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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Exchange Act of 1934
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Fiscal year ended December 31, 2002
Commission file number 0-11578
AMERICAN REPUBLIC REALTY FUND I
(Exact name of registrant as specified in its charter)
Wisconsin 39-1421936
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
2800 N Dallas Pkwy #100, Plano, Texas 75093-5994
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including area code (972) 836-8000
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:
Limited Partnership Interests
(Title of Class)
Indicated by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X . No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained, to the best of Registrant's
knowledge in definitive proxy on information to statements incorporated
by reference in Part III of the Form 10-K or any amendment to this Form
10-K.
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes ..... No X.
Documents Incorporated by Reference
The Definitive Prospectus of American Republic Realty Fund I dated May 2,
1983 filed pursuant to Rule 424(b) is incorporated by reference as is
the Supplement to that Prospectus filed pursuant to Rule 424(b) on May
25, 1984.
PART I
Item 1. Business
The Registrant, American Republic Realty Fund I, (the
"Partnership"), is a limited partnership organized under the
Wisconsin Uniform Limited Partnership Act pursuant to a Certificate
of Limited Partnership dated December 22, 1982. As of December 31,
2002, the Partnership consisted of an individual general partner,
Mr. Robert J. Werra, (the "General Partner") and 672 limited
partners owning 11,000 limited partnership interests at $1,000 per
interest. The distribution of limited partnership interests
commenced May 2, 1983 and ended April 17, 1984, pursuant to a
Registration Statement on Form S-11 under the Securities Act of
1933 (Registration #0-11578) as amended.
The Partnership was organized to acquire a diversified portfolio of
income-producing real properties, primarily apartments, as well as
office buildings, industrial buildings, and other similar
properties.
During 1983 and 1984, the Partnership acquired four properties:
Kenwood Gardens Apartments, a 104 unit apartment community located
in Fort Myers, Florida (acquired on September 1, 1983, subsequently
disposed of by sale during 1988), Jupiter Plaza Office/Showroom, a
131,440 rentable square foot commercial building located in
Garland, Texas (acquired on September 29, 1983, subsequently
disposed of in foreclosure during 1988), Four Winds Apartments, a
154 unit apartment community located in Orange Park, Florida (Phase
I acquired September 12, 1983 and Phase II acquired May 1, 1984)
and Forestwood Apartments (formerly Oak Creek) a 263 unit apartment
community located in Bedford, Texas (acquired December 20, 1983).
No additional properties were purchased by the Partnership and the
Partnership will not acquire additional properties in the future.
The properties remaining are described more fully in this report at
"Item 2. Properties".
Univesco, Inc.("Univesco"), a Texas corporation, eighty three
percent owned by Robert J. Werra ("Univesco") manages the affairs
of the Partnership. Univesco acts as the managing agent with
respect to the Partnership's properties. Univesco may also engage
other on-site property managers and other agents to the extent the
management considers appropriate. The General Partner has ultimate
authority regarding property management decisions.
The Partnership competes in the residential rental markets.
Univesco prepared marketing analyses for all property areas and
determined that these areas contain other like properties which are
considered competitive on the basis of location, amenities and
rental rates. It is realistic to assume that additional properties
similar to the foregoing will be constructed within their various
market areas.
No material expenditure has been made or is anticipated for either
Partnership-sponsored or consumer research and development
activities relating to the development or improvement of facilities
or services provided by the Partnership. There neither has been,
nor are any anticipated, material expenditures required to comply
with any federal, state, or local environmental provisions which
would materially affect the earnings or competitive position of the
Partnership.
The Partnership is engaged solely in the business of real estate
investments. Its business is believed by management to fall
entirely within a single industry segment. Management does not
anticipate that there will be any material seasonal effects upon
the operation of the Partnership.
Competition and Other Factors
The majority of the Properties' leases are six to twelve month
terms. Accordingly, operating income is highly susceptible to
changing market conditions. Occupancy and local market rents are
driven by general market conditions which include job creation, new
construction of single and multi-family projects, and demolition
and other reduction in net supply of apartment units.
Rents have generally been increasing in recent years due to the
generally positive relationship between apartment unit supply and
demand in the Partnership's markets. However, the properties are
subject to substantial competition from similar and often newer
properties in the vicinity in which they are located. In addition,
operating expenses and capitalized expenditures have increased as
units are updated and made more competitive in the market place.
(See Item 7 "Management's Discussion and Analysis of Financial
Condition and Results of Operations".)
Item 2. Properties
At December 31, 2002 the Partnership owned two properties with
approximately 416,623 net rentable square feet. Both properties are
apartment communities.
Name and Location General Description of the Property
Forestwood A fee simple interest in a 263-unit
Apartments apartment community located in
Bedford, Texas, purchased in 1983
containing 244,407 net rentable
square feet on approximately 14
acres of land.
Four Winds Apartments A fee simple interest in a 100-unit
Phase I community, located in Orange Park,
Florida, purchased in 1983,
containing approximately 110,716 net
rentable square feet on 10 acres of
land.
Four Winds Apartments A fee simple interest in a 54-unit
Phase II apartment community located in
Orange Park, Florida, adjacent to
four Winds Apartments I, purchased
in 1984 and containing approximately
61,500 net rentable square feet on
3.73 acres of land.
Occupancy Rates
December 31,
Percent
1998 1999 2000 2001 2002
Four Winds I & II 95.0% 94.0% 95.0% 95.2% 89.6%
Forestwood 96.5% 96.9% 94.8% 95.9% 93.2%
The Properties are encumbered by non-recourse mortgages payable.
For information regarding the encumbrances to which the properties
are subject and the status of the related mortgage loans, see
"Management's Discussion and Analysis of Financial Condition and
Results of Operating - Liquidity and Capital Resources" contained
in Item 7 hereof and Note B to the Financial Statements contained
in Item 8.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the unit holders of the
Partnership during the fourth quarter of 2002.
By virtue of its organization as a limited partnership, the
Partnership has outstanding no securities possessing traditional
voting rights. However, as provided and qualified in the Limited
Partnership Agreement, limited partners have voting rights for,
among other things, the removal of the General Partner and
dissolution of the Partnership.
PART II
Item 5. Market for the Partnership's Securities and Related Unit
Holder Matters
The Partnership's outstanding securities are in the form of Limited
Partnership Interests ("Interests"). The distribution period for
the sale of the Interests began May 2, 1983,and closed April 17,
1984. As of December 31, 2002 there were approximately 672 limited
partners owning 11,000 limited partnership interests at $1,000 per
interest. A public market for trading Interests has not developed
and none is expected to develop. In addition, transfer of an
Interest is restricted pursuant to the Limited Partnership
Agreement.
Although a public market for trading Interests has not developed,
MP Value Fund 5, LLC acquired 1,444.5 units, approximately 13.1%,
of the outstanding Interests of the partnership during, 1999. MP
Value Fund 5 has also tendered offers to other owners, although no
additional Interests have been sold. The registrant knows of no
other activity involving the sale or acquisition of Interest.
The General Partner continues to review the Partnership's ability
to make distributions on a quarter-by-quarter basis, however, no
such distributions have been made and none are anticipated in the
immediate future due to the debt service requirements of the
Partnership.
An analysis of taxable income or (loss) allocated, and cash
distributed to Investors per $1,000 unit is as follows:
YEARS INCOME GAIN LOSS CASH
DISTRIBUTED
1984 $0 $0 $342 $0
1985 0 0 $291 0
1986 0 0 $271 0
1987 0 0 $279 0
1988 0 $43 $63 0
1989 0 $38 $127 0
1990 0 0 $126 0
1991 0 0 $122 0
1992 $121 0 0 0
1993 $2 $1,071 0 0
1994 $17 0 0 0
1995 0 (a) 0 0 0
1996 $45 0 0 0
1997 $0 0 $70 0
1998 $0 0 $48 0
1999 0 0 $39 0
2000 $46 0
2001 $47 $50
2001 $29 $25
(a) For Federal Income Tax purposes income only was reallocated in
accordance with the regulations promulgated thereunder of the
Internal Revenue code of 1986 as amended.
Item 6: Selected Financial Data
The following table sets forth selected financial data regarding the
Partnership's results of operations and financial position as of
the dates indicated. This information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in Item 7 hereof and Financial
Statements and notes thereto contained in Item 8.
2002 2001 2000 1999 1998
Limited Partner Units Outstanding 11,000 11,000 11,000 11,000 11,000
Statement of Operations
Total Revenues $2,760 $2,896 $2,797 $2,752 $2,675
Net Income (Loss) (217) (42) (65) (137) (194)
Limited Partner Net Income (19.54) (3.45) (5.33) (12.31) (17.53)
(Loss) per Unit - Basic
Cash Distributions to Limited 25 50 0
Partners per Unit - Basic
Balance Sheet:
Real Estate, net $5,382 $5,943 $6,499 $7,096 $7,639
Total Assets 6,305 6,941 7,613 7,941 8,426
Mortgages Payable 10,211 10,341 10,461 10,572 10,675
Notes Payable to Affiliate 0 0 0 165 399
Partner's Deficit (4,316) (3,824) (3,231) (3,166) (3,030)
Item 7. Management's Discussion and Analysis of Financial Conditions
and Results of Operations
This discussion should be read in conjunction with Item 6 -
"Selected Financial Data" and Item 8 - "Financial Statements and
Supplemental Information."
Results of Operations: 2002 VERSUS 2001 -
Revenue from Property Operations decreased $136,588 or 4.7% as
compared to 2001. This decrease is primarily attributed to a
$120,366 decrease in rental revenue, which was principally due to
an decrease in occupancy. Interest income decreased $22,187 due to
a decrease in interest rates and available funds for investment
during 2002. The increase in other revenues of $5,965 were
principally caused by a increase in fees from tenants and vending
revenues. The following table illustrates the increases:
Increase/
(Decrease)
Rental income $(120,366)
Interest (22,187)
Fees & Other 5,965
Net Increase $(136,588)
Property operating expenses for 2002 increased $38,431 or 1.31%.
General and administrative expenses increased $70,152 or 16.45%
primarily due to increased incurance costs. . Real estate taxes
increased $9,498 or 3.18% due to increased assessed valuation of
the underlying real estate assets Maintenance and repairs
increased $7,419 or 2.80% due primarily to the increased deferred
maintenance projects performed. Interest expense on mortgage
payable decreased $9,873 or 1.21% due to normal amortization.
Utilities decreased $22,784 or 10,10% primarily due to lower
utility rates. Administrative service fees are paid to an
affiliate of the general partner and represent reimbursements for
accounting and bookkeeping costs. Property management fees are
paid to an affiliated entity and represent approximately 5% of
gross revenues (see Note C to the Financial Statements and Schedule
Index contained in Item 8). The following table illustrates the
increases or (decreases):
Increase
(Decrease)
General and administrative 70,152
Real estate taxes 9,498
Maintenance and repairs 7,419
Depreciation and amortization -4,137
Property management fee to affiliate -5,769
Advertising and marketing -6,075
Interest expense on mortgages payable -9,873
Utilities -22,784
Total operating expenses 38,431
Results of Operations: 2001 VERSUS 2000 -
Revenue from Property Operations increased $99,614 or 3.6% as
compared to 2000. This increase is primarily attributed to a
$87,680 increase in rental revenue, which was principally due to an
increase in rents. Interest income increased $10,990 due to a
increase in available funds for investment during 2001. The
increase in other revenues of $944 were principally caused by a
increase in fees from tenants and vending revenues. The following
table illustrates the increases:
Increase/
(Decrease)
Rental income $87,680
Interest 10,990
Other 944
Net Increase $99,614
Property operating expenses for 2001 increased $76,599 or 2.68%.
Utilities increased $33,998 or 17.75% primarily due to higher
utility rates. Interest expense on note payable to affiliate
decreased $2,175 due to the payoff of the note early in 2000.
Real estate taxes increased $21,413 or 7.73% due to increased
assessed valuation of the underlying real estate assets. General
and administrative expenses increased $28,237 or 7.09% primarily
due to increased operational administrative costs. Maintenance and
repairs increased $9,646 or 3.78% due primarily to the increased
deferred maintenance projects performed. Interest expense on
mortgage payable decreased $9,129 or 1.1% due to normal
amortization. Administrative service fees are paid to an affiliate
of the general partner and represent reimbursements for accounting
and bookkeeping costs. Property management fees are paid to an
affiliated entity and represent approximately 5% of gross revenues
(see Note C to the Financial Statements and Schedule Index
contained in Item 8). The following table illustrates the increases
or (decreases):
Increase
(Decrease)
Interest expense on mortgages payable -9,129
Depreciation and amortization -14,455
General and administrative 28,237
Real estate taxes 21,413
Maintenance and repairs 9,646
Utilities 33,998
Property management fee to affiliate 4,398
Advertising and marketing 2,266
Administrative service fee to general partner 2,400
Interest expense on notes payable to affiliates -2,175
Total operating expenses 76,599
Liquidity and Capital Resources
While it is the General Partner's primary intention to operate
and manage the existing real estate investments, the General
Partner also continually evaluates this investment in light of
current economic conditions and trends to determine if these
assets should be considered for disposal. At this time, there is
no plan to dispose of either Property.
As of December 31, 2002, the Partnership had $214,237 in cash and
cash equivalents as compared to $294,437 as of December 31, 2001.
The reduction of cash on hand reflects the distribution of $25
per limited partnership unit paid in December 2002. See Note C to
the Financial Statements contained in Item 8 for information
regarding related party transactions.
The properties are encumbered by two non-recourse mortgage notes
as of December 31, 2002. These mortgages payable have a carrying
value of $10,211,238 at December 31, 2002. The mortgage notes
were entered into during 1997 to refinance certain mortgage
notes.
The general partner had provided funding to the Partnership in
the form of notes payable that were paid off during 2000. During
February 2000, the Partnership repaid the $165,346 remaining to
the general partner. The general partner is not obligated to
provide additional funding to the Partnership.
For the foreseeable future, the Partnership anticipates that
mortgage principal payments (excluding any balloon mortgage
payments), improvements and capital expenditures will be funded
by net cash from operations. The primary source of capital to
fund balloon mortgage payments will be proceeds from the sale,
financing or refinancing of the Properties.
The Partnership's required principal payments due under the
stated terms of the Partnership's mortgage notes payable and
notes payable to affiliates are $140,551, $152,028
$164,442,$177,870, and 9,576,346 for each of the next five years.
Item 7a - Quantitative and Qualitative Disclosure about Market
Risk
Market Risk
The Partnership is exposed to interest rate changes primarily as
a result of its real estate mortgages. The Partnerships interest
rate risk management objective is to limit the impact of interest
rate changes on earnings and cash flows and to lower it's overall
borrowing costs. To achieve its objectives, the partnership
borrows primarily at fixed rates. The partnership does not enter
into derivative or interest rate transactions for any purpose.
The Partnerships' activities do not contain material risk due to
changes in general market conditions. The partnership invests
only in fully insured bank certificates of deposits, and mutual
funds investing in United States treasury obligations.
Risk Associated with Forward-Looking Statements Included in this
Form 10-KThis Form 10-K contains certain forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of
1934, which are intended to be covered by the safe harbors
created thereby. These statements include the plans and
objectives of management for future operations, including plans
and objectives relating to capital expenditures and
rehabilitation costs on the Properties. The forward-looking
statements included herein are based on current expectations that
involve numerous risks and uncertainties. Assumptions relating
to the foregoing involve judgments with respect to, among other
things, future economic, competitive and market conditions and
future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the
control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements are
reasonable, any of the assumptions could be inaccurate and,
therefore, there can be no assurance that the forward-looking
statements included in this Form 10-K will prove to be accurate.
In light of the significant uncertainties inherent in the forward-
looking statements included herein, the inclusion of such
information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the
Company will be achieved.
AMERICAN REPUBLIC REALTY FUND I
COMBINED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORTS
December 31, 2002 and 2001
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Reports 2
Combined Financial Statements
Balance Sheets as of December 31, 2002 and 2001 3
Statements of Operations for the years ended
December 31, 2002, 2001 and 2000 4
Statements of Partners' Equity (Deficit) for the years ended
December 31, 2002, 2001 and 2000 5
Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000 6
Notes to Financial Statements 7
Schedule III - Real Estate and Accumulated Depreciation13
All other schedules have been omitted because they are not
applicable, not required or the information has been supplied
in the financial statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
To the General Partner and Limited Partners of
American Republic Realty Fund I
We have audited the accompanying combined balance sheets of
American Republic Realty Fund I and subsidiary, a Wisconsin
limited partnership (the "Partnership") as of December 31, 2002
and 2001, and the related combined statements of operations,
partners' equity (deficit), and cash flows for the years ended
December 31, 2002, 2001 and 2000. These financial statements are
the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with U.S. 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 presentation of the financial
statements. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion the financial statements referred to above present
fairly, in all material respects, the financial position of
American Republic Realty Fund I as of December 31, 2002 and 2001,
and the results of its operations and its cash flows for the
years ended December 31, 2002, 2001 and 2000 in conformity with
U.S. generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. Schedule III for
the year ended December 31, 2002 is presented for the purpose of
complying with the Securities and Exchange Commission's rules and
is not a required part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in
the audits of the basic financial statements and, in our opinion,
fairly states, in all material respects, the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
January 24, 2003
Plano, Texas
AMERICAN REPUBLIC REALTY FUND I
COMBINED BALANCE SHEETS
December 31, 2002 and 2001
ASSETS
2002 2001
Investments in real estate at cost
Land $1,822,718 $1,822,718
Buildings, improvements and furniture
and fixtures $16,006,007 15,886,583
17,828,725 17,709,301
Accumulated depreciation (12,446,239) (11,765,922)
5,382,486 5,943,379
Cash and cash equivalents 214,237 294,437
Escrow deposits 572,601 552,994
Deferred financing costs, net of
accumulated amortization of $126,188
and $103,244, respectively 103,242 126,186
Prepaid expenses 32,194 24,039
TOTAL ASSETS 6,304,760 6,941,035
LIABILITIES AND PARTNERS' DEFICIT
Mortgages payable 10,211,238 10,341,178
Amounts due affiliates 1,725 1,911
Accounts payable and accrued expenses 333,000 342,521
Security deposits 75,028 79,501
TOTAL LIABILITIES 10,620,991 10,765,111
PARTNERS' DEFICIT (4,316,231) (3,824,076)
TOTAL LIABILITIES AND PARTNERS' DEFICIT $6,304,760 $6,941,035
AMERICAN REPUBLIC REALTY FUND I
COMBINED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2002, 2001 and 2000
2002 2001 2000
INCOME
Rentals $2,686,909 $2,807,275 $2,719,595
Fees and other 69,060 63,095 62,151
Interest 4,256 26,443 15,453
Total income 2,760,225 2,896,813 2,797,199
OPERATING EXPENSES
Interest expense on mortgages payable 808,952 818,825 827,954
Depreciation and amortization 703,261 707,398 721,853
General and administrative 496,504 426,352 398,115
Real estate taxes 307,848 298,350 276,937
Maintenance and repairs 272,282 264,863 255,217
Utilities 202,803 225,587 191,589
Property management fee to affiliate 137,883 143,652 139,254
Advertising and marketing 35,439 41,514 39,248
Administrative service fee to general
partner 12,408 12,408 10,008
Interest expense on notes payable to
affiliates --- --- 2,175
Total operating expenses 2,977,380 2,938,949 2,862,350
NET LOSS $(217,155) $(42,136) $(65,151)
NET LOSS PER LIMITED PARTNERSHIP
UNIT - BASIC
Net loss per unit - basic $(19.54) $(3.45) $(5.33)
LIMITED PARTNERSHIP UNITS
OUTSTANDING - BASIC 11,000 11,000 11,000
AMERICAN REPUBLIC REALTY FUND I
COMBINED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 2002, 2001 and 2000
General Limited
Partner Partners Total
Balance, January 1,2000 $54,027 (3,220,816) (3,166,789)
Net loss (6,515) (58,636) (65,151)
Balance, December 31,2000 47,512 (3,279,452) (3,231,940)
Distributions --- (550,000) (550,000)
Net loss (4,214) (37,922) (42,136)
Balance, December 31,2001 43,298 (3,867,374) (3,824,076)
Distributions --- (275,000) (275,000)
Net loss (2,172) (214,983) (217,155)
Balance, December 31,2002 $41,126 $(4,357,357) $(4,316,231)
AMERICAN REPUBLIC REALTY FUND I
COMBINED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2002, 2001 and 2000
2002 2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(217,155) $(42,136) $(65,151)
Adjustments to reconcile net loss to
net cash provided by operations:
Depreciation and amortization 703,261 707,398 721,853
Change in assets and liabilities:
Prepaid expenses (8,155) (7,204) (2,768)
Escrow deposits (2,095) (6,238) (18,500)
Accounts payable and accrued expenses (9,519) 32,248 12,661
Security deposits (4,473) 6,056 4,836
Net cash provided by operating activities 461,864 690,124 652,931
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in real estate (119,424) (128,652) (101,315)
Net proceeds from (payments to)
reserve for replacement (17,514) (41,553) 55,372
Net cash used for investing activities (136,938) (170,205) (45,943)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on mortgages payable (129,940) (120,132) (111,062)
Payments on notes payable to affiliates --- --- (165,346)
Distributions (275,000) (550,000) ---
Proceeds from (payments on)
amounts due affiliates (186) 1,911 (4,490)
Net cash used for financing activities (405,126) (668,221) (280,898)
Net increase (decrease) in cash and cash
equivalents (80,200) (148,302) 326,090
Cash and cash equivalents at beginning
of period 294,437 442,739 116,649
Cash and cash equivalents at end of
period $214,237 $294,437 $442,739
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $809,805 $819,613 $ 828,683
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
American Republic Realty Fund I (the "Partnership"), a
Wisconsin limited partnership, was formed on December 22,
1982, under the laws of the state of Wisconsin, for the
purpose of acquiring, maintaining, developing, operating,
and selling buildings and improvements. The Partnership
operates rental apartments in Texas and Florida. The
Partnership will be terminated by December 31, 2012,
although this date can be extended if certain events occur.
The general partner is Mr. Robert J. Werra.
An aggregate of 20,000 units is authorized, of which 11,000
were outstanding for each of the three years ended December
31, 2002. Under the terms of the offering, no additional
units will be offered.
Allocation of Net Income (Loss) and Cash
Net operating income and loss are allocated 1% to general
partners and 99% to limited partners. Net operating cash
flow, as defined in the partnership agreement, shall be
distributed to the limited and general partners first to the
limited partners in an amount equal to a variable
distribution preference on capital contributions for the
current year and then to the extent the preference has not
been satisfied for all preceding years, and, thereafter, 10%
to the general partner and 90% to the limited partners.
Net income from the sale of property is allocated first, to
the extent there are cumulative net losses, 1% to the
general partner and 99% to the limited partners; second, to
the limited partners in an amount equal to their
distribution preference; and, thereafter, 15% to the general
partner and 85% to the limited partners.
Cash proceeds from the sale of property or refinancing are
allocated first to the limited partners to the extent of
their capital contributions and their distribution
preference and, thereafter, 15% to the general partner and
85% to the limited partners.
Basis of Accounting
The Partnership maintains its books on the basis of
accounting used for federal income tax reporting purposes.
Memorandum entries have been made to present the
accompanying financial statements in accordance with U.S.
generally accepted accounting principles.
Investments in Real Estate and Depreciation
Buildings, improvements, and furniture and fixtures are
recorded at cost and depreciated using the straight-line
method over the estimated useful lives of the assets ranging
from 5 to 27.5 years.
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Income Taxes
No provision for income taxes has been made since the
partners report their respective share of the results of
operations on their individual income tax return.
Revenue Recognition
The Partnership has leased substantially all of its rental
apartments under cancelable leases for periods generally
less than one year. Rental revenue is recognized on a
monthly basis as earned.
Deferred Financing Costs
Costs incurred to obtain mortgage financing are being
amortized over the life of the mortgage using the straight-
line method.
Combination
The financial statements include the accounts of the
Partnership and a wholly owned entity. All intercompany
amounts have been eliminated.
Cash and Cash Equivalents
The Partnership considers all highly liquid instruments with
a maturity of three months or less to be cash equivalents.
Long-Lived Assets
In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting For the Impairment
of Long-Lived Assets and For Long-Lived Assets to be
Disposed Of", the Partnership records impairment losses on
long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the
assets' carrying amount. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be
disposed of. Based on current estimates, management does
not believe impairment of operating properties is present.
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Computation of Earnings Per Unit
The Partnership has adopted Statement of Financial
Accounting Standards ("SFAS") No.128, "Earnings per Share".
Basic earnings per unit is computed by dividing net income
(loss) attributable to the limited partners' interests by
the weighted average number of units outstanding. Earnings
per unit assuming dilution would be computed by dividing net
income (loss) attributable to the limited partners'
interests by the weighted average number of units and
equivalent units outstanding. The Partnership has no
equivalent units outstanding for any period presented.
Concentration of Credit Risk
Financial instruments which potentially subject the
Partnership to concentrations of credit risk consist
primarily of cash. The Partnership places its cash with
various financial institutions. The Partnership's exposure
to loss should any of these financial institutions fail
would be limited to any amount in excess of the amount
insured by the Federal Deposit Insurance Corporation or
Securities Investor Protection Corporation, where
applicable. Management does not believe significant credit
risk exists at December 31, 2002.
Use of Estimates
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during that reporting period. Actual results
could differ from those estimates.
Environmental Remediation Costs
The Partnership accrues for losses associated with
environmental remediation obligations when such losses are
probable and reasonably estimable. Accruals for estimated
losses from environmental remediation obligations generally
are recognized no later than completion of the remedial
feasibility study. Such accruals are adjusted as further
information develops or circumstances change. Costs of
future expenditures for environmental remediation
obligations are not discounted to their present value.
Recoveries of environmental remediation costs from other
parties are recorded as assets when their receipt is deemed
probable. Project management is not aware of any
environmental remediation obligations that would materially
affect the operations, financial position or cash flows of
the Project.
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2002 and 2000
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Comprehensive Income
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, (SFAS 130), requires that
total comprehensive income be reported in the financial
statements. For the years ended December 31, 2002, December
31, 2001, and December 31, 2000, the Partnership's
comprehensive income (loss) was equal to its net income
(loss) and the Partnership does not have income meeting the
definition of other comprehensive income.
Segment Information
The Partnership is in one business segment, the real estate
investment business, and follows the requirements of FAS
131, "Disclosures about Segments of an Enterprise and
Related Information."
NOTE B - MORTGAGES PAYABLE
Mortgages payable at December 31, 2002 and 2001, consisted
of the following:
2002 2001
Mortgage note, original face value of
$6,800,000, payable in monthly
installments of principal and interest
of $49,517, bears interest at a rate of
7.92% and matures August 1, 2007, at
which time a lump-sum payment of
approximately $5,965,548 is due. This
mortgage note is secured by real estate
assets with a net book value of
approximately $3,443,603. $6,432,178 $6,513,428
Mortgage note, original face value of
$4,000,000, payable in monthly
installments of principal and interest
of $28,795 bears interest at a rate of
7.8% and matures August 1, 2007, at
which time a lump-sum payment of
approximately $3,500,406 is due. This
mortgage note is secured by real estate
assets with a net book value of
approximately $1,938,883. 3,779,060 3,827,750
$10,211,238 $10,341,178
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE B - MORTGAGES PAYABLE - CONTINUED
At December 31, 2002, required principal payments due under
the stated terms of the Partnership's mortgage notes payable
and notes payable to affiliates are as follows:
2003 140,551
2004 152,028
2005 164,443
2006 177,870
2007 9,576,346
Thereafter ---
$10,211,238
NOTE C - RELATED PARTY TRANSACTIONS
The Partnership agreement specifies that certain fees be
paid to the general partner or his designee. An affiliate
of the general partner receives a property management fee
that is 5% of the Partnership 's gross receipts.
Additionally, the Partnership reimburses the affiliate for
administrative expenditures. The following fees and
reimbursements earned by an affiliate of the general partner
in 2002, 2001 and 2000:
2002 2001 2000
Property management fee $137,883 $143,652 $139,254
Administrative service fee 12,408 12,408 10,008
NOTE D - COMMITMENTS
The Partnership will pay a real estate commission to the
general partner or his affiliates in an amount not exceeding
the lessor of 50% of the amounts customarily charged by
others rendering similar services or 3% of the gross sales
price of a property sold by the Partnership, provided that
the limited partners have received their original capital
plus preferential interest, as defined.
AMERICAN REPUBLIC REALTY FUND I
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE E - RECONCILIATION OF BOOK TO TAX LOSS (UNAUDITED)
If the accompanying financial statements had been prepared
in accordance with the accrual income tax basis of
accounting rather than generally accepted accounting
principals ("GAAP"), the excess of revenues over expenses
for 2002 would have been as follows:
Net loss per accompanying financial statements $(217,155)
Add - book basis depreciation using straight-line method 680,317
Deduct - income tax basis depreciation expense using
ACRS method 145,426
Excess of revenues over expenses, accrual income tax basis $317,736
NOTE F - ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair value amounts have been
determined using available market information or other
appropriate valuation methodologies that require
considerable judgement in interpreting market data and
developing estimates. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that
the Partnership could realize in a current market exchange.
The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated
fair value amounts.
The fair value of financial instruments that are short-term
or reprice frequently and have a history of negligible
credit losses is considered to approximate their carrying
value. These include cash and cash equivalents, accounts
payable and other liabilities.
Management has reviewed the carrying values of its mortgages
payable in connection with interest rates currently
available to the Partnership for borrowings with similar
characteristics and maturities and has determined that their
estimated fair value would approximate their carrying value
as of December 31, 2002 and 2001.
The fair value information presented herein is based on
pertinent information available to management. Although
management is not aware of any factors that would
significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes
of these financial statements since that date, and
therefore, current estimates of fair value may differ
significantly from the amounts presented herein.
AMERICAN REPUBLIC REALTY FUND I
Schedule III - Real Estate and Accumulated Depreciation
December 31, 2002
Initial Cost
to Partnership
Description Encumbrances Land Building Total Cost
And Improvements Subsequent to
Acquisitions
26 two-story
apartment
buildings of
concrete block
construction
with stucco
and cedar
exterior and
gabled roofs
located in
Jacksonville,
Florida (b) $583,000 $5,686,771 $454,416
37 two-story
apartment
buildings of
concrete
block
construction
with brick
veneer,
stucco and
wood siding
exterior, and
composition,
shingled
roofs located
in Bedford,
Texas (b) 1,239,718 8,679,421 1,185,399
$1,822,718 $14,366,192 $1,639,815
Gross Amounts at Which
Carried at Close of Year
Buildings and Accumulated
Description Land Improvements Total Depreciation
(c)(d) (c)
26 two-story
apartment
buildings of
concrete block
construction
with stucco
and cedar
exterior and
gabled roofs
located in
Jacksonville,
Florida 583,000 6,141,187 6,724,187 4,785,304
37 two-story
apartment
buildings of
concrete
block
construction
with brick
veneer,
stucco and
wood siding
exterior, and
composition,
shingled
roofs located
in Bedford,
Texas 1,239,718 9,864,820 11,104,538 7,660,935
1,822,718 16,006,007 17,828,725 12,446,239
Life on Which
Date of Date Depreciation
Construction Acquired is Computed
26 two-story
apartment
buildings of
concrete block
construction
with stucco
and cedar
exterior and
gabled roofs Phase I complete at
located in date acquired; 9/12/83 (a)
Jacksonville, Phase II complete at
Florida date acquired; 5/1/84 (a)
37 two-story
apartment
buildings of
concrete
block
construction
with brick
veneer,
stucco and
wood siding
exterior, and
composition,
shingled
roofs located
in Bedford, Complete at
Texas date acquired; 12/20/83 (a)
See notes to Schedule III.
AMERICAN REPUBLIC REALTY FUND I
Schedule III - Real Estate and Accumulated Depreciation (Continued)
December 31, 2002
NOTES TO SCHEDULE III:
(a) See Note A to financial statements outlining depreciation methods
and lives.
(b) See description of mortgages and notes payable in Note B to the
financial statements.
(c) The reconciliation of investments in real estate and accumulated
depreciation for the years ended December 31, 2002, 2001 and 2000 is
as follows:
Investments Accumulated in
Real Estate Depreciation
Balance, January 1, 2000 17,479,334 10,382,557
Acquisitions 101,315 ---
Depreciation expense --- 698,910
Balance, December 31, 2000 17,580,649 11,081,467
Acquisitions 128,652 ---
Depreciation expense --- 684,455
Balance, December 31, 2001 $17,709,301 $11,765,922
Acquisitions 119,424 ---
Depreciation expense --- 680,317
Balance, December 31, 2002 $17,828,725 $12,446,239
(d) Aggregate cost for federal income tax purposes is $17,375,988.
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
On November 6, 1998, an 8-K was filed to disclose the change in
auditors. No financial statements were issued in conjunction with
this filing. The Registrant has not been involved in any
disagreements on accounting and financial disclosure.
PART III
Item 10. Directors and Executive Officer of the Partnership
The Partnership itself has no officers or directors. Robert J.
Werra is the General Partner of the Partnership.
Robert J. Werra, 64, the General Partner, Mr. Werra joined Loewi &
Co., Incorporated ("Loewi") in 1967 as a Registered Representative.
In 1971, he formed the Loewi real estate department, and was
responsible for its first sales of privately placed real estate
programs. Loewi Realty was incorporated in 1974, as a wholly owned
subsidiary of Loewi & Co., with Mr. Werra as President. In 1980, Mr.
Werra, along with three other individuals, formed Amrecorp Inc. to
purchase the stock of Loewi Real Estate Inc., and Loewi Realty. In
1991 Univesco, Inc. became the management agent for the Partnership.
Limited Partners have no right to participate in management of the
Partnership.
Item 11. Management Remuneration and Transactions
As stated above, the Partnership has no officers or directors.
Pursuant to the terms of the Limited Partnership Agreement, the
General Partner receives 1% of Partnership income and loss and up to
15% of Net Proceeds received from sale or refinancing of
Partnership properties (after return of Limited Partner capital
contributions and payment of a 6% Current Distribution Preference
thereon).
Univesco, Inc., an affiliate of the General Partner, is entitled
to receive a management fee with respect to properties actually
managed of 5% of the actual gross receipts from a property or an
amount competitive in price or terms for comparable services available
from non-affiliated persons. The Partnership is also permitted to
engage in various transactions involving affiliates of the General
Partner as described under the caption "Compensation and Fees" at
pages 6-8, "Management" at page 17 and "Allocation of Net Income and
Losses and Cash Distributions" at pages 34-36 of the Prospectus as
supplemented, incorporated in the Form S-11 Registration Statement
which was filed with the Securities and Exchange Commission and made
effective on May 2, 1983.
For the years ended December 31, 2002, 2001, 2000, and, property
management fees earned totaled $137,883, $143,642, and $139,254,
respectively. An additional administration service fee was paid to
the General Partner of $12,408, $10,008 and $10,008 for the years
ended December 31, 2002, 2001, and 2000, respectively.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
(a) No one except as listed in item (b) below, owns of
record, and the General Partner knows of no one who owns beneficially,
more than five percent of the Interests in the Partnership, the only
class of securities outstanding.
Amount and Nature
Title Name of of Beneficial Percent
of Class Beneficial Owner Ownership of Interest
Limited M.P. Valu Fund IV L.L.C. 1,439 13.08%
Partnership
Interests
(b) By virtue of its organization as a limited partnership,
the Partnership has no officers or directors. Persons performing
functions similar to those of officers and directors of the
Partnership, beneficially own, the following Units of the Partnership
as of March 1, 2002.
Amount and Nature
Title Name of of Beneficial Percent
of Class Beneficial Owner Ownership of Interest
Limited Robert J. Werra 566 5.14%
Partnership
Interests
No Selling Commissions were paid in connection with the purchase of
these Units.
(c) There is no arrangement, known to the Partnership,
which may, at a subsequent date, result in a change in control of the
Partnership.
Item 13. Certain Relationships and Related Transactions
None other than discussed in Item 11 and Note C to the financial
statements at Item 8 elsewhere in this 10-K.
Item 14. Controls and Procedures
Based on their most recent evaluation, which was completed within 90
days of the filing of this Form 10-K, our Principal Financial Officer
and Principal Executive Officer, believe our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are
effective. There were not any significant changes in internal controls
or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, and there has not been any
corrective action with regard to significant deficiencies and material
weaknesses.
PART IV
Item 15. Exhibits, Financial Statements, Schedules and Reports on Form 8-K
(A) 1. See accompanying Financial Statements Index
2. Additional financial information required to be furnished:
Schedule III - Real Estate and Accumulate Depreciation.
3. Exhibits
None
(B) Reports on Form 8-K for the quarter ended December 31, 2002.
None
(C) Exhibits
3. Certificate of Limited Partnership, incorporated by
reference to Registration Statement No. 0-11578 effective
May 2, 1983.
4. Limited Partnership Agreement, incorporated by
reference to Registration Statement No. 0-11578 effective
May 2, 1983.
9. Not Applicable
10. Not Applicable
11. Not Applicable
12. Not Applicable
13. Reports to security holders, incorporated by reference
from Registrant's Quarterly Reports on Form 1O-Q, dated
September 30, 1998.
18. Not Applicable
19. Not Applicable
22. Not Applicable
23. Not Applicable
24. Not Applicable
25. Power of Attorney, incorporated by reference to
Registration Statement No. 0-11578 effective May
2, 1983.
28. None
(d) Financial Statement Schedules excluded from the annual report
None
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.
AMERICAN REPUBLIC REALTY FUND I
ROBERT J. WERRA, GENERAL PARTNER
/s/ Robert J. Werra
March 21, 2003
CERTIFICATION
I, Robert J Werra, certify that:
1. I have reviewed this annual report on Form 10-K of American
Republic Realty Fund;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present
in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the
periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 21, 2003
/s/ Robert J. Werra
General Partner
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of American Republic Realty
Fund ("the Company") on Form 10-K for the year ending December 31,
2002 as filed with the Securities and Exchange Commission on the
date hereof ("the Report"), I, Robert J. Werra, Acting Principal
Executive Officer and Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of
the Sarbanes-Oxley Act of 2002, that:
(1) The report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Robert J. Werra
Acting Principal Executive Officer and Chief Financial Officer
March 21, 2003