<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
/ /TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-17683
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
- --------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 94-3069380
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(State or other jurisdiction of I.R.S. Employer Identification No.)
incorporation or organization)
1341 West Robinhood, Suite B-9, Stockton, CA 95207
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (209) 478-0140
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
------------------- ----------------------
Securities registered pursuant to Section 12(g) of the Act:
Depository Units of Limited Partnership Interests
-------------------------------------------------
(Title of class)
Indicate by check CK 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 such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days. Yes _CK_ No__
Indicate by check CK if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ CK ]
Page 1 of 43
Exhibit Index at page 36
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<PAGE>
TABLE OF CONTENTS
Part I
Item 1. Business 3
Item 2. Properties 5
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Part II
Item 5. Market for the Partnership's Depository Units of Limited
Partnership Interest and Related Security Holder Matters 8
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 32
Part III
Item 10. Directors and Executive Officers of the Registrant 33
Item 11. Executive Compensation 36
Item 12. Security Ownership of Certain Beneficial Owners and
Management 36
Item 13. Certain Relationships and Related Transactions 37
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 39
2<PAGE>
<PAGE>
PART I
Item 1. Business
The Registrant, Prudential-Bache/A.G. Spanos Realty Partners L.P., I (the
"Partnership"), is a limited partnership formed on June 3, 1988 under
Delaware law. The business of the Partnership is managed and controlled
by its general partners (the "General Partners"), A.G. Spanos Realty
Partners, L.P. (the "Spanos General Partner") and Prudential-Bache
Properties, Inc. (the "Bache General Partner"). The primary purpose of
the Partnership is to acquire from affiliates of the Spanos General
Partner, invest in, hold, manage, sell, dispose of, and otherwise act with
respect to eight properties on which multi-family residential developments
have been constructed (the "Properties"). The Partnership will continue
until December 31, 2030, unless terminated earlier under the provisions of
its Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement").
On May 12, 1997, the Spanos General Partner and certain of its affiliates
entered into a Stipulation of Settlement with legal counsel representing
the plaintiff class in the litigation in Note E to the financial
statements set forth below in Item 8, Financial Statements and
Supplementary Data. The settlement contemplates, among other things, the
sale of all of the Partnership Properties at public auction and the
subsequent liquidation and dissolution of the Partnership. The Spanos
General Partner filed a preliminary proxy statement seeking the Limited
Partners' consent to the auction sale with the Securities and Exchange
Commission on July 28, 1997, and has received a third series of comments
to which it is in the process of responding. The settlement agreement
contains numerous conditions and must be finally approved by the Court at
a fairness hearing at which Limited Partners and other interested parties
will have an opportunity to be heard. There can be no assurance that the
conditions to implementation of the settlement will be satisfied.
The Properties are subject to competition from similar apartment
properties located in close proximity, including properties owned by
affiliates of the Spanos General Partner. The Properties compete for a
variety of tenant groups, including young professionals, retail, service
and trade employees, students and retirees. Competition for tenants is
principally on the basis of location, physical condition, amenities, and
rental rates. The location and condition of the Properties is considered
to be good to above-average. The Properties feature fairly typical
amenity packages, including swimming pools, tennis courts, fitness
facilities, microwave ovens and guarded entrances, and are generally able
to compete adequately with other projects in their respective markets.
3<PAGE>
<PAGE>
Many areas, including Phoenix, Denver, Las Vegas, Sparks and Atlanta have
seen construction of new apartment properties increase since 1992. This
has led to the emergence of market segmentation between 1980's vintage
properties (such as the Partnership's) and the newer generation of
apartment properties completed recently. The newer properties have a
competitive advantage not only because they are new, but because many are
designed with larger unit sizes, have floor plans and finishes similar to
those found in single family homes, and feature more extensive amenities
than do the properties built in the 1980's. To date, these newer
properties generally command higher rents and have competed with each
other for tenants able to pay premium rents, leaving the 1980's vintage
properties to compete with each other for the next tier of apartment
renters. There is a risk, however, that if overbuilding in the upper
segment of the market results in lower rents, the new properties with more
extensive amenities could be highly competitive with the 1980's vintage
apartment product.
Within the greater housing market, the apartment sector competes with
single-family homes. Thus, apartment demand can be affected by the
affordability of owner-occupied housing, which can increase and decrease
with changes in mortgage interest rates.
The Partnership does not segregate revenues or assets by geographic
regions. The Properties that accounted for more than 15% of revenue
during any of the past three years are Rancho del Sol (17%), Harbor Pointe
(18% to 19%) and Regency Square (15%). No single tenant accounted for 10%
or more of the revenue for any of the three years ended December 31, 1997.
The Partnership is engaged solely in the business of real estate
investment; therefore, presentation of industry segment information is not
applicable. The General Partners believe the Properties are adequately
insured. For more information regarding the Properties, see Item 2,
Properties. For more information regarding the Partnership's operations,
see Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The Partnership has no employees. The officers and employees of the
Spanos General Partner and the Bache General Partner, and their
affiliates, perform services for the Partnership pursuant to the
Partnership Agreement.
The Partnership resumed paying Distributions in 1996. Distributions had
been suspended beginning with the third quarter of 1992. See Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, for a discussion of the factors affecting Distributions.
4<PAGE>
<PAGE>
Item 2. Properties
<TABLE>
<CAPTION>
The Partnership owned the eight Properties described below at March 1, 1997:
<S> <C> <C> <C>
Purchase
Location Date Mortgage Holder
Silver Springs Apartments: Tempe, Arizona 11/18/88 MDS Loan Services (2)
a 198-unit midrise apartment complex (suburb of Phoenix)
located on approximately 9.28 acres.
Rancho del Sol Apartments: Las Vegas, Nevada 12/30/88 Great Western Bank (3)
a 376-unit garden apartment complex
located on approximately 16 acres.
Sandpebble Village Apartments: Sparks, Nevada 12/30/88 Wells Fargo Realty (4)
a 236-unit garden apartment complex
located on approximately 11.5 acres.
Regency Square Apartments: Chamblee, Georgia 01/31/89 Mellon Mortgage (2)
a 276-unit garden apartment complex (suburb of Atlanta) (successor to American
located on approximately 9.2 acres. Savings Bank)
Cameron Creek Apartments: Tempe, Arizona 03/31/89 Great Western Bank (3)
a 211-unit garden apartment complex (suburb of Phoenix)
located on approximately 8.7 acres.
Harbor Pointe Apartments: Dunwoody, Georgia 06/30/89 Great Western Bank (3)
a 366-unit garden apartment complex (suburb of Atlanta)
located on approximately 45.9 acres.
Bernardo Crest Apartments: San Diego, California 12/01/89 Great Western Bank (3)
a 216-unit garden apartment complex
located on approximately 16.6 acres.
Pointe West Apartments: Aurora, Colorado 09/30/89 Great Western Bank (5)
a 138-unit garden apartment complex (suburb of Denver)
located on approximately 5.27 acres.
</TABLE>
5<PAGE>
<PAGE>
Item 2. Properties (continued)
<TABLE>
<CAPTION>
Average Annual Occupancy Average Annual Revenue Per Apt. Unit (6) 1997 Realty Tax Data
1997 1996 1995 1994 1993 1997 1996 1995 1994 1993 Amount Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Silver Springs 93.8% 94.1% 95.1% 95.2% 95.0% $6,924 $7,029 $6,832 $6,183 $5,844 $ 77,311 1.0130%
Rancho del Sol 93.7% 94.9% 93.6% 95.7% 94.7% $7,112 $7,099 $6,921 $6,850 $6,177 $149,815 0.9611%
Sandpebble Village 95.3% 97.4% 95.8% 96.0% 94.7% $7,505 $7,519 $7,142 $6,875 $6,369 $109,045 1.1221%
Regency Square 92.3% 94.4% 96.2% 94.8% 94.5% $8,408 $8,582 $8,219 $7,452 $6,991 $215,580 1.6064%
Cameron Creek 94.5% 92.8% 93.0% 94.4% 92.9% $7,826 $7,544 $7,187 $6,816 $6,058 $ 95,621 1.2048%
Harbor Pointe 93.5% 92.1% 94.5% 97.2% 96.1% $8,065 $7,951 $7,828 $7,433 $6,822 $234,953 1.5784%
Bernardo Crest 96.4% 95.2% 94.4% 91.5% 92.4% $10,617 $10,215 $9,736 $9,167 $9,201 $161,513 1.0220%
Pointe West 95.4% 93.9% 95.7% 94.7% 95.2% $6,968 $6,514 $6,348 $5,903 $5,463 $ 59,782 0.8715%
<CAPTION>
(1) The Partnership has a 100% fee simple ownership interest in each Property subject to a first mortgage lien in favor
of the indicated holder. Each mortgage is secured only by the Property to which it relates and is without recourse
to either of the General Partners or the Partnership. (See Note C and Schedule III to the Financial Statements.)
(2) Loan may be prepaid without charge.
(3) Loan may be prepaid upon payment of a 2% prepayment charge. The lender may waive the prepayment charge for
principal prepayments during the calendar year which do not exceed 20% of the original loan balance and for
prepayments made within 90 days of a notice of installment adjustment. The lender will also waive the prepayment
charge so long as A.G. Spanos Construction, Inc. or any entity owned and controlled (with "control" defined as a
50% beneficial interest) by A.G. Spanos Construction or by Alex G. Spanos remains liable on the loan.
(4) Loan may be prepaid upon payment of a 4.14% prepayment charge.
(5) Loan may be prepaid upon payment of a 2% prepayment charge. The lender may waive the prepayment charge for
principal prepayments during the calendar year which do not exceed 20% of the original loan balance and for
prepayments made within 90 days of a notice of installment adjustment. The lender will also waive the prepayment
charge so long as A.G. Spanos Construction, Inc. or any entity owned and controlled by A.G. Spanos Construction or
by Alex G. Spanos remains liable on the loan.
(6) Average annual revenue per apartment unit is determined by dividing total operating revenues for the Property by
the number of apartment units.
</TABLE>
6
<PAGE>
<PAGE>
Item 3. Legal Proceedings
This information is incorporated by reference to Note E to the financial
statements in Item 8, Financial Statements and Supplementary Data.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Unitholders during the fourth
quarter of the fiscal year covered by this report through the solicitation
of proxies or otherwise.
7
<PAGE>
<PAGE>
PART II
Item 5. Market for Partnership's Depository Units of Limited Partnership
Interest and Related Security Holder Matters
The Partnership had three limited partners as of March 5, 1998: AGS
Depository Corp. (the "Assignor Limited Partner"), a wholly owned
subsidiary of AGS Financial Corporation, and two affiliates of the Spanos
General Partner which are holders of Subordinated Limited Partnership
Interests ("Subordinated Interests"). The Assignor Limited Partner has
transferred and assigned to the Unitholders all of the Assignor Limited
Partner's rights and interest in and to the assigned Limited Partnership
Interests, except for record ownership and the right to vote directly on
matters submitted to the Limited Partners and Unitholders for a vote.
There were 4,779 Unitholders as of March 5, 1998.
A significant secondary market for the Units has not developed, and it is
not expected that one will develop in the future. There are also certain
restrictions set forth in the Partnership Agreement limiting the ability
of a Unitholder to transfer Units. Consequently, Unitholders may not be
able to liquidate their investments in the event of an emergency or any
other reason.
The Partnership resumed paying Distributions to the Unitholders in 1996.
Distributions had been suspended beginning with the third quarter of 1992.
Distributions were paid approximately 45 days after the end of the
specified quarter as follows:
Quarter Ended Distribution
March 31, 1996 $1.22
June 30, 1996 $1.22
September 30, 1996 $1.22
December 31, 1996 $1.22
March 31, 1997 $1.22
June 30, 1997 $1.22
September 30, 1997 $1.22
December 31, 1997 $1.22
All of the distributions paid to Unitholders for 1996 and 1997 represents
a return of capital on a generally accepted accounting principle ("GAAP")
basis. The return of capital on a GAAP basis is calculated as Unitholder
distributions less net income, if any, allocated to Unitholders.
8<PAGE>
<PAGE>
There are no material legal restrictions on the Partnership's present or
future ability to make distributions in accordance with the provisions of
the Partnership Agreement. Future distributions will be dependent upon the
performance of the Partnership. See Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, for a
discussion of the factors affecting future Distributions.
9<PAGE>
<PAGE>
Item 6. Selected Financial Data (a)
<TABLE>
<CAPTION>
For the year ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Total revenues $16,124,230 $15,930,615 $15,362,108 $14,499,788 $13,424,097
Interest expense $5,082,298 $5,176,971 $6,014,655 $6,381,294 $6,835,318
Net loss ($53,509) ($402,122) ($1,752,058) ($2,713,210) ($3,672,977)
Net loss per Unit ($0.17) ($1.24) ($5.42) ($8.39) ($11.36)
Net loss per Subordinated
Interest -- -- -- -- --
Cash distributions per Unit (b) $4.88 $4.88 -- -- --
Cash distributions per
Subordinated Interest -- -- -- -- --
Total assets $79,257,157 $82,001,149 $84,563,942 $87,946,202 $91,804,442
Mortgage loans payable $64,183,994 $65,322,170 $66,361,897 $67,215,017 $68,580,958
<CAPTION>
(a) The above selected financial data should be read in conjunction with the financial statements
and the related notes (see Item 8).
(b) Cash distributions were paid from operating cash flow. The cash distributions did not result
in taxable income to the Unitholders. Each Unitholder's taxable income or loss from the
Partnership is equal to his allocable share of the taxable income or loss of the Partnership,
without regard to the cash generated or distributed by the Partnership.
</TABLE>
10
<PAGE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Capital Resources and Liquidity
The Partnership had cash of $4,161,000 at December 31, 1997. There are no
proposed programs for renovation, improvement or development of the
Properties other than maintenance and repairs (including major repairs) in
the ordinary course which will be paid from operations, and the
Partnership's liquidity position is considered satisfactory. However, see
below for information regarding the balloon payment due on the Sandpebble
Village mortgage and the possible consequences of failing to obtain
replacement financing.
On May 12, 1997, the Spanos General Partner and certain of its affiliates
entered into a Stipulation of Settlement with legal counsel representing
the plaintiff class in the consolidated actions. The settlement
contemplates, among other things, the sale of all of the Partnership
Properties at public auction and the subsequent liquidation and
dissolution of the Partnership. The Spanos General Partner filed a
preliminary proxy statement with the Securities and Exchange Commission on
July 28, 1997, and has received a third series of comments to which it is
in the process of responding. The settlement agreement contains numerous
conditions and must be finally approved by the Court at a fairness hearing
at which Limited Partners and other interested parties will have an
opportunity to be heard. There can be no assurance that the conditions to
implementation of the settlement will be satisfied.
The Partnership's operating activities provided cash of $2,930,000 in
1997, of which $62,000 reflects timing differences related to current
assets and liabilities. Of the balance, $1,138,000 was applied to
scheduled principal amortization on the Partnership's mortgage debt,
$1,578,000 was paid in cash distributions, and $276,000 was retained.
Cash provided by operating activities in 1995 reflects the payment of
$795,000 of fees incurred in prior years and is not directly comparable
with cash provided by operating activities in 1996. As adjusted for the
effect of the fee deferral and the other timing differences related to
prepaid and accrued expense items, cash provided by operating activities
improved from $2,097,000 in 1995 to $2,822,000 in 1996, reflecting the
Properties' improved operating performance as described below. Cash flows
from financing activities reflects the resumption of distributions paid to
the partners for the fourth quarter of 1996. (Fourth quarter 1996
distributions of $394,000 were paid in February 1997.) Scheduled principal
amortization increased in 1996 and 1997, reflecting the fact that the
principal portion of the monthly mortgage payments increases over time.
11<PAGE>
<PAGE>
The Partnership's long term debt, which consists of eight real estate
mortgages with respect to the Properties, was $64,184,000 at December 31,
1997. This debt requires monthly installments of principal and interest
of $516,000. The Properties are currently generating aggregate revenue to
cover operating expenses and debt service. Five of the mortgages are
fully self-amortizing. The Sandpebble mortgage requires a balloon payment
of approximately $5,474,000 on June 1, 1998, however, the Partnership
expects to obtain a short term extension of the maturity date pending the
results of the proxy solicitation regarding the auction sale of the
Properties. The other two require balloon payments of $5,030,000 in 2000
and $7,732,000 in 2001. The General Partners anticipate that the
Properties securing the balloon payment mortgages will be sold or
refinanced before the balloon payment due dates. If the Properties are
not sold or refinanced beforehand, the Partnership would be required to
refinance them when the balloon payments become due subject to then
existing conditions in the real estate and mortgage financing markets or
to sell the properties under terms which may not be the most favorable to
the Partnership. If the Partnership were unable to complete sales or
refinancings, then the lenders could institute foreclosure proceedings
against the Properties.
The interest rates on five of the mortgage loans (Rancho del Sol, Cameron
Creek, Harbor Pointe, Pointe West and Bernardo Crest) adjusted downward
during 1995, resulting in monthly debt service savings of $62,000. The
new interest rates are fixed for five years. The debt service savings
coupled with the Properties' improved operating performance enabled the
Partnership to resume paying cash distributions to the Unitholders in
1996. The Partnership had suspended distributions to the Unitholders
beginning with the third quarter of 1992.
The Partnership deferred payment of $795,000 of certain fees payable to
the General Partners for the period July 1, 1992 through December 31, 1993
because property income after debt service was insufficient to pay them.
Operating results improved in 1994, and payment of these items resumed on
a current basis. The deferrals were paid in 1995 without interest.
Results of Operations
1997 Compared to 1996. Rental revenue was $15,995,000 in 1997, an
increase of 1.2% from 1996. Revenue increased at four properties (Cameron
Creek, Harbor Pointe, Bernardo Crest and Pointe West) reflecting increases
in both occupancy and effective rental rates. Revenue was down 1.5% at
Silver Springs and 2% at Regency Square, principally because of lower
occupancy. Revenue at Rancho del Sol and Sandpebble was generally
unchanged from 1996. Overall, the weighted average occupancy of the
Apartment Projects was 94.2% in 1997 compared to 94.3% in 1996.
12<PAGE>
<PAGE>
Property operating expenses were $5,736,000 in 1997 compared to $5,716,000
for 1996. Major repairs (i.e., exterior painting, asphalt work and other
expensive repairs that do not recur on an annual basis) declined to
$265,000 in 1997 compared to $541,000 for 1996. Furnished unit expense
was down $45,000 compared to 1996, reflecting fewer furnished unit rentals
in 1997. Operating expenses excluding major repairs and furnished unit
expense increased $341,000 or approximately 6.8% over 1996. Expense
categories showing the greatest increases were maintenance, up $128,000 or
7.8% reflecting the generally higher costs of operating an aging property
portfolio; on-site salaries, up $78,000 or 6%, reflecting higher personnel
costs; and advertising, up $75,000 or 22%. Property taxes increased
$76,000 primarily because of an increase at Harbor Pointe which had a
lower assessment in 1996. Property management fees, which are 3% of
property revenue, increased with the increase in revenue. Interest
expense declined $95,000, reflecting lower outstanding principal on the
mortgage loans. Depreciation expense declined $180,000 because certain
personal property assets became fully depreciated in 1996.
1996 Compared to 1995. Rental revenue was $15,811,000 in 1996, an
increase of 3.6% from 1995. Revenue increased at all eight properties,
with the increases ranging from 5.3% at Sandpebble Village to 1.6% at
Harbor Pointe. Revenue increases resulted primarily from increased
effective rental rates. Overall, the weighted average occupancy of the
Apartment Projects was 94.3% in 1996 compared to 94.7% in 1995.
Property operating expenses were $5,716,000 in 1996 compared to $5,222,000
for 1995. Major repairs (i.e., exterior painting, asphalt work and other
expensive repairs that do not recur on an annual basis) increased to
$541,000 in 1996 compared to $371,000 for 1995. Furnished unit expense
was up $22,000 over 1995, reflecting the increased furnished unit rentals,
but this expense was offset by the higher rents received for those
apartments. Operating expenses excluding major repairs and furnished unit
expense increased $303,000 or approximately 6.4% over 1995. Expense
categories showing the greatest increases were maintenance, up $177,000 or
12% reflecting the generally higher costs of operating an aging property
portfolio; utilities, up $50,000 or 4.5%; and advertising, up $47,000 or
16%. Property taxes declined $51,000 because of lower assessed valuations
at Harbor Pointe and Bernardo Crest. Property management fees, which are
3% of property revenue, increased with the increase in revenue. Interest
expense declined $838,000, reflecting the lower interest rates now
applicable on five of the Partnership mortgage loans. In addition,
interest expense in 1995 included $201,000 of loan fee amortization not
charged in 1996 because the fees became fully amortized in 1995.
Depreciation expense declined $424,000 because certain personal property
assets became fully depreciated in 1995.
Year 2000.
The General Partners do not expect that any costs related to year 2000
compliance will be material to the financial statements of the
Partnership.
13
<PAGE>
<PAGE>
Item 8. Financial Statements and Supplementary Data Page
Independent Auditors' Report 15
Balance sheets at December 31, 1997 and 1996 16
Statements of operations for the years ended
December 31, 1997, 1996 and 1995 17
Statements of changes in partners' equity (deficit)
for the years ended December 31, 1997, 1996 and 1995 18
Statements of cash flows for the years ended
December 31, 1997, 1996 and 1995 19
Notes to financial statements 20-31
Schedule to financial statements 45
14<PAGE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
General and Limited Partners
Prudential-Bache/A.G. Spanos
Realty Partners, L.P., I:
We have audited the accompanying balance sheets of Prudential-Bache/A.G.
Spanos Realty Partners L.P., I (a limited partnership) (the "Partnership")
as of December 31, 1997 and 1996, and the related statements of
operations, changes in partners' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1997. Our audits also
included the financial statement schedule of the Partnership listed at
Item 14(a)(2). These financial statements and financial statement
schedule are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule 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, such financial statements present fairly, in all material
respects, the financial position of Prudential-Bache/A.G. Spanos Realty
Partners L.P., I as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1997 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
/s/ Deloitte & Touche LLP
San Francisco, California
March 13, 1998
15<PAGE>
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
(A Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Property, net $74,608,817 $77,633,657
Cash and cash equivalents 4,161,323 3,946,802
Other assets (net of accumulated amortization
of $1,297,372 and $1,276,744, respectively) 487,017 420,690
---------- ----------
$79,257,157 $82,001,149
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Mortgage loans payable $64,183,994 $65,322,170
Accounts payable 602,925 603,086
Accounts payable, affiliate 203,930 200,389
Distributions payable 394,418 394,418
Accrued interest 433,615 428,040
Unearned rent and tenant deposits 569,495 553,085
---------- ----------
66,388,377 67,501,188
---------- ----------
Partners' equity (deficit):
Limited partners' equity (316,828 units
authorized and outstanding) 5,330,720 6,929,279
Subordinated limited partners' equity (46,364 units
authorized and outstanding) 8,878,175 8,878,175
General partners' deficit (1,340,115) (1,307,493)
---------- ----------
12,868,780 14,499,961
---------- ----------
$79,257,157 $82,001,149
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
16
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Revenues:
Rental $15,994,514 $15,811,247 $15,269,148
Interest 129,716 119,368 92,960
---------- ---------- ----------
16,124,230 15,930,615 15,362,108
---------- ---------- ----------
Expenses:
Property operating expenses 5,736,362 5,716,463 5,221,536
Property taxes 1,109,706 1,033,812 1,084,608
Property management fees to affiliates 479,863 474,158 458,074
General and administrative expense 104,890 94,903 96,939
Interest expense 5,082,298 5,176,971 6,014,655
Management fees to General Partners 639,780 632,450 610,766
Depreciation 3,024,840 3,203,980 3,627,588
---------- ---------- ----------
16,177,739 16,332,737 17,114,166
---------- ---------- ----------
Net loss $ (53,509) $ (402,122) $(1,752,058)
---------- ---------- ----------
---------- ---------- ----------
Net loss allocated to General Partners $ (1,070) $ (8,042) $ (35,041)
---------- ---------- ----------
---------- ---------- ----------
Net loss allocated to Limited Partners $ (52,439) $ (394,080) $(1,717,017)
---------- ---------- ----------
---------- ---------- ----------
Net loss allocated to Subordinated Limited
Partners $ -0- $ -0- $ -0-
---------- ---------- ----------
---------- ---------- ----------
Net loss per unit of limited partnership
interest $ (0.17) $ (1.24) $ (5.42)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to financial statements.
17
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
Subordinated
Limited Limited General
Total Partners Partners Partners
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Partners' equity
(deficit)-
December 31, 1994 $18,231,821 $10,586,496 $ 8,878,175 $(1,232,850)
Net loss (1,752,058) (1,717,017) -0- (35,041)
---------- ---------- ---------- ----------
Partners' equity
(deficit)-
December 31, 1995 16,479,763 8,869,479 8,878,175 (1,267,891)
Net loss (402,122) (394,080) -0- (8,042)
Distributions (1,577,680) (1,546,120) -0- (31,560)
---------- ---------- ---------- ----------
Partners' equity
(deficit)-
December 31, 1996 14,499,961 6,929,279 8,878,175 (1,307,493)
Net loss (53,509) (52,439) -0- (1,070)
Distributions (1,577,672) (1,546,120) -0- (31,552)
---------- ---------- ---------- ----------
Partners' equity
(deficit)-
December 31, 1997 $12,868,780 $ 5,330,720 $ 8,878,175 $(1,340,115)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements.
18
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (53,509) $ (402,122) $(1,752,058)
---------- ---------- ----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 3,024,840 3,203,980 3,627,588
Amortization of loan fees included in
interest expense 20,628 20,628 221,744
(Increase) decrease in other assets (86,955) 22,312 18,390
Decrease (increase) in accounts payable (161) 31,800 37,400
Increase (decrease) in accounts payable,
affiliate 3,541 2,777 (783,498)
Increase (decrease) in accrued interest 5,575 (6,578) (57,123)
Increase in unearned rent and tenant deposits 16,410 34,319 26,139
---------- ---------- ----------
Total adjustments 2,983,878 3,309,238 3,090,640
---------- ---------- ----------
Net cash provided by operating activities 2,930,369 2,907,116 1,338,582
---------- ---------- ----------
Cash flows from financing activities:
Mortgage loan principal amortization (1,138,176) (1,039,727) (853,120)
Distributions to partners (1,577,672) (1,183,262) -0-
---------- ---------- ----------
Net cash used in financing activities (2,715,848) (2,222,989) (853,120)
---------- ---------- ----------
Net increase in cash and cash equivalents 214,521 684,127 485,462
Cash and cash equivalents, beginning of year 3,946,802 3,262,675 2,777,213
---------- ---------- ----------
Cash and cash equivalents, end of year $ 4,161,323 $ 3,946,802 $ 3,262,675
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to financial statements.
19
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/A. G. SPANOS
REALTY PARTNERS L.P., I
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
Years Ended December 31, 1997, 1996 and 1995
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Prudential-Bache/A.G. Spanos Realty Partners L.P., I (the "Partnership")
is a Delaware limited partnership organized for the purpose of acquiring
and operating eight specified apartment properties (the "Properties").
The General Partners of the Partnership are Prudential-Bache Properties,
Inc. (the "Bache General Partner") and A.G. Spanos Realty Partners, L.P.,
(the "Spanos General Partner"). The Partnership will continue until
December 31, 2030, unless previously terminated in accordance with the
provisions of its Amended and Restated Agreement of Limited Partnership
(the "Partnership Agreement").
The Partnership sold 316,828 depository units of limited partnership
interest ("Units") between October 1988 and December 1989 for aggregate
capital contributions (net of certain volume selling commission discounts)
of $79,194,827. The Partnership has also issued non-voting Subordinated
Limited Partnership Interests ("Subordinated Interests") to affiliates of
the Spanos General Partner in consideration for capital contributions and
payments under a cash flow guaranty.
Financial Statement Preparation
The Partnership has a fiscal year ending December 31. The books and
records of the Partnership are maintained on the accrual basis of
accounting in accordance with generally accepted accounting principles.
Certain reclassifications have been made to prior year amounts in order to
be in conformity with the current year presentation.
Accounting Estimates
In preparing the financial statements, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities (see Note E) at the date
of the financial statements and the reported amounts of revenues and
expenses from the reporting period. Actual results could differ from
those estimates.
20<PAGE>
<PAGE>
Cash Equivalents
Cash equivalents consist of money market funds containing money market
instruments with an original maturity date of 90 days or less whose cost
approximates market value.
Property
Property, which includes land, buildings and equipment, is carried at the
lower of depreciated cost or estimated fair value. Depreciated cost was
reduced by certain payments received under the cash flow guaranty (see
Note D). Depreciation on buildings and equipment is recorded on a
straight-line basis over their estimated useful lives, which range from 7
to 27.5 years.
Income Taxes
No provision has been made for federal or state income taxes (or benefits)
since such items are the responsibility of the partners. A reconciliation
of the net loss in the financial statements to the net taxable income
(loss) is set forth below:
1997 1996 1995
Net loss per financial statements $ (53,509) $ (402,122) $(1,752,058)
Financial statement depreciation
in excess of tax depreciation 124,558 175,997 269,972
Loan fee amortization and interest
expense adjustment -0- -0- (10,051)
Unearned rent and non refundable
deposits recognized as income for
tax purposes when received 6,145 148 618
---------- ---------- ----------
Net taxable income (loss) $ 77,194 $ (225,977) $(1,491,519)
---------- ---------- ----------
---------- ---------- ----------
The book and tax bases of partners' equity differ by the cumulative effect
of the book to tax income adjustments.
Allocations and Distributions
Pursuant to the Partnership Agreement, operating income, losses and cash
distributions are generally allocated 98% to the Unitholders and 2% to the
General Partners. Taxable income and losses are allocated in the same
manner. Cash distributions resulting from sales or refinancings of the
Properties are generally allocable as follows: First, 98% to the limited
partners and 2% to the General Partners until (i) the aggregate of all
21<PAGE>
<PAGE>
such distributions equals the limited partners' aggregate capital
contributions and (ii) the aggregate of all other cash distributions
(including operating cash distributions, but excluding distributions in
repayment of capital contributions) equals the limited partners' 10% per
annum cumulative noncompounded return on their adjusted capital
contributions (the "First Level Sale or Refinance Distributions").
Thereafter, cash distributions resulting from a sale or refinancing are
generally allocable 85% to the Unitholders and 15% to the General Partners
(the "Second Level Sale or Refinance Distributions"). Income from sales
of the Properties is generally allocable in the same manner as cash
distributions resulting from such sales, after taking into account the
depreciation expense with respect to the Properties sold.
The Subordinated Interests entitle the holders to receive First Level Sale
or Refinance Distributions (and corresponding allocations of income on
sales), but no allocations of operating income, losses or cash
distributions and no allocations of Second Level Sale or Refinance
Distributions.
Cash distributions to the partners are recorded in the periods to which
they relate for financial reporting purposes. In February 1997, the
Partnership paid fourth quarter 1996 distributions of $394,418 which were
accrued at December 31, 1996. No distributions were paid in 1995.
Revenue Recognition
Rental income is accrued as rents are due.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial instruments," requires the determination of fair
value for certain of the Partnership's assets and liabilities. The
following methods and assumptions were used to estimate the fair value of
those financial instruments included in the following categories:
Cash and Cash Equivalents - The carrying amount approximates fair value
based on the liquidity of the assets.
Mortgage Loans Payable (see Note C) - The carrying value approximates fair
value based on interest rates available to the Partnership on debt
instruments with similar terms.
22<PAGE>
<PAGE>
NOTE B - PROPERTY
Property is comprised of the following at December 31, 1997 and 1996:
1997 1996
Apartment buildings $ 83,030,825 $ 83,030,825
Equipment 4,369,974 4,369,974
Land 18,053,226 18,053,226
----------- -----------
105,454,025 105,454,025
Less: Accumulated depreciation (30,845,208) (27,820,368)
----------- -----------
$ 74,608,817 $ 77,633,657
----------- -----------
----------- -----------
The Partnership leases apartments under lease agreements with terms
ranging from one to twelve months.
NOTE C - MORTGAGE LOANS PAYABLE
The mortgage loans payable are collateralized by first deeds of trust on
the respective Properties and security interests in the equipment
contained therein. Detailed information regarding the mortgage loans is
set forth below.
23<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Final Monthly Principal Estimated
Property Pledged Obligation Obligation Interest Maturity Payment Due During Balloon
as Collateral at 12/31/97 at 12/31/96 Rate Date Terms 1998 Payment
---------- ---------- -------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Silver Springs Village
Tempe, Arizona 5,398,434 5,500,487 6.50% 12/01/00 38,006 113,018 5,030,000
Rancho del Sol
Las Vegas, Nevada 11,129,984 11,325,219 8.11% 10/01/19 92,172 211,673 N/A
Sandpebble Village
Sparks, Nevada 5,527,992 5,650,644 8.28% 06/01/98 48,828 5,527,992 5,474,000
Regency Square
Chamblee, Georgia 8,191,919 8,321,802 8.00% 02/01/01 61,269 95,321 7,732,000
Cameron Creek
Tempe, Arizona 6,426,800 6,530,719 8.11% 10/01/19 52,480 112,669 N/A
Harbor Pointe
Dunwoody, Georgia 12,930,605 13,150,748 7.75% 10/01/19 102,635 237,824 N/A
Pointe West
Aurora, Colorado 3,063,205 3,138,599 7.61% 03/01/16 25,971 81,337 N/A
Bernardo Crest
San Diego, California 11,515,055 11,703,952 8.12% 08/01/19 94,221 204,811 N/A
----------- ----------- -------- -----------
64,183,994 65,322,170 515,582 6,584,645
----------- ----------- -------- -----------
----------- ----------- -------- -----------
</TABLE>
Interest paid in 1997, 1996 and 1995 was $5,056,095, $5,150,209 and
$5,850,034, respectively.
24<PAGE>
<PAGE>
Aggregate maturities of mortgage loans payable for each of the five years
ending December 31, 2002 and thereafter are as follows:
1998 $ 6,584,645
1999 1,146,784
2000 6,262,350
2001 8,807,983
2002 1,165,320
Thereafter 40,216,912
----------
$64,183,994
----------
----------
NOTE D - RELATED PARTY TRANSACTIONS
The Partnership acquired the Properties from affiliates of the Spanos
General Partner (the "Sellers"). Under the terms of the acquisitions, the
Sellers guaranteed that if the Properties as a group did not meet certain
annual net cash flow levels between their acquisition dates and June 30,
1992, then the Sellers would make up any deficiency by periodic cash
payments ("Support Payments") to the Partnership. The first $4,500,000 of
Support Payments were non-refundable, and the Partnership accounted for
them as a reduction of the purchase price of the Properties. The
Partnership issued Subordinated Interests in exchange for Support Payments
in excess of that amount; however, the Subordinated Interests were
cancelable by the Partnership to the extent that the aggregate net cash
flow from any of the Properties (treated individually and not
collectively) was negative during the guaranty period. The cancellations
were also accounted for as a reduction of the purchase price of the
Properties.
Support Payments of $11,083,798 accrued to the Partnership based upon the
operating results of the Properties from inception of the Partnership
through the conclusion of the guaranty. The Partnership issued 26,335
Subordinated Interests (at $250 each) to a Seller in exchange for
$6,583,798 of Support Payments in excess of the $4,500,000 non-refundable
amount. The Silver Springs property had aggregate negative net cash flow
of $537,220; accordingly, the Partnership canceled 2,149 Subordinated
Interests.
An affiliate of the Spanos General Partner manages the Apartment Projects.
Property management fees totaled $479,863, $474,158 and $458,074 in 1997,
1996 and 1995, respectively. Under the management agreements, the
affiliate employs property managers and other on-site personnel, and the
Partnership bears the expense for their compensation (including employment
taxes and fringe benefits). That expense was approximately $1,379,000,
$1,301,000 and $1,262,000 in 1997, 1996 and 1995, respectively. Accruals
of $41,966 and $41,315 for property management fees and $121,813 and
$104,347 for salary expense reimbursements were outstanding at
December 31, 1997 and 1996, respectively.
25<PAGE>
<PAGE>
Under the Partnership Agreement, the Spanos General Partner is entitled to
a supervisory management fee and the Bache General Partner is entitled to
a special distribution. The fee and distribution are each equal to two
percent of the revenues from the Properties. The special distribution is
reduced to the extent of reimbursements to the Bache General Partner for
certain expenses incurred in the administration of the Partnership.
Amounts accrued during the past three years were as follows.
1997 1996 1995
Supervisory management fee $319,890 $316,225 $305,383
Special distribution 264,362 260,697 249,855
Administrative expense reimbursements 55,528 55,528 55,528
------- ------- -------
$639,780 $632,450 $610,766
------- ------- -------
------- ------- -------
Accruals of $161,964 and $159,074 for management fees payable to the
General Partners were outstanding at December 31, 1997 and 1996,
respectively.
The General Partners deferred payment of a total of $795,432 of
supervisory management fees, special distributions and administrative
expense reimbursements accrued for the period July 1, 1992 through
December 31, 1993. The deferrals were paid in 1995 without interest.
The General Partners' capital account deficit for financial accounting
purposes exceeds the amount the General Partners would be obligated to
restore if the Partnership were to dissolve.
Prudential Securities Incorporated ("PSI"), an affiliate of the Bache
General Partner, owned 4,663 Units at December 31, 1997.
NOTE E - CONTINGENCIES
On or about October 18, 1993, a putative class action captioned Kinnes et
al. v. Prudential Securities Group Inc. et al. (93 Civ. 654) was filed in
the United States District Court for the District of Arizona, purportedly
on behalf of investors in the Partnership against the Partnership, the
Bache General Partner, PSI and a number of other defendants. On or about
November 16, 1993, a putative class action captioned Connelly et al. v.
Prudential-Bache Securities Inc. et al. (93 Civ. 713) was filed in the
United States District Court for the District of Arizona, purportedly on
behalf of investors in the Partnership against the Partnership, the Bache
General Partner, PSI and a number of other defendants. On or about July
23, 1993 a putative class action, captioned Kahn v. Prudential-Bache
Properties, Inc. et al. (Index No. 11867/93) was filed in the Supreme
Court of the State of New York, County of New York, purportedly on behalf
of investors in the Partnership against the General Partners, PSI, The
Prudential Insurance Company of America and certain of their affiliates
and officers. The case was subsequently removed to the United States
District Court for the Southern District of New York (93 Civ. 5976).
26<PAGE>
<PAGE>
On or about February 13, 1995, an individual action captioned Estate of
Jean Adams v. Prudential Securities, Inc. et al. (Case No. 1995 CV 00265)
was filed in the Court of Common Pleas in Stark County, Ohio against PSI,
The Prudential, the General Partners, the Partnership and affiliates of
the Spanos General Partner. The action was removed to the United States
District Court for the Northern District of Ohio (Eastern Division) on
March 15, 1995. Plaintiff alleged misrepresentations, breach of fiduciary
duties and civil conspiracy by defendants in connection with the sale of
units of the Partnership. Plaintiff sought unspecified damages, including
punitive damages.
By order of the Judicial Panel on Multidistrict Litigation dated April 14,
1994, the Kinnes and Kahn cases, by order dated June 8, 1994, the Connelly
case, and by order dated April 7, 1995, the Adams case, were transferred
to a single judge of the United States District Court for the Southern
District of New York and consolidated for pretrial proceedings under the
caption In re Prudential Securities Incorporated Limited Partnerships
Litigation (MDL Docket 1005). On June 8, 1994, plaintiffs in the
transferred cases filed a complaint that consolidated the previously filed
complaints and named as defendants, among others, PSI, certain of its
present and former employees and the General Partners. The Partnership is
not named a defendant in the consolidated complaint, but the name of the
Partnership is listed as being among the limited partnerships at issue in
the case. The consolidated complaint alleges violations of the federal
and New Jersey Racketeer Influenced and Corrupt Organizations Act ("RICO")
statutes, fraud, negligent misrepresentation, breach of fiduciary duties,
breach of third- party beneficiary contracts and breach of implied
covenants in connection with the marketing and sales of limited
partnership interests. Plaintiffs request relief in the nature of
rescission of the purchase of securities and recovery of all consideration
and expenses in connection therewith, as well as compensation for lost use
of money invested less cash distributions; compensatory damages;
consequential damages; treble damages for defendants' RICO violations
(both federal and New Jersey); general damages for all injuries resulting
from negligence, fraud, breaches of contract, and breaches of duty in an
amount to be determined at trial; disgorgement and restitution of all
earnings, profits, benefits, and compensation received by defendants as a
result of their unlawful acts; and costs and disbursements of the action.
On November 28, 1994 the transferee court deemed each of the complaints in
the constituent actions (including Kinnes and Kahn) amended to conform to
the allegations of the consolidated complaint. On August 9, 1995 the
Bache General Partner, PSI and other Prudential defendants entered into a
Stipulation and Agreement of Partial Compromise and Settlement with legal
counsel representing plaintiffs in the consolidated actions. On November
20, 1995, the court gave final approval to the settlement, dismissed the
Kinnes and Kahn actions, certified a class of purchasers of specific
limited partnerships, including the Partnership, released all settled
claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing
or prosecuting any settled claim against the released parties. By orders
27 <PAGE>
<PAGE>
entered August 12, 1996 and October 25, 1996, respectively, the Adams and
Connelly cases were dismissed as to the Bache General Partner, PSI and the
other Prudential defendants. The full amount due under the settlement
agreement has been paid. The consolidated action as well as the Adams and
Connelly cases remain pending against nonsettling defendants, including
the Spanos General Partner and certain of its affiliates. The Partnership
is not named a defendant in the consolidated complaint and the action is
not expected to have a material effect on the Partnership's financial
statements; accordingly, no provision for any loss that may result upon
resolution of this matter has been made in the accompanying financial
statements.
On May 12, 1997, the Spanos General Partner and certain of its affiliates
entered into a Stipulation of Settlement with legal counsel representing
the plaintiff class in the consolidated actions. The settlement
contemplates, among other things, the sale of all of the Partnership
Properties at public auction and the subsequent liquidation and
dissolution of the Partnership. The settlement agreement was preliminarily
approved by the Court on August 28, 1997. Pursuant to the settlement,
detailed information about the proposed auction sale and other terms of
the settlement will be sent to the Limited Partners with proxy
solicitation materials seeking the Limited Partners' consent to the
auction sale. The Spanos General Partner filed a preliminary proxy
statement with the Securities and Exchange Commission on July 28, 1997,
and has received a third series of comments to which it is in the process
of responding. The settlement agreement contains numerous conditions and
must be finally approved by the Court at a fairness hearing at which
Limited Partners and other interested parties will have an opportunity to
be heard. There can be no assurance that the conditions to implementation
of the settlement will be satisfied.
On or about April 15, 1994 a multiparty petition entitled Schreiber, et
al. v. Prudential Securities, Inc., et al. (Cause No. 94-17696) was filed
in the 189th Judicial District Court of Harris County, Texas, purportedly
on behalf of investors in the Partnership against the Partnership, the
General Partners, PSI, The Prudential Insurance Company of America and a
number of other defendants. The Petition alleges common law fraud, fraud
in the inducement and negligent misrepresentation in connection with the
offering of limited partnership interests and negligence, breach of
fiduciary duty, civil conspiracy, and violations of the federal Securities
Act of 1933 (sections 11 and 12) and of the Texas Securities and Deceptive
Trade Practices statutes. The suit seeks, among other things,
compensatory and punitive damages, costs and attorneys' fees. Most of the
plaintiffs have released their claims against the defendants in exchange
for monetary payments by PSI. It is expected that the remaining claims
will be resolved by PSI at no cost to the Partnership. Accordingly, no
provision for any loss that may result upon resolution of this matter has
been made in the accompanying financial statements.
28<PAGE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Not applicable.
29
<PAGE>
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership does not have directors or executive officers. The
Partnership is managed by the General Partners, which have formed, and may
continue to form, other real estate investment entities with investment
policies similar to those of the Partnership and which may compete with
the Partnership for management services. The Spanos General Partner is a
California limited partnership whose general partners are AGS Financial
Corporation and A.G. Spanos Realty Capital, Inc. AGS Financial
Corporation is the managing general partner of the Spanos General Partner.
The directors and executive officers of AGS Financial Corporation and the
Bache General Partner who perform services for the Partnership are listed
below, together with a brief description of their experience. All have
indefinite terms.
AGS Financial Corporation is owned by Dean A. Spanos, Barry L. Ruhl,
Michael A. Spanos, Dea Spanos and a Spanos family trust. Dean A. Spanos,
Michael A. Spanos and Dea Spanos are children of Alex G. Spanos, Chairman
of the Board of AGS Financial Corporation. Barry L. Ruhl is a son-in-law
of Alex G. Spanos. There are no other family relationships among the
directors and executive officers of AGS Financial Corporation or the Bache
General Partner.
The General Partners and their directors and executive officers, and any
persons holding more than ten percent of the Partnership's Units are
required to report their initial ownership of such units and any
subsequent changes in that ownership to the Securities and Exchange
Commission on Forms 3, 4 and 5. Such executive officers, directors and
greater than ten percent Unitholders are required by Securities and
Exchange Commission regulations to furnish the Partnership with copies of
all Forms 3, 4 and 5 they file. All of these filing requirements were
satisfied on a timely basis. In making the disclosures, the Partnership
has relied solely on written representations of the General Partners'
directors and executive officers and greater than ten percent Unitholders
or copies of the reports that they have filed with the Securities and
Exchange Commission during and with respect to its most recent fiscal
year.
30
<PAGE>
<PAGE>
AGS FINANCIAL CORPORATION
Name Position
Alex G. Spanos Chairman of the Board
Dean A. Spanos Vice Chairman and Director
Barry L. Ruhl Director
Michael A. Spanos Director
Arthur J. Cole President and Director
Jeremiah T. Murphy Executive Vice President and
Chief Financial Officer
ALEX G. SPANOS, age 74, has been Chairman of the Board of AGS Financial
Corporation since its founding in 1981. In addition, he serves as
Chairman of the Board or President of each of the other Spanos companies
and owns a controlling interest in the San Diego Chargers, a professional
football team. Mr. Spanos founded the combined Spanos organizations in
the early 1960's and has been the driving force behind the development of
approximately 50,000 apartments and over 3 million square feet of office
space. Mr. Spanos maintains close contact with the key executives of each
of his companies and lends his judgment and experience to all major land
acquisitions, development and property financing decisions, and the
investment activities of AGS Financial Corporation. Mr. Spanos attended
the University of the Pacific.
DEAN A. SPANOS, age 47, has been Vice Chairman and a Director of AGS
Financial Corporation since its founding in 1981. He is the chief
operating officer of the property development and management companies
within the Spanos organization, responsible for land acquisitions,
financing construction and property sales. Mr. Spanos holds a bachelor's
degree in business administration from the University of the Pacific.
MICHAEL A. SPANOS, age 38, has served as a Director of AGS Financial
Corporation since its founding in 1981. He is Executive Vice President of
A.G. Spanos Construction, Inc. He holds a bachelor's degree from the
University of the Pacific.
BARRY L. RUHL, age 46, has been a Director of AGS Financial Corporation
since its founding in 1981. He is Executive Vice President of A.G. Spanos
Construction, Inc. He holds a D.D.S. from the University of the Pacific
Dental School.
31<PAGE>
<PAGE>
ARTHUR J. COLE, age 43, has served as President of AGS Financial
Corporation since August 1990 and as a director since 1986. He joined AGS
Financial Corporation in 1983. He holds a bachelor's degree from Golden
Gate University.
JEREMIAH T. MURPHY, age 53, has served as an Executive Vice President of
AGS Financial Corporation and is the Chief Financial Officer for all the
A.G. Spanos Companies. He has been employed by the Spanos companies since
1983. Prior to joining the Spanos companies he was a partner with the
accounting firm, Bowman & Company, which he joined in 1970. Mr. Murphy is
a Certified Public Accountant and a graduate of Bernard Baruch College.
PRUDENTIAL-BACHE PROPERTIES, INC.
Name Position
Brian J. Martin President, Chief Executive
Officer, Director and Chairman
of the Board of Directors
Barbara J. Brooks Vice President - Finance and
Chief Financial Officer
Eugene D. Burak Vice President
Chester A. Piskorowski Senior Vice President
Frank W. Giordano Director
Nathalie P. Maio Director
BRIAN J. MARTIN, age 47, is the President, Chief Executive Officer,
Chairman of the Board of Directors and a Director of the Bache General
Partner. He is a Senior Vice President of Prudential Securities
Incorporated ("PSI"), an affiliate of the Bache General Partner. Mr.
Martin also serves in various capacities for other affiliated companies.
Mr. Martin joined PSI in 1980. Mr. Martin is a member of the Pennsylvania
Bar.
BARBARA J. BROOKS, age 49, is the Vice President-Finance and Chief
Financial Officer of the Bache General Partner. She is a Senior Vice
President of PSI. Ms. Brooks also serves in various capacities for other
affiliated companies. She has held several positions within PSI since
1983. Ms. Brooks is a certified public accountant.
32<PAGE>
<PAGE>
EUGENE D. BURAK, age 52, is a Vice President of the Bache General Partner.
He is a First Vice President of PSI. Prior to joining PSI in September
1995, he was a management consultant for three years and was with
Equitable Capital Management Corporation from March 1990 to May 1992. Mr.
Burak is a certified public accountant.
CHESTER A. PISKOROWSKI, age 54, is a Senior Vice President of the Bache
General Partner. He is a Senior Vice President of PSI and is the Senior
Manager of the Specialty Finance Asset Management area. Mr. Piskorowski
has held several positions within PSI since April 1972. Mr. Piskorowski is
a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 55, is a Director of the Bache General Partner. He
is a Senior Vice President of PSI and Executive Vice President and General
Counsel of Prudential Mutual Fund Management LLC, an affiliate of PSI.
Mr. Giordano also serves in various capacities for other affiliated
companies. He has been with PSI since July 1967.
NATHALIE P. MAIO, age 47, is a Director of the Bache General Partner. She
is a Senior Vice President and Deputy General Counsel of PSI and
supervises nonlitigation legal work for PSI. She joined PSI's Law
Department in 1983; presently, she also serves in various capacities for
other affiliated companies.
Thomas F. Lynch, III ceased to serve as President, Chief Executive
Officer, Chairman of the Board of Directors and Director of the Bache
General Partner effective May 2, 1997. Effective May 2, 1997, Brian J.
Martin was elected President, Chief Executive Officer, Chairman of the
Board of Directors and Director of the Bache General Partner.
Item 11. Executive Compensation
The Partnership is not required to and did not pay remuneration to the
officers and directors of the General Partners. Certain officers and
directors of the General Partners receive compensation from the General
Partners and/or their affiliates (but not from the Partnership) for
services performed for various affiliated entities, which may include
services performed for the Partnership; however, the General Partners
believe that any compensation attributable to services performed for the
Partnership is immaterial. See Item 13, "Certain Relationships and
Related Transactions," for a discussion of compensation and fees to which
the General Partners and their affiliates are entitled.
Item 12. Security Ownership of Certain Beneficial Owners and Management
No Unitholder is known by the Partnership to own beneficially more than 5%
of the outstanding Units. The percentage of outstanding Units held by all
directors and officers of the General Partners is less than 1%.
33<PAGE>
<PAGE>
The Partnership has issued 48,513 Subordinated Interests (of which 46,364
remain outstanding at March 5, 1998) to affiliates of the Spanos General
Partner, all of which Subordinated Interests are beneficially owned by
members of the Spanos family, certain of whom are directors and officers
of the general partners of the Spanos General Partner.
As of March 5, 1998, the individual directors and the directors and
officers, as a group, of AGS Financial Corporation and A.G. Spanos Realty
Capital, Inc., the general partners of the Spanos General Partner,
beneficially owned shares of the common stock of AGS Financial Corporation
and A.G. Spanos Realty Capital, Inc. as follows:
AGS Financial A.G. Spanos
Corporation Realty, Inc.
Name Shares % of Class Shares % of Class
Alex G. Spanos -0- -0- 20 100%
Dean A. Spanos 1,000 10%
Barry L. Ruhl 1,000 10%
Michael A. Spanos 1,000 10%
All directors and officers
as a group (8 persons) 9,000(1) 90% 20 100%
(1) These amounts include shares beneficially owned by virtue of certain
beneficial interests in a Spanos family trust which owns 6,000 shares
(60%) of the shares of AGS Financial Corporation.
Item 13. Certain Relationships and Related Transactions
The General Partners and their affiliates are permitted to engage in
transactions with the Partnership as described in the Partnership
Agreement.
The General Partners and certain affiliates thereof have, during the
Partnership's year ended December 31, 1997, earned or received
compensation or payments for services from the Partnership as follows:
34<PAGE>
<PAGE>
Capacity in Form of Cash
Recipient Which Served Compensation Compensation
Spanos General General Partner Supervisory $319,890
Partner Management Fee(1)
Bache General General Partner Special 264,362
Partner Distribution(2)
A.G. Spanos Property Manager Property 479,863
Management Inc. Management Fees(3)
General Partners General Partners Cash from Operations(4) 31,552
Bache General General Partner Expense 55,528
Partner Reimbursements
(1) Supervisory Property Management Fee for supervising the management of the
Properties equal to 2% of gross receipts from the Properties.
(2) Special Distribution for services in managing and administering the
Partnership equal to 2% of gross receipts from the Properties, reduced to the
extent of reimbursements, if any, for certain expenses incurred in the
administration of the Partnership.
(3) Property Management Fees for property management services equal to 3% of
gross receipts from the Properties.
(4) Cash from Operations equal to 2% of Adjusted Cash from Operations remaining
after payment of the Special Distribution.
35<PAGE>
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements:
See Index to Financial Statements and Schedule on page 14.
(2)Financial Statement Schedule:
III. Real Estate and Accumulated Depreciation, page 42.
All other schedules have been omitted because they are
inapplicable or not required, or the information is included in
the financial statements or notes thereto.
Exhibits
4(a) Certificate of Limited Partnership of Registrant as
filed with the Secretary of State of Delaware,
incorporated by reference to Exhibit 4(a) to
Registration Statement on Form S-11, File No. 33-22613,
filed with the Securities and Exchange Commission on
October 14, 1988.
4(b) Amendment to Certificate of Limited Partnership of
Registrant as filed with the Secretary of State of
Delaware, incorporated by reference to Exhibit 4(b) to
Amendment No. 1 to Registration Statement on Form S-11,
File No. 33-22613, filed with the Securities and
Exchange Commission on October 14, 1988.
4(c) Amended and Restated Agreement of Limited Partnership of
Registrant, incorporated by reference to Exhibit 4(c) to
Amendment No. 1 to Registration Statement on Form S-11,
File No. 33-22613, filed with the Securities and
Exchange Commission on October 14, 1988.
4(d) Amendments No. 1 through 7 dated November 21, and
December 30, 1988 and January 31, February 28, March 31,
April 28, and May 31, 1989 to the Amended and Restated
Agreement of Limited Partnership of Registrant,
incorporated by reference to Exhibit 4(d) to
Post-Effective Amendment No. 1 to Registration Statement
on Form S-11, File No. 33-22613, filed with the
Securities and Exchange Commission on June 30, 1989.
36<PAGE>
<PAGE>
4(e) Amendments No. 8 through 14 dated June 30, August 11
and 31, September 29, October 31, and December 1 and 22,
1989 to the Amended and Restated Agreement of Limited
Partnership of Registrant, incorporated by reference to
Exhibit 4(e) to Annual Report on Form 10-K, File No.
0-17683, filed with the Securities and Exchange
Commission on March 28, 1991.
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the last quarter
of the period covered by this Report.
37
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I (Registrant)
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/Brian J. Martin Date: March 27, 1998
---------------------------------------
Brian J. Martin
Chairman of the Board of Directors and Director
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 (with respect to the General Partners) and on
the dates indicated.
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
By: /s/Brian J. Martin Date: March 27, 1998
---------------------------------------
Brian J. Martin
Chairman of the Board of Directors and Director
(Principal Executive Officer)
By: /s/Barbara J. Brooks Date: March 27, 1998
---------------------------------------
Barbara J. Brooks
Vice President-Finance and Chief Financial Officer
(Principal Financial Officer)
By: /s/Nathalie P. Maio Date: March 27, 1998
---------------------------------------
Nathalie P. Maio
Director
38
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I (Registrant)
By: A.G. Spanos Realty Partners, L.P.
General Partner
By: AGS Financial Corporation, a general partner
By: /s/Arthur J. Cole Date: March 27, 1998
-------------------------------
Arthur J. Cole
President
(Principal Accounting Officer)
By: A.G. Spanos Realty Capital, Inc., a general partner
By: /s/Arthur J. Cole Date: March 27, 1998
-------------------------------
Arthur J. Cole
Vice President
AGS DEPOSITORY CORP. (Registrant as to the issuance of Depository Receipts
with respect to the Assigned Limited Partnership Interests)
By: /s/Arthur J. Cole Date: March 27, 1998
-------------------------------
Arthur J. Cole
Vice President
39
<PAGE>
<PAGE>
SIGNATURES
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 (with respect to the General Partners) and on
the dates indicated.
By: A.G. Spanos Realty Partners, L.P.
General Partner
By: AGS Financial Corporation, a general partner
By: /s/Alex G. Spanos Date: March 27, 1998
----------------------------------
Alex G. Spanos
Chairman of the Board of Directors
By: /s/Dean A. Spanos Date: March 27, 1998
----------------------------------
Dean A. Spanos
Vice Chairman and Director
By: /s/Michael A. Spanos Date: March 27, 1998
----------------------------------
Michael A. Spanos
Director
By: /s/Barry L. Ruhl Date: March 27, 1998
----------------------------------
Barry L. Ruhl
Director
By: /s/Arthur J. Cole Date: March 27, 1998
----------------------------------
Arthur J. Cole
President and Director
(Principal Executive Officer)
By: /s/Jeremiah T. Murphy Date: March 27, 1998
----------------------------------
Jeremiah T. Murphy
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
40<PAGE>
<PAGE>
SIGNATURES
By: A.G. Spanos Realty Capital, Inc., a general partner
By: /s/Alex G. Spanos Date: March 27, 1998
----------------------------------
Alex G. Spanos
President and Director (Principal Executive Officer)
By: /s/Dean A. Spanos Date: March 27, 1998
----------------------------------
Dean A. Spanos
Executive Vice President and Director
By: /s/Michael A. Spanos Date: March 27, 1998
----------------------------------
Michael A. Spanos
Executive Vice President and Director
By: /s/Barry L. Ruhl Date: March 27, 1998
----------------------------------
Barry L. Ruhl
Executive Vice President and Director
By: /s/Jeremiah T. Murphy Date: March 27, 1998
----------------------------------
Jeremiah T. Murphy
Vice President (Principal Financial and Accounting Officer)
AGS Depository Corp.
By: /s/Alex G. Spanos Date: March 27, 1998
----------------------------------
Alex G. Spanos
Director, President and Chief Financial Officer
(Principal Executive, Financial and Accounting Officer)
By: /s/Dean A. Spanos Date: March 27, 1998
----------------------------------
Dean A. Spanos
Director
By: /s/Jeremiah T. Murphy Date: March 27, 1998
----------------------------------
Jeremiah T. Murphy
Director
41<PAGE>
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
(A LIMITED PARTNERSHIP)
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F Column G
Costs Capitalized Gross Amount at which Carried at
Initial Cost to Subsequent to Close of Period
Partnership Acquisition Notes 2, 3 and 5
Accumulated
Bldgs & Carrying Buildings & Total Depr. Date of Date
Description (Note 1) Land Equip Imps Cost Land Equipment Note 2 (Note 4) Construction Acquired
- ------------------- ---- ------ ----- ---- ---- --------- ------ ------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Silver Springs Village 1,842,000 6,977,200 -0- -0- 1,417,226 6,380,215 7,797,441 2,421,517 1985 11/18/88
Tempe, Arizona
Rancho del Sol 3,019,000 17,919,645 -0- -0- 2,358,000 18,007,683 20,365,683 6,522,015 1988 12/30/88
Las Vegas, Nevada
Sandpebble Village 1,409,000 8,615,000 -0- -0- 1,055,000 8,418,056 9,473,056 3,056,527 1983 12/30/88
Sparks, Nevada
Regency Square 2,623,000 12,776,000 -0- -0- 2,115,000 12,730,384 14,845,384 4,577,873 1988 01/31/89
Chamblee, Georgia
Cameron Creek 1,950,000 8,270,400 -0- -0- 1,601,000 8,195,184 9,796,184 2,900,811 1988 03/31/89
Tempe, Arizona
Harbor Pointe 3,845,000 16,896,000 -0- -0- 3,147,000 16,777,942 19,924,942 5,792,013 1988 06/30/89
Dunwoody, Georgia
Bernardo Crest 6,337,000 12,901,000 -0- -0- 5,670,000 12,808,626 18,478,626 4,199,053 1988 12/04/89
San Diego, California
Pointe West 885,000 4,226,000 -0- -0- 690,000 4,082,709 4,772,709 1,375,399 1985 09/29/89
Aurora, Colorado
---------- ---------- --------------------------- ---------- ---------- ----------
21,910,000 88,581,245 -0- -0- 18,053,226 87,400,799 105,454,025 30,845,208
---------- ---------- --------------------------- ---------- ---------- ----------
---------- ---------- --------------------------- ---------- ---------- ----------
</TABLE>
See notes.
42<PAGE>
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
( A Limited Partnership)
NOTES TO SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Note 1 - See description of mortgage notes payable in note C of the Notes
to Financial Statements. Depreciable property is depreciated over
useful lives of 7 to 27.5 years.
Note 2 - Reconciliation of real
estate: 1997 1997 1995
Balance at beginning of period $105,454,025 $105,454,025 $105,454,025
Deductions during period:
Payments received under cash
flow guaranty adjustment -0- -0- -0-
------------ ------------ ------------
Balance at close of period 105,454,025 105,454,025 105,454,025
------------ ------------ ------------
------------ ------------ ------------
The sellers guaranteed that if the Properties do not meet certain
targeted net cash flow levels between their acquisition dates and June
30, 1992, then the sellers would make payments necessary to meet those
targets. Nonrefundable payments of $4,500,000 received under the
guaranty are accounted for as an adjustment to the purchase prices of
the Properties. Payments totaling $537,220 received under the cash
flow guaranty contribution are also accounted for as an adjustment to
the purchase price of the Properties. Amounts shown as initial cost to
Partnership on the accompanying schedule do not reflect such cash flow
guaranty adjustments.
Note 3 - The aggregate cost of real estate for federal income tax
purposes is $105,454,025.
Note 4 - The Partnership acquired the Properties from affiliates of the
Spanos General Partner. The |amount of affiliate profit included in the
amounts in column E is approximately $14,004,000.
Note 5 - Reconciliation of 1997 1996 1995
accumulated depreciation:
27,820,368 24,616,388 20,988,800
Balance at beginning of period
Additions during period: 3,024,840 3,203,980 3,627,588
Depreciation ------------ ------------ ------------
30,845,208 27,820,368 24,616,388
------------ ------------ ------------
------------ ------------ ------------
43
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> The Schedule contains summary financial
information extracted from the financial
statements for Prudential-Bache/A.G. Spanos
Realty Partners L.P., I, and is qualified
entirely by reference to such financial
statements.
</LEGEND>
<RESTATED>
<CIK> 000844159
<NAME> Prudential-Bache/A.G. Spanos Realty Partners L.P., I
<MULTIPLIER> 1
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Dec-31-1997
<PERIOD-TYPE> 12-Mos
<CASH> 487017
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4648340
<PP&E> 105454025
<DEPRECIATION> 30845208
<TOTAL-ASSETS> 79257157
<CURRENT-LIABILITIES> 2204383
<BONDS> 64183994
0
0
<COMMON> 0
<OTHER-SE> 12868780
<TOTAL-LIABILITY-AND-EQUITY> 79257157
<SALES> 15994514
<TOTAL-REVENUES> 16124230
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 11095441
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5082298
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (53509)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> 0
</TABLE>
