<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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, B-9, Stockton, CA 95207
- - ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (209) 478-0140
N/A
- - ---------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since
last report
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__
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Part I. Financial Information
Item 1: Balance Sheets - September 30, 1998 and
December 31, 1997 . . . . . . . . . . . . . . . . . 3
Statements of operations for the nine months ended
September 30, 1998 and 1997 . . . . . . . . . . . . 4
Statements of operations for the three months ended
September 30, 1998 and 1997 . . . . . . . . . . . . 5
Statement of changes in partners' equity (deficit)
for the nine months ended September 30, 1998 . . . 6
Statements of cash flows for the nine months
ended September 30, 1998 and 1997 . . . . . . . . . 7
Notes to Financial Statements . . . . . . . . . . . 8
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . 11
Part II. Other Information . . . . . . . . . . . . . . . . . 12
</TABLE>
2
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PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
(A Limited Partnership)
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Property, net $72,340,187 $74,608,817
Cash and cash equivalents 4,405,674 4,161,323
Other assets (net of accumulated amortization
of $1,312,843 and $1,297,372, respectively) 475,281 487,017
---------- ----------
$77,221,142 $79,257,157
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Mortgage loans payable $63,267,740 $64,183,994
Accounts payable 974,714 608,500
Accounts payable, affiliate 203,059 203,930
Accrued distributions 394,418 394,418
Accrued interest 420,453 428,040
Unearned rent and tenant deposits 584,016 569,495
---------- ----------
65,844,400 66,388,377
---------- ----------
Partners' equity (deficit):
Limited partners' equity (316,828 units
authorized and outstanding) 3,868,522 5,330,720
Subordinated limited partners' equity (46,364
units authorized and outstanding) 8,878,175 8,878,175
General partners' deficit (1,369,955) (1,340,115)
---------- ----------
11,376,742 12,868,780
---------- ----------
$77,221,142 $79,257,157
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
3
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<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the nine months ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Rental $12,066,789 $11,945,380
Interest 101,612 92,866
---------- ----------
12,168,401 12,038,246
---------- ----------
Expenses:
Property operating expenses 4,321,609 4,319,090
Property taxes 854,934 835,359
Property management fees to affiliates 361,432 358,011
General and administrative expense 93,211 94,929
Proxy solicitation costs 316,609 -0-
Interest expense 3,778,088 3,819,954
Management fees to General Partners 482,672 477,816
Depreciation 2,268,630 2,268,630
---------- ----------
12,477,185 12,173,789
---------- ----------
Net loss $ (308,784) $ (135,543)
---------- ----------
---------- ----------
Net loss allocated to General Partners $ (6,176) $ (2,711)
---------- ----------
---------- ----------
Net loss allocated to Limited Partners $ (302,608) $ (132,832)
---------- ----------
---------- ----------
Net loss allocated to Subordinated
Limited Partners $ -0- $ -0-
---------- ----------
---------- ----------
Net loss per unit of limited partnership
interest $ (0.96) $ (0.42)
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
4
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
(A Limited Partnership)
STATEMENTS OF OPERATIONS
For the three months ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Rental $ 4,068,781 $ 3,977,323
Interest 37,121 28,458
---------- ----------
4,105,902 4,005,781
---------- ----------
Expenses:
Property operating expenses 1,527,979 1,525,331
Property taxes 277,563 258,477
Property management fees to affiliates 122,006 118,902
General and administrative expense 12,752 18,687
Proxy solicitation costs 10,239 -0-
Interest expense 1,241,408 1,267,832
Management fees to General Partners 162,752 159,094
Depreciation 756,210 756,210
---------- ----------
4,110,909 4,104,533
---------- ----------
Net loss $ (5,007) $ (98,752)
---------- ----------
---------- ----------
Net loss allocated to General Partners $ (100) $ (1,975)
---------- ----------
---------- ----------
Net loss allocated to Limited Partners $ (4,907) $ (96,777)
---------- ----------
---------- ----------
Net loss allocated to Subordinated
Limited Partners $ -0- $ -0-
---------- ----------
---------- ----------
Net loss per unit of limited partnership
interest $ (0.02) $ (0.31)
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
5
<PAGE>
<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
(A Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
For the nine months ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
Subordinated
Limited Limited General
Total Partners Partners Partners
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Partners' equity
(deficit)-
December 31, 1997 $12,868,780 $ 5,330,720 $ 8,878,175 $(1,340,115)
Net loss (308,784) (302,608) -0- (6,176)
Distributions (1,183,254) (1,159,590) -0- (23,664)
---------- ---------- ---------- ----------
Partners' equity
(deficit)-
September 30, 1998 $11,376,742 $ 3,868,522 $ 8,878,175 $(1,369,955)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to financial statements.
6
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<PAGE>
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (308,784) $ (135,543)
---------- ----------
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation 2,268,630 2,268,630
Amortization of loan fees included in
interest expense 15,471 15,471
Change in other assets (3,735) 41,866
Change in accrued liabilities 358,627 371,004
Change in accounts payable, affiliate (871) (1,382)
Change in unearned rent and tenant deposits 14,521 12,753
---------- ----------
Total adjustments 2,652,643 2,708,342
---------- ----------
Net cash provided by operating activities 2,343,859 2,572,799
---------- ----------
Cash flows from financing activities:
Mortgage loan principal amortization (916,254) (844,929)
Distributions to partners (1,183,254) (1,183,254)
---------- ----------
Net cash used in financing activities (2,099,508) (2,028,183)
---------- ----------
Net increase in cash and cash equivalents 244,351 544,616
Cash and cash equivalents, beginning of period 4,161,323 3,946,802
---------- ----------
Cash and cash equivalents, end of period $ 4,405,674 $ 4,491,418
---------- ----------
---------- ----------
</TABLE>
See notes to financial statements.
7
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<PAGE>
PRUDENTIAL-BACHE/A. G. SPANOS REALTY PARTNERS L.P., I
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE A - FINANCIAL STATEMENT PREPARATION
The September 30, 1998 financial statements have been prepared without
audit. In the opinion of management, the financial statements contain all
adjustments (consisting of normal recurring accruals) necessary to present
fairly the Partnership's financial position, results of operations and cash
flows. The operating results for the nine months ended September 30, 1998
may not necessarily be indicative of the results expected for the full
year.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These financial statements must
be read in conjunction with the financial statements and notes thereto
included in the Partnership's annual report for the year ended December 31,
1997.
NOTE B - PROPERTY
Property is comprised of the following:
<TABLE>
<CAPTION>
September 30,1998 December 31, 1997
--------------------------------------
<S> <C> <C>
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 (33,113,838) (30,845,208)
----------- -----------
$ 72,340,187 $ 74,608,817
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</TABLE>
8
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NOTE C - RELATED PARTY TRANSACTIONS
Set forth below are the fees and other amounts relating to transactions
between the Partnership and the General Partners and their affiliates for
the nine months ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
-----------------------
<S> <C> <C>
Expensed to the General Partners:
Supervisory management fee $241,336 $238,908
Special distribution 187,193 184,765
Administrative expense reimbursements 54,143 54,143
------- -------
$482,672 $477,816
------- -------
------- -------
Expensed to A.G. Spanos Management, Inc.:
Property management fees $361,432 $358,011
------- -------
------- -------
</TABLE>
Accruals of $40,307 and $41,966 for property management fees and $162,752
and $161,964 for General Partner fees were outstanding at September 30,
1998 and December 31, 1997, respectively. 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 September 30, 1998.
On May 15, 1998, the Spanos General Partner initiated a consent
solicitation for the Unitholders to consider a proposal to sell the
Properties at a public auction and then distribute the sale proceeds in
liquidation of the Partnership. The proposed auction and liquidation are
part of an overall settlement of the Multidistrict Litigation described in
Note D. The settlement includes a provision whereby an affiliate of the
Spanos General Partner will open the auction with a bid of $22,440,000 in
excess of the outstanding mortgage debt. The settlement also provided for
the Spanos General Partner to pay the costs of the consent solicitation
subject to reimbursement by the Partnership if a majority in interest of
the Unitholders approved the proposal. As of June 30, 1998, the
Partnership had received consent from the requisite number of Unitholders.
On July 20, 1998, the Partnership reimbursed the Spanos General Partner for
$190,143 of solicitation costs.
9
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NOTE D - CONTINGENCIES
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 a number of actions pending before a single judge of
the United States District Court for the Southern District of New York.
The settlement contemplated, 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. As of June 30, 1998, a majority
in interest of the Unitholders approved the proposed auction sale of the
properties and the liquidation of the Partnership. On July 21, 1998, a
hearing before the Court was held to determine whether the settlement is
fair and reasonable. After the hearing, the Court entered an order and
final judgment approving the settlement, which includes the auction of the
Partnership's properties and liquidation of the Partnership. 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.
NOTE E - SUBSEQUENT EVENT
The Partnership paid third quarter cash distributions of $386,530 to the
Unitholders and $7,888 to the General Partners in November 1998.
10<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Capital Resources and Liquidity
The Partnership had cash of $4,406,000 at September 30, 1998. 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.
The Partnership's operating activities provided cash of $2,344,000 in the
first nine months of 1998, of which $369,000 reflects timing differences
related to current assets and liabilities. Of the balance, $916,000 was
applied to scheduled principal amortization on the Partnership's mortgage
debt and $1,059,000 was paid in cash distributions. Total distributions
for the first nine months of 1998 were $1,183,000, which included $124,000
paid from previously accumulated cash.
On June 1, 1998, the Partnership and the lender on the Sandpebble mortgage
entered into an agreement to extend the maturity date of the debt by eight
months to February 1, 1999. The Partnership paid a fee to the lender and
other costs totaling $31,000 in connection with the extension, which amount
is included in interest expense on the statements of operations.
As of June 30, 1998, a majority in interest of the Unitholders approved a
proposal to sell the Properties at a public auction and then distribute the
sale proceeds in liquidation of the Partnership. The proposed auction and
liquidation are part of an overall settlement of the Multidistrict
Litigation described in Note D to the financial statements. The settlement
includes a provision whereby an affiliate of the Spanos General Partner
will open the auction with a bid of $22,440,000 in excess of the
outstanding mortgage debt. On July 21, 1998, the settlement, including the
auction and liquidation, was approved by the court overseeing the
litigation. The Partnership's sales agent, E& Y Kenneth Leventhal,
commenced marketing the Properties in October 1998, and it is anticipated
that the winning bid or bids will be known and the closings of the sales
will occur in the first quarter of 1999.
Results of Operations
Rental revenue was $12,067,000 for the first nine months of 1998, an
increase of 1% compared to the same period last year. Revenue was down
$199,000 or 5.9% at the Partnership's two Nevada properties due to lower
occupancy and effective rental rates, and $35,000 or 2.8% at Cameron Creek
in Tempe, Arizona, which had new competition this year for the property's
student market. Those declines were more than offset by revenue increases
at the Partnership's other properties, however. The average occupancy of
the eight properties was 94.4% for the first nine months of 1998 compared
to 94.2% for the same period last year.
Property operating expenses were $4,322,000 for the first nine months of
1998, only slightly above the comparable period last year. Comparative
third quarter 1998 and 1997 operating results generally reflect the same
trends.
Operating results for 1998 reflect $317,000 of nonrecurring costs incurred
with respect to the solicitation of consents for the proposed auction and
liquidation. Any future costs with respect to the solicitation are not
expected to be material. The General Partners do not expect that any costs
related to year 2000 compliance will be material to the financial
statements of the Partnership.
11
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
This information is incorporated by reference to Note D to the financial
statements filed herewith in Item 1 of Part I of the Registrant's
Quarterly Report.
Item 2. Changes in Securities
(None)
Item 3. Defaults Upon Senior Securities
(None)
Item 4. Submission of Matters to a Vote of Security Holders
(None)
Item 5. Other Information
(None)
Item 6. Exhibits and Reports on Form 8-K
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.
12
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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.
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.
4(f) Amendment No. 15 dated August 12, 1998, to the
Amended and Restated Agreement of Limited Partnership of
Registrant (filed herewith).
27 Financial Data Schedule (filed herewith).
Reports on Form 8-K
(None)
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
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: November 13, 1998
---------------------------------
Arthur J. Cole
President and Chief Accounting Officer
By: A.G. Spanos Realty Capital, Inc., a general partner
By: /s/Arthur J. Cole Date: November 13, 1998
---------------------------------
Arthur J. Cole
Vice President and Chief Accounting Officer
14
AMENDMENT NO. 15 TO AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PRUDENTIAL-BACHE/A.G. SPANOS REALTY PARTNERS L.P., I
This Amendment dated August 12, 1998 to the Amended and Restated
Agreement of Limited Partnership of Prudential-Bache/A.G. Spanos Realty
Partners L.P., I, dated as of June 3, 1988, as amended and restated as of
October 13, 1988, and amended as of November 21 and December 30, 1988 and
January 31, February 28, March 31, April 28, May 31, June 30, August 31,
September 29, October 31, December 1 and December 22, 1989 (the
"Partnership Agreement").
Pursuant to written consents received from Unitholders holding a
majority of the outstanding Units of the Partnership, Paragraph 15.4.20 of
the Partnership Agreement is hereby amended to read in full as follows:
15.4.20 except as provided in Paragraph 15.4.4, purchase or
lease real property from the Partnership or except with respect
to the Properties and as set forth in Paragraphs 15.4.4 and
15.4.25, sell or lease real property to the Partnership;
provided, however, that an Affiliate of the Spanos General
Partner may bid for, and if such bid is successful purchase, any
or all of the Properties in a public auction held pursuant to the
order of a court with jurisdiction over the Partnership, the
General Partners, the Subordinated Limited Partners, the Limited
Partners and the Unitholders.
Except as otherwise provided above, the Partnership Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment
as of the date hereof.
GENERAL PARTNERS:
BACHE GENERAL PARTNER:
PRUDENTIAL-BACHE PROPERTIES, INC.:
By: /s/Brian J. Martin, President
------------------------------
SPANOS GENERAL PARTNER:
A.G. SPANOS REALTY PARTNERS, L.P.
By: AGS FINANCIAL CORPORATION,
General Partner
By: /s/Arthur J. Cole, President
-----------------------------
By: A.G. SPANOS REALTY CAPITAL, INC.,
General Partner
By: /s/Arthur J. Cole, Vice President
----------------------------------
ASSIGNOR LIMITED PARTNER:
AGS DEPOSITORY CORP.
By: /s/Arthur J. Cole, Assistant Secretary
--------------------------------------
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<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-31-1998
<PERIOD-START> Jan-1-1998
<PERIOD-END> Sep-30-1998
<PERIOD-TYPE> 9-Mos
<CASH> 4405674
<SECURITIES> 0
<RECEIVABLES> 475281
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4880955
<PP&E> 105454025
<DEPRECIATION> 33113838
<TOTAL-ASSETS> 77221142
<CURRENT-LIABILITIES> 2576660
<BONDS> 63267740
0
0
<COMMON> 0
<OTHER-SE> 11376742
<TOTAL-LIABILITY-AND-EQUITY> 77221142
<SALES> 12066789
<TOTAL-REVENUES> 12168401
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8699097
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3778088
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (308784)
<EPS-PRIMARY> (0.96)
<EPS-DILUTED> 0
</TABLE>
