10-Q 1 foundation10q_09-01.txt SEPTEMBER 30 2001 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 2001 Commission File Number 0-17717 FOUNDATION REALTY FUND, LTD --------------------------- (Exact name of Registrant as specified in its charter) Florida 59-2802896 ------- ---------- (State or other jurisdiction of (IRS Employer ID No.) incorporation or organization) 1100 Abernathy Road NE, Building 500, Suite 700, Atlanta, GA 30328 ------------------------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's Telephone Number, Including Area Code - (770) 551-0007 Indicate by check mark whether the Registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 Number of share outstanding of each of Registrant's classes of securities. Title of Each Class Number of Units September 30, 2001 Units of Limited Partnership 9,407 Interest: $1,000 per unit DOCUMENT INCORPORATION BY REFERENCE Part IV - Registration Statement S-11, File No. 33-13849 FOUNDATION REALTY FUND, LTD. (A Florida Limited Partnership) INDEX TO FINANCIAL STATEMENTS Part I - Financial Information Page No. Balance Sheets as of September 30, 2001 and December 31, 2000 3 Statements of Operations - For the Nine Months Ended September 30, 2001 and 2000 4 Statement of Operations - For the Three Months Ended September 30, 2001 and 2000 5 Statements of Partners' Equity - For the Nine Months Ended September 30, 2001 and 2000 6 Statements of Cash Flows - For the Nine Months Ended September 30, 2001 and 2000 7 Notes to Financial Statements 8-10 Management's Discussion and Analysis of Financial Condition and Results of Operations 11-12 FOUNDATION REALTY FUND, LTD. (A Florida Limited Partnership) BALANCE SHEET

FOUNDATION REALTY FUND, LTD. (A Florida Limited Partnership) STATEMENT OF OPERATIONS (Unaudited)

FOUNDATION REALTY FUND, LTD. (a Florida Limited Partnership) STATEMENT OF OPERATIONS (Unaudited)

FOUNDATION REALTY FUND, LTD. (A Florida Limited Partnership) STATEMENT OF PARTNERS' EQUITY (Unaudited) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

FOUNDATION REALTY FUND, LTD. (A Florida Limited Partnership) STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 (Unaudited)

FOUNDATION REALTY FUND, LTD A Florida Limited Partnership) NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1 - ORGANIZATION Foundation Realty Fund, Ltd., (the "Partnership"), a Florida Limited Partnership, was formed April 14, 1987 under the laws of Florida. Operations commenced on January 12, 1988. The Partnership operates two apartment properties. The Partnership will terminate on December 31, 2020, or sooner, in accordance with the terms of the Limited Partnership Agreement. The Partnership has received Limited and General Partner capital contributions of $9,407,000 and $1,000 respectively. J. Robert Love, an individual, and RJ Properties, Inc., a wholly owned subsidiary of Raymond James Financial, Inc. are the General Partners and they manage and control the business of the Partnership. Operating profits and losses are allocated 95% to the Limited Partners and 5% to the General Partners. Cash from operations will be shared 95% by the Limited Partners and 5% by the General Partners; however, distributions to the General Partners are subordinated to certain preferred returns to the Limited Partners. Profit or loss and cash distributions from sales of property will be allocated as formulated in the Limited Partnership Agreement. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES: Basis of Accounting The Partnership utilizes the accrual basis of accounting whereby revenues are recognized when earned and expenses are recognized as obligations are incurred. Cash and Cash Equivalents It is the Partnership's policy to include short-term investments with an original maturity of three months or less in Cash and Cash Equivalents. These short-term investments are comprised of money market funds, and repurchase agreements. Restricted Cash Cash and Cash Equivalents include $556,397 at September 30, 2001 and $401,199 at December 31, 2000 of cash held in escrow for the payment of real estate taxes. Cash and Cash Equivalents also include $105,995 at September 30, 2001 and $102,515 at December 31, 2000 of tenant security deposits held in an escrow account. Income Taxes No provisions for income taxes has been made in these financial statements, as income taxes are a liability of the partners rather than of the Partnership. Depreciation The apartment buildings are being depreciated over 35 years using the straight-line method. Furniture and fixtures are being depreci- ated over 8 years using the straight-line method. NOTE 3 - COMPENSATION, REIMBURSEMENTS AND ACCRUALS TO THE GENERAL PARTNERS AND AFFILIATES: The General Partners and affiliates are entitled to the following types of compensation and reimbursement for costs and expenses incurred for the Partnership for the nine months ended September 30, 2001. Property Management Fees $ 148,336 General and Administrative Costs 1,030 NOTE 4 - LEASES AND APARTMENT PROPERTIES: The Partnership owns apartment complexes leased to residents under short term operating leases. A summary of the apartment properties is as follows:

NOTE 5 - NOTES PAYABLE The notes payable are secured by the apartment properties. NOTE 6 - BASIS OF PREPARATION: The unaudited financial statements presented herein have been pre- pared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principals. These statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's Form 10-K for the year ended December 31, 2000. In the opinion of management, such financial statements include all adjustments, consisting only of normal recurring adjust- ments, necessary to summarize fairly the Partnership's financial position and results of operations. The results of operations for the periods may not be indicative of the result to be expected for the year. NOTE 7 - SUBSEQUENT EVENT: On or about October 31, 2001, the Partnership will pay distributions of $105,829 to the Limited Partners. NOTE 8 - OTHER MATTERS In June 2001, the Limited Partners of the Partnership voted for a plan of liquidation and dissolution that authorizes the Managing General Partner of the Partnership to sell all of the assets of the Partnership and effectuate the orderly liquidation and winding-up of the business of the Partnership. Marketing materials and property brochures have been made to begin the liquidation process. No offers have been received yet for the properties. FOUNDATION REALTY FUND, LTD. (A Florida Limited Partnership) Management's Discussion and Analysis of Financial Condition and Results of Operations Rental income for the nine months ended September 30, 2001 was $2,838,252 as compared to $2,712,945 for the comparable period ended September 30, 2000. Income from property operations for the nine months ended September 30, 2001 was $1,015,264 as compared to $1,038,716 for the comparable period ended September 30, 2000. The decrease in income from property operations was a result of higher repair and maintenance costs primarily of the Springfield Apartments. In 2001, the Springfield Apartments were painted and had some wood replacement at a cost of $110,000. Approximately $40,000 was spent for roof repairs and replacements. We are expecting a property tax increase for the Oakwood Village Apartments and have increased our tax accrual by $17,487. These expense increases are offset by higher rental and other income levels achieved at both properties. Rental income for the three months ended September 30, 2001 was $983,478 as compared to $965,423 for the comparable period ended September 30, 2000. Income from property operations also remained stable and totaled $359,941 for the three months ended September 30, 2001 verse $354,099 for the three months ended September 30, 2000. Interest expense decreased from $1,007,210 for the nine months ended September 30, 2000 to $996,599 for the nine months ended September 30, 2001. Other general and administrative costs increased $104,879 from September 30, 2000 to September 30, 2001. This increase is solely attributable to the costs incurred as a result of the recent proxy and consent sent to all limited partners and filed with the Securities and Exchange Commission. Net loss for the nine months ended September 30, 2001 was $104,002 or $10.50 per Limited Partnership Unit outstanding as compared to a net income of $20,129 or $2.03 per Limited Partnership Unit for the comparable period ended September 30, 2000. The $124,131 swing is attributable to the repair and maintenance, property tax and proxy expense increases mentioned above offset by $133,279 in increased income from property operations. A net income of $7,494 occurred for the three months ended September 30, 2001 verse a net loss of $19,471 for the three months ended September 30, 2000. This change was a result of higher income from property operations offset by a small increase other general and administrative expenses. Liquidity and Capital Resources In management's opinion, working capital reserves and liquidity are sufficient to meet the short-term operating needs of the Partnership. Cash provided by operating activities decreased by $251,901 for the nine month period ended September 30, 2001 as compared to the nine month period ended September 30, 2000. The change resulted primarily from a $124,131 decrease in net income caused by higher operating expenses in the repair and maintenance, property tax and proxy expense areas coupled with a $158,678 increase in the restricted cash balance. Cash used by investing activities totaled $60,061 at September 30, 2001 as compared to $57,683 at September 30, 2000. The primary expenditure for both years is carpet and appliance replacement. Cash used by financing activities increased by $11,229 from the nine month period ended September 30, 2001 when compared to the nine month period ended September 30, 2000. The increase is attributed to the increase in principal payments on the partnership's notes payable. ITEM 6 - EXHIBIT AND REPORTS ON FORM 8-K a) Exhibits - NONE b) Reports on Form 8-K - NONE SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the report has been signed by the following persons on behalf of the Registrant and in the capacities and on the date indicated. FOUNDATION REALTY FUND, LTD. A Florida Limited Partnership By: RJ PROPERTIES, INC. a General Partner 11/06/01 J. Robert Love -------- ------------------------------ Date President 11/06/01 Alan G. Lee -------- -------------------------- Date Secretary

FOUNDATION REALTY FUND LTD 10-Q