Item 1. Business
General
Fogelman Mortgage L.P. I (the ``Registrant''), a Tennessee limited partnership, was formed on September 4, 1986 and will terminate on December 31, 2016 unless terminated sooner under the provisions of the Second Amendment to Amended and Restated Certificate and Agreement of Limited Partnership (the ``Partnership Agreement''). The Registrant was formed to invest in mortgage loans with the proceeds raised from the initial sale of 54,200 depositary units (``Units''). The Registrant invested in two mortgage loans (the ``Mortgage Loans'') which provided construction and permanent financing for the development of two multi-family residential apartment complexes. The Registrant's fiscal year for book and tax purposes ends on December 31.
The Registrant is engaged solely in the business of investing in mortgage loans; 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.
General Partner
The general partner of the Registrant is Prudential-Bache Properties, Inc. (``PBP'' or the ``General Partner'').
Mortgage Loans
The Registrant holds first mortgages on two properties, Pointe Royal apartments and Westmont apartments (individually, a ``Property'' and collectively, the ``Properties''). The Pointe Royal apartments were financed by the ``Royal View Loan'' and the Westmont apartments were financed by the ``Chesterfield Loan.''
The Pointe Royal project, which secures the Royal View Loan, is located in Overland Park, Kansas and is a townhouse apartment community consisting of 52 buildings on approximately 35 acres of land. As of December 31, 1995, the monthly rents at the Pointe Royal project range from $560 to $875.
The Westmont project, which secures the Chesterfield Loan, is located in Chesterfield, Missouri and is an apartment community consisting of 25 buildings on approximately 58 acres of land. As of December 31, 1995, the monthly rents at the Westmont project range from $560 to $790.
The interest pay rate has been modified and is equal to the net property cash flow generated by the respective Properties payable monthly (7.7% for 1995), with the difference between the amount actually paid and the original pay rate of 9.5% per annum being accounted for in a separate account for each Property, which itself bears interest at 9.5% per annum (``Unpaid Interest''). The Mortgage Loans require
current payments of interest only with balloon payments of the entire principal and Unpaid Interest amounts due from sale or refinancing proceeds or upon maturity. The ultimate collectibility of the Unpaid Interest as well as the full principal of the Mortgage Loans will depend upon the value of the underlying properties which are currently estimated, based on third party appraisals, to be less than the amounts due. However, the estimated property values exceed the Registrant's carrying amount of the Mortgage Loans. A full appraisal for both properties was obtained in 1990 which used the cost, sales comparison and income capitalization approaches to value. These reports were subsequently updated via limited appraisal reports in 1991, 1992 and 1993. Limited appraisal reports consist of an update of the income capitalization approach used to determine a property's market value. The values of Pointe Royal and Westmont estimated in the limited appraisal reports were $22,400,000 and $19,000,000, respectively, as of December 1, 1993.
Following is the interest received from each of the Registrant's Mortgage Loans as a percentage of total interest received and the equity income on the underlying properties as a percentage of total equity income:
For summary financial statements of the underlying properties, see Note G to the financial statements in the Registrant's Annual Report to Unitholders for the year ended December 31, 1995 (``Registrant's Annual Report'') which is filed as an exhibit hereto.
Competition
The General Partner has formed various entities to engage in businesses which may be competitive with the Registrant. Both of the Properties collateralizing the Mortgage Loans are located in markets where the property manager manages other apartment complexes.
The Registrant's business is affected by competition to the extent that the underlying properties from which it derives interest payments are subject to competition from neighboring properties. The Westmont apartments are located in the St. Louis metropolitan area and the Pointe Royal apartments are located in the Kansas City metropolitan area. The Properties' occupancy and rental rates are comparable to their competitors. There are new complexes under construction with expected completion dates during 1996 and 1997 that could become future competitors in Pointe Royal's market.
Employees
The Registrant has no employees. Management and administrative services for the Registrant are performed by the General Partner and its affiliates pursuant to the Partnership Agreement. The General Partner receives compensation and reimbursement of expenses in connection with such activities as described in Sections 9 and 10 of the Partnership Agreement. See Note E to the financial statements in the Registrant's Annual Report which is filed as an exhibit hereto.
Item 2.
Item 2. Properties
The Registrant does not own or lease any property.
Item 3.
Item 3. Legal Proceedings
This information is incorporated by reference to Note F 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 Unitholders
None
PART II
Item 5.
Item 5. Market for Registrant's Units and Related Unitholder Matters
As of March 1, 1996 there were 5,553 holders of record owning 54,200 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 Unitholder 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 Unitholders during the following calendar quarters.
There are no material legal restrictions upon the Registrant's present or future ability to make distributions in accordance with the provisions of the Partnership Agreement. Cash distributions paid in 1995 were funded from current operations. Approximately $1,434,000 and $1,231,000 of the distributions paid to Unitholders during 1995 and 1994, respectively, represent a return of capital on a generally accepted accounting principles (GAAP) basis. The return of capital on a GAAP basis is calculated as Unitholder distributions less net income allocated to Unitholders. The Registrant currently expects that cash distributions will continue to be paid in the foreseeable future from cash generated by operations, which may be supplemented by previously undistributed cash from operations. For discussion of other factors that may affect future distributions, see Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 10 through 11 of the Registrant's Annual Report which is filed as an exhibit hereto.
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 on pages 2 through 9 of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This information is incorporated by reference to pages 10 and 11 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 9 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 Partner.
The Registrant, the Registrant's General Partner and its directors and executive officers, and any persons 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 Unitholders 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 Unitholders 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 its most recent fiscal year.
The directors and executive officers of PBP and their positions with regard to managing the Registrant are as follows:
THOMAS F. LYNCH, III, age 37, 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 (``PSI''), an affiliate of PBP. Mr. Lynch also serves in various capacities for other affiliated companies. Mr. Lynch joined PSI in November 1989.
BARBARA J. BROOKS, age 47, 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.
EUGENE D. BURAK, age 50, is a Vice President of PBP. He is a First Vice President of PSI. Prior to joining PSI in September 1995, he was a management consultant for three years and was with Equitable Capital Management Corporation from March 1990 to May 1992. Mr. Burak is a certified public accountant.
CHESTER A. PISKOROWSKI, age 52, 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 53, is a Director of PBP. He is a Senior Vice President of PSI and an Executive Vice President 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 45, is a Director of PBP. She 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.
James M. Kelso ceased to serve as President, Chief Executive Officer, Chairman of the Board of Directors and Director effective June 30, 1995. Effective June 30, 1995, Thomas F. Lynch, III was elected President, Chief Executive Officer, Chairman of the Board of Directors and Director. Robert J. Alexander ceased to serve as Vice President effective August 25, 1995. Eugene D. Burak was elected Vice President effective October 9, 1995.
There are no family relationships among any of the foregoing directors or officers. All of the foregoing officers and/or 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 Partner for their services. Certain officers and directors of the General Partner receive compensation from affiliates of the General Partner, not from the Registrant, for services performed for various affiliated entities, which may include services performed for the Registrant; however, the General Partner believes that any compensation attributable to services performed for the Registrant is immaterial. See Item 13 Certain Relationships and Related Transactions for information regarding reimbursement to the General Partners for services provided to the Registrant.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 1, 1996, no director or officer of the General Partner owns directly or beneficially any interest in the voting securities of the General Partner.
As of March 1, 1996, no director or officer of the General Partner owns directly or beneficially any of the Units issued by the Registrant.
As of March 1, 1996, no beneficial owners who are neither a director nor officer of the General Partner beneficially own more than five percent (5%) of the 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 Partner and its affiliates. However, there have been no direct financial transactions between the Registrant and the directors or officers of the General Partner.
Reference is made to Notes A and E to the financial statements in 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.
PART IV
(LOGO) 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 Fogelman Mortgage L.P. I New York, New York
We have audited the financial statements of Fogelman Mortgage L.P. I (a Tennessee Limited Partnership) as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, and have issued our report thereon dated February 12, 1996; such financial statements and report are included in your 1995 Annual Report to Limited Partners and are incorporated herein by reference. Our audits also included the financial statement schedule of Fogelman Mortgage L.P. I, listed in Item 14.