estimates, assuming a Closing Date of December 31, 1996. Actual results will
likely differ from these estimates.
The estimated distribution amounts in the following chart differ from the
distribution amounts set forth in the "Unaudited Pro Forma Financial Statements"
of the Partnership included elsewhere in this Proxy Statement because the pro
forma condensed balance sheets give effect to the Sale and the resulting
distribution of net cash proceeds as if they had occurred on December 31, 1995
and June 30, 1996.
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<PAGE>
SOURCE AND USE OF FUNDS
Total
-----
Estimated Source of Funds
Purchase Price $7,800,000
Operating Cash Balance 75,000
----------
Estimated Total Sources of Funds $7,875,000
==========
Estimated Uses of Funds
Pay-off of First Mortgage $7,143,000
Closing Costs 35,000
Proxy Statement Costs (including filing
fees, printing, mailing and solicitation
costs) 20,000
Legal Fees 80,000
Accounting Fees 10,000
Reserves for Post-Closing Expenses 47,000
----------
Estimated Total Uses of Funds $7,335,000
==========
Total Estimated Distribution
to Limited Partners $ 540,000
==========
Estimated Distribution
per Unit $ 150
==========
Alternative Sale
If the Partnership received net proceeds from an Alternative Sale
similar to the estimated net proceeds from the Sale set forth above, the
estimated distribution per Unit would approximate the amount calculated above in
connection with the proposed Sale. There can, however, be no assurances that a
sale to another buyer in an Alternative Sale will be on as favorable terms to
the Partnership as the terms of the Sale.
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<PAGE>
ACCOUNTING TREATMENT
Upon the Closing of the Sale, the Partnership currently estimates that it
will realize a loss for accounting purposes. The amount of the loss will differ
from the loss reflected in the "Unaudited Pro Forma Financial Statements" of the
Partnership included elsewhere in this Proxy Statement due to results of
operations after December 31, 1995 and June 30, 1996, the dates as of which such
pro forma financial information assumes the Sale to have occurred, and through
the anticipated date of Closing of the Sale.
Due to the proposed sale of the Royal Wood Apartments and the subsequent
liquidation of the Partnership, the Partnership will reflect its investment in
the property at the lower of cost or market by recording an impairment loss in
the statement of operations for the quarter ended September 30, 1996.
-22-
<PAGE>
INCOME TAX CONSEQUENCES
The following discussion of Federal income tax consequences is intended to
inform Limited Partners of the anticipated Federal income tax consequences to
the Limited Partners resulting from the Sale (which is anticipated to take place
by the end of 1996 or early in 1997) or an Alternative Sale. This discussion is
based upon information compiled by the General Partner and is not based upon the
advice or an opinion of counsel. The following discussion should not be
considered tax advice. Based on the complexities of the Federal income tax laws
and because the tax consequences may vary depending upon a holder's individual
circumstances or tax status, it is recommended that each Limited Partner consult
his tax advisor concerning the Federal (and any applicable state, local or
other) tax consequences of the liquidation and dissolution of the Partnership
pursuant to a Sale or Alternative Sale.
Sale Proposal
The General Partner anticipates that the Sale will result in a loss to the
Partnership for federal income tax purposes. The amount of the loss will be the
excess of the Partnership's adjusted basis in the Royal Wood Apartments over the
amount realized on the Sale. The amount realized will be the Purchase Price less
the expenses of Sale, such as transfer taxes and expenses incurred or allowances
made to repair the Property or otherwise put it in acceptable condition to the
Buyer. The Partnership's adjusted basis in the Property is the cost of such
Property when purchased less the sale of the adjacent Parcel back to the Seller
plus capital improvements reduced by depreciation deductions taken with respect
to the Property. The Partnership's loss on the Sale will be allocated among the
Limited Partners in the manner discussed below. The character of any loss
allocable to Limited Partners will be the same as the character of the loss
reported by the Partnership.
The Property is real property used in a trade or business. Such property is
excluded from the definition of capital assets under Section 1221(2) of the
Code. Instead, the character of gain or loss from the sale or exchange of such
property is governed by the provisions of Section 1231 of the Code and such
property is referred to herein as a "Section 1231 asset." In general, if
property sold is a Section 1231 asset, gains and losses from the sale allocable
to a taxpayer are combined with any other Section 1231 gains or losses of such
taxpayer and a net gain is treated as a capital gain while a net loss is treated
as an ordinary loss. There is an exception in the case of gains recognized on a
sale or exchange of Section 1231 assets where a taxpayer has incurred losses on
such sales or exchanges during
-23-
<PAGE>
the preceding five taxable years if such losses were treated as ordinary losses.
The Partnership's loss to be allocated among the Limited Partners on the
Sale of the Royal Wood Apartments will be characterized as a loss under Section
1231 of the Code, which would be an ordinary loss unless such loss is used to
offset Section 1231 capital gains of the Limited Partners. Partnership losses
are allocated 99% to the Limited Partners and 1% to the General Partner.
In addition to the loss from the Sale by the Partnership, the General
Partner also anticipates that the Partnership's operating income combined with
forgiveness of liabilities owed to the General Partner combined with the
Partnership's operating loss will result in net income from operations in the
year of the Sale being allocated to the Limited Partners. The net income from
operations would be characterized as ordinary income and also as passive
activity income under Section 469 of the Code as discussed below.
Section 469 of the Code provides special rules for the treatment of income
and loss from "passive activities." A passive activity, for purposes of this
section, includes any rental activity, and therefore a Limited Partner's
distributive share of Partnership income or loss is treated as income or loss
from a passive activity. Losses from passive activities, to the extent they
exceed income from all such activities (exclusive of interest, dividends,
royalties, and similar items which are referred to as "portfolio income"),
generally may not be deducted against other income of the taxpayer, including
wages, active business income, and the taxpayer's own portfolio income.
Suspended losses are carried forward and treated as deductions from passive
activities in the next taxable year. An exception exists, however, if during the
taxable year a taxpayer disposes of his entire interest in a passive activity in
a fully taxable transaction (i.e., one in which all realized gains and losses
are recognized). In such cases, any excess losses for the activity may be used
to offset nonpassive income.
Since the Partnership's only asset consists of the Royal Wood Apartments,
the sale by the Partnership of the Royal Wood Apartments followed by the
liquidation of the Partnership and its distribution of available cash to the
Limited Partners will constitute a complete disposition by a Limited Partner of
his interest in the Partnership (unless he has elected to aggregate his limited
partnership interest with other similar interests). As a result, the excess of
(1) the sum of any loss from the Partnership for the taxable year in which the
Sale occurs (including losses carried over from prior years) plus any losses
realized on the Sale, over (2) net income or gain for such taxable year from all
passive activities (including the
-24-
<PAGE>
Partnership) will not be treated as a loss from a passive activity. Thus, such
excess loss, if any, may be used by a Limited Partner to offset nonpassive
income.
Upon the liquidation of the Partnership, Limited Partners may receive a
distribution of cash from the Partnership. If such distribution exceeds a
Limited Partner's basis in his Partnership interest, after such basis has been
adjusted for income from operations for the Partnership in the taxable year of
the Sale and losses from the Sale, such excess will be treated as a gain
realized by the Limited Partner on the sale of his Unit. Similarly, the excess
of a Limited Partner's basis in his Units (after the allocations described above
and including any non-deductible and non-amortized expenditures such as
syndication costs allocated to the Limited Partners) over the amount distributed
to such Partner will be treated as a loss realized by the Limited Partner on the
sale of his Units. The General Partner anticipates that Limited Partners will
realize an additional loss on the dissolution and termination of the
Partnership. However, whether or not a loss will be obtained or the amount of
such loss is based on each Limited Partner's adjusted tax basis in his Units.
Such amounts will be reported separately by the Limited Partners and not as part
of Partnership income or loss. Gain or loss realized by a Limited Partner (who
is not a Dealer in such property) on the liquidation of the Partnership in
respect of a Unit that has been held for more than 12 months will be treated as
a long-term capital gain or loss as if such Unit had been sold. Limited Partners
are urged to consult their tax advisors with regard to the tax consequences of
the dissolution and termination of the Partnership.
The deduction for capital losses of non-corporate taxpayers is limited,
generally, to the amount of capital gains of such taxpayers and to $3,000 of
other income. Although there is no exclusion for any portion of capital gains
recognized by a taxpayer, for federal income tax purposes, capital gains are
taxed at a rate not greater than 28 percent for non-corporate taxpayers. In the
case of corporate taxpayers, such gains are taxed as ordinary income, and losses
are allowable only to the extent of capital gains but may be carried forward or
carried back as permitted.
Gain on the Sale of the Royal Wood Apartments would also be treated as
ordinary income if the Partnership were deemed to be a Dealer in real estate for
federal income tax purposes. Under existing law, whether property is so held is
a question of fact and dependent upon all the facts and circumstances of the
particular transaction. The Partnership has not engaged in the business of
buying and selling real properties and, accordingly, the General Partner does
not believe that the Partnership will be treated as a Dealer in real property
and will not report any gain from the sale of Partnership property as such.
-25-
<PAGE>
Gain on the sale of partnership property may also be characterized as
ordinary income rather than capital gain to the extent that certain cost
recovery ("depreciation") deductions are required to be recaptured. Since the
cost of the Partnership's real property was recovered using a straight-line
method of depreciation, no portion of the gain on the sale of such property
would be recaptured as ordinary income. However, to the extent there was any
gain on the sale of the Partnership's tangible personal property, such gain
would be recaptured as ordinary income but only to the extent of prior cost
recovery deductions with respect to such property.
Since the Partnership anticipates reporting income from its operations in
the year of the Sale and a loss from the Sale, the General Partner does not
expect that Limited Partners will be subject to any applicable state or local
income tax consequences from the transaction as a result of the Royal Wood
Apartments being located in the Stone Mountain area east of Dekalb County,
Georgia. However, the impact of the Sale and the dissolution and termination of
the Partnership upon an individual's state or local income tax liabilities may
vary depending upon each Limited Partner's state of residence and his personal
income tax situation. Limited Partners should consult their tax advisors with
regard to any potential state or local income tax consequences as a result of
the Sale or the dissolution and termination of the Partnership.
Alternative Sale Proposal
If the Sale is not completed, but subsequently the Partnership does sell
the Royal Wood Apartments, at that time the tax consequences to Limited Partners
should be as described above. If the Royal Wood Apartments were sold on terms
similar to the Sale, it would be anticipated that the Partnership and the
Limited Partners would recognize a loss on the transaction. However, because the
Partnership will continue to report depreciation deductions on the Royal Wood
Apartments, depending on the time period that elapses until the Property is
sold, a sale even for the same Purchase Price could result in the Partnership
reporting a gain on the transaction.
-26-
<PAGE>
OTHER RELEVANT INFORMATION
The principal executive offices of the Partnership and the General Partner
are located at 23 West Park Avenue, Merchantville, New Jersey 08109, and their
telephone number is (609) 662-1116.
The Units are registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934 (the "Exchange Act"). Accordingly, the Partnership
currently is subject to the informational filing requirements of the Exchange
Act and is obligated to file periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "SEC") relating to
its business, financial condition and other matters. Reports and other
information filed by the Partnership can be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the SEC at the SEC's Chicago regional offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and New York regional offices at 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can be obtained from the public reference
section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Partnership's registration and reporting requirements under the
Exchange Act will discontinue after the liquidation and dissolution of the
Partnership.
There are no material pending legal proceedings to which the Partnership is
a party or to which the Property is subject.
There is no public market for the Units, and it is not anticipated that a
public market for the Units will develop. Transferability of Units is subject to
substantial restrictions, including limitations contained in the Partnership
Agreement. As of the date of this Proxy Statement, 351 Limited Partners held
3,591 Units.
There have been no changes in or disagreements with the Partnership's
accountants on accounting and financial disclosure.
-27-
<PAGE>
CLOVER APPRECIATION PROPERTIES I, L.P.
SELECTED HISTORICAL FINANCIAL DATA INFORMATION
The General Partner maintains a policy that the only cash distributions
made to Partners are distributions of "net cash receipts" (other than
distributions of proceeds from the sale of Partnership property or the
liquidation of the Partnership). Total distributions from inception through June
30, 1996 were $240,117, which amount represents a return of capital. All
distributions to Partners have been funded by current year net cash receipts and
undistributed net cash receipts from prior years and all distributions have been
made on a quarterly basis. No distributions have been made since 1991.
The following table presents selected historical financial information of
the Partnership as of the end of and for each of the periods presented below.
The selected historical information has been derived from historical financial
statements and should be read in conjunction with such statements and the
related notes contained elsewhere in this Proxy Statement.
Selected Financial Data
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------------------------
Six Months Ended
6/30/96 6/30/95 12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total
Revenues $ 809,051 $ 730,437 $ 1,502,645 $ 1,404,195 $ 1,348,665 $ 1,287,078 $ 1,212,935
Interest
Expense $ 332,152 $ 334,848 $ 670,503 $ 676,685 $ 682,019 $ 699,646 $ 717,585
Net Income
(loss) $ (33,831) $ (53,995) $ (146,810) $ (213,542) $ (236,185) $ (308,605) $ (554,665)
Net Income
(loss) per
Unit $ (9.33) $ (14.89) $ (40.47) $ (58.87) $ (65.11) $ (85.08) $ (152.92)
Cash
distribution
per Unit $ $ $ $ $ $ $ 12.50
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total
assets at
end of
period $ 8,516,474 $ 8,692,608 $ 8,487,563 $ 8,706,558 $ 8,894,576 $ 9,069,744 $ 9,349,568
----------- ----------- ----------- ----------- ----------- ----------- -----------
Long-term
debt $ 8,096,900 $ 8,170,000 $ 8,134,271 $ 8,195,047 $ 8,182,042 $ 8,091,725 $ 8,029,205
----------- ----------- ----------- ----------- ----------- ----------- -----------
Book Value
per Unit $ 34.47 $ 69.39 $ 43.80 $ 84.27 $ 143.15 $ 208.26 $ 293.34
</TABLE>
-28-
<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition; Liquidity and Capital Resources
The Partnership owns one resi ential apartment complex located in the Stone
Mountain area east of DeKalb County, Georgia. The Partnership acquired the Royal
Woods Apartments on January 25, 1989 from an unaffiliated third party. The
Partnership derives its revenues from rental income from its Property and is
responsible for operating expenses, administrative expenses, capital
improvements and debt service payments.
At June 30, 1996, the Partnership had cash on hand of $228,335 including
cash reserves of $191,336 and $36,999 in security deposits. Total cash on hand
at December 31, 1995, was $141,781, including cash reserves of $104,782 and
$36,999 in security deposits. While the Partnership is able to satisfy its
current obligations with cash flows from operations, the General Partner
believes that if there should be a reversal of the real estate market in the
area where the Royal Wood Apartments are located, then it would be likely that
the Partnership's current funds, together with cash flows from operations, would
not be sufficient to meet the Partnership's liquidity requirements. The
Partnership's working capital deficit was $29,468 on June 30, 1996, compared to
a working capital deficit of $55,448 on December 31, 1995. The decrease in the
working capital deficit is primarily attributable to an increase in cash and
real estate tax escrows, partially offset by an increase in accounts payable,
accrued expenses and prepaid rents.
The Partnership's net cash flow from operations was $117,018 in 1995 as
compared to $140,208 in 1994 and $57,716 in 1993. The decrease of $23,190 in
1995 as compared to 1994, is primarily due to an increase in cash paid for other
expenses, partially offset by an increase in cash received from rentals and a
decrease in interest paid. The increase of $82,492 in 1994 as compared to 1993
was primarily due to an increase in cash received from rentals. No distributions
to partners were made during 1995.
The Partnership's net cash flow from operations was $159,446 for the six
months ended June 30, 1996, compared to $87,085 for the corresponding period of
1995. The increase in net cash flow from operations during the six months ended
June 30, 1996, is primarily attributable to an increase in cash received from
rentals, partially offset by an increase in cash paid for operating activities.
No distributions to partners were made during the six months ended June 30, 1996
or 1995, and it is
-29-
<PAGE>
unlikely that distributions will be made in the foreseeable future.
As of December 31, 1995 and June 30, 1996, the Partnership owed a total of
approximately $808,900 to Clover Financial and its affiliates, including
$487,600 in accrued property management fees and reimbursable costs and $321,300
in advances made to or on behalf of the Partnership. The amounts owed to Clover
Financial and its affiliates will be waived and forgiven upon the occurrence of
a Sale or Alternative Sale.
Effective February 21, 1995, the General Partner and certain of its
affiliates entered into an agreement with NPI-CL Management L.P. ("NPI"), an
entity unaffiliated with the Partnership or its General Partner, pursuant to
which NPI began providing day-to-day asset management services for the
Partnership as well as property management services for the Partnership. NPI is
an affiliate of National Property Investors, Inc. On January 19, 1996, the
stockholders of National Property Investors, Inc. sold all of the issued and
outstanding stock to IFGP Corporation, an affiliate of Insignia Financial Group,
Inc.
Results of Operations
Total revenues for the year ended December 31, 1995 were $1,502,645 as
compared to $1,404,195 and $1,348,665 for the years ended December 31, 1994 and
1993, respectively. The increases in total revenue in 1995 and 1994 are
primarily attributable to increases in rental income. The increases in rental
income of $102,256 from 1994 to 1995 and $56,246 from 1993 to 1994 are the
result of increases in occupancy and rental rates combined with a decrease in
concessions and write-offs.
Total revenues for the six and three months ended June 30, 1996, were
$809,051 and $400,544, respectively, compared to $730,437 and $368,605 for the
corresponding period of 1995. The increase in total revenues for the six and
three months ended June 30, 1996 is primarily attributable to rental rate
increases at the Partnership's investment property.
The average effective rentals per unit were $6,177, $5,824 and $5,650 for
1995, 1994 and 1993, respectively. The average occupancy was 95.0%, 93.9% and
92.9% in 1995, 1994 and 1993, respectively. The increases in average occupancy
are primarily attributable to the general improvement in the residential real
estate market in the surrounding area.
The average effective rentals per unit for the six and three months ended
June 30, 1996, were $3,320 and $1,664, respectively, compared to $2 980 and
$1,494 for the corresponding periods of 1995. The average occupancy for the six
and three months ended June 30, 1996 was
-30-
<PAGE>
95% and 94%, respectively, compared to 96% for each of the corresponding
periods of 1995.
Operating expenses were $688,325, $633,470 and $608,186 in 1995, 1994 and
1993, respectively. The increase in 1995 as compared to 1994 is primarily due to
increases in cleaning and decorating expenses, repairs and maintenance, payroll
and related costs and real estate taxes, partially offset by the elimination of
management fees effective with NPI's assumption of management responsibility.
Under the terms of the Property Management Agreement with NPI, NPI does not
charge a management fee. The increase in 1994 as compared to 1993, is primarily
due to increases in repairs and maintenance and office and miscellaneous costs.
Professional services were $21,934, $41,096 and $25,308 for 1995, 1994 and 1993,
respectively. The decrease in 1995 as compared to 1994 and the increase in 1994
over 1993, was primarily due to the settlement of a lawsuit in 1994 in which the
Partnership paid a $10,000 deductible not covered by the insurance company and
related legal expenses. Credit and collection fees were also reduced in 1995.
Operating expenses for the six and three months ended June 30, 1996, were
$367,284 and $224,565 respectively, compared to $306,241 and $146,809 for the
corresponding periods of 1995. The increase in opera ing expenses is primarily
attributable to an increase in repairs and maintenance expenses incurred in
efforts to increase the curb appeal of the Partnership's property.
The Partnership had a net loss of $146,810, 213,592 and $236,185 for 1995,
1994 and 1993, respectively. The reduction in loss in 1995 as compared to 1994
is primarily due to increased rental income and a decrease in professional
services, partially offset by an increase in operating expenses. The reduction
in loss in 1994 as compared to 1993 is also primarily due to increased rental
income, partially offset by increases in operating expenses and professional
services.
The Partnership realized a net loss for the six and three months ended June
30, 1996, of $33,831 and $63,427, respectively, compared to $53,995 and $17,275
for the corresponding periods of 1995. The reduction in net loss for the six
months ended June 30, 1996, is primarily due to an increase in rental revenue
caused by improvements in the area and reduced write-downs, write-offs and
rental concessions. The increase in net loss for the three months ended June 30,
1996, is primarily due to increased repairs and maintenance expenses.
-31-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Certified Public
Accountants for Clover Appreciation
Properties, I, L.P. ......................................................F-1
Clover Appreciation Properties I, L.P. Balance
Sheets as of December 31, 1995 and 1994 ..................................F-2
Clover Appreciation Properties I, L.P. Statements
of Operations for each of the three years in
the period ended December 31, 1995 .......................................F-4
Clover Appreciation Properties I, L.P. Statements
of Partners' Capital for each of the three years
in the period ended December 31, 1995 ....................................F-5
Clover Appreciation Properties I, L.P. Statements
of Cash Flows for each of the three years in the
period ended December 31, 1995 ...........................................F-6
Clover Appreciation Properties I, L.P. Summary of
Significant Accounting Policies ..........................................F-8
Clover Appreciation Properties I, L.P. Notes to
the Financial Statements .................................................F-9
Financial Statement Schedules
Clover Appreciation Properties I, L.P. Schedule III
Real Estate and accumulated depreciation for each
of the three years in the period ended
December 31, 1995 .......................................................F-17
Introductory paragraph to Unaudited Pro Forma
Financial Statements for Clover Appreciation
Properties I, L.P., relating to the sale of the
Royal Wood Apartments as of December 31, 1995 ...........................F-18
Clover Appreciation Properties I, L.P. Unaudited
Pro Forma Condensed Balance Sheet as of
December 31, 1995 .......................................................F-19
Clover Appreciation Properties I, L.P. Unaudited
Pro Forma Condensed Statement of Operations
for the year ended December 31, 1995 ....................................F-20
Clover Appreciation Properties I, L.P. Notes
to Unaudited Pro Forma Condensed Financial
Statements ..............................................................F-21
-32-
<PAGE>
Introductory paragraph to Unaudited Pro Forma
Financial Statements for Clover Appreciation
Properties I, L.P. relating to the sale of
the Royal Woods Apartments as of June 30, 1996 ..........................F-23
Clover Appreciation Properties I, L.P.
Unaudited Pro Forma Condensed Balance Sheet
of June 30, 1996 ........................................................F-24
Clover Appreciation Properties I, L.P. Unaudited
Pro Forma Condensed Statement of Operations for
the six months ended June 30, 1996 ......................................F-25
Clover Appreciation Properties I, L.P. Notes
to Unaudited Pro Forma Condensed Financial
Statements ..............................................................F-26
Crown Management Corporation Independent
Auditors' Report ........................................................F-29
Crown Management Corporation Balance Sheet as
of November 30, 1995 ....................................................F-30
Crown Management Corporation Notes to Financial
Statements ..............................................................F-31
Clover Appreciation Properties I, L.P. Unaudited
Balance Sheet as of June 30, 1996 .......................................F-34
Clover Appreciation Properties I, L.P. Unaudited
Statements of Operations for the six months ended
June 30, 1996 and 1995 ..................................................F-35
Clover Appreciation Properties I, L.P. Statements
of Partners' Capital (Deficit) for six months ended
June 30, 1996 and 1995 ..................................................F-37
Clover Appreciation Properties I, L.P. Statements
of Cash Flows for the six months ended June 30,
1996 and 1995 ...........................................................F-38
Clover Appreciation Properties I, L.P. Notes
to Financial Statements .................................................F-39
-33-
<PAGE>
Report of Independent Certified Public Accountants
Clover Appreciation Properties I, L.P.
Merchantville, New Jersey
We have audited the accompanying balance sheets of Clover Appreciation
Properties I, L.P. (a Delaware limited partnership) as of December 31, 1995 and
1994, and the related statements of operations, partners' capital and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Clover Appreciation
Properties I, L.P. as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
January 30, 1996
F-1
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Balance Sheets
<TABLE>
<CAPTION>
December 31, 1995 1994
- ---------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash (including $36,999 in 1995 and $29,670 in 1994
of cash held for security deposits) $ 141,781 $ 118,590
Accounts receivable 10,586 --
Real estate tax escrow 13,429 34,697
Prepaid expenses 9,998 2,733
----------- -----------
Total current assets 175,794 156,020
----------- -----------
Investment property, at cost 10,120,054 10,090,130
Less accumulated depreciation 1,809,055 1,540,362
----------- -----------
Net investment property 8,310,999 8,549,768
----------- -----------
Utility deposits 770 770
----------- -----------
$8,487,563 $8,706,558
----------- -----------
----------- -----------
</TABLE>
F-2
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Balance Sheets
December 31, 1995 1994
- -------------------------------------------------------------------------------
Liabilities and Partners' Capital
Current liabilities
Current maturities of mortgage payable $ 69,898 $ 63,903
Accounts payable 37,613 58,414
Accrued interest 55,465 55,944
Accrued expenses 23,058 17,187
Tenants' security deposits 40,414 30,257
Prepaid rents 4,794 16,946
----------- -----------
Total current liabilities 231,242 242,651
Mortgage payable, less current maturities 7,325,375 7,395,273
Due to affiliates 808,896 799,774
----------- -----------
Total liabilities 8,365,513 8,437,698
----------- -----------
Commitments and contingencies
Partners' capital
General partner (deficiency) (35,237) (33,769)
Limited partners 157,287 302,629
----------- -----------
Total partners' capital 122,050 268,860
----------- -----------
$ 8,487,563 $ 8,706,558
----------- -----------
----------- -----------
See accompanying summary of significant accounting policies
and notes to financial statements.
F-3
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Rental income $ 1,502,216 $ 1,399,960 $ 1,343,714
Other income -- 2,291 4,372
Interest income 429 1,944 579
----------- ----------- -----------
Total revenues 1,502,645 1,404,195 1,348,665
----------- ----------- -----------
Expenses
Interest 670,503 676,685 682,019
Operating expenses (including affiliate
transactions of $9,122 in 1995, $77,152
in 1994 and $78,829 in 1993) 688,325 633,470 608,186
Depreciation and amortization 268,693 266,486 269,337
Professional services 21,934 41,096 25,308
----------- ----------- -----------
Total expenses 1,649,455 1,617,737 1,584,850
----------- ----------- -----------
Net (loss) $ (146,810) $ (213,542) $ (236,185)
----------- ----------- -----------
----------- ----------- -----------
Net (loss) per limited partnership unit $ (40.47) $ (58.87) $ (65.11)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-4
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Statements of Partners' Capital
General Limited
Partner Partners Total
- -------------------------------------------------------------------------------
Balance, December 31, 1992 $ (29,272) $ 747,859 $ 718,587
Net (loss) (2,362) (233,823) (236,185)
--------- --------- ---------
Balance, December 31, 1993 (31,634) 514,036 482,402
Net (loss) (2,135) (211,407) (213,542)
--------- --------- ---------
Balance, December 31, 1994 (33,769) 302,629 268,860
Net (loss) (1,468) (145,342) (146,810)
--------- --------- ---------
Balance, December 31, 1995 $ (35,237) $ 157,287 $ 122,050
--------- --------- ---------
--------- --------- ---------
See accompanying summary of significant accounting policies
and notes to financial statements.
F-5
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Cash received from rentals $ 1,485,936 $ 1,417,876 $ 1,347,194
Other income received -- 2,291 4,372
Interest received 429 1,944 579
Interest paid (670,982) (677,123) (682,420)
Cash paid for other expenses (698,365) (604,780) (612,009)
----------- ----------- -----------
Net cash provided by operating activities 117,018 140,208 57,716
----------- ----------- -----------
Investing activities
Expenditures for property (29,924) (65,837) --
----------- ----------- -----------
Financing activities
Loans and advances from affiliates -- -- 73,503
Repayment of mortgage payable (63,903) (58,425) (53,413)
----------- ----------- -----------
Net cash (used) provided by
financing activities (63,903) (58,425) 20,090
----------- ----------- -----------
Net increase in cash 23,191 15,946 77,806
Cash, at beginning of year 118,590 102,644 24,838
----------- ----------- -----------
Cash, at end of year $ 141,781 $ 118,590 $ 102,644
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-6
<PAGE>
- --------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Reconciliation of net (loss) to net cash provided
by operating activities
Net (loss) $(146,810) $(213,542) $(236,185)
--------- --------- ---------
Adjustments
Depreciation and amortization 268,693 266,486 269,337
(Increase) decrease in accounts receivable (10,586) 7,742 (3,074)
Decrease (increase) in real estate tax escrow 21,268 (9,101) (13,896)
(Increase) decrease in prepaid expenses (7,265) 4,674 607
(Decrease) in accounts payable (20,801) (10,739) (33,356)
Increase (decrease) in accrued expenses
and interest 5,392 (176) (7,508)
Increase in tenants' security deposits 10,157 7,782 2,705
(Decrease) increase in prepaid rents (12,152) 10,174 3,849
Increase in due to affiliates 9,122 76,908 75,237
--------- --------- ---------
Total adjustments 263,828 353,750 293,901
--------- --------- ---------
Net cash provided by operating activities $ 117,018 $ 140,208 $ 57,716
========= ========= =========
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-7
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Summary of Significant Accounting Policies
Rental Revenue
Rental revenue is recognized when earned and represents potential billings, net
of concessions and vacancies.
Income Taxes
The Partnership has not provided for income taxes, since all income and losses
are to be allocated to the partners for inclusion in their respective tax
returns. The tax returns, the status of the Partnership as such for tax purposes
and the amount of allocable Partnership income or loss are subject to
examination by the Internal Revenue Service. If such examinations result in
changes with respect to the Partnership status or in changes to allocable
Partnership income or loss, then the tax liability of the partners could be
changed accordingly.
Net (Loss) and
Distributions Per
Partnership Unit
Net (loss) and distributions per limited partnership unit are computed from the
date of the closing of the Minimum Offering (October 1, 1990) based upon net
(loss) and distributions allocated to the limited partners and the weighted
average number of limited partnership units outstanding. Per unit information
has been computed based on 3,591 weighted average limited partnership units
outstanding.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-8
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Financial Statements
1. Organization
and Basis of
Accounting
Clover Appreciation Properties I, L.P. (the Partnership) is a limited
partnership which was formed in June 1988, in the State of Delaware for the
purpose of acquiring, operating and holding, directly or indirectly, residential
real estate for investment purposes. Leases primarily have a term of one year or
less. The general partner of the Partnership is Crown Management Corporation
(Crown), a wholly-owned subsidiary of Clover Financial Corporation (Clover).
The Partnership's records are maintained on the accrual basis of accounting as
adjusted for federal income tax reporting purposes. The accompanying financial
statements have been prepared from such records after making appropriate
adjustments, where applicable, to reflect the Partnership's accounts on the
accrual basis of accounting according to generally accepted accounting
principles (GAAP). For tax purposes, the Partnership in 1990 filed a Section 754
election due to the transfer of the limited partners' interest during the year
resulting in stepped up basis of the Partnership's investment property. In
addition, the costs incurred to modify the mortgage agreement in 1992 have been
expensed for book purposes and capitalized for tax purposes and are being
amortized over the remaining life of the mortgage.
The net effect of these items is summarized as follows:
December 31, 1995 1994
- -------------------------------------------------------------------------------
GAAP Tax Basis GAAP Tax Basis
- -------------------------------------------------------------------------------
Total assets $ 8,487,563 $ 9,719,442 $ 8,706,558 $ 9,080,085
=========== =========== =========== ===========
Partners' capital $ 122,050 $ 1,353,929 $ 268,860 $ 1,542,389
=========== =========== =========== ===========
Net (loss) $ (146,810) $ (188,458) $ (213,542) $ (255,217)
=========== =========== =========== ===========
F-9
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Financial Statements
Reconciliation of net (loss) per financial statement to net (loss) per federal
income tax return is as follows:
Year ended December 31, 1995 1994 1993
- -------------------------------------------------------------------------------
Net (loss) per financial
statement $(146,810) $(213,542) $(236,185)
Reconciling items
Depreciation (34,509) (34,536) (34,536)
Amortization of debt
modification costs (7,139) (7,139) (7,139)
--------- --------- ---------
Net (loss) per federal
income tax return $(188,458) $(255,217) $(277,860)
--------- --------- ---------
--------- --------- ---------
2. Investment
Property
This account balance refers to the Royal Wood Apartments, a 256 unit residential
apartment complex located in Stone Mountain, Georgia, and it consists of:
December 31, 1995 1994
- --------------------------------------------------------------------------------
Land $ 1,171,749 $ 1,171,749
Apartment buildings 8,167,125 8,138,448
Furniture and fixtures 781,180 779,933
----------- -----------
10,120,054 10,090,130
Less accumulated depreciation 1,809,055 1,540,362
----------- -----------
$ 8,310,999 $ 8,549,768
----------- -----------
----------- -----------
Depreciation is provided over the estimated useful lives of the various assets
using the straight-line method. The estimated lives range from 27 to 40 years
for apartment buildings and twelve years for furniture and fixtures. Maintenance
and repair costs are charged to expense as incurred. Significant betterments and
improvements are capitalized.
F-10
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Financial Statements
3. Notes and
Mortgages
Payable
In connection with the acquisition of Royal Wood, the Partnership assumed a
first mortgage loan held by Aetna Life Insurance Company in the original amount
of $8,000,000. The note is collateralized by the deed to the property and by the
assignment of all rents and leases. The note bore interest at a rate of 9.375%.
On November 25, 1992, the Partnership entered into a loan modification agreement
with Aetna Life Insurance Company effective May 1, 1992. The modification
resulted in a reduction of the interest rate on the loan from 9.375 to 9%
effective August 1, 1992. From September 1992 to June 1997, monthly payments of
principal and interest of $61,053 will be made with a balloon payment of
$7,288,004 due July 1, 1997, the maturity date of the mortgage. The lender
agreed to waive all default charges and late fees.
The modification also provided for the following:
Additional principal payments equal to the excess cash flow, as defined in the
agreement as all operating income less approved expenses for the fiscal years
ended June 30, 1993 through 1996. Approved expenses are day to day expenses
relating to the operation, management or ownership of the property exclusive of
management fees, payments to the Partnership or the General Partner and
affiliates, except for health insurance costs and computer fees.
Additional interest payments for the fiscal years ended June 30, 1995 through
1997 are to be equal to the lesser of: (a) excess cash flow as defined above or
(b) 1/2 of 1% of the outstanding principal balance of the loan on June 30 of
each year.
If, during any of the years ended June 30, 1995 through 1997, the additional
interest payment equals or exceeds the additional principal payment for that
period, no additional principal payment is due. Payment of additional interest
and principal are due on July 25 of each year. Through the reporting period
ended June 30, 1995 there has been no excess cash flow and, therefore, there
have been no payments of additional principal and interest due as required by
the provisions of the modification.
F-11
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Financial Statements
The minimum principal payments through maturity are as follows:
Year Ending December 31,
- ------------------------
1996 $ 69,898
1997 7,325,375
----------
$7,395,273
----------
----------
The Partnership also delivered an unconditional and irrevocable letter of credit
to Aetna Life Insurance Company in the amount of $100,000. The letter of credit
expires on September 1, 1996 and is guaranteed by Clover Financial Corporation.
The Partnership has agreed to maintain the letter of credit until September 1,
1997.
4. Transactions
With Affiliates
Clover and its affiliates are entitled to reimbursement for administrative
services rendered to the Partnership, direct expenses of Partnership operations,
and goods and services used by and for the Partnership. In addition, Clover and
its affiliates advanced the Partnership funds to pay initial offering,
organizational, and acquisition costs, as well as to fund additional working
capital outlays. These advances are non-interest bearing and a portion of the
advances were repaid by the Partnership from the proceeds of the sale of limited
partnership units. Clover and its affiliates also advanced the Partnership funds
to pay the first and second quarter 1991 distributions. As of both December 31,
1995 and 1994, advances due to Clover and its affiliates were $321,293.
Per the loan modification agreement, only approved expenses, which are expenses
that relate to the operation, management or ownership of the property, are
permitted to be paid. Approved expenses do not include management fees and
payments to reimburse the General Partner and its affiliates except for health
insurance costs and computer fees.
F-12
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Financial Statements
Effective February 21, 1995, NPI-CL, L.P. ("NPI") which is unaffiliated with the
general partner, replaced an affiliate of the general partner as property
manager. Until that time, as compensation for property management services
performed with respect to the Property, the affiliate was entitled to fees in an
amount not to exceed 5% of gross revenues. These fees were accrued but cannot be
paid until the mortgage payable is satisfied.
Reimbursable
Management Costs and
Fees Advances Total
- -------------------------------------------------------------------------------
Due to affiliates, balance
at January 1, 1993 $ 237,959 $ 336,167 $ 574,126
Incurred during 1993 67,472 84,860 152,332
Payments during 1993 -- (3,592) (3,592)
--------- --------- ---------
Due to affiliates, balance
at December 31, 1993 305,431 417,435 722,866
Incurred during 1994 71,008 6,144 77,152
Payments during 1994 -- (244) (244)
--------- --------- ---------
Due to affiliates, balance
at December 31, 1994 376,439 423,335 799,774
Incurred during 1995 8,610 512 9,122
Payments during 1995 -- -- --
--------- --------- ---------
Due to affiliates, balance
at December 31, 1995 $ 385,049 $ 423,847 $ 808,896
--------- --------- ---------
F-13
<PAGE>
- --------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Financial Statements
5. Partnership
Agreement
Pursuant to the terms of the Partnership Agreement, the net losses through
September 1990 were allocated 1% to the General Partner and 99% to the Initial
Limited Partner. After the sale of the Minimum Offering and the admission of
additional limited partners to the Partnership, all items of income, gain and
loss and distributions of cash are allocated as follows:
Net income of the Partnership from operations will be allocated as follows:
(a) first, if the Partnership made net cash receipts distributions with
respect to such period, an amount of net income up to the amount of such
net cash receipts distributions shall be allocated among the partners in
the same proportions as such net cash receipts distributions were made;
provided, however, that if the total amount of net income is less than the
amount of net cash receipts distributions for such a period, an amount of
net income equal to the amount of net cash receipts distributions
distributed to the General Partner shall be allocated to the General
Partner and all remaining net income shall be allocated to the Limited
Partners;
(b) second, to those partners having deficit balances in their capital
accounts in proportion to and to the extent of such deficits;
(c) third, to those partners, if any, who have received cumulative net cash
receipts distributions in the current and prior periods in an amount in
excess of the cumulative amount of net income allocated to such partners
in proportion to and to the extent of any such excess and;
(d) fourth, the balance, if any, shall be allocated 10% to the General Partner
and 90% to the Limited Partners in proportion to their relative ownership
of units.
F-14
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Financial Statements
Net income or gain realized by the Partnership on a sale shall be allocated in
the following order of priority:
(a) first, to the partners with negative capital account balances,
proportionately based on the respective negative balances in their capital
accounts until each such partner has a zero capital account balance;
(b) second, to the Limited Partners until the capital account balance of each
Limited Partner shall equal his adjusted capital contribution, as
determined without reduction for any sale or refinancing proceeds
distributed or to be distributed for the current period;
(c) third, to the Limited Partners until their capital accounts equal the sum
of the priority returns (a 12% annual noncompounded cumulative return on
their adjusted capital contributions) distributed or to be distributed to
the Limited Partners and the amount described in subparagraph (b);
(d) any remaining amounts of net income or gain shall be allocated 15% to the
General Partner and 85% to the Limited Partners in proportion to their
relative ownership of units.
Net losses of the Partnership shall be allocated 1% to the General Partner and
99% to the Limited Partners, in accordance with their relative ownership of
units.
Net cash receipts shall, to the extent determined by the General Partner, be
distributed 10% to the General Partner and 90% to the Limited Partners quarterly
with respect to the periods ending March 31, June 30, September 30, and December
31 of each year, with all amounts distributed to the Limited Partners as a group
being divided among the Limited Partners in accordance with relative ownership
of units. The sale and refinancing proceeds shall be distributed to the extent
available first, to the Limited Partners in an amount equal to their adjusted
capital contributions, second to the Limited Partners in an amount equal to
their priority returns, and third, the balance shall be
F-15
<PAGE>
distributed 15% to the General Partner and 85% to the Limited Partners in
accordance with their relative ownership of units.
6. Commitments
and
Contingencies
The Partnership was involved in litigation arising from two complaints each
seeking damages in excess of $50,000. Both complaints were settled and, except
for the deductibles, the costs were covered under the Partnership's insurance
policy.
F-16
<PAGE>
- ------------------------------------------------------------------------------
Years Ended December 31, 1995, 1994 and 1993
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Cost Capitalized
Initial Cost Subsequent to Acquisition
------------- -------------------------
Buildings and Buildings and
Description Encumbrance Land Improvements Land Improvements
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
256-unit residential apartment complex
located in Stone Mountain, Georgia Deed $1,132,248 $8,513,557 $39,501 $434,748
</TABLE>
(A) The aggregate cost for federal income tax purposes is equal to the amount at
which the real estate is carried for financial reporting purposes, plus the
additional stepped up basis due to a Section 754 election in the amount of
$1,403,493.
(B) Reconciliation of real estate:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance, at beginning of year $10,090,130 $10,024,293 $10,024,293
Additions during year:
Acquisition 29,924 65,837 --
----------- ----------- -----------
Balance, at end of year $10,120,054 $10,090,130 $10,024,293
----------- ----------- -----------
----------- ----------- -----------
(C) Reconciliation of accumulated depreciation:
Balance, at beginning of year $ 1,540,362 $ 1,273,876 $ 1,008,360
Depreciation expense 268,693 266,486 265,516
----------- ----------- -----------
Balance, at end of year $ 1,809,055 $ 1,540,362 $ 1,273,876
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE III
Clover Appreciation Properties I, L.P.
Schedules of Real Estate and Accumulated Depreciation
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Gross Amount at Which Life on Which
Carried at December 31, 1995 (A) Depreciation Has
- ---------------------------------------------------------------------
Buildings and Date of Date Been Computed
Land Improvements Total (B) Depreciation(C) Construction Acquired in 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,171,749 $8,948,305 $10,120,054 $1,809,055 1979 1/25/89 12-40 years
</TABLE>
F-17
<PAGE>
- -------------------------------------------------------------------------------
CLOVER APPRECIATION PROPERTIES I, L.P.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
Clover Appreciation Properties I, L.P. (the "Partnership) will enter into an
agreement of sale with Strand Inc. on or about November 15, 1996. Under the
terms of the agreement, the Partnership will sell the Royal Wood Apartments
(including land), all related improvements and tangible and intangible property
for $7,800,000.
The sale is contingent upon, among other things, the approval by a majority in
interest of the limited partners of the Partnership. If the sale is approved by
a majority in interest of the limited partners and all other conditions of the
sale are met, the sale will be completed.
Concurrent with the sale of the Royal Wood Apartments, the Partnership will then
liquidate its net assets, distribute the proceeds and be dissolved.
With respect to the alternative sale as discussed in the Proxy Statement, no
buyers or transactions have been identified. Therefore, pro forma financial
statements giving effect to the alternative sale are not provided.
The following unaudited pro forma financial statements have been prepared based
on the financial statements of the Partnership at December 31, 1995 and for the
year then ended contained herein, giving effect to the adjustments in the notes
accompanying these pro forma financial statements. The pro forma condensed
balance sheet as of December 31, 1995 gives effect to the sale of the Royal Wood
Apartments and the resulting distribution of net cash proceeds as a result of
the Partnership's termination and dissolution as if it had occurred on December
31, 1995; the pro forma condensed statement of operations for the year ended
December 31, 1995 gives effect to the sale of Royal Wood Apartments as if the
transaction had occurred on January 1, 1995. These pro forma financial
statements are not necessarily indicative of the results that actually would
have occurred if the sale of the Royal Wood Apartments had been consummated on
the date indicated or which may be attained in the future, and should be read in
conjunction with the Partnership's financial statements and notes thereto.
F-18
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Unaudited Pro Forma Condensed Balance Sheet
<TABLE>
<CAPTION>
December 31, 1995
- -------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
-------------------------------
Dissolution Pro Forma
of the Condensed
As Sale of Limited Balance
Reported Royal Wood Partnership Sheet
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $ 104,782 $ 230,836 (2) $ (335,618)(2) $ -
Cash held for security deposits, restricted 36,999 (36,999)(2) - -
Accounts receivable 10,586 (10,586)(2) - -
Real estate tax escrow 13,429 (13,429)(2) - -
Prepaid expenses 9,998 (9,998)(2) - -
Utility deposits 770 (770)(2) - -
Investment property held for sale,
net of accumulated depreciation 8,310,999 (7,655,000)(1) - -
(655,999)(1)
- -----------------------------------------------------------------------------------------------------------------------
Total assets $8,487,563 $(8,151,945) $ (335,618) $ -
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Accounts payable $ 37,613 $ - $ (37,613)(2) $ -
Accrued interest 55,465 (55,465)(2) - -
Accrued expenses 23,058 - (23,058)(2) -
Tenant's security deposits 40,414 (40,414)(2) - -
Prepaid rents 4,794 (4,794)(2) - -
Mortgage payable 7,395,273 (7,395,273)(2) - -
Due to affiliates 808,896 - (808,896)(3) -
- -----------------------------------------------------------------------------------------------------------------------
Total liabilities 8,365,513 (7,495,946) (869,567) -
General partner (35,237) (6,560)(1) 41,797 (3) -
Limited partner 157,287 - (274,947)(2) -
(649,439)(1) 767,099 (3) -
- -----------------------------------------------------------------------------------------------------------------------
Total partners' capital 122,050 (655,999) 533,949 -
Total liabilities and partners' capital $8,487,563 $(8,151,945) $ (335,618) $ -
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to unaudited pro
forma condensed financial statements.
F-19
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Unaudited Pro Forma Condensed Statement of Operations
<TABLE>
<CAPTION>
Year ended December 31, 1995
- ------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
---------------------------------
Dissolution Pro Forma
of the Condensed
As Sale of Limited Statement of
Reported Royal Wood Partnership Operations
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Rental income $1,502,216 $(1,502,216)(4) $ - $ -
Interest income 429 (429)(4) - -
- -------------------------------------------------------------------------------------------------------------------
Total revenues 1,502,645 (1,502,645) - -
- -------------------------------------------------------------------------------------------------------------------
Expenses
Interest 670,503 (670,503)(4) - -
Operating expenses 688,325 (688,325)(4) - -
Depreciation and amortization 268,693 (268,693)(4) - -
Professional services 21,934 (21,934)(4) - -
- -------------------------------------------------------------------------------------------------------------------
Total expenses 1,649,455 (1,649,455) - -
- -------------------------------------------------------------------------------------------------------------------
Net (loss) income $ (146,810) $ 146,810 $ - $ -
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Net (loss) per limited
partnership unit $ (40.47) $ - $ - $ -
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Distribution per limited
partnership unit $ - $ - $ 76.56 $ -
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Weighted average of limited
partnership units 3,591 - 3,591 -
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to unaudited pro
forma condensed financial statements.
F-20
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
1. The (loss) for accounting purposes would have been recognized on the
sale after deduction of $145,000 in expenses related to the sale.
The calculation is as follows:
Investment property held for sale,
net of accumulated depreciation $ 8,310,999
Proceeds from sale 7,800,000
Less cost of sale (145,000)
---------------
Net market value 7,655,000
---------------
(Loss) on sale $ 655,999
---------------
---------------
Allocated to: General Partner $ 6,560
Limited Partners $ 649,439
---------------
$ 655,999
---------------
---------------
All adjustments related to the (loss) on the sale are of a
non-recurring nature and are not part of the continuing operations of
the Partnership. Therefore, such adjustments are not included in the
pro forma condensed statement of operations.
Per unit information for pro forma purposes has been computed on 3,591
limited partnership units.
The expenses related to the sale are as follows:
Closing costs $ 35,000
Professional fees 90,000
Proxy statement costs 20,000
----------
$ 145,000
----------
----------
F-21
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
2. The following pro forma adjustments to cash have been made to estimate
the distribution to the partners upon dissolution of the Partnership:
Sale of the Royal Wood Apartments
Sales price $ 7,800,000
Settlement costs (145,000)
---------------
Net cash proceeds from sale of
the Royal Wood Apartments 7,655,000
Reimbursement of operating
assets at settlement 34,783
Satisfaction of first mortgage
debt and accrued interest (7,450,738)
Transfer of security deposits
and prepaid rents at settlement (45,208)
---------------
Net cash proceeds from sale of
the Royal Wood Apartments $ 193,837
Cash held for security deposits,
unrestricted upon sale 36,999
Cash on hand $ 104,782
Payment of remaining liabilities upon
dissolution of the Partnership (60,671)
---------------
Distribution to limited partners $ 274,947
---------------
---------------
Distribution per limited partnership unit $ 76.56
---------------
---------------
3. The pro forma adjustment represents the write off of management fees
and reimbursable costs and advances due to affiliates.
4. The pro forma adjustment to the statement of operations gives effect to
the sale and liquidation as if they had occurred on January 1, 1995.
The pro forma financial statements do not give effect to the (loss)
that would have been incurred from the sale had it taken place as of
that date.
F-22
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
CLOVER APPRECIATION PROPERTIES I, L.P.
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
Clover Appreciation Properties I, L.P. (the "Partnership) will enter into an
agreement of sale with Strand Inc. on or about November 15, 1996. Under the
terms of the agreement, the Partnership will sell the Royal Wood Apartments
(including land), all related improvements and tangible and intangible property
for $7,800,000.
The sale is contingent upon, among other things, the approval by a majority in
interest of the limited partners of the Partnership. If the sale is approved by
a majority in interest of the limited partners and all other conditions of the
sale are met, the sale will be completed.
Concurrent with the sale of the Royal Wood Apartments, the Partnership will then
liquidate its net assets, distribute the proceeds and be dissolved.
With respect to the alternative sale as discussed in the Proxy Statement, no
buyers or transactions have been identified. Therefore, pro forma financial
statements giving effect to the alternative sale are not provided.
The following unaudited pro forma financial statements have been prepared based
on the unaudited financial statements of the Partnership at June 30, 1996 and
for the six months then ended contained herein, giving effect to the adjustments
in the notes accompanying these pro forma financial statements. The pro forma
condensed balance sheet as of June 30, 1996 gives effect to the sale of the
Royal Wood Apartments and the resulting distribution of net cash proceeds as a
result of the Partnership's termination and dissolution as if it had occurred on
June 30, 1996; the pro forma condensed statement of operations for the six
months ended June 30, 1996 gives effect to the sale of Royal Wood Apartments as
if the transaction had occurred on January 1, 1995. These pro forma financial
statements are not necessarily indicative of the results that actually would
have occurred if the sale of the Royal Wood Apartments had been consummated on
the date indicated or which may be attained in the future, and should be read in
conjunction with the Partnership's financial statements and notes thereto.
F-23
<PAGE>
- -----------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Unaudited Pro Forma Condensed Balance Sheet
<TABLE>
<CAPTION>
June 30, 1996
- -------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
------------------------------
Dissolution Pro Forma
of the Condensed
As Sale of Limited Balance
Reported Royal Wood Partnership Sheet
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash $ 191,336 $ 290,846 (2) $ (482,182)(2) $ -
Cash held for security deposits, restricted 36,999 (36,999)(2) - -
Accounts receivable 7,686 (7,686)(2) - -
Real estate tax escrow 65,866 (65,866)(2) - -
Utility deposits 770 (770)(2) - -
Investment property held for sale,
net of accumulated depreciation 8,213,817 (7,655,000)(1) - -
(558,817)(1)
--------- ---------- ---------- ---------
Total assets $8,516,474 $(8,034,292) $ (482,182) $ -
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
Accounts payable $ 70,113 $ - $ (70,113)(2) $ -
Accrued interest 55,465 (55,465)(2) - -
Accrued expenses 73,771 - (73,771)(2) -
Tenant's security deposits 42,319 (42,319)(2) - -
Prepaid rents 16,584 (16,584)(2) - -
Mortgage payable 7,361,107 (7,361,107)(2) - -
Due to affiliates 808,896 - (808,896)(3) -
--------- ---------- ---------- ---------
Total liabilities 8,428,255 (7,475,475) (952,780) -
General partner (35,575) (5,768)(1) 41,343 (3) -
Limited partner 123,794 - (338,298)(2) -
- (553,049)(1) 767,553 (3) -
--------- ---------- ---------- ---------
Total partners' capital 88,219 (558,817) 470,598 -
Total liabilities and partners' capital $8,516,474 $(8,034,292) $ (482,182) $ -
--------- ---------- ---------- ---------
--------- ---------- ---------- ---------
</TABLE>
See notes to unaudited pro
forma condensed financial statements.
F-24
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Unaudited Pro Forma Condensed Statement of Operations
<TABLE>
<CAPTION>
Six months ended June 30, 1996
- -------------------------------------------------------------------------------------------------------------------
Pro Forma Adjustments
----------------------------
Dissolution Pro Forma
of the Condensed
As Sale of Limited Statement of
Reported Royal Wood Partnership Operations
- -------------------------------------------------------------------------------------------------------------------
Revenues
<S> <C> <C> <C> <C>
Rental income $809,051 $(809,051)(4) $ - $ -
Interest income - - (4) - -
-------- --------- ---------- ----------
Total revenues 809,051 (809,051) - -
-------- --------- ---------- ----------
Expenses
Interest 332,152 (332,152)(4) - -
Operating expenses 367,284 (367,284)(4) - -
Depreciation and amortization 135,908 (135,908)(4) - -
Professional services 7,538 (7,538)(4) - -
-------- --------- ---------- ----------
Total expenses 842,882 (842,882) - -
-------- --------- ---------- ----------
Net (loss) income $(33,831) $ 33,831 $ - $ -
======== ========= ========== ==========
Net (loss) per limited
partnership unit $ (9.33) $ - $ - $ -
======== ========= ========== ==========
Distribution per limited
partnership unit $ - $ - $ 94.20 $ -
======== ========= ========== ==========
Weighted average of limited
partnership units 3,591 - 3,591 -
======== ========= ========== ==========
</TABLE>
See notes to unaudited pro
forma condensed financial statements.
F-25
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
1. The (loss) for accounting purposes would have been recognized on the
sale after deduction of $145,000 in expenses related to the sale.
The calculation is as follows:
Investment property held for sale,
net of accumulated depreciation $ 8,213,817
Proceeds from sale 7,800,000
Less cost of sale (145,000)
---------------
Net market value 7,655,000
---------------
Loss on sale $ 558,817
===============
Allocated to: General Partner $ 5,768
Limited Partners $ 553,049
---------------
$ 558,817
===============
All adjustments related to the (loss) on the sale are of a
non-recurring nature and are not part of the continuing operations of
the Partnership. Therefore, such adjustments are not included in the
pro forma condensed statement of operations.
Per unit information for pro forma purposes has been computed on 3,591
limited partnership units.
The expenses related to the sale are as follows:
Closing costs $ 35,000
Professional fees 90,000
Proxy statement costs 20,000
----------
$ 145,000
==========
F-26
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
2. The following pro forma adjustments to cash have been made to determine
the cash available for distribution:
Sale of the Royal Wood Apartments
Sales price $ 7,800,000
Settlement costs (145,000)
-------------
Net cash proceeds from sale of
the Royal Wood Apartments 7,655,000
Reimbursement of operating
assets at settlement 74,322
Satisfaction of first mortgage
debt and accrued interest (7,416,572)
Transfer of security deposits and
prepaid rents at settlement (58,903)
-------------
Net cash proceeds from sale of
the Royal Wood Apartments $ 253,847
Cash held for security deposits,
unrestricted upon sale 36,999
Cash on hand $ 191,336
Payment of remaining liabilities upon
dissolution of the Partnership (143,884)
-------------
Distribution to limited partners $ 338,298
-------------
-------------
Distribution per limited partnership unit $ 94.20
-------------
-------------
F-27
<PAGE>
- -------------------------------------------------------------------------------
Clover Appreciation Properties I, L.P.
Notes to Unaudited Pro Forma Condensed Financial Statements
3. The pro forma adjustment represents the write off of management fees
and reimbursable costs and advances due to affiliates.
4. The pro forma adjustment to the statement of operations gives effect to
the sale and liquidation as if they had occurred on January 1, 1995.
The pro forma financial statements do not give effect to the loss that
would have been incurred from the sale had it taken place as of that
date.
F-28
<PAGE>
Independent Auditors' Report
Crown Management Corporation and Subsidiaries
Merchantville, New Jersey
We have audited the accompanying consolidated balance sheet of Crown Management
Corporation and subsidiaries (a wholly-owned subsidiary of Clover Financial
Corporation) as of November 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated balance sheet is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated balance sheet. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
balance sheet presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the consolidated balance sheet referred to above presents
fairly, in all material respects, the financial position of Crown Management
Corporation and subsidiaries as of November 30, 1995, in conformity with
generally accepted accounting principles.
April 22, 1996
F-29
<PAGE>
Crown Management Corporation and Subsidiaries
(A Wholly-Owned Subsidiary of Clover Financial Corporation)
Consolidated Balance Sheet
November 30, 1995
- -------------------------------------------------------------------------------
Assets
Cash $ 8,918
Prepaid expenses and other assets 1,111
Investment in partnerships 317,886
---------
$327,915
=========
Liabilities and Stockholders' Equity
Liabilities
Share of accumulated losses from partnerships
in excess of investments and advances $ 78,294
Deferred income taxes 35,725
---------
Total liabilities 114,019
---------
Commitments
Stockholders' equity
Common stock, no par value
Authorized 1,000 shares
Issued 728 shares 1,348,648
(Deficit) (1,134,752)
---------
Total stockholders' equity 213,896
---------
$327,915
=========
See accompanying notes to consolidated balance sheet.
F-30
<PAGE>
Crown Management Corporation and Subsidiaries
(A Wholly-Owned Subsidiary of Clover Financial Corporation)
Notes to Consolidated Financial Statements
1.Organization Organization
and
Principles Crown Management Corporation (the "Company"), a
of wholly-owned subsidiary of Clover Financial Corporation
Consolidation (Clover), formed on April 6, 1988, is the general
partner of Clover Appreciation Properties I, L.P.
(CAP I) and Clover Income Properties, III, L.P.
(CIP III), real estate limited partnerships.
Principles of Consolidation
The consolidated balance sheet includes the accounts of
the Company and its wholly-owned subsidiaries,
Environmental Concepts, Inc., Garden Hill Management
Corporation and CFC Management Corporation, which are
the general partners of three separate real estate
limited partnerships. All significant intercompany
accounts and transactions have been eliminated.
2. Summary of Income Taxes
Significant
Accounting The Company and its subsidiaries file a consolidated
Policies federal income tax return with Clover. The Company and
its subsidiaries have a tax-sharing agreement with
Clover under which Clover agrees to pay to or for the
benefit of the Company, the federal income tax
liability of the consolidated group attributable to the
Company and to treat the amount as a contribution to
capital. The Company and its subsidiaries provide for
state income taxes.
Income taxes are calculated using the liability method
specified by Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
Deferred income taxes are recorded to reflect the net
state tax effect of temporary differences between the
carrying amount of assets and liabilities for financial
reporting purposes and the amount used for income tax
purposes.
At November 30, 1995, the Company has a net deferred
tax liability of $35,725. The temporary differences
pertain to the Company's investment in Partnerships and
the write-off of a receivable from an affiliate for
financial reporting purposes. A 100% valuation
allowance has been established on the deferred tax
assets since the likelihood of recognizing this benefit
cannot be certain.
F-31
<PAGE>
Crown Management Corporation and Subsidiaries
(A Wholly-Owned Subsidiary of Clover Financial Corporation)
Notes to Consolidated Financial Statements
Had the Company and its subsidiaries provided for
federal income taxes on an individual company basis,
the accompanying consolidated balance sheet would have
included a liability for deferred federal income taxes
of approximately $140,000.
Investments
Investments in partnerships are accounted for using the
equity method.
Use of Estimates
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that
affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
3. Investment Environmental Concepts, Inc., Garden Hill Management
in Corporation and CFC Management Corporation are the
Partnerships general partners in Mill Village Limited, Mt. Holly
Associates Limited and Community Partners Limited,
respectively, all of which are Clover sponsored limited
partnerships. Generally, the profits and losses from
operations, cash distributions, and gains from capital
transactions are allocated 25% to the general partner
and 75% to the limited partners as per their respective
partnership agreements.
F-32
<PAGE>
Crown Management Corporation and Subsidiaries
(A Wholly-Owned Subsidiary of Clover Financial Corporation)
Notes to Consolidated Financial Statements
As of November 30, 1995, Mill Village Limited and
Mt. Holly Associates Limited have ceased operations and
the partnerships closed out. The following represents a
summary of the financial position of Community Partners
Limited as of December 31, 1995:
December 31, 1995
----------
Mortgage receivable $3,250,000
Cash 65,000
Other assets 3,000
----------
Total assets $3,318,000
==========
Mortgage payable $1,895,000
Other liabilities 2,000
Partners' capital 1,421,000
----------
Total liabilities and partners' capital $3,318,000
==========
The Company purchased for $1,000 a 1% general
partnership interest and a 98% limited partnership
interest in CAP I, a partnership formed in June 1988.
On January 5, 1989, the Company sold its 98% limited
partnership interest to individuals affiliated with
Clover for $900.
The Company's allocated losses in excess of its
investments in and advances to CAP I and CIP III
amounted to $35,115 and $43,179, respectively, and are
recorded as a liability in the consolidated balance
sheet.
4. Commitments The Company, as a general partner in CAP I and CIP III,
could be liable for, or otherwise committed to provide
funds to these partnerships.
F-33
<PAGE>
CLOVER APPRECIATION PROPERTIES I, L.P.
BALANCE SHEET
(Unaudited)
June 30,
1996
--------
ASSETS
------
CURRENT ASSETS
Cash (including $36,999 of cash held
for security deposits) $ 228,335
Accounts receivable 7,686
Real estate tax escrow 65,866
------------
Total current assets 301,887
------------
INVESTMENT PROPERTY, at cost 10,158,780
Less - accumulated depreciation 1,944,963
------------
Net investment property 8,213,817
------------
OTHER ASSETS
Utilities deposits 770
------------
TOTAL ASSETS $ 8,516,474
============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITIES
Current maturities of mortgage payable $ 73,103
Accounts payable 70,113
Accrued interest 55,465
Accrued expenses 73,771
Tenants' security deposits 42,319
Prepaid rents 16,584
------------
Total current liabilities 331,355
------------
MORTGAGE PAYABLE,
Less current maturities 7,288,004
DUE TO AFFILIATES 808,896
------------
Total liabilities 8,428,255
------------
PARTNERS' CAPITAL
General partner (deficit) (35,575)
Limited partners (3,591 units
outstanding) 123,794
------------
Total partners' capital 88,219
------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 8,516,474
============
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
CLOVER APPRECIATION PROPERTIES I, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Six Months Ended,
June 30,1996 June 30, 1995
------------ -------------
REVENUES
Rental income $ 809,051 $ 730,084
Interest income -- 353
--------- ---------
Total revenues 809,051 730,437
--------- ---------
EXPENSES
Professional services 7,538 8,649
Interest 332,152 334,848
Operating expenses
(Including affiliate transactions of $0
and $9,122 for the six months ended
6/30/96 and 6/30/95, respectively) 367,284 306,241
Depreciation 135,908 134,694
--------- ---------
Total expenses 842,882 784,432
--------- ---------
NET LOSS $ (33,831) $ (53,995)
========= =========
NET LOSS PER LIMITED PARTNERSHIP UNIT $ (9.33) $ (14.89)
========= =========
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
CLOVER APPRECIATION PROPERTIES I, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended,
June 30, 1996 June 30, 1995
------------- -------------
REVENUES
Rental income $ 400,544 $ 368,538
Interest income -- 67
--------- ---------
Total revenues 400,544 368,605
--------- ---------
EXPENSES
Professional services 5,241 4,515
Interest 166,011 167,209
Operating expenses
(Including affiliate transactions of
$0 for the three months ended 6/30/96 224,565 146,809
and 6/30/95, respectively)
Depreciation 68,154 67,347
--------- ---------
Total expenses 463,971 385,880
--------- ---------
NET LOSS $ (63,427) $ (17,275)
========= =========
NET LOSS PER LIMITED PARTNERSHIP UNIT $ (17.49) $ (4.76)
========= =========
The accompanying notes are an integral part of these financial statements.
F-36
<PAGE>
CLOVER APPRECIATION PROPERTIES I, L.P.
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Balance, at January 1, 1996 $(35,237) $157,287 $122,050
Net loss for the six months
ended June 30, 1996 (338) (33,493) (33,831)
-------- -------- -------
Balance, June 30, 1996 $(35,575) $123,794 $ 88,219
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE>
CLOVER APPRECIATION PROPERTIES I, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1996 1995
--------- ---------
OPERATING ACTIVITIES
Cash received from rentals $ 823,741 $ 722,569
Cash paid for operating activities (332,143) (300,989)
Interest received -- 353
Interest paid (332,152) (334,848)
--------- ---------
Net cash provided by operating activities 159,446 87,085
--------- ---------
Investing Activities
Expenditures for property (38,726) --
--------- ---------
FINANCING ACTIVITIES
Repayment of mortgage payable (34,166) (31,236)
--------- ---------
Net increase in cash 86,554 55,849
Cash, beginning of period 141,781 118,590
--------- ---------
Cash, end of period $ 228,335 $ 174,439
========= =========
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
NET INCOME LOSS $ (33,831) $ (53,995)
Adjustments
Depreciation 135,908 134,694
Decrease (increase) in prepaid expenses 9,998 (8,198)
Decrease (increase) in accounts receivable 2,900 (4,221)
(Increase) in real estate tax escrow (52,437) (52,476)
Increase (decrease) in accounts payable 32,500 (5,922)
Increase in security deposits 1,905 4,267
Increase (decrease) in prepaid rents 11,790 (3,294)
Increase in accrued expenses 50,713 67,342
Increase in due to affiliate -- 9,122
(Decrease) in accrued interest -- (234)
--------- ---------
Total adjustments 193,277 141,080
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 159,446 $ 87,085
========= =========
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE>
CLOVER APPRECIATION PROPERTIES I, L.P.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
Readers of this quarterly report should refer to the audited financial
statements of Clover Appreciation Properties I, L.P. (the "Partnership" or
"Registrant") as of December 31, 1995, as certain footnote disclosures which
would substantially duplicate those contained in such audited financial
statements have been omitted from this report.
1. Investment Property:
On January 25, 1989, the Partnership acquired the Royal Wood Apartments, a
256-unit residential complex located in Stone Mountain, Georgia.
The Investment property at June 30, 1996, consists of:
Land $1,171,749
Apartment buildings 8,167,125
Furniture and fixtures 819,906
----------
10,158,780
Less: accumulated depreciation 1,944,963
----------
$8,213,817
==========
2. Transactions with Affiliates:
Effective February 21, 1995, NPI-CL Management, L.P. ("NPI") which is
unaffiliated with Crown Management Corporation, (the "General Partner") replaced
an affiliate of the General Partner as Property Manager. Until this time, as
compensation for property management services performed by an affiliate of the
General Partner with respect to the Property, the affiliate was entitled to a
management fee in an amount not to exceed 5% of gross revenues. These fees were
accrued but cannot be paid until the mortgage payable is satisfied.
Per the loan modification agreement, only approved expenses, which are expenses
that relate to the operation, management or ownership of the property, are
permitted to be paid.
Approved expenses did not include management fees and payments to reimburse the
General Partner and its affiliates except for health insurance costs and
computer fees. Certain reimbursable costs due to the affiliate have also been
accrued as noted in the following table.
F-39
<PAGE>
CLOVER APPRECIATION PROPERTIES I, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
(Unaudited)
2. Transactions with Affiliates (continued):
The General Partner and its affiliates have made certain advances to enable the
Partnership to avoid incurring late charges on the mortgage payable which is due
on the first day of each month, prior to the receipt of monthly rents from
residents. As of June 30, 1996, advances due to the General Partner and its
affiliates were $321,293.
Reimbursable
Management Costs and
Fees Advances Total
---------- --------- -----
Due to affiliates, balance at
January 1, 1996 $385,049 $423,847 $808,896
Incurred during the six
months ended June 30, 1996 -- -- --
Paid during the six months ended
June 30, 1996 -- -- --
-------- -------- --------
Due to affiliates, balance at
June 30, 1996 $385,049 $423,847 $808,896
======== ======== ========
3. General:
The financial statements reflect all adjustments which are, in the opinion of
the General Partner, necessary for a fair statement of results for the interim
period presented. Such adjustments are of a normal recurring nature.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
F-40
<PAGE>
FORM OF PROXY
CLOVER APPRECIATION PROPERTIES I, L.P.
23 West Park Avenue
Merchantville, New Jersey 08109
THIS PROXY IS SOLICITED ON BEHALF OF
CLOVER APPRECIATION PROPERTIES I, L.P.
The undersigned hereby appoints Crown Management Corporation (the "General
Partner") with full power of substitution, attorney and proxy, and hereby
authorizes it to represent and to vote as designated below all units of limited
partnership interests ("Units") in Clover Appreciation Properties I, L.P. (the
"Partnership") at the Special Meeting of the Limited Partners of the
Partnership, to be held on November 27, 1996, at 10:00 a.m., local time at 23
West Park Avenue, Merchantville, New Jersey 08109 or at any adjournments or
postponements thereof. You are being asked to consider and vote upon the
following proposals:
Please check the appropriate blank box below in blue or black ink.
1. Sale Proposal: Proposal to approve the sale of The Royal Wood
Apartments (the "Royal Wood Apartments") to Strand Inc. (the
"Buyer"), pursuant to the terms of the Agreement of Sale to be
entered into on or about November 15, 1996 (the "Sale
Agreement"), for a purchase price of $7,800,000 (the "Sale"),
and to authorize the General Partner to agree on behalf of the
Partnership to modifications, amendments and waivers to the
final Sale Agreement which the General Partner determines to
be necessary or appropriate, including changes in the amount
and type of consideration to be received by the Partnership.
This Sale Proposal requires approval by the holders of more
than 50% of the outstanding Units of the Partnership
("Majority Vote"). Approval of this Sale Proposal will also
be deemed a consent to the termination and dissolution of the
Partnership (upon the completion of the Sale).
For |_| Against |_| Abstain |_|
2. Alternative Sale Proposal: Proposal to authorize any
alternative sale of the Royal Wood Apartments (an "Alternative
Sale") approved by the General Partner. An Alternative Sale
only will be authorized if (i) the Sale Proposal set forth in
Item 1 above is approved by a Majority Vote, but is not
completed for any reason, (ii) the Alternative Sale is
completed by December 31, 1999 for cash consideration not less
than the fair market value of the Royal Wood Apartments (as
set forth in an appraisal dated within nine months of the
execution of an Alternative Sale agreement) and (iii) the
<PAGE>
purchaser in such transaction is not an affiliate of the
General Partner. The Alternative Sale Proposal must be
approved by a Majority Vote. Approval of the Alternative Sale
Proposal will also be deemed a consent to the termination and
dissolution of the Partnership (upon the completion of an
Alternative Sale).
For |_| Against |_| Abstain |_|
<PAGE>
The General Partner recommends a vote FOR adoption of both of the
proposals. This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned Unit holder. If no direction is made, this
Proxy will be voted FOR each of the proposals, and in the discretion of the
General Partner, with respect to such other matters as may properly come before
the Special Meeting or any adjournment or postponement thereof. This Proxy also
delegates discretionary authority to the General Partner with respect to any
other business which may properly come before the Special Meeting or any
adjournment or postponement thereof.
--------------------------- ------
Signature of Unit Holder Date
--------------------------- ------
Print Name
---------------------------- ------
Signature of Unit holder, Date
if held jointly
---------------------------- ------
Print Name
Please sign exactly as your name appears on the certificate(s)
representing your limited partner interest(s). When such interest(s)
are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as
such. If a corporation, please have signed in full corporate name by
the president or other authorized officer. If a partnership, please
have signed in partnership name by an authorized person.
