SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
or
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 33-23463
CLOVER APPRECIATION PROPERTIES I, L.P.
--------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 22-2898428
- --------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
23 W. Park Avenue, Merchantville, NJ 08109
- ------------------------------------ -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609) 662-1116
- --------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The registrant has no voting stock. The registrant's outstanding voting
securities consist of units of limited partnership interest which have no
readily ascertainable market value since there is no public trading market for
these securities on which to base a calculation of aggregate market value.
Documents incorporated by reference: The Prospectus of the registrant dated
November 15, 1988, filed with the Commission under the Securities Act of 1933 as
a part of Registration Statement No. 33-23463 filed on August 1, 1988, is
incorporated by reference in Parts I, II and III of this Annual Report on Form
10-K, and Supplement No. 1 to the Prospectus dated March 9, 1989, filed with the
Commission pursuant to Rules 424(b)(3) and 424(c) on March 13, 1989, is
incorporated by reference in Part I of this Annual Report on Form 10-K, and
Supplement No. 3 dated September 22, 1989, filed with the Commission pursuant to
Rules 424(b)(3) and 424(c) on September 27, 1989, is incorporated by reference
in Part II of this Annual Report on Form 10-K.
PART I
Item 1. Business
The Registrant, Clover Appreciation Properties I, L.P. (the
"Partnership"), is a limited partnership formed in June 1988 under the Revised
Uniform Limited Partnership Act of the State of Delaware, to acquire, operate
and hold for investment existing apartment complexes located primarily in the
eastern half of the United States. Crown Management Corporation, a New Jersey
corporation which is a wholly-owned subsidiary of Clover Financial Corporation
("Clover"), a New Jersey Corporation, is the General Partner (the "General
Partner") of the Partnership. On October 1, 1990, the Partnership sold
$3,588,130 of units (the "Units") of limited partnership interest in a public
offering made pursuant to a Prospectus dated November 15, 1988 (the
"Prospectus") contained in the Partnership's Registration Statement on Form
S-11 (the "Registration Statement") under the Securities Act of 1933 (No.
33-23463). The Partnership supplemented the Prospectus by Supplement No. 1
dated March 9, 1989 ("Supplement No. 1"), Supplement No. 2 dated August 7,
1989 ("Supplement No. 2"), Supplement No. 3 dated September 22, 1989
("Supplement No. 3"), Supplement No. 4 dated March 21, 1990 ("Supplement
No. 4"), and Supplement No. 5 dated April 25, 1990 ("Supplement No. 5")
which superseded Supplement Nos. 2 and 4.
On January 25, 1989, the Partnership acquired the Royal Wood Apartments
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 the
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 an existing first mortgage loan in the original principal amount of
$8,000,000 (the "First Mortgage Loan") payable to Aetna Life Insurance Company
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) at the Royal Wood Apartments for a cash price of
$800,000, of which $200,000 was used to repay a portion of the first mortgage
loan on the property, and the balance was retained by the Partnership as cash
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.
The Royal Wood Apartments consist of an existing 256-unit two-story
complex of garden apartments and townhouses located in the Stone Mountain area
east of DeKalb County, Georgia. Reference is made to the sections contained in
the Prospectus and Supplement No. 1 captioned "Real Property Investments" which
provide a more detailed discussion of the Royal Wood Apartments and other
competitive properties, which discussions are incorporated herein by reference.
Although during 1995, the Partnership was able to satisfy its current
obligations with cash flows from operations, the General Partner believes that
if there should be a reversal of the recent improvement in the national or local
economy or the real estate market in the region 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. During 1995, the Partnership continued its
program of offering rent concessions in order to attract and retain tenants. The
Partnership expects that rent concessions will be offered when necessary in
order to maintain current occupancy rates.
The Royal Wood Apartments are subject to risks, including competition
from other rental apartment and townhouse developments in the area, adverse
local market conditions due to changes in economic conditions, area
characteristics, interest rates, availability and cost of insurance coverage,
changes in real estate tax rates or laws, rising utilities costs and operating
expenses, rent control, governmental regulations, acts of God and other factors
which are beyond the control of the Partnership.
The Partnership will not purchase any additional properties and,
therefore, the Partnership is entirely dependent on the performance of the Royal
Wood Apartments to produce an economic return for the limited partners.
Services at Royal Wood Apartments are performed by on-site personnel
all of whom are employees of NPI-CL Management L.P. ("NPI"), an unaffiliated
third party. Such services are provided pursuant to a written agreement
providing for fees equal to 5% of the gross revenues from the Royal Wood
Apartments. NPI replaced Allstate Management Corp., an affiliate of the General
Partner, as the property manager effective February 21, 1995. At the same time,
other partnerships affiliated with the General Partner also engaged NPI as
property manager at rates equivalent to the rates previously paid to the prior
property manager of each partnership.
In January 1996, NPI was acquired by an affiliate of Insignia Financial
Group, Inc. According to Commercial Property News and the National Multi-Housing
Council, Insignia, together with its affiliates, 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.
Reference is made to Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations for a further discussion of the
operations of the Partnership's business.
Item 2. Properties
----------
The Partnership's sole property is the Royal Wood Apartments.
Reference is made to Item 1. Business for a description of the Royal Wood
Apartments.
The Royal Wood Apartments are subject to a mortgage with an outstanding
principal balance of $7,395,273 at December 31, 1995. See Note 4 of Notes to the
Partnership's Financial Statements under Item 8. Financial Statements and
Supplementary Data.
During 1995, the Partnership made [capital improvements] at an
aggregate cost of $29,924. Major projects planned for 1996 include exterior wood
replacement and painting at an anticipated cost of approximately $85,000 and
roof replacement and carpentry work at an anticipated cost of approximately
$122,000.
The average occupancy rates at the Royal Wood Apartments for the five
years ended December 31, 1991, 1992, 1993, 1994 and 1995 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 $6,181,
respectively. The realty tax rate for 1995 for the Royal Wood Apartments was
$41.51 per $1,000 of assessed value, resulting in annual realty taxes of
$126,220 for 1995. The General Partner believes that the Royal Wood Apartments
are adequately covered by insurance.
Item 3. Legal Proceedings
-----------------
The Partnership was a defendant in two Complaints filed on December 22,
1993 in the Superior Court of Fulton County, Georgia against the Partnership,
the General Manager and certain others, arising out of two assaults which took
place at Royal Woods Apartments. In each Complaint, the plaintiff alleged
failure to maintain the Royal Woods Apartments and demanded compensatory 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.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None.
PART II
Item 5. Market for the Partnership's Units of Limited Partnership Interests
and Related Security
Holder Matters
----------------------------------------
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's Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement"), included as an Exhibit to the Prospectus and
incorporated herein by reference. As of March 7, 1996, 353_ limited partners
held 3,591 Units of limited partnership interest.
Cash distributions, if any, to be distributed to the partners of the
Partnership are described generally at pages 25-26 in the Prospectus and page 2
in the Supplement No. 3, which descriptions are incorporated herein by
reference. No distributions were made during 1995 or 1994 or the first quarter
of 1996, and it is unlikely that distributions will be made in the foreseeable
future.
Item 6. Selected Financial Data
-----------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1995 1994 1993 1992 1991
---------------- ----------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Total revenues $1,502,645 $1,404,195 $1,348,665 $ 1,287,078 $ 1,212,935
Interest expense $ 670,503 $ 676,685 $ 682,019 $ 699,646 $ 717,585
Net loss $ (146,810) $ (213,542) $ (236,185) $ (308,604) $ (554,665)
Net income (loss)
per Unit $ (40.47) $ (58.87) $ (65.11) $ (85.08) $ (152.92)
Cash distributions
per Unit $ -- $ -- $ -- $ -- $ 12.50
Total Assets at
end of period $8,487,563 $8,706,558 $8,894,576 $ 9,069,744 $ 9,349,568
Long-term debt $8,134,271 $8,195,047 $8,182,042 $ 8,091,725 $ 8,029,205
</TABLE>
The above selected financial data should be read in conjunction with
the financial statements for the Partnership appearing in Item 8. Financial
Statements and Supplementary Data and Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
Financial Condition; Liquidity and Capital Resources
- ----------------------------------------------------
On December 31, 1995, the Partnership had cash on hand of $141,781,
including cash reserves of $104,782 and $36,999 in security deposits. Total cash
on hand on December 31, 1994 of $118,590 included cash reserves of $88,920 and
$29,670 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
locality where the Royal Wood Apartments is 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 $55,448 on December 31, 1995 as
compared to $86,631 on December 31, 1994. The decrease in the deficit is
primarily attributable to an increase in cash and accounts receivable and a
decrease in accounts payable and prepaid rents, partially offset by a decrease
in real estate tax escrow and an increase in accrued expenses and tenants'
security deposits.
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 and it is unlikely that
distributions will be made in the foreseeable future.
As of December 31, 1995, the Partnership owed a total of
$808,896 to Clover and its affiliates, including $385,049 in accrued and unpaid
property management fees and $423,847 in reimbursable costs and advances made to
or on behalf of the Partnership. The payment of such costs will be made from the
Partnership's cash flow when available (subject to the restrictions imposed by
the Partnership's mortgage loan) and from the proceeds of any sales or
refinancing of Partnership assets.
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.
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.
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 a decrease in management fees effective with NPI's assumption of management
responsibility. Under the terms of the Property Management Agreement, 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.
The Partnership had net income before depreciation of
$121,883, $52,944 and $33,152 for 1995, 1994 and 1993, respectively. The
increase 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 increase in 1994 as compared to 1993 is also primarily
due to increased rental income, partially offset by increases in operating
expenses and professional services.
Item 8. Financial Statements and Supplementary Data.
-------------------------------------------
Clover Appreciation Properties I, L.P.
Contents
Report of Independent Certified Public Accountants
Financial statements
Balance sheets
Statements of operations
Statements of partners' capital
Statements of cash flows
Summary of significant accounting policies
Notes to financial statements
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
December 31, 1995 1994
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
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.
Clover Appreciation Properties I, L.P.
Statements of Operations
Year ended December 31, 1995 1994 1993
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)
========== ========== ==========
See accompanying summary of significant accounting policies and notes to
financial statements.
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.
Clover Appreciation Properties I, L.P.
Statements of Cash Flows
Year ended December 31, 1995 1994 1993
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
========== ========== ==========
See accompanying summary of significant accounting policies and notes to
financial statements.
Clover Appreciation Properties I, L.P.
Statements of Cash Flows
Year ended December 31, 1995 1994 1993
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
========= ========= =========
See accompanying summary of significant accounting policies and notes to
financial statements.
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.
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)
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.
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.
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.
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
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 part- ners
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.
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
distributed 15% to the General Partner and 85% to the Limited Partners
in accordance with their relative ownership of units.
Clover Appreciation Properties I, L.P.
Notes to Financial Statements
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.
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:
1995 1994 1993
----------- ----------- -----------
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
=========== =========== ===========
Schedule III
Clover Appreciation Properties I, L.P.
Schedule of Real Estate and Accumulation Depreciation
<TABLE>
<CAPTION>
Gross Amount at Which
Carried at December 31, 1995 (A) Life on Which
- --------------------------------------------------------- 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>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
------------------------------------------------
None.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant
-------------------------------------------------
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 Revised Uniform Limited Partnership 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.
The General Partner is a New Jersey corporation which is a wholly-owned
subsidiary of Clover Financial Corporation ("Clover"), a New Jersey corporation
which has engaged, directly and indirectly, in real estate ownership and
operation since 1972. The officers and directors of the General Partner, Donald
N. Love, Steven R. Zalkind, Diane P. Duggan and Stanley E. Borucki, are also
officers and/or directors of Clover. In addition, Messrs. Love and Zalkind are
the majority shareholders of Clover.
Various relationships of the Partnership to the General Partner and its
affiliates are described at pages 13-15 of the Prospectus, which description is
incorporated herein by reference.
The executive officers and directors of the General Partner
and Clover are as follows:
Name Age Position
- ---- --- --------
Donald N. Love 57 President, Director
Steven R. Zalkind 53 Vice President, Director
Diane P. Duggan 53 Secretary
Stanley E. Borucki 42 Treasurer
Mr. Love has been President and a director of the General Partner
since its formation in 1986, and he is President and a director of Clover and
various affiliates of Clover. Mr. Love has been associated with Clover
since 1971. Mr. Love holds a B.S. degree in Business Administration from Temple
University.
Mr. Zalkind has been Vice President and a director of the General
Partner since its formation in 1986, and he is Vice President and a director
of Clover and various affiliates of Clover. Mr. Zalkind has been
associated with Clover since May 1985.
Ms. Duggan has been Secretary of the General Partner since its
formation in 1986, and she serves as Secretary of Clover and various affiliates
of Clover. Ms. Duggan has been associated with Clover since 1973 and has
served as an officer of Clover and its affiliates since 1982.
Mr. Borucki has served as Treasurer of the General Partner since May
1990, and he serves as Treasurer of various affiliates of Clover. He has been
the Assistant Treasurer of Clover since 1988. Mr. Borucki joined Clover
as a staff accountant in 1977, and he served as the Controller of Clover
from 1984 to 1988. Mr. Borucki is a Certified Public Accountant.
All of the directors and executive officers of the General Partner are
elected annually to the offices set forth above to hold office until their
successors are duly elected and qualified.
Item 11. Executive Compensation
----------------------
The officers and directors of the General Partner receive no current or
proposed direct compensation for serving in such capacities. The General Partner
received acquisition fees for services rendered in connection with the selection
and acquisition of direct or indirect interests in properties and the General
Partner will be entitled to receive a share of cash distributions. Such fees and
distributions are described generally under the caption "Compensation and Fees"
at pages 10-12 and under the caption "Allocations of Profits and Losses and Cash
Distributions" on pages 25-26 of the Prospectus dated September 18, 1987 and at
pages A-7 to A-11 of the Partnership Agreement, included as an Exhibit to the
Prospectus, which descriptions are incorporated herein by reference. Effective
February 21, 1995, NPI, which is unaffiliated with the General Partner, replaced
Allstate Management Corp., an affiliate of the General Partner, as the property
manager of the Royal Wood Apartments. See Item 2. Properties.
The Partnership is permitted to engage in various transactions
involving the General Partner and its affiliates as described under the captions
"Compensation and Fees" at pages 10-12 and "Conflicts of Interests" at pages
13-16 of the Prospectus and "Rights, Authority, Powers, Responsibilities and
Duties of the General Partner" at pages A-20 to A-27 of the Partnership
Agreement, included as an Exhibit to the Prospectus, which descriptions are
incorporated herein by reference.
In accordance with the Partnership Agreement, the General Partner and
its affiliates may be reimbursed by the Partnership for the actual costs
advanced by them for materials used by the Partnership and obtained from
unaffiliated parties, administrative services and direct expenses of Partnership
operations. However, the agreement entered into by the Partnership in connection
with the modification of its mortgage loan prohibits the payment of any fees or
costs to the General Partner other than health insurance costs and computer
fees. Any other reimbursable costs are required to be accrued and may not be
paid until the mortgage loan is fully paid.
Reference is made to Note 6 of Notes to the Partnership's Financial
Statements under Item 8. Financial Statements and Supplementary Data, which
contain information on the amounts of acquisition fees and reimbursements which
were actually earned by the General Partner and its affiliates and actually paid
by the Partnership. Reference is made to the Statements of Partners' Capital
(Deficiency) in the Partnership's Financial Statements under Item 8. Financial
Statements and Supplementary Data, which contain information on the amount of
cash distributions actually made by the Partnership to the General Partner.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
---------------------------------------------------
No person (including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) is known to the Partnership to
be the beneficial owner of more than five percent of the outstanding Units as of
March 8, 1996.
As of March 8, 1996, the directors of the General Partner and the
directors and officers of the General Partner as a group subscribed for the
following 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
All the outstanding shares of the Common Stock of the General Partner
are owned by Clover as discussed under Item 10. Directors and Executive Officers
of the Registrant.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
Since January 1, 1995, there were no significant transactions or
business relationships with the General Partner or its affiliates, and none are
currently proposed, other than those described in Item 11. Executive
Compensation. As of December 31, 1995, the Partnership was indebted to Clover
and its affiliates in the aggregate amount of $808,896, including $385,049 in
accrued property management fees and $423,847 in reimbursable costs and advances
made to or on behalf of the Partnership.
PART IV
Item 14. Exhibits. Financial Statement Schedules and
Reports on 8-K.
-------------------------------------------
(a) The following documents are filed as part of this report:
(1) Financial statements. See Index to Financial
Statements under Item 8. Financial Statements and
Supplementary Data.
(2) Financial statement schedules. See Index to
Financial Statements under Item 8. Financial
Statements and Supplementary Data.
(3) Exhibits.
* 3.1 Certificate of Limited Partnership (Exhibit 3.1 to the
Registrant's Registration Statement, No. 33-23463 filed
on August 1, 1988 (the "Registration Statement")).
* 3.2 Limited Partnership Agreement (Exhibit 3.2 to the
Registration Statement).
* 3.3 First Amendment to Limited Partnership Agreement (Exhibit 3.3
of the Registration Statement).
* 3.4 Second Amendment to Limited Partnership Agreement (Exhibit
3.4 to the registrant's Annual Report on Form 10-K for the year
ended December 31, 1988 (the "1988 Form 10-K")).
* 3.5 Amended and Restated Agreement of Limited Partnership dated
October 1, 1990 (Exhibit 3.5 to the registrant's Annual
Report on Form 10-K for the year ended December 31, 1991
(the "1991 Form 10-K")).
*10.1 Real Estate Note dated June 24, 1986 of Royal Wood Associates,
together with a First Modification of Real Estate Note dated as
of May 1, 1992 between the Partnership and Aetna Life Insurance
Company (Exhibit 10.2 to the registrant's Annual Report on Form
10-K for the year ended December 31, 1992 (the "1992 Form
10-K")).
*10.2 Deed to Secure Debt, Assignment of Rents and Security Agreement
dated June 24, 1986 between Royal Wood Associates and Aetna
Life Insurance Company, together with a First Amendment dated
as of January 25, 1989 among Royal Wood Associates, Royal Wood
Associates II, the Partnership and Aetna Life Insurance
Company, and a Second Amendment dated June 25, 1986 between the
Partnership and Aetna Life Insurance Company (Exhibit 10.3 to
the 1992 Form 10-K").
*99.1 The Prospectus of the Partnership dated November 15, 1988,
contained in Amendment No. 1.
*99.2 Supplement No. 1 dated March 9, 1989 to the Prospectus, as
filed with the Commission pursuant to Rules 424(b)(3) and
424(c) on March 13, 1989, and as part of Post-Effective
Amendment No. 1 to the Registration Statement.
*99.3 Supplement No. 3 dated September 22, 1989 to the Prospectus
and Supplements No. 1 and 2, as filed with the Commission
pursuant to Rules 424(b)(3) and 424(c) on September 27,
1989, and as part of Post-Effective Amendment No. 3 to the
Registration Statement.
*99.4 Supplement No. 5 dated April 25, 1990 to the Prospectus and
Supplements No. 1 and 3 and superseding Supplement Nos. 2
and 4, as filed with the Commission pursuant to Rules 424(b)
(3) and 424(c) on May 2, 1990, and as part of Post-Effective
Amendment No. 5 to the Registration Statement.
- -----------------
* Incorporated by reference.
(b) No reports on Form 8-K were filed during the fourth quarter
of 1995.
------------------------------
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
Pursuant to the Partnership Agreement and certain undertakings in the
Registration Statement, the registrant is obligated to provide an annual report
to limited partners of the Partnership on or before April 30, 1995. The
Partnership will furnish copies of such report to the Commission when it is sent
to the limited partners. No proxy material has been or will be furnished to
limited partners.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CLOVER APPRECIATION PROPERTIES I, L.P.
CROWN MANAGEMENT CORPORATION,
General Partner
Date: March 27, 1996 By: /s/ Donald N. Love
-------------------------------
Donald N. Love, President
Date: March 27, 1996 By: /s/ Stanley E. Borucki
--------------------------------
Stanley E. Borucki, Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Date: March 27, 1996 /s/ Donald N. Love
------------------------------------
Donald N. Love, Director and
President of Crown Management
Corporation, the General Partner
Date: March 27, 1996 /s/ Steven R. Zalkind
----------------------------------
Steven R. Zalkind, Director
and Vice-President of
Crown Management Corporation,
the General Partner
