ITEM 1 - BUSINESS:
Venetian Park Associates, Ltd., a California limited partnership (the "Registrant") was formed on October 31, 1983 to acquire, own and operate a 295 unit rental housing project known as Venetian Park Apartments (the "Property") on a parcel of real property located at 1540, 1555 and 1560 Mosaic Way and 4841 North Pershing Avenue, Stockton, California, for $10,925,000, in accordance with Section 221(d) (4) of the National Housing Act, as amended, and the rules and regulations of the Department of Housing and Urban Development pertaining thereto. Norman Jacobson and Theodore J. Weill are the general partners (the "General Partners") of Registrant.
Registrant's objective from the Property are to:
1) Generate sufficient cash flow from operations to (i) pay all expenses, (ii) reduce the outstanding balances of loans secured by the Partnership property, and (iii) thereafter, provide cash distributions to the Limited Partners;
2) Have potential to appreciate in value in excess of the purchase price; and
3) To the extent possible, the Partners should not realize taxable income with respect to a portion or all of distributions to the Limited Partners of cash from operations. The fundamental objective was to acquire the Property for its economic benefits.
Registrant's property is managed by Norman Jacobson Management Company, an affiliate of one of the General Partners.
GEOGRAPHICAL DATA
VENETIAN PARK APARTMENTS
The Venetian Park Apartments is on a 16.4 acre site in the city of Stockton, California. Stockton is the county seat of San Joaquin Valley and is approximately 45 miles south of Sacramento, California, the state capital. The Property is one block west of Stockton's major regional shopping center which includes Macy's, Sears, Weinstock's, JCPenney's and Ward's. Delta College is immediately across the street, and the University of the Pacific is one mile to the south. Interstate Highway 5 is approximately one mile to the west, and downtown Stockton is approximately three miles due south. The Property is located in northern Stockton where nearly all of the city's population growth has occurred during the past four decades. Stockton's current population is 210,500, an increase of 48,400 since 1982 when the population was 162,100.
Agriculture is Stockton's largest industry and is the home of five of California's major grower and producer associations. Major manufacturing firms include American Forest Products, Gold Bond Building Products, H. J. Heinz Company, Safeway Meat Processing, Libbey-Owens-Ford Glass Company and Sun Diamond Growers of California. Honda Company's district automobile parts center is located in Stockton. American Savings Bank, with offices throughout California, is headquartered in Stockton and is the city's largest financial institution. The Port of Stockton, with approximately 1,000 employees, has been one of the county's leading employers since 1933. It serves all the world's major ports.
Stockton Metropolitan Airport is 10 minutes from Venetian Park Apartments. The city is 85 miles from San Francisco and approximately two and a half hours driving time from South Lake Tahoe, and less than three hours from Reno, Nevada.
ITEM 1 - BUSINESS:
PROPERTY DESCRIPTION
VENETIAN PARK APARTMENTS 1540, 1555 AND 1560 MOSAIC WAY AND 4841 N. PERSHING AVENUE STOCKTON, CALIFORNIA
Number of Units: 295 (41 buildings) Lot Size: 16.44 acres (716,126 square feet) Zoning: R-3, Apartment District Parking: 317 carports, 122 open spaces Year Built: 1976 through 1978 in four phases Construction: 2-story wood frame and stucco except 12 one-story "villa" units
AMENITIES - Clubhouse (includes exercise room with universal gym and sauna) - Extensive network of canals, waterways and fountains - Individually-metered central forced-air conditioning and heating in each unit - Built-in electric ranges and ovens - Dishwashers in all apartments - Refrigerators in all apartments - Garbage disposals - Washer and dryer in each apartment - 209 units with fireplaces - Dining rooms with wet bar in all villas and townhouses - Three swimming pools - One tennis court with access to seven additional courts and 18 night-lighted courts across Pershing Avenue - Wall-to-wall carpets and drapes - Large walk-in closets - Outside storage units in each apartment - Laundry rooms
ITEM 1 - BUSINESS:
VENETIAN PARK APARTMENTS
SCHEDULED GROSS INCOME
BEGINNING JANUARY, 1999
RENTAL RATES
- -------
(1) Net security deposit forfeitures plus late charges and miscellaneous income.
ITEM 2
ITEM 2 - PROPERTIES:
LOAN INFORMATION
VENETIAN PARK APARTMENTS
Registrant's only property is a 295-unit apartment complex (herein the "Property") consisting of 41 buildings on a 16.44 acre site at 1540, 1555 and 1560 Mosaic Way and 4841 North Pershing Avenue, Stockton, California, and commonly known as the Venetian Park Apartments. The Property is subject to encumbrances, consisting of four (one for each parcel) first trust deed notes totaling $5,315,331 at December 31, 1998. The partnership borrowed $18,000 for laundry equipment. The outstanding loan balance at December 31, 1998 is $17,298. The General Partners believe that the foregoing Property is adequately covered by insurance. Also, at this time there are no proposed programs for renovation, improvements or further development of the Property.
FIRST TRUST DEED INFORMATION
ITEM 3
ITEM 3 - LEGAL PROCEEDINGS:
A former employee has filed a complaint claiming discrimination with the State of California. A Mutual Release & Settlement Agreement was procured on January 30, 1998. The Agreement provided for the defendant to pay $7,500. Venetian Park's insurance carrier covered some of the legal costs. The insurance carrier provided legal counsel for settling the case and paid the agreed upon settlement amount.
ITEM 4
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None
PART II
ITEM 5
ITEM 5 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS:
The Limited Partnership Units have limited transferability and no established public trade market has developed or is expected to develop in the future.
There were approximately 530 holders of Limited partnership Units at December 31, 1998, holding 6,041 Limited Partnership Units of Registrant. Although the General Partners have an equity interest in Registrant, they were not issued units. The general partners own 61 units, giving the partnership a total of 6,102 partner units.
During 1998, the Registrant paid $0 or $0 per unit; during 1997, paid $60,410; and during 1996, paid $0. Additionally, the Registrant paid the General Partners the following distributions: $0, $608 and $0 for 1998, 1997 and 1996, respectively.
ITEM 6
ITEM 6 - SELECTED FINANCIAL DATA:
PER UNIT LIMITED PARTNER CASH DISTRIBUTIONS
ITEM 7
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
Results of Operations:
Operating income for 1998 was $1,610,999, an improvement of $104,708 (6.91%) when compared to the 1997 operating income of $1,506,921 and a decrease of $11,282 (1.07%) when compared to $1,622,281 for 1996. Net spendable for 1998 was $69,434 vs. ($170,494) in 1997, an improvement of $239,928 or 140.73%. When compared to 1996 net spendable of $159,060, the net spendable generated in 1998 was $89,626 (56.35%) lower. Operating income in 1998 includes Insurance Receivables-Fire Rent Loss of $50,765.
The scheduled gross monthly rental roll for December 1998 was $156,737, $4,640 (3.05%) more than the December 1997 rent roll of $152,097 and 5.68% higher than the December 1996 rent roll of $148,308. Aggregate rental loss (vacancies, net delinquencies and rental discounts) for 1998 of $298,566 is an improvement of $55,542 or 15.69% when compared to 1997's rental loss of $354,108. The main contributing factor to this is the decrease in rental discounts by $68,266 from $106,219 in 1997 to $37,953 in 1998. There was a noticeable improvement in the local rental market in 1998. However, 1996's rental loss of $228,648 is lower by $69,918 or 23.42% when compared to 1998.
Operating expenses during 1998 were $964,881 vs. $1,114,411 in 1997, a cut of $149,530 (13.42%). When compared to 1996's operating expenses of $884,245, 1998's operating expenses are higher by $80,637 (9.12%).
During 1998, Fixed Expenses was the only category that went up when compared to 1997 ($688,073 vs. $670,827). This is due to the increase in the monthly services such as landscape (up by $3,840), security (up by $3,998) and pool (up by $2,252). In 1996, Fixed Expenses were $631,926 which is lower by $56,147 when compared to 1998.
Of the total $69,434 net spendable generated during 1998, $53,059 or 76.42% was booked during the third quarter of 1998 indicating a favorable trend.
Although the fire insurance settlement had not been concluded in December 31, 1998 due to the mortgage holder's tardiness in endorsing the last insurance proceeds draw of $106,626, the books closed with respect to fire insurance receipts and disbursements before the end of January 1999. Accordingly, our accounts payable include funds still owed to the fire insurance adjuster the partnership hired to negotiate the settlement whose fees were paid in January 1999 from funds generated from the mortgage holder's endorsed proceeds check. The overall settlement was enough to cover the building repair and the adjuster's fees. We have not yet received a settlement regarding the property's loss of rent insurance coverage.
The property's cash accounts at the end of 1998, 1997 and 1996, respectively, were $135,283, $159,824 and $376,368. The property's FHA reserve for replacement fund at the end of 1998, 1997 and 1996, respectively, were $166,672, $141,500 and $141,237. We have applied for a release of approximately $22,000 of these funds late last year of which $13,310 was released in February 1999.
Our goal set last year was to apply for refinancing on the first trust deed loan in order to generate sufficient funds for the reroofing of the complex, the completion of the exterior painting and refurbishment of the driveways; however, until we improve our occupancy rate and cash flow, it is unwise to pursue such refinancing although lenders have ample funds available for apartment loans at favorable terms.
ANALYSIS OF CASH FLOWS:
Operating Activities:
The Partnership had a cash flow from operating activities of $115,351, ($58,633), and $279,906 for each of the three years in the period ended December 31, 1998, respectively. The improvement of the cash flow in 1998 was attributable to the decline in vacancies, decrease in rental discounts and the lowering of operating expenses in all categories except fixed expenses.
Financing Activities:
The principal repayment of long-term debt remain consistent over the three-year period. There were no cash distributions to partners in 1998 to recover from the negative cash flow in 1997. The Partnership declared and paid a distribution in January 1997 for the 1996 year. The relatively small distribution of $61,018 is the first to be issued in some period of time. The distributions to partners were $0, $61,018, and $0 for each of the three year period ended December 31, 1998, respectively.
ITEM 8
ITEM 8 - FINANCIAL STATEMENTS:
The Registrant's Financial Statements for the periods ended December 31, 1998, 1997 and 1996 follow.
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
TO VENETIAN PARK ASSOCIATES, LTD. SANTA MONICA, CALIFORNIA
We have audited the accompanying balance sheets of VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP) as of December 31, 1998 and 1997, and the related statements of operations, changes in partners' equity, and cash flows for each of the years in the three year period ended December 31, 1998. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Venetian Park Associates, Ltd. (A Limited Partnership) as of December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 1998, in conformity with generally accepted accounting principles.
/s/ Block, Plant, Eisner, Fiorito & Belak-Berger
Encino, California FEBRUARY 23, 1999
VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP) - ------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS
VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------
VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED) - ------------------------------------------------------------------------------ LONG TERM DEBT:
VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED) - -------------------------------------------------------------------------------
ITEM 9
ITEM 9 - DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:
There have been no disagreements with accountants on any matters of financial statement presentation or related disclosures.
PART III
ITEM 10
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS:
Registrant has no directors or executive officers but is managed by the General Partners.
The General Partners are described below:
NORMAN JACOBSON. Mr. Jacobson co-founded WAGNER/JACOBSON CO., INC. in 1958. That firm engaged primarily in real estate brokerage of income-producing multifamily residential real estate and served as general partner for a number of public and private syndications. Because Mr. Jacobson's time is devoted to property management and syndication activities and serving the interests of the investors in the syndications formed by him, his involvement with WAGNER/JACOBSON CO., INC., has ceased. In 1982, Mr. Jacobson, formed NORMAN JACOBSON REALTY RESOURCES, INC. Mr. Jacobson is also President of NORMAN JACOBSON MANAGEMENT CO, which acts as property manager for various apartment complexes and commercial properties in Los Angeles, Orange, Sacramento, San Joaquin, Solano and Contra Costa Counties.
In 1981 Mr. Jacobson co-formed Jacobson/Weill Income Realty Fund, a publicly offered real estate fund, which purchased the Chateau Apartments, a 104-unit apartment complex located at 1503 Fulton Avenue, Sacramento, California. In 1982 Mr. Jacobson and Mr. Ted Weill were co-general partners with Bateman Eichler, Hill Richards Realty in Parkfair Associates, Ltd., a publicly offered limited partnership, formed for the purpose of purchasing the 120-unit Parkfair Apartments and Parkfair Professional Building in Sacramento. In 1983, Mr. Jacobson and Mr. Weill formed Venetian Park Associates, Ltd. which purchased the 295-unit Venetian Park Apartments in Stockton, California.
Mr. Jacobson is also General Partner for Hilltop Associates, Ltd. (formed in 1983 to purchase the 70-unit Hilltop Apartments), Hillsdale Investors, Ltd. (formed in 1984 to purchase the 48-unit Hillsdale Garden Apartments), Jefferson Place Investors (formed in 1985 to purchase the 66-unit Jefferson Place Apartments) and Cottage Bell Investors (formed in 1985 to purchase the 160-unit Cottage Bell Apartments). These properties are all in Sacramento. In addition, Mr. Jacobson is General Partner for Muir Creek Investors (formed in 1986 to purchase the 108-unit Muir Creek Apartments in Martinez, California), and Med Village Investors (formed in 1988 for the purpose of constructing the 106-unit Mediterranean Village Apartments in Fairfield, California).
Norman Jacobson Realty Resources, Inc., of which Mr. Jacobson is a principal and the sole owner, is general partner of Palm Mesa, Ltd. (formed in 1970 to purchase the 147-unit Palm Mesa Apartments) and Parkwood Village, Ltd. (formed in 1971 to purchase the 276-unit Newport Village Apartments). Both of these properties are in Costa Mesa, California.
In 1977, Mr. Jacobson was president of the Los Angeles Board of Realtors. Formerly he was president of the Venice Board of Realtors. He has been a director of the California Association of Realtors (CAR) periodically since 1963 and was elected regional vice-president of the CAR in 1978. In 1971-72 he was vice-chairman of the CAR's Syndication Division and was founding editor of the Syndication Division's official publication, THE CALIFORNIA SYNDICATOR. Mr. Jacobson lectures and writes extensively in the fields of real estate investments. He has periodically instructed for University of California Extension since 1961, lectures from time to time for the UCLA Graduate School of Management and is one of 80 real estate professionals in the United States invited to write a Chapter for THE REAL ESTATE HANDBOOK published by Dow-Jones, Irwin.
Mr. Jacobson holds a degree in business administration from UCLA, where he graduated in 1952. THEODORE J. WEILL. Mr. Weill is a general partner in numerous ongoing private and public syndications, and is active in real estate development and other activities. From December, 1969 to February, 1977, Mr. Weill served as principal in the development of recreational communities and became Executive Vice President of the Resort Development Group of Dart/Kraft Industries in 1970. From January, 1963, to November, 1969, he was President and Chairman of a privately held real estate and brokerage company specializing in commercial, industrial and income property with annual sales of $50 million, and a property management company with managed assets of $100 million. Mr. Weill has served as a consultant to Dart/Kraft Industries, SRI International and ITT Corporation. In March, 1977, he founded Weill Financial Corporation, a Los Angeles real estate investment organization.
Mr. Weill has a Bachelor's degree in marketing and finance from the University of Pennsylvania, Wharton School of Finance and Commerce in 1956, and in 1977 graduated with honors from the Pepperdine University Presidential/Key Executive MBA program.
PROPERTY MANAGEMENT
The Partnership Agreement provides that J/W Management Corp., a California Corporation organized by the General Partners, will be responsible, through its own personnel and/or through subcontracted management services, for the management of the Property, for a fee of 5% of the gross income of the Property, which fee is generally charged in the Stockton area. Historically, J/W Management has subcontracted the off-site property management to firms specializing in apartment house management and has paid 3% of the gross income to such firms while retaining the remaining 2% as compensation for overseeing the subcontractor's work. J/W Management Corp. was dissolved in 1990, and the General Partners individually continue to oversee the subcontractor's work and receive the 2% compensation.
Presently, the off-site management of the property is subcontracted to Norman Jacobson Management Co., an affiliate of one of the General Partners.
ITEM 11
ITEM 11 - EXECUTIVE COMPENSATION:
During the year ended December 31, 1998, the General Partners (see Item 13) received cash compensation from Registrant totaling $31,961 consisting of project management fees. Norman Jacobson received $20,934 and Theodore J. Weill received $11,027.
Also, during the year ended December 31, 1998, one of the General Partners and his affiliate, Norman Jacobson Management Co. (see Item 13) received cash compensation from Registrant totaling $61,778 consisting of project management fees and reimbursement for out-of-pocket expenses.
The following table summarizes the types, estimated amounts and recipients of compensation that will or may be paid to the General Partners or their affiliates from and after January 1, 1999:
ITEM 12
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
Registrant has no directors or officers but is managed by the General Partners. At December 31, 1998, neither of the General Partners owned any of the outstanding Limited Partnership Units nor did any person known to the General Partners own 5% or more of the outstanding Limited Partnership Units.
ITEM 13
ITEM 13 - CERTAIN RELATIONSHIPS:
The General Partners, either personally or through affiliated entities, are General Partners in other real estate limited partnerships, some of which may be comparable in certain respects to the Partnership. The General Partners have organized other partnerships in the past and will organize other partnerships in the future, including partnerships which may have investment objectives similar to those of the Partnership. Such General Partner will have legal and financial obligations with respect to those other partnerships which are similar to his obligations with respect of the Partnership, including contingent liability, for the obligations of such partnerships.
The General Partners are prohibited from entering into any transaction on behalf of the Partnership with any other limited partnership in which the General Partners or any affiliate of the General Partners has an interest. The General Partners may engage in the real estate business or in other businesses for their own account for the accounts of others or otherwise, and neither the Partnership nor any Limited Partners shall be entitled to any interest therein. There may be conflicts of interest on the part of the General Partners between the Partnership and other limited partnerships with which they are affiliated at such time as the Partnership attempts to sell or rent realty or employ resident and building managers, as well as under other circumstances.
It is the policy of the Partnership that the Limited Partners may not engage directly or indirectly in any capacity for monetary gain. Generally the Limited Partners participate in the profits, losses and distributions and have certain limited partner voting rights. No Limited Partner shall have any right to be active in the conduct or management of the Partnership business, nor have any power to bind the Partnership by contract, agreement, compromise or undertaking; provided, however, that Limited Partners shall have the right to vote on Partnership matters, as set forth in the Partnership Agreement, which affects its basic structure.
Limited Partners holding 10% of the Units may call (in the General Partnership notice) a meeting as provided in the Rules of the Commissioner of Corporations of the State of California, and an affirmative vote of the majority interest of the Limited Partners shall be required to take action upon certain matters as provided in the Partnership Agreement.
PART IV
ITEM 14
ITEM 14 - FINANCIAL STATEMENTS AND EXHIBITS:
(a) EXHIBITS
None
(b) FINANCIAL STATEMENTS
The following financial statements are included in Item 8:
Independent Auditors' Report
Balance Sheets as of December 31, 1998 and 1997
Statements of Operation for the years ended December 31, 1998, December 31, 1997 and December 31, 1996.
Statements of changes in partners' equity for the years ended December 31, 1998, December 31, 1997, and December 31, 1996.
Statements of cash flows for the years ended December 31, 1998, December 31, 1997, and December 31, 1996.
Notes to Financial Statements
The following financial statement schedules follow:
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON SUPPORTING SCHEDULES
TO VENETIAN PARK ASSOCIATES, LTD. SANTA MONICA, CALIFORNIA
Under date of February 23, 1999, we reported on the balance sheets of VENETIAN PARK ASSOCIATES, LTD. (A CALIFORNIA LIMITED PARTNERSHIP) as of December 31, 1998 and 1997 and the related statements of operations, changes in partners' equity and cash flows for each of the years in the three-year period ended December 31, 1998, which are included in Item 8 of this annual report on Form 10-K. In connection with our audits of the aforementioned financial statements, we also have audited the related financial statement schedule as listed in Item 14 of this annual report on Form 10-K. The financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion on the financial statement schedule based on our audits.
In our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/ Block, Plant, Eisner, Fiorito & Belak-Berger
Encino, California FEBRUARY 23, 1999
VENETIAN PARK ASSOCIATES, LTD. (A LIMITED PARTNERSHIP)
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
(D) Aggregate cost of real estate at December 31, 1998 for Federal income tax purposes is $11,053,328.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) or 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.
VENETIAN PARK ASSOCIATES, LTD. A California Limited Partnership
Date: 3/3/99 By: /s/ Theodore J. Weill --------------- ------------------------------------ Theodore J. Weill General Partner
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 and on the dates indicated.
Date: 3/18/99 By: /s/ Norman Jacobson --------------- ------------------------------------ Norman Jacobson, General Partner