Item 1. Business
General
Prudential Acquisition Fund I, L.P. (the ``Registrant''), a Delaware limited partnership, was formed on February 16, 1983 and will terminate on December 31, 2007 unless terminated sooner under the provisions of the Amended and Restated Agreement of Limited Partnership (the ``Partnership Agreement''). The Registrant was formed to acquire and manage income-producing commercial real estate with proceeds raised from the initial sale of 70,124 limited partnership units (``Units''). The Registrant's fiscal year for book and tax purposes ends on December 31.
The Registrant has invested in and operates a real estate investment portfolio consisting of five properties. These commercial real estate properties consist of two office buildings, a warehouse and two shopping centers. The shopping centers were acquired through a joint venture agreement with Prudential Realty Acquisition Fund II, L.P., an affiliated limited partnership. The Registrant is engaged solely in the business of real estate investment; therefore, presentation of industry segment information is not applicable. For more information regarding the Registrant's operations, see Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.
As the economy has improved in certain of the markets relating to the Registrant's properties, the market for commercial real estate has also generally improved. While property values continue to be below the levels reached in the mid-1980's, investment capital is more readily available and investor interest in acquiring certain types of real estate has increased. Accordingly, the Partnership intends to list its properties for sale. See Note C to the financial statements of the Registrant's Annual Report to Limited Partners for the year ended December 31, 1994 (``Registrant's Annual Report'') which is filed as an exhibit hereto for additional information.
General partners
The general partners of the Registrant are Prudential Realty Partnerships, Inc. (``PRP'') and Prudential-Bache Properties, Inc. (``PBP'') (collectively, the ``General Partners'').
Competition
The General Partners and/or their affiliates have formed, and may continue to form, various entities to engage in businesses which may be competitive with the Registrant.
The real estate industry is highly competitive. The Registrant's properties are subject to competition from similar properties located in the immediate vicinity of its properties. See Item 2
Item 2. Properties
As of December 31, 1994 the Registrant owns the following properties:
Revenues from the Norwest Center in Rochester, Minnesota, a multi-tenant office building, represented approximately 46%, 52% and 47% of the Registrant's income from directly-owned properties for the years ended December 31, 1994, 1993 and 1992, respectively. One tenant at this property, Norwest Bank, N.A., whose lease expires in 2012, accounted for 28%, 21% and 14% of the revenues of the Registrant for the years ended December 31, 1994, 1993 and 1992, respectively.
The Rochester office market has been impacted by the construction of a new County Government Center and the acquisition of the old County Government Center by Mayo Clinic, the primary employer in its downtown market. Mayo Clinic, currently occupies about 28% of the Class ``A'' office market in downtown Rochester and approximately 12% of the Norwest Center. While Mayo Clinic has consolidated into facilities it owns during the past few years, certain aspects of its businesses are expanding. Plans to build a new office facility are on hold indefinitely due to the uncertainty facing the health care industry.
The Registrant's industrial warehouse facility located in Norwalk, California was vacant from September 1992 through February 1993; however, a ten year lease for the entire building was signed March 1, 1993 with Weber Distribution. Revenues from this property represented approximately 18%, 13% and 18% of the Registrant's income from directly-owned properties for the years ended December 31, 1994, 1993 and 1992, respectively.
Revenues from One Executive Center, a five-story office building located in Albuquerque, New Mexico represented approximately 36%, 35% and 35% of the Registrant's income from directly-owned properties for the years ended December 31, 1994, 1993 and 1992, respectively.
In May 1985, the Registrant and The Prudential Insurance Company of America (``The Prudential''), through the Ridge Plaza joint venture (the ``Joint Venture''), acquired two shopping centers, Pine Island Ridge Plaza (``Pine Island'') and Ridge Plaza (collectively, the ``Joint Venture Properties''), located in Davie,
Broward County, Florida. The Registrant has a 54% interest in the Joint Venture. During 1986, The Prudential sold its 46% joint venture interest to Prudential Realty Acquisition Fund II, L.P. (``PRAF II''), an affiliated limited partnership. The Registrant's share of the Joint Venture's net income (loss) is recorded as revenue (``Joint Venture Equity Income (Loss)'') in the Registrant's Statements of Operations. The Joint Venture properties were written down to fair value in 1993 to reflect a permanent impairment. See Notes B and C to the Ridge Plaza Joint Venture's financial statements which are filed as an exhibit hereto for further information. One tenant at Pine Island, Builders Square whose lease expires in 2003, accounted for 16%, 13% and 11% of the revenues of the Joint Venture for the years ended December 31, 1994, 1993 and 1992, respectively.
The estimated fair value of the Registrant's properties (including its pro rata share of the fair value of the Joint Venture's properties) based on third party appraisals as of September 30, 1994 was $31,700,000. Appraised values are only estimates of fair value and should not be relied on as a measure of immediately realizable value. Estimated values may fluctuate with changes in the real estate and financial markets, economic conditions and other factors including the anticipated performance of the properties, property type and geographic location.
The General Partners believe the Registrant's properties are adequately insured.
For additional information describing the Registrant's properties, see Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations and Schedule III--Real Estate and Accumulated Depreciation on page 13 in Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Item 3.
Item 3. Legal Proceedings
This information is incorporated by reference to Note H to the financial statements in the Registrant's Annual Report which is filed as an exhibit hereto.
Item 4.
Item 4. Submission of Matters to a Vote of Limited Partners
None
PART II
Item 5.
Item 5. Market for the Registrant's Units and Related Limited Partner Matters
As of March 1, 1995, there were 7,869 holders of record owning 70,124 Units. 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 Limited Partner to transfer Units. Consequently, holders of Units may not be able to liquidate their investments in the event of an emergency or for any other reason.
The following per Unit cash distributions were paid to Limited Partners during the quarter indicated:
There are no material restrictions upon the Registrant's present or future ability to make distributions in accordance with the provisions of the Partnership Agreement. The Registrant currently expects that cash distributions will continue to be paid in the foreseeable future from cash generated by current operations and prior undistributed cash flow from operations. The Registrant increased the distribution levels paid during 1994 as a result of an increase in rental income from directly-owned properties and improved operations of the joint venture. The distributions paid to limited partners during 1994 and 1993 represent a return of capital on a generally accepted accounting principles (GAAP) basis. (The return of capital on a GAAP basis is calculated as limited partner distributions less net income allocated to limited partners.) For
discussion of other factors that may affect the amount of future distributions, see Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 6.
Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This data should be read in conjunction with the financial statements of the Registrant and the notes thereto contained on pages 2 through 10 in the Registrant's Annual Report which is filed as an exhibit hereto.
--------------- (a) Includes $7,587,000 and $1,674,000 provisions for loss on impairment of assets in 1993 and 1992, respectively
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This information is incorporated by reference to pages 11 through 14 of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 8.
Item 8. Financial Statements and Supplementary Data
The financial statements are incorporated by reference to pages 2 through 10 of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The Registrant is managed by the General Partners.
The Registrant, the Registrant's General Partners and their directors and executive officers, and any limited partners holding more than ten percent of the Registrant'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 limited partners who own greater than ten percent of the Registrant's Units are required by Securities and Exchange Commission regulations to furnish the Registrant with copies of all Forms 3, 4 or 5 they file. All of these filing requirements were
satisfied on a timely basis. In making these disclosures, the Registrant has relied solely on written representations of the General Partners' directors and executive officers and limited partners who own greater than ten percent of the Registrant's Units or copies of the reports they have filed with the Securities and Exchange Commission during and with respect to most recent fiscal year.
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP and their positions with regard to managing the Registrant are as follows:
Name Position
James M. Kelso President, Chief Executive Officer, Chairman of the Board of Directors and Director Barbara J. Brooks Vice President--Finance and Chief Financial Officer Robert J. Alexander Vice President and Chief Accounting Officer Chester A. Piskorowski Vice President Frank W. Giordano Director Nathalie P. Maio Director
JAMES M. KELSO, age 40, is the President, Chief Executive Officer, Chairman of the Board of Directors and a Director of PBP. He is a Senior Vice President of Prudential Securities Incorporated. Mr. Kelso also serves in various capacities for other affiliated companies. Mr. Kelso joined PSI in July 1981.
BARBARA J. BROOKS, age 46, is the Vice President-Finance and Chief Financial Officer of PBP. 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.
ROBERT J. ALEXANDER, age 33, is a Vice President of PBP. He is a First Vice President of PSI. Mr. Alexander also serves in various capacities for other affiliated companies. Prior to joining PSI in July 1992, he was with Price Waterhouse for nine years. Mr. Alexander is a certified public accountant.
CHESTER A. PISKOROWSKI, age 51, is a Vice President of PBP. 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 52, is a Director of PBP. He is a Senior Vice President of PSI and General Counsel of Prudential Mutual Fund Management Inc., 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 44, is a Director of PBP Ms. Maio is a Senior Vice President and Deputy General Counsel of PSI and supervises non-litigation legal work for PSI. She joined PSI's Law Department in 1983; presently, she also serves in various capacities for other affiliated companies.
There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing directors and executive officers have indefinite terms.
Prudential Realty Partnerships, Inc.
The directors and executive officers of Prudential Realty Partnerships, Inc. and their positions are as follows:
Name Position
Joel W. Stoesser Chairman of the Board of Directors John C. Hoffman President and Director Kevin R. Smith Vice President and Director Steven B. Saperstein Vice President and Comptroller Martin Pfinsgraff Treasurer Claude J. Zinngrabe, Jr. Director Roger S. Pratt Director Joseph D. Margolis Secretary
JOEL W. STOESSER, age 54, is a Managing Director of Prudential Real Estate Investors. He is head of all client investment programs for real estate assets with areas of responsibility including portfolio management of domestic and international sources of funds. Prior to his current assignment, Mr. Stoesser served as a Senior Vice President of the Prudential Realty Group. He also previously served as a Senior Vice President in Real Estate Investment Management at CIGNA Corporation and held assignments with Connecticut General Life Insurance Company as head of real estate operations and as Director of strategic planning for all investment operations.
JOHN C. HOFFMAN, age 49, is a Managing Director of Prudential Real Estate Investors. He serves as Portfolio Manager for the PRISA portfolio, a $2.2 billion real estate fund. Prior to his current assignment, Mr. Hoffman was Regional Managing Director for the Northeast region. Mr. Hoffman joined the Prudential in 1974.
KEVIN R. SMITH, age 37, is Vice President, Prudential Real Estate Investors. He is portfolio manager for four separate accounts and four commingled funds. Mr. Smith has been employed by The Prudential since 1981 and has experience in asset management, development, property acquisitions and sales, and mortgage loans as a result of field office assignments in Cleveland, Houston, and northern New Jersey.
STEVEN B. SAPERSTEIN, age 33, is Vice President and Comptroller of Prudential Real Estate Investors as well as other Prudential Asset Management Group Real Estate entities. He joined The Prudential Insurance Company of America's Comptroller's Department in 1984 as an Accountant. In 1985, he transferred within the Comptroller's Department to the Tax division.
MARTIN PFINSGRAFF, age 40, is Vice President and Treasurer of The Prudential Insurance Company of America. He is responsible for all borrowings, cash management and securities custody activities of The Prudential. Prior to joining The Prudential in 1989 as Vice President, Corporate Finance Group, Mr. Pfinsgraff was employed by Mellon Bank where he held various positions in portfolio management, funds management, securities marketing and asset sales.
CLAUDE J. ZINNGRABE, JR., age 48, is Chairman and Chief Executive Officer of Prudential Real Estate Investors. He also serves as Chairman of Prudential Home Building Investors, Inc., a specialty real estate investment management firm. Mr. Zinngrabe joined Prudential in 1972 and has worked in every area of Prudential's real estate investment activity. From 1979-1981, Mr. Zinngrabe directed a number of real estate development operations in the U.S. and Canada. In 1981, he assumed responsibility for all the company's real estate investment activities throughout New England and the Mid-Atlantic states. From 1984-1991, Mr. Zinngrabe was Senior Vice President of Prudential Realty Group, responsible for property acquisitions and sales on a national basis for all Prudential-managed portfolios.
ROGER S. PRATT, age 42, is Vice President of Prudential Real Estate Investors. He is the portfolio manager of PRISA II, a large commingled fund. Mr. Pratt joined the Prudential Realty Group in June 1982 as an asset manager in the Atlanta regional office and subsequently served in a variety of positions for the
company. Prior to assuming his current position in February 1992, Mr. Pratt was Vice President in charge of the New Jersey regional office.
JOSEPH D. MARGOLIS, age 34, is Assistant General Counsel responsible for the provision and coordination of legal services to Prudential Real Estate Investors as well as other Prudential Asset Management Group Real Estate entities. His assignments with Prudential have included counsel to The Prudential Mortgage Capital Company, Inc. and Associate Regional Counsel in the Boston Realty Group office. Prior to joining Prudential, Mr. Margolis was employed by Nutter, McClennen & Fish in Boston, Massachusetts.
Charles R. Lightner and Mark R. Clarke ceased to serve as Directors effective April 28, 1994. Claude J. Zinngrabe Jr. was elected Director as of July 22, 1994. Charles R. Lightner ceased to serve as Chairman of the Board effective April 28, 1994 and Joel W. Stoesser ceased to serve as President effective July 22, 1994. Effective July 22, 1994, Joel W. Stoesser was elected Chairman of the Board and John C. Hoffman was elected President. Effective April 28, 1994, Claude J. Zinngrabe, Jr. was elected Director. Effective March 1, 1995, Steven B. Saperstein was elected Vice President and Comptroller and Joseph D. Margolis was elected Secretary. Effective March 1, 1995, Nicholas R. Sucic ceased to serve as Vice President and Comptroller and S. Gilmer Towell ceased to serve as Secretary.
There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing executive officers and directors have indefinite terms.
Item 11.
Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of compensation to directors and officers of the General Partners for their services. Certain executive officers and directors of the General Partners receive compensation from affiliates of the General Partners, not from the Registrant, for services performed for various affiliated entities, which may include services performed for the Registrant; however, the General Partners believe that any compensation attributable to services performed for the Registrant is immaterial. See Item 13 Certain Relationships and Related Transactions for information regarding compensation to the General Partners.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 1, 1995, no director or executive officer of either of the General Partners owns directly or beneficially any interest in the voting securities of the General Partners.
As of March 1, 1995, no director or executive officer of either of the General Partners owns directly or beneficially any of the Units issued by the Registrant.
As of March 1, 1995, no limited partner beneficially owns more than five percent (5%) of the outstanding Units issued by the Registrant.
Item 13.
Item 13. Certain Relationships and Related Transactions
The Registrant has and will continue to have certain relationships with the General Partners and their affiliates. However, there have been no direct financial transactions between the Registrant and the directors or executive officers of the General Partners.
Reference is made to Notes A, B and G to the financial statements of the Registrant's Annual Report which is filed as an exhibit hereto, which identify the related parties and discuss the services provided by these parties and the amounts paid or payable for their services. The Joint Venture's relationship with the General Partners is described in Notes A and F of the Joint Venture's financial statements on pages 16 through 21 herein.
PART IV
Page in Annual Report
Item 14.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1 Financial Statements and Independent Auditors' Report--Incorporated by reference to the Registrant's Annual Report which is filed as an exhibit hereto
Independent Auditors' Report 2
Financial Statements: Statements of Financial Condition--December 31, 1994 and 1993 3 Statements of Operations--Three years ended December 31, 1994 4 Statements of Changes in Partners' Capital--Three years ended December 31, 1994 4 Statements of Cash Flows--Three years ended December 31, 1994 5 Notes to Financial Statements 6
2 Financial Statement Schedules and Independent Auditors' Report Independent Auditors' Report on Schedules
Schedules: II--Valuation and Qualifying Accounts and Reserves--Three years ended December 31, 1994 III--Real Estate and Accumulated Depreciation--December 31, 1994 Notes to Schedule III-Real Estate and Accumulated Depreciation Ridge Plaza Joint Venture Financial Statements and Independent Auditors' Report Independent Auditors' Report
Financial Statements: Statements of Financial Condition--December 31, 1994 and 1993 Statements of Operations--Three years ended December 31, 1994 Statements of Changes in Partners' Capital--Three years ended December 31, 1994 Statements of Cash Flows--Three years ended December 31, 1994 Notes to Financial Statements
All other schedules have been omitted because they are not applicable or the required information is included in the financial statements and notes thereto.
3 Exhibits Description: 3 and 4 Amended and Restated Agreement of Limited Partnership (1) Amendment to Limited Partnership Agreement dated as of January 1, 1987(2)
10 Material Contracts: A. Joint Venture Agreement dated May 8, 1985 between The Prudential Insurance Company of America (``Prudential'') and the Registrant (3) B. Purchase Agreement and First Amendment to Joint Venture Agreement dated June 28, 1985 between Registrant and Prudential (4) C. Amended and Restated Joint Venture Interest Acquisition and Option Agreement dated June 28, 1985 between Prudential and Prudential Realty Acquisition Fund II, L.P. (``PRAF II'') (4) D. Amended and Restated Acquisition Fee Agreement dated June 28, 1985 among Prudential Realty Partnerships, Inc., Prudential-Bache Properties, Inc., Registrant, PRAF II, Prudential, and Ridge Plaza Joint Venture (4) E. Second Amendment to Joint Venture Agreement of Ridge Plaza Joint Venture and Second Amendment to Amended and Restated Joint Venture Interest Acquisition and Option Agreement and First Amendment to Amended and Restated Acquisition Fee Agreement dated January 14, 1986 among Registrant, Prudential and PRAF II (5) F. Third Amendment to Joint Venture Agreement of Ridge Plaza Joint Venture dated as of May 15, 1986 among Registrant, Prudential and PRAF II (6)
13 Registrant's 1994 Annual Report to Limited Partners (With the exception of the information and data incorporated by reference in Items 3, 7, and 8 of this Annual Report on Form 10-K, no other information or data appearing in the Registrant's 1994 Annual Report to Limited Partners is to be deemed filed as part of this report.)
25(i) Executed Power of Attorney of Martin Pfinsgraff (7)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of the period covered by this report. --------------- (1) Incorporated by reference to Prospectus dated July 1, 1983 as filed with the Commission pursuant to Rule 424(b) under the Securities Act of 1933 (2) Incorporated by reference to Exhibits 3 and 4 of Registrant's Annual Report on Form 10-K for the year ended December 31, (3) Incorporated by reference to Exhibit 10(c) of Registrant's Current Report on Form 8-K dated May 23, 1985 (4) Incorporated by reference to Exhibit 10(d) of Amendment on Form 8 to Registrant's Current Report on Form 8-K dated May 23, (5) Incorporated by reference to Exhibit 10(a) of Registrant's Current Report on Form 8-K dated January 14, 1986 (6) Incorporated by reference to Exhibit 10(a) of Registrant's Current Report on Form 8-K dated May 15, 1986 (7) Incorporated by reference to Exhibit 25(i) of Registrant's Annual Report on Form 10-K for the year ended December 31, 1991
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Two World Financial Center Telephone: (212) 436-2000 New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Prudential Acquisition Fund I, L.P. New York, New York
We have audited the financial statements of Prudential Acquisition Fund I, L.P. (a Delaware Limited Partnership) as of December 31, 1994 and 1993, and for each of the three years in the period ended December 31, 1994, and have issued our report thereon dated March 14, 1995; such financial statements and report thereon are included in your 1994 Annual Report to Limited Partners and are incorporated herein by reference. Our audits also included the financial statement schedules of Prudential Acquisition Fund I, L.P., listed in Item 14. These financial statement schedules are the responsibility of the General Partners. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP --------------------------- March 14, 1995
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PRUDENTIAL ACQUISITION FUND I, L.P. (a limited partnership)
Schedule II--Valuation and Qualifying Accounts and Reserves
-------------------------------------------------------------------------------- See notes to Schedule III on the following page
PRUDENTIAL ACQUISITION FUND I, L.P. (a limited partnership) Notes to Schedule III - Real Estate and Accumulated Depreciation December 31, 1994
(A) Initial cost represents the initial purchase price of the properties including acquisition fees.
(B) There are no encumbrances against any of the properties.
(C) The aggregate cost of the real estate owned for Federal income tax purposes is $37,777,127.
(D) Reconciliation of Real Estate Owned:
(E) Reconciliation of Accumulated Depreciation:
(F) Costs Capitalized Subsequent to Acquisition include noncash write-downs of $3,870,000.
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Two World Financial Center Telephone: (212) 436-2000 New York, New York 10281-1414 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Ridge Plaza Joint Venture New York, New York
We have audited the accompanying statements of financial condition of Ridge Plaza Joint Venture as of December 31, 1994 and 1993, and the related statements of operations, changes in partners' capital and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Joint Venture Partners. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Joint Venture Partners, 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 Ridge Plaza Joint Venture as of December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP --------------------------- March 14, 1995
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RIDGE PLAZA JOINT VENTURE STATEMENTS OF FINANCIAL CONDITION
RIDGE PLAZA JOINT VENTURE STATEMENTS OF OPERATIONS
RIDGE PLAZA JOINT VENTURE STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
RIDGE PLAZA JOINT VENTURE STATEMENTS OF CASH FLOWS
RIDGE PLAZA JOINT VENTURE NOTES TO FINANCIAL STATEMENTS
A. General
Ridge Plaza Joint Venture (the ``Joint Venture'') is a joint venture formed on May 8, 1985 which will terminate on May 8, 2025 unless ended sooner under the provisions of the joint venture agreement (the ``Joint Venture Agreement''). The Joint Venture was formed to acquire and manage two shopping centers, Ridge Plaza Shopping Center and Pine Island Ridge Plaza Shopping Center, located in Davie, Broward County, Florida. The co-venturers are Prudential Acquisition Fund I, L.P. (``PAF I'') and Prudential Realty Acquisition Fund II, L.P. (``PRAF II''). PAF I and PRAF II are Delaware limited partnerships of which Prudential-Bache Properties, Inc. (``PBP'') and Prudential Realty Partnerships, Inc. (``PRP'') are the co-general partners.
B. Summary of Significant Accounting Policies
Basis of accounting
The books and records of the Joint Venture are maintained on the accrual basis of accounting in accordance with generally accepted accounting principles.
Certain reclassifications have been made to prior year balances to conform with the current year's financial statement presentation.
Investment in property
Property investments are carried at the lower of depreciated cost or estimated amounts recoverable through future operations and sale of the property. Property investments are depreciated using the straight-line method over their estimated economic lives which range from 5 to 35 years depending on property type.
Buildings and improvements include furniture and fixtures, tenant improvements and capitalized leasing costs. Tenant improvements and capitalized leasing costs are amortized over the lives of the respective leases. Ccapitalized leasing costs, net of accumulated amortization, were $130,733 and $96,140 at December 31, 1994 and 1993, respectively.
A provision for loss on impairment of assets is recorded when estimated amounts recoverable through future operations and sale of a property on an undiscounted basis are below depreciated cost. However, depreciated cost, adjusted for such reductions in value, if any, may be greater than the estimated fair value. Property investments themselves are reduced to estimated fair value (based on third party appraisals) when the property is considered to be permanently impaired and the depreciated cost exceeds the estimated fair value.
Cash and cash equivalents
Cash and cash equivalents include money market funds.
Income taxes
The Joint Venture is not required to provide for, or pay, any Federal or state income taxes. Income tax attributes that arise from its operations are passed to the individual partners. The Joint Venture may be subject to other state and local taxes in jurisdictions in which it operates.
Profit and loss allocations and distributions
For financial reporting purposes, net profits or losses are allocated 54% to PAF I and 46% to PRAF II.
Distributions of cash are made in accordance with the Joint Venture Agreement and are allocated 54% to PAF I and 46% to PRAF II.
C. Investment in Property
The Joint Venture's net investment in property is comprised of the following:
The Joint Venture's properties were considered to be permanently impaired in 1993 because declines in net operating income had continued for an extended period of time and the trend was not expected to change in the foreseeable future. Based on low rental rates, which continued to decline in comparison to the average rental rates charged by the competition, significant tenant concessions and oversupply of retail space in the Joint Venture's submarket, a write-down of $17,150,000 was recorded at December 31, 1993 to reduce the Joint Venture's properties to estimated fair value based on third party appraisals.
D. Income Taxes
The following is a reconciliation of net income (loss) for financial reporting purposes with net income (loss) for tax reporting purposes.
The differences between the tax basis and book basis of partners' capital are primarily attributable to the cumulative effect of the book-to-tax income (loss) adjustments.
E. Leases
The Joint Venture has noncancellable operating leases at its two shopping centers. One tenant, Builders Square (whose lease expires in 2003) accounted for 16%, 13% and 11% of the revenues of the Joint Venture for the years ended December 31, 1994, 1993 and 1992, respectively. Future minimum base lease receipts at December 31, 1994 due under these noncancellable leases are as follows:
In addition, certain of the leases require the lessees to reimburse the Joint Venture for real estate taxes, insurance costs and other expenses.
F. Related Parties
The general partners of the co-venturers and their affiliates perform services for the Joint Venture which include, but are not limited to; accounting and financial management; asset management; and other administrative services. The amount of reimbursement from the Joint Venture is limited by the provisions of the Joint Venture Agreement. The approximate costs and expenses incurred on behalf of the Joint Venture which are reimbursable to the general partners of the co-venturers and their affiliates were:
Expenses payable to the general partners of the co-venturers and their affiliates (which are included in accrued expenses) as of December 31, 1994 and 1993 were approximately $19,900 and $21,600, respectively.
The Joint Venture maintains an account with the Prudential Institutional Liquidity Portfolio Fund, an affiliate of the co-venturers, for investment of its available cash in short-term instruments pursuant to the guidelines established by the Joint Venture Agreement.
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 ACQUISITION FUND I, L.P.
By: Prudential-Bache Properties, Inc. A Delaware corporation, General Partner By: /s/ Robert J. Alexander Date: March 30, 1995 --------------------------------------------- Robert J. Alexander Vice President and Chief Accounting Officer
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 and 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/ James M. Kelso Date: March 30, 1995 --------------------------------------------- James M. Kelso President, Chief Executive Officer, Chairman of the Board of Directors and Director By: /s/ Barbara J. Brooks Date: March 30, 1995 --------------------------------------------- Barbara J. Brooks Vice President-Finance and Chief Financial Officer By: /s/ Robert J. Alexander Date: March 30, 1995 --------------------------------------------- Robert J. Alexander Vice President By: /s/ Frank W. Giordano Date: March 30, 1995 --------------------------------------------- Frank W. Giordano Director By: /s/ Nathalie P. Maio Date: March 30, 1995 --------------------------------------------- Nathalie P. Maio Director
Prudential Realty Partnerships, Inc. A Delaware corporation, General Partner By: /s/ Joel W. Stoesser Date: March 30, 1995 --------------------------------------------- Joel W. Stoesser Chairman of the Board of Directors By: /s/ John C. Hoffman Date: March 30, 1995 --------------------------------------------- John C. Hoffman President and Director By: /s/ Kevin R. Smith Date: March 30, 1995 --------------------------------------------- Kevin R. Smith Vice President and Director By: /s/ Steven B. Saperstein Date: March 30, 1995 --------------------------------------------- Steven B. Saperstein Vice President and Comptroller By: * Date: March 30, 1995 --------------------------------------------- Martin Pfinsgraff Treasurer By: /s/ Claude J. Zinngrabe, Jr. Date: March 30, 1995 --------------------------------------------- Claude J. Zinngrabe, Jr. Director By: /s/ Roger S. Pratt Date: March 30, 1995 --------------------------------------------- Roger S. Pratt Director By: /s/ Joseph D. Margolis Date: March 30, 1995 --------------------------------------------- Joseph D. Margolis Secretary By: * /s/ Kevin R. Smith --------------------------------------------- Kevin R. Smith (Attorney-in-fact)