ITEM 1. BUSINESS (Continued)
Business Plan (Continued)
of $.07 per unit, the Partnership declared an extra distribution of $1.00 per unit which was paid January 2, 1996 to unitholders of record on December 15, 1995. The Partnership declared total distributions of $8.1 million in 1995. In March 1996, the Partnership announced an increase in its regular quarterly distribution from $.07 per unit to $.10 per unit. The Partnership also announced a special distribution of $.15 per unit. Both distributions are payable March 31, 1996 to unitholders of record March 15, 1996.
At the discretion of the Managing General Partner, the Partnership may, from time to time, sell properties or other assets, renovate or make improvements to properties, make additional investments or obtain additional or initial financing for its properties.
The establishment, implementation and modification of the business objectives and policies of the Partnership are the responsibility of the Managing General Partner, and, in general, the limited partners have no voting rights with respect to such matters. With respect to the GCLP properties, such business objectives and policies are the responsibility of GCMI. The Partnership's primary business purpose is the ownership of improved, income-producing real estate, but the Partnership may also conduct any business that may lawfully be conducted under the Delaware Revised Uniform Limited Partnership Act. As long as the Settlement Plan is in effect, Oversight Committee approval is required for the Partnership to enter into any new line of business. See "Management and Operations" below.
Management and Operations
Since February 1, 1990, affiliates of the Managing General Partner have provided property management services to the Partnership. Currently, Carmel, Ltd. provides such property management services. Carmel, Ltd. subcontracts with other entities for the property-level management services to the Partnership. The general partner of Carmel, Ltd. is BCM. The limited partners of Carmel, Ltd. are (i) Syntek West, Inc. ("SWI") of which Mr. Phillips is the sole shareholder, (ii) Mr. Phillips and (iii) a trust for the benefit of the children of Mr. Phillips. Carmel, Ltd. subcontracts the property-level management and leasing of twelve of the Partnership's commercial properties to Carmel Realty, Inc. ("Carmel Realty"), which is a company owned by SWI. Carmel Realty is entitled to receive property and construction management fees and leasing commissions in accordance with the terms of its property-level management agreement with Carmel, Ltd. Effective November 25, 1992, Carmel, Ltd. ceased providing property management services for the apartment complexes transferred to GCLP.
BCM performs administrative functions such as accounting services, mortgage servicing and portfolio review and analysis for the Partnership on a cost reimbursement basis. GCMI performs similar administrative functions for GCLP, also on a cost reimbursement basis. Affiliates of BCM also perform loan placement services, leasing services and real estate brokerage, and other services, for the Partnership for fees and commissions.
ITEM 1. BUSINESS (Continued)
Pending Withdrawal of General Partner
As described in ITEM 3. "LEGAL PROCEEDINGS - Moorman Settlement," the Settlement Plan provided that, if certain aggressive, annually increasing Targets relating to the price of National Realty's units of limited partner interest and distributions to unitholders were not met for two successive years of the Settlement Plan or the fifth and final year of the Settlement Plan, the General Partner would be required to resign and the Partnership would be required to repurchase the General Partner's interest in the Partnership (the "Redeemable General Partner Interest") for its fair value, and to pay certain fees and other compensation, as provided in the Partnership Agreement and the Settlement Agreement.
If Targets are not met for any two successive years of the Settlement Plan or for the final year of the Settlement Plan, SAMLP must withdraw as General Partner effective at the time a successor general partner is selected. The Settlement Plan terminates upon the withdrawal of SAMLP as General Partner and the due election and taking office of a successor. Withdrawal of SAMLP as General Partner pursuant to the Settlement Agreement would be subject to the provisions of the Partnership Agreement, including the right of unitholders to elect a successor general partner by majority vote. Upon the withdrawal or removal of the General Partner without the election of a successor, the Partnership would be dissolved.
The Targets for the first and second anniversary dates were not met. Since the Targets were not met for two successive years, SAMLP expects to resign as General Partner, effective upon the election and qualification of its successor. On July 8, 1992, SAMLP notified the Oversight Committee of the failure to meet the Target for two successive years. See ITEM 3. "LEGAL PROCEEDINGS - Moorman Settlement," for further information regarding the pending resignation of SAMLP as General Partner.
Competition
The real estate business is highly competitive and the Partnership competes with numerous entities engaged in real estate activities (including certain entities described in ITEM 13. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - - Certain Business Relationships,") some of which may have greater financial resources than the Partnership. The Partnership believes that success against such competition is dependent upon the geographic location of the property, the performance of the property managers in areas such as marketing, collection and the ability to control operating expenses, the amount of new construction in the area, and the maintenance and appearance of the property. Additional competitive factors with respect to commercial properties are the ease of access to the property, the adequacy of related facilities, such as parking, and sensitivity to market conditions in setting rent levels. With respect to apartments, competition is also based upon the design and mix of the units and the ability to provide a community atmosphere for the tenants. The Partnership believes that general economic
ITEM 1. BUSINESS (Continued)
Competition (Continued)
circumstances and trends and the rate at which properties are renovated or new properties are developed in the vicinity of each of the Partnership's properties are also competitive factors.
As discussed in "Business Plan" above, the Partnership does not anticipate making material property acquisitions at the present time. However, to the extent that the Partnership seeks to sell any of its properties, the sales prices for such properties may be affected by competition from other real estate entities and financial institutions also attempting to sell their properties located in areas in which the Partnership's properties are located.
As described in ITEM 13. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - Certain Business Relationships," the executive officers of SAMI, the Managing General Partner of SAMLP, are also executive officers of certain other entities, each of which has business objectives similar to the Partnership's. These executive officers owe fiduciary duties to such other entities and the Partnership under applicable law.
In addition, the Partnership also competes with other entities which are affiliates of BCM or for which BCM acts as advisor, and which may have investment objectives similar to the Partnership's and that may compete with the Partnership in purchasing, selling, leasing and financing real estate and real estate related investments. In resolving any potential conflicts of interest which may arise, BCM has informed the Partnership that it intends to continue to exercise its best judgment as to what is fair and reasonable under the circumstances in accordance with applicable law.
Special Considerations Relating to Investments in Real Estate
The Partnership is subject to all of the risks incident to the ownership of real estate and interests therein, many of which relate to the general illiquidity of real estate investments. These risks include, changes in general or local economic conditions, changes in interest rates and the availability of permanent mortgage financing which may render the sale or refinancing of a property difficult or unattractive and which may make debt service burdensome, changes in real estate and zoning laws, increases in real estate taxes, federal or local economic or rent controls, floods, earthquakes, hurricanes and other acts of God and other factors beyond the control of the Partnership. Also, the illiquidity of real estate investments may impair the ability of the Partnership to respond promptly to changing circumstances. The Partnership believes that such risks are partially mitigated by the diversification by geographic region and property type of the Partnership's real estate portfolio.
ITEM 2.

ITEM 2. PROPERTIES (Continued)
Real Estate (Continued)
In March 1995, the Partnership purchased the Chalet II Apartments, a 72 unit apartment complex in Topeka, Kansas, for $1.6 million. The Partnership paid $439,000 in cash and obtained new first mortgage financing of $1.2 million. The mortgage bears interest at a rate of prime plus 1% per annum (10% at December 31, 1995), requires monthly payments of principal and interest, currently $12,000, and matures in March 2002. The Partnership, in accordance with the Partnership Agreement, paid a real estate brokerage commission of $98,000 to Carmel Realty based on the $1.6 million purchase price of the property.
In December 1995, the Partnership sold the Harbour Pointe Apartments in Miami, Florida, for $5.2 million. The Partnership received $2.1 million in cash after the payoff of $3.0 million in existing mortgage debt and the payment of various closing costs associated with the sale. The Partnership, in accordance with the Partnership Agreement, paid a real estate sales commission of $155,000 to Carmel Realty based upon the $5.2 million sales price of the property. The Partnership recognized a gain of $2.8 million on the sale.
Also in December 1995, the Partnership sold the Vineyards Apartments in Broadview Heights, Ohio, for $10.7 million. The Partnership received net cash of $2.4 million after the payoff of $8.2 million in existing mortgage debt and the payment of various closing costs associated with the sale. The Partnership, in accordance with the Partnership Agreement, paid a real estate sales commission of $322,000 to Carmel Realty based upon the $10.7 million sales price of the property. The Partnership recognized a gain of $4.9 million on the sale.
In May 1995, the Partnership refinanced the mortgage debt secured by the Mallard Lake Apartments in Greensboro, North Carolina, in the amount of $8.2 million. The Partnership received net cash of $1.4 million after the payoff of $6.5 million in existing mortgage debt. The remainder of the refinancing proceeds were used to fund escrows for replacements and repairs and to pay various closing costs associated with the refinancing. The new mortgage bears interest at the rate of 8.75% per annum, requires monthly payments of principal and interest of $67,416 and matures June 1, 2005. The Partnership, in accordance with the Partnership Agreement, paid a mortgage brokerage and equity refinancing fee of $82,000 to BCM, based upon the new $8.2 million mortgage.
In September 1995, the Partnership refinanced the mortgage debt secured by the Four Seasons Apartments in Denver, Colorado, in the amount of $9.9 million. The Partnership received net cash of $4.4 million after the payoff of $5.2 million in existing mortgage debt, including a $147,000 prepayment penalty. The remainder of the refinancing proceeds were used to fund escrows for replacements and repairs and to pay various closing costs associated with the refinancing. The new mortgage bears interest at the rate of 8.25% per annum, requires monthly payments of principal and interest of $78,000 and matures in October 2005. The Partnership, in accordance with the Partnership Agreement, paid a
ITEM 2. PROPERTIES (Continued)
Real Estate (Continued)
mortgage brokerage and equity refinancing fee of $99,000 to BCM based upon the new $9.9 million mortgage.
Also in September 1995, the Partnership refinanced the mortgage debt secured by the Nora Pines Apartments in Indianapolis, Indiana, in the amount of $6.2 million. The Partnership received net cash of $952,000 after the payoff of $4.9 million in existing mortgage debt, including a $48,000 prepayment penalty. The remainder of the refinancing proceeds were used to fund escrows for replacements and repairs and to pay various closing costs associated with the refinancing. The new mortgage bears interest at the rate of 8.25% per annum, requires monthly payments of principal and interest of $48,000 and matures in October 2005. The Partnership, in accordance with the Partnership Agreement, paid a mortgage brokerage and equity refinancing fee of $62,000 to BCM based upon the new $6.2 million mortgage.
In October 1995, the Partnership refinanced the mortgage debt secured by the Covered Bridge Apartments in Gainesville, Florida, in the amount of $4.7 million. The Partnership received net cash of $907,000 after the payoff of $3.6 million in existing mortgage debt, including a $35,000 prepayment penalty. The remainder of the refinancing proceeds were used to pay various closing costs associated with the refinancing. The new mortgage bears interest at the rate of 8% per annum, requires monthly payments of principal and interest of $36,000 and matures in November 2005. The Partnership, in accordance with the Partnership Agreement, paid a mortgage brokerage and equity refinancing fee of $47,000 to BCM based upon the new $4.7 million mortgage.
In December 1995, the Partnership refinanced the mortgage debt secured by the Marina Playa Office Building in Santa Clara, California, in the amount of $8.3 million. The Partnership received net cash of $2.9 million after the payoff of $4.5 million in existing mortgage debt, including a $22,000 prepayment penalty. The remainder of the refinancing proceeds were used to fund a $625,000 escrow for tenant improvements and to pay various closing costs associated with the refinancing. The new mortgage bears interest at the rate of 8.25% per annum, requires monthly payments of principal and interest of $65,000 and matures in January 2006. The Partnership, in accordance with the Partnership Agreement, paid a mortgage brokerage and equity refinancing fee of $83,000 to BCM based upon the new $8.3 million mortgage.
Also in December 1995, the Partnership refinanced the mortgage debt secured by the Timbercreek Apartments in Omaha, Nebraska, in the amount of $5.0 million. The Partnership received net cash of $1.8 million after the payoff of $3.1 million in existing mortgage debt, including a $63,000 prepayment penalty. The remainder of the refinancing proceeds were used to pay various closing costs associated with the refinancing. The new mortgage bears interest at the rate of 7.75% per annum, requires monthly payments of principal and interest of $38,000 and matures in January 2006. The Partnership, in accordance with the Partnership Agreement, paid a mortgage brokerage and equity refinancing fee of $50,000 to BCM based upon the new $5.0 million mortgage.
ITEM 2. PROPERTIES (Continued)
Mortgage Loans
In addition to real estate, a portion of the Partnership's assets consists of mortgage notes receivable, principally those originating from the sale of Partnership properties and secured by income-producing properties. The Partnership's mortgage notes consist of first and wraparound mortgage loans.
First Mortgage Loans. These loans generally provide for level periodic payments of principal and interest sufficient to substantially repay the loan prior to maturity, but may involve interest-only payments or moderate amortization of principal and a "balloon" principal payment at maturity. With respect to first mortgage loans, it is the Partnership's general policy to require that the borrower provide a mortgagee's title policy or an acceptable legal opinion of title as to the validity and the priority of the mortgage lien over all other obligations, except liens arising from unpaid property taxes and other exceptions normally allowed by first mortgage lenders in the relevant area.
Wraparound Mortgage Loans. A wraparound mortgage loan, sometimes called an all-inclusive loan, is a mortgage loan having an original principal amount equal to the outstanding balance under the prior existing mortgage loan(s) plus the amount actually advanced under the wraparound mortgage loan. Wraparound mortgage loans may provide for full, partial or no amortization of principal.
At December 31, 1995, the Partnership's mortgage notes had an aggregate face amount of $28.1 million and an aggregate net carrying value of $10.2 million, net of deferred gains ($15.8 million), discounts ($187,000) and allowance for estimated losses ($1.9 million).
The following table sets forth the percentage (based on the outstanding mortgage note balance at December 31, 1995), by property type and geographic region, of the properties that serve as collateral for the five mortgage notes receivable in the Partnership's mortgage notes receivable portfolio at December 31, 1995. See Schedule IV to the Consolidated Financial Statements included at ITEM 8. "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" for further details of the Partnership's mortgage notes receivable portfolio.
In 1991, the Partnership and an insurance company entered into an Asset Sales Agreement to sell participations in certain of the Partnership's mortgage notes receivable in exchange for participations in other mortgage notes or assets and cash. The Partnership entered into the Asset Sales Agreement in an effort to develop a potential source for
ITEM 2. PROPERTIES (Continued)
Mortgage Loans
future financing and to generate cash from otherwise illiquid assets. The assets transferred by the Partnership pursuant to the Asset Sales Agreement included a $2.5 million senior participation in a wraparound mortgage note receivable secured by a shopping center in Las Vegas, Nevada, a $1.0 million senior participation in a wraparound mortgage note receivable secured by a shopping center in La Crosse, Wisconsin, and a first lien mortgage note with a carrying value of $1.2 million prior to transfer. In return, the Partnership received a $447,000 senior participation in a note secured by land in Granby, Colorado, a $1.5 million participation in a note secured by a country club in the Ka'u District of Hawaii, a 10% limited partner interest in the partnership owning the country club, valued at $1.5 million, a $213,000 first lien mortgage note secured by land in Denver, Colorado and $1.0 million in cash. The Asset Sales Agreement included put and guaranty provisions.
In March 1992, the insurance company was placed in receivership. In June 1992, the Partnership provided notice to the insurance company, under the terms of the put and guaranty provisions, of its desire to divest itself of all the assets received. The Receiver refused to allow the enforcement of the terms of the Asset Sales Agreement.
A settlement between the Partnership and the Receiver was approved by the court on February 15, 1995. Under the terms of the settlement, the insurance company returned to the Partnership the senior participations in the wraparound mortgage notes secured by the shopping centers in Las Vegas, Nevada and La Crosse, Wisconsin. In exchange, the Partnership returned all of the assets that it had received from the insurance company other than the first lien mortgage note secured by the land in Denver, Colorado, which had been foreclosed and sold by the Partnership, and $657,000 in cash. The Partnership also purchased from the insurance company the first lien note secured by the land in Granby, Colorado and a second lien note secured by commercial condominiums also in Granby, Colorado for a total of $550,000. The Partnership incurred no loss on the settlement.
In October 1995, the Partnership accepted a $3.7 million discounted payoff of three wraparound mortgage loans secured by the Hurstbourne Business Park in Louisville, Kentucky. The Partnership received $1.5 million in cash after the payoff of $2.2 million in first mortgage debt. No loss was recorded as the discounted note payoff was equal to the Partnership's net carrying value of the loans.
Investment in Marketable Equity Securities of ART
At December 31, 1995, the Partnership owned 97,866 shares of common stock of ART, a real estate investment company, representing approximately 1% of ART's outstanding shares. Mr. Phillips, a general partner of SAMLP, the General Partner of the Partnership, served as Chairman of the Board and as a director of ART until November 16, 1992. The executive officers of the Managing General Partner are also executive officers of ART. See ITEM 12. "SECURITY OWNERSHIP OF CERTAIN
ITEM 2. PROPERTIES (Continued)
Mortgage Loans
BENEFICIAL OWNERS AND MANAGEMENT." At December 31, 1995, the market value of the ART common stock owned by the Partnership was $722,000. ART owns a 76.8% limited partner interest in SAMLP. In addition, as of March 15, 1996 ART owned 3,340,522 of National Realty's units of limited partner interest, approximately 52% of the units then outstanding.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
Moorman Settlement
The Partnership is party to a Settlement Agreement, dated as of May 9, 1990, between plaintiffs Joseph B. Moorman, et al. and defendants Robert A. McNeil, National Realty, the Operating Partnership, SAMLP, Gene E. Phillips, William S. Friedman, and Shearson Lehman Hutton Inc., successor-in-interest to defendant E.F. Hutton & Company Inc., relating to the action entitled Moorman, et al. v. Southmark Corporation, et al. Such action was filed on September 2, 1987, in the Superior Court of the State of California, County of San Mateo. On May 9, 1990, the Partnership agreed to settle such action pursuant to the terms of a written agreement (the "Moorman Settlement Agreement"). On June 29, 1990, after a hearing as to its fairness, reasonableness and adequacy, the Moorman Settlement Agreement was granted final court approval.
The Moorman Settlement Agreement is complex and the following summary is qualified in its entirety by reference to the text thereof, which was previously included as an exhibit to the Partnership's Form 10-Q for the quarter ended March 31, 1990, as filed with the Securities and Exchange Commission. The Moorman Settlement Agreement provides for a plan (the "Moorman Settlement Plan") consisting of, among other things, the following: (i) the appointment and operation of a committee (the "Oversight Committee") to oversee the implementation of the Moorman Settlement Plan, (ii) the appointment and operation of an audit committee having a majority of members unaffiliated with Messrs. Phillips and Friedman or SAMLP, (iii) the establishment of specified annually increasing targets described below (each a "Target") for each of the next five years through May 1995, relating to the price of the units of limited partner interest as decreased for certain distributions to unitholders, (iv) an agreement by SAMLP not to seek reimbursement of greater than $500,000 per year for Messrs. Phillips' and Friedman's salaries for serving as general partners of SAMLP, (Mr. Friedman resigned as general partner of SAMLP effective March 4, 1994) and a deferral of such payments until such time as a Target may be met, and, if SAMLP resigns as General Partner, a waiver of any compensation so deferred, (v) a deferral until such time as a Target may be met of certain future annual General Partner compensation payable, pursuant to the Partnership's governing documents, to SAMLP or its affiliates, and, if SAMLP resigns as General Partner, a waiver of any compensation so deferred, (vi) the required distribution to unitholders of all the Partnership's operating cash flow in excess of certain renovation costs, unless the Oversight Committee approves alternative uses for such operating cash flow, (vii) the issuance of Warrants to purchase an
ITEM 3. LEGAL PROCEEDINGS (Continued)
Moorman Settlement (Continued)
aggregate of up to 2,019,579 units (the "Warrants") to Class Members, (viii) the contribution by certain co-defendants of cash and notes payable to the Partnership aggregating $5.5 million (including $2.5 million contributed by SAMLP and its general partners over a four-year period), (ix) the amendment of the Partnership Agreement to reduce the vote required to remove the General Partner from a two-thirds vote to a majority vote of the units, (x) the Partnership's redemption of its unit purchase rights and an agreement not to adopt a similar rights plan without Oversight Committee approval and (xi) the Partnership's payment of certain settlement costs, including plaintiffs' attorneys' fees in the amount of $3.4 million. The Moorman Settlement Plan will remain in effect until SAMLP has resigned as General Partner and a successor general partner is elected and takes office, and the Warrants will remain exercisable for five years from the February 14, 1992 date of issuance or until earlier redemption.
On January 27, 1995, National Realty, SAMLP, the Oversight Committee and William H. Elliott executed an Implementation Agreement which provides for the nomination of an entity controlled by Mr. Elliott as successor general partner and for the resolution of all related matters under the Moorman Settlement. On February 20, 1996, the parties to the Implementation Agreement executed an Amended and Restated Implementation Agreement.
Provided that the successor general partner is elected pursuant to the terms of the Amended and Restated Implementation Agreement, SAMLP shall receive $12,471,500 from the Partnership. This amount represents a compromise settlement of the net amounts owed by the Partnership to SAMLP upon SAMLP's withdrawal as General Partner and any amounts which SAMLP and its affiliates may owe to the Partnership. This amount shall be paid to SAMLP pursuant to a promissory note in accordance with the terms set forth in the Amended and Restated Implementation Agreement.
The Amended and Restated Implementation Agreement has been submitted to the Supervising Judge for tentative approval and approval of the notice to be sent to the original class members. Upon final approval by the Supervising Judge, the proposal to elect the successor general partner will be submitted to the unitholders of the Partnership for a vote. In addition, the unitholders will vote upon amendments to the Partnership Agreement which relate to the proposed compensation of the successor general partner and other related matters.
Upon approval by the unitholders, SAMLP shall withdraw as General Partner and the successor general partner shall take office. If the required approvals are obtained, it is anticipated that the successor general partner will be elected and take office during the second or third quarter of 1996.
The Amended and Restated Implementation Agreement provides that SAMLP, and its affiliates owning units in the Partnership shall not vote to remove the successor general partner, except for removal with cause, for a period of 36 months from the date the successor general partner takes office.
ITEM 3. LEGAL PROCEEDINGS (Continued)
Moorman Settlement (Continued)
Upon the election and taking office of the successor general partner, the Moorman Settlement Plan and the Oversight Committee shall be terminated. If the successor general partner is not elected, the existing Moorman Settlement shall remain in full force and effect and all of the provisions of the Amended and Restated Implementation Agreement shall be voided.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
_________________________________
PART II
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNER INTEREST AND RELATED SECURITY HOLDER MATTERS
National Realty's units of limited partner interest are traded on the American Stock Exchange ("AMEX") using the symbol "NLP." Although National Realty does not anticipate that the AMEX will seek to delist its units, there can be no assurance that the AMEX will not seek to do so.
The following table sets forth high and low sale prices of National Realty's units of limited partner interest as reported by the AMEX:
* Restated for the three for one forward unit split effected January 2, 1996.
As of March 15, 1996, the closing price of National Realty's units of limited partner interest on the AMEX was $10.50 per unit.
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNER INTEREST AND RELATED SECURITY HOLDER MATTERS (Continued)
As of March 15, 1996, National Realty's units of limited partner interest were held by 7,380 holders of record.
Pursuant to the Moorman Settlement Agreement, on February 14, 1992, the Partnership issued 2,692,773 warrants (the "Warrants") to purchase an aggregate of 2,019,579 of National Realty's units of limited partner interest subject to adjustment. Each Warrant initially entitled the holder thereof to purchase three quarters of one unit at the exercise price ($11.00 per Warrant). The initial exercise price was equal to $14.67 per unit and increased to $16.00 per unit on February 14, 1993, subject to adjustment. The Warrants may be exercised for five years from their February 14, 1992 date of issuance, or until earlier redemption.
Prior to 1989, the Partnership's policy was to distribute operating cash flow in excess of necessary reserves for property improvements and repairs. However, due to liquidity problems, on December 29, 1989 the Partnership announced a suspension of cash distributions. Pursuant to the terms of the Moorman Settlement Agreement, the Partnership has agreed to distribute to unitholders all of the Partnership's operating cash flow in excess of certain renovation costs, unless the Oversight Committee approves alternative uses for such operating cash flow. On October 7, 1993, the Partnership announced a resumption of regular quarterly distributions. During the first three quarters of 1995, the Partnership paid regular quarterly distributions of $.07 per unit. In the fourth quarter of 1995, in addition to the regular quarterly distribution of $.07 per unit, the Partnership declared an extra distribution of $1.00 per unit both payable January 2, 1996 to unitholders of record December 15, 1995. The Partnership declared total distributions of $8.1 million in 1995.
The distributions paid by the Partnership in 1995 and 1994 were are follows:
__________________
* Restated for the three for one forward unit split effected January 2, 1996.
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNER INTEREST AND RELATED SECURITY HOLDER MATTERS (Continued)
In November 1987, the Board of Directors of the Managing General Partner approved the Partnership's purchase of up to 10% of National Realty's units of limited partner interest and on December 15, 1992, the Board of Directors of the Managing General Partner approved the repurchase of up to 300,000 additional units in open-market transactions. Through December 31, 1995, the Partnership had purchased a total of 402,960 units at an total cost of $5.1 million. The Partnership has not repurchased any additional units under such repurchase program since January 1993.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. SELECTED FINANCIAL DATA (Continued)
Units and per unit data have been restated for the three for one forward unit split, effected January 2, 1996.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
National Realty, L.P. ("National Realty") is a Delaware limited partnership formed on January 29, 1987, the business of which consists primarily of owning and operating through National Operating, L.P., also a Delaware limited partnership (the "Operating Partnership"), a portfolio of real estate. Most of the Operating Partnership's properties were acquired in transactions consummated on September 18, 1987, pursuant to which National Realty acquired all of the assets, and assumed all of the liabilities, of 35 public and private limited partnerships. National Realty and the Operating Partnership operate as an economic unit and, unless the context otherwise requires, all references herein to the "Partnership" shall constitute references to National Realty and the Operating Partnership as a unit.
In November 1992, the Operating Partnership, in conjunction with a refinancing of 52 of its apartment complexes and a wraparound note receivable, transferred such assets to Garden Capital, L.P. ("GCLP"), a Delaware limited partnership in which the Operating Partnership holds a 99.3% limited partner interest. See NOTE 7. "NOTES PAYABLE."
Liquidity and Capital Resources
The Managing General Partner has discretion in determining methods of obtaining funds for the Partnership's operations. The Partnership's governing documents place no limitation on the amount of leverage that the Partnership may incur either in the aggregate or with respect to any particular property or other investment. At December 31, 1995, the aggregate loan-to-value ratio of the Partnership's real estate portfolio, computed on the basis of the ratio of total property-related debt to aggregate appraised values, was 47.3% compared to 47.9% at December 31, 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (Continued)
Cash and cash equivalents aggregated $20.7 million at December 31, 1995 as compared with $3.7 million at December 31, 1994.
The Partnership's principal sources of cash have been and will continue to be from property operations and externally generated funds. Externally generated funds include borrowings, proceeds from the sale of the Partnership's properties and other assets, proceeds from the issuance of debt secured by the Partnership's properties or mortgage notes receivable and in the future may include proceeds from the exercise of the Warrants which were issued to the class members included in the Moorman litigation settlement. The Partnership expects that cash flow from property operations together with externally generated funds will be sufficient to meet the Partnership's various cash needs in 1996, including, but not limited to, the payment of distributions, debt service obligations coming due and property maintenance and improvements, as more fully discussed in the paragraphs below.
Currently, all but six of the Partnership's properties are encumbered by mortgage debt. In 1996, mortgage debt totaling $9.7 million comes due, including a $2.3 million mortgage which matures in March 1996 and for which the Partnership has a commitment from the lender to refinance the mortgage. The Partnership intends to seek to refinance certain mortgages that mature in the next two years or where there is an interest rate advantage to the Partnership, and use excess refinancing proceeds for working capital purposes.
During 1995, the Partnership received $39.6 million from mortgage refinancings secured by one commercial property and five apartment complexes, of which $27.8 million was used to payoff existing mortgage debt secured by the properties. In addition, the Partnership made scheduled principal paydowns on mortgage debt totaling $6.4 million.
In 1995, the Partnership sold two apartment complexes, the Harbour Pointe Apartments in Miami, Florida and the Vineyard Apartments in Broadview Heights, Ohio, for a total of $15.9 million. The Partnership received net cash of $4.5 million after the payoff or assumption by the purchaser of $11.2 million in existing mortgage debt and the payment of various closing costs associated with the sales.
In February 1995, the Partnership reached a settlement with the receiver for an insurance company. As part of the settlement, the Partnership paid the insurance company a total of $1.2 million in cash in exchange for the transfer of certain assets between the Partnership and the insurance company. See "NOTE 4. NOTES RECEIVABLE."
In March 1995, the Partnership purchased the Chalet II Apartments, a 72 unit apartment complex in Topeka, Kansas, for $1.6 million. The Partnership paid $439,000 in cash, obtaining new mortgage financing of $1.2 million.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (Continued)
In October 1995, the Partnership accepted a $3.7 million discounted payoff of three wraparound mortgage notes receivable secured by the Hurstbourne Business Park in Louisville, Kentucky. The Partnership received $1.5 million in cash after the payoff of $2.2 million in first mortgage debt.
In November 1992, in conjunction with the transfer of the net assets of 52 apartment complexes and a wraparound note receivable to GCLP, such assets were refinanced under a $223 million blanket mortgage loan. The blanket mortgage loan requires that cash flow from the GCLP properties be used to fund various escrow and reserve accounts and limits the payment of distributions to the Partnership. During 1995, the Partnership received distributions from GCLP totaling $2.9 million compared to $3.0 million in 1994. A total of $3.4 million of escrow deposits, excluding the tax and insurance reserve, are required to be funded by GCLP during 1996 in monthly installments. Such escrowed amounts are included in escrow deposits and other assets in the accompanying Consolidated Balance Sheets. GCLP is required to make monthly deposits, from the cash flow of its properties, for (i) a credit enhancement reserve and (ii) a tax and insurance reserve. As a result of the restrictions placed on GCLP's use of its cash flow, excess cash of approximately $3.4 million is expected to be remittable to the Partnership during 1996.
The Partnership has made regular quarterly distributions since the fourth quarter of 1993. During the first three quarters of 1995, the Partnership continued the payment of regular quarterly distributions of $.07 per unit. In the fourth quarter of 1995, in addition to the regular quarterly distribution of $.07 per unit, the Partnership declared an extra distribution of $1.00 per unit. The Partnership declared total distributions of $8.1 million in 1995. In March 1996, the Partnership announced an increase in its regular quarterly distribution from $.07 per unit to $.10 per unit. The Partnership also announced a special distribution of $.15 per unit. Both distributions are payable March 31, 1996 to unitholders of record on March 15, 1996.
The Partnership's rents collected increased from $105.4 million for 1994 to $107.9 million for 1995 due to the Partnership's successful effort of increasing and maintaining higher rental rates during 1995 as compared to 1994. Rental rates at the Partnership's apartment complexes, which account for over 80% of the Partnership's properties, increased an average of 3.2% as compared to 1994 rental rates. However, payments for property operating expenses increased from $63.4 million in 1994 to $64.8 million in 1995. This increase is primarily due to an increase in payments for repairs and maintenance.
As more fully discussed in NOTE 14. "COMMITMENTS AND CONTINGENCIES - Moorman Settlement," the Moorman litigation settlement agreement (the "Moorman Settlement Agreement") set forth certain aggressive, annually increasing targets relating to the price of the Partnership's units of limited partner interest which were not achieved, resulting in, among
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (Continued)
other things, the required withdrawal of the Partnership's General Partner upon election of a successor and the resulting required purchase of the Redeemable General Partner Interest, as defined below.
The withdrawal of the General Partner requires the Partnership to acquire the General Partner's interest in the Partnership (the "Redeemable General Partner Interest") at its then fair value, and to pay certain fees and other compensation, as provided in the Partnership Agreement and the Moorman Settlement Agreement. The Moorman Settlement Agreement provides that any payment for such Redeemable General Partner Interest, fees and other compensation during the pendency of the Moorman Settlement Agreement may, at the option of the Oversight Committee (also established under the Moorman Settlement Agreement), be made over three years pursuant to a secured promissory note bearing interest at a financial institution's prime rate. The Managing General Partner has calculated the fair value of the Redeemable General Partner Interest at December 31, 1995 to be $36.2 million, and believes that there has been no material change in such value since that date. The Partnership would be entitled to offset against such payment the then outstanding principal balance of the note receivable ($4.2 million at December 31, 1995) plus all accrued and unpaid interest ($5.2 million at December 31, 1995) on the note receivable from the General Partner representing its capital contribution to the Partnership. When Syntek Asset Management, L.P. ("SAMLP") withdraws as General Partner of the Partnership, the fair value of the Redeemable General Partner Interest would depend on the value of the Partnership's assets at the time of calculation and there can be no assurance that the Redeemable General Partner Interest, fees and other compensation payable on any such withdrawal will not be substantially higher or lower than any current estimate or calculation.
In the accompanying Consolidated Financial Statements, the Redeemable General Partner Interest is shown as a reduction of Partners' Equity and the note receivable from the General Partner has been offset against the Redeemable General Partner Interest.
On January 27, 1995, National Realty, SAMLP and the Oversight Committee executed an Implementation Agreement which provides for the nomination of a successor general partner and for the resolution of all related matters under the Moorman Settlement. On February 20, 1996, the parties to the Implementation Agreement executed an Amended and Restated Implementation Agreement.
Provided that the successor general partner is elected pursuant to the terms of the Amended and Restated Implementation Agreement, SAMLP shall receive $12,471,500 from the Partnership. This amount represents a compromise settlement of the net amounts owed by the Partnership to SAMLP upon SAMLP's withdrawal as General Partner and any amounts which SAMLP and its affiliates may owe to the Partnership. This amount shall be paid to SAMLP pursuant to a promissory note in accordance with the terms set forth in the Amended and Restated Implementation Agreement.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (Continued)
The Amended and Restated Implementation Agreement has been submitted to the Supervising Judge for tentative approval and approval of the notice to be sent to the original class members. Upon final approval by the Supervising Judge, the proposal to elect the successor general partner will be submitted to the unitholders of National Realty for a vote. In addition, the unitholders will vote upon amendments to the National Realty Partnership Agreement which relate to the proposed compensation of the successor general partner and other related matters.
Upon approval by the unitholders, SAMLP shall resign as General Partner and the successor general partner shall take office. If the required approvals are obtained, National Realty anticipates that the successor general partner may be elected and take office during the second or third quarter of 1996.
The Amended and Restated Implementation Agreement provides that SAMLP, and its affiliates owning units in National Realty, shall not vote to remove the successor general partner, except for removal with cause, for a period of 36 months from the date the successor general partner takes office.
Upon the election and taking office of the successor general partner, the Moorman Settlement Plan and the Oversight Committee shall terminate. If the successor general partner is not elected, the existing Moorman Settlement Agreement shall remain in full force and effect and all of the provisions of the Amended and Restated Implementation Agreement shall be voided.
In November 1987, the Board of Directors of the Managing General Partner approved the Partnership's repurchase of up to 10% of National Realty's units of limited partner interest and on December 15, 1992, the Board of Directors of the Managing General Partner approved the repurchase of up to 300,000 additional units in open-market transactions. Through December 31, 1995, the Partnership had purchased a total of 402,960 units at a total cost of $5.1 million. The Partnership has not purchased any additional units under such repurchase program since January 1993.
Results of Operations
1995 COMPARED TO 1994. The Partnership reported net income of $3.8 million for 1995 as compared to net income of $5.0 million for 1994. Contributing to the Partnership's 1995 net income was a gain on sale of real estate of $7.7 million compared to a gain on real estate of $8.3 million in 1994. See NOTE 3. "REAL ESTATE AND DEPRECIATION."
Rents increased from $105.0 million in 1994 to $108.0 million in 1995. This increase is primarily attributable to a 3.2% increase in average rental rates combined with a 1.8% increase in average occupancy rates at the
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
Partnership's apartment complexes. In addition, an increase of $280,000 is attributable to the acquisition of the Chalet II Apartments in March 1995. These increases are partially offset by a decrease of $2.3 million due to the sale of the Brandywine and Raintree Apartments in October 1994. Rents are expected to decrease slightly in 1996 due to the sale of the Harbour Pointe and Vineyards Apartments in December 1995.
Interest income increased from $2.4 million in 1994 to $2.9 million in 1995. Of this increase, $265,000 is due to interest earned on the Partnership's credit enhancement escrow deposit, which increased $3.3 million from December 31, 1994 to December 31, 1995. An additional $211,000 is attributable to interest earned on a $5.1 million note receivable, in which a senior participation previously sold by the Partnership was returned in July 1995. See NOTE 4. "NOTES RECEIVABLE." Interest income is expected to continue to increase in 1996 due to interest earned on the Partnership's credit enhancement escrow account, which requires deposits totaling $3.5 million in 1996.
Interest expense increased from $34.1 million in 1994 to $35.0 million in 1995. Of this increase, $331,000 is due to an increase in interest expense on the blanket mortgage secured by the GCLP properties as a result of the increase in the LIBOR interest rate. An additional increase of $1.0 million is due to mortgage debt which was refinanced in 1994 and 1995 and $89,000 is due to the acquisition of the Chalet II Apartments in March 1995. These increases are offset by a decrease of $713,000 due to the sale of Brandywine and Raintree Apartments in October 1994. Interest expense is expected to increase in 1996 due to a full year's interest on mortgages which were refinanced in 1995 and anticipated to be refinanced in 1996, offset in part by a decrease in interest expense due to the sale of the Harbour Pointe and Vineyards Apartments in December 1995.
Repairs and maintenance expense increased from $21.9 million in 1994 to $23.9 million in 1995. This increase is attributable to the Partnership's effort to obtain higher rental rates, which increased an average of 3.2% in 1995, and to sustain occupancy levels in 1995. In addition, 1995 repairs and maintenance expenses include fire and storm damage repairs made in 1995.
Property taxes and insurance, utilities, property-level payroll costs, other property operation expenses and property management fees for 1995 approximated those of 1994.
General and administrative expenses increased from $5.8 million in 1994 to $6.3 million in 1995. This increase is primarily attributable to an increase in legal and consulting fees related to the Moorman litigation of $429,000 and an increase in the Partnership's overhead reimbursements to Basic Capital Management, Inc. ("BCM").
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
In 1995, the Partnership recognized gains on the sale of real estate totaling $7.7 million on the sale of the Harbour Pointe and Vineyards Apartments, compared to gains on sale of real estate in 1994 totaling $8.3 million on the sale of the Brandywine and Raintree Apartments. See NOTE 3. "REAL ESTATE AND DEPRECIATION."
1994 COMPARED TO 1993. The Partnership reported net income of $5.0 million for 1994 as compared to net income of $1.3 million for 1993. Contributing to the Partnership's 1994 net income was an increase in operating income of $4.6 million, as more fully discussed below, and a gain on sale of real estate of $8.3 million. See NOTE 3. "REAL ESTATE AND DEPRECIATION." The Partnership's 1993 net income included an extraordinary gain of $9.0 million related to the acquisition at a discount of a mortgage obligation. See NOTE 8. "ACCRUING MORTGAGE."
Rental income increased from $99.3 million in 1993 to $105.0 million in 1994. Of this increase, $1.4 million is due to the acquisition in June 1993 of the controlling partnership interest in Club Mar Realty Group, Ltd., which owns the Club Mar Apartments, and obtaining the Whispering Pines Apartments in Canoga Park, California through insubstance foreclosure in December 1993. This is offset by a decrease of $515,000 due to the sale of Brandywine and Raintree Apartments in October 1994. The remaining net increase of $4.8 million is primarily attributable to a 4.4% increase in average rental rates at the Partnership's apartment complexes.
Property operating expenses increased from $60.4 million in 1993 to $60.8 million in 1994. Of this increase, $764,000 is due to the acquisition in June 1993 of the controlling partnership interest in Club Mar Realty Group, Ltd., which owns the Club Mar Apartments, and obtaining the Whispering Pines Apartments through insubstance foreclosure in December 1993. This increase is offset by a decrease of $465,000 due to the sale of Brandywine and Raintree Apartments in October 1994.
Interest income decreased from $3.1 million in 1993 to $2.4 million in 1994. This decrease is primarily attributable to the nonaccrual of interest income on the loan secured by the Whispering Pines Apartments in Canoga Park, California, which was foreclosed in December 1993 and to a decrease in cash receipts in 1994 on a mortgage note receivable on which interest is recognized on a cash receipts basis.
Interest expense decreased from $34.7 million in 1993 to $34.1 million in 1994. Of this decrease, $265,000 is due to the December 1993 Southern Palms debt modification in which the interest rate was reduced from 11.7% per annum to 8.9% per annum and $350,000 is due to achievement escrows of $1.8 million applied against the principal balances of three of the Partnership's mortgage loans in 1993 and the payment of $228,000 in related prepayment penalties which were included in interest expense in 1993. An additional decrease of $144,000 is due
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (Continued)
to the sale of the Brandywine and Raintree Apartments in October 1994. These decreases are offset in part by an increase in interest expense of $252,000 related to the acquisition of the controlling partnership interest in Club Mar Apartments in June 1993.
General and administrative expenses increased from $5.6 million in 1993 to $5.8 million in 1994. The increase is attributable to an increase in the Partnership's overhead reimbursements to BCM.
In 1994, the Partnership recognized gains totaling $8.3 million on the sale of the Brandywine and Raintree Apartments. No gain on sale of real estate was recognized in 1993. See NOTE 3. "REAL ESTATE AND DEPRECIATION."
In 1993, the Partnership recognized an extraordinary gain of $9.0 million from the acquisition at a discount of a mortgage obligation. No such gains were recognized in 1994. See NOTE 8. "ACCRUING MORTGAGE."
Environmental Matters
Under various federal, state and local environmental laws, ordinances and regulations, the Partnership, may be potentially liable for removal or remediation costs, as well as certain other potential costs relating to hazardous or toxic substances (including governmental fines and injuries to persons and property) where property-level managers have arranged for the removal, disposal or treatment of hazardous or toxic substances. In addition, certain environmental laws impose liability for release of asbestos-containing materials into the air, and third parties may seek recovery from the Partnership for personal injury associated with such materials.
The Managing General Partner is not aware of any environmental liability relating to the above matters that would have a material adverse effect on the Partnership's business, assets or results of operations.
Impact of Inflation
The effects of inflation on the Partnership's operations are not quantifiable. Revenues from property operations fluctuate proportionately with inflationary increases and decreases in housing costs. Fluctuations in the rate of inflation also affect the sales values of the Partnership's properties and, correspondingly, the ultimate gains to be realized by the Partnership from property sales. Inflation also has an effect on the Partnership's earnings from short- term investments, and on its interest income and interest expense to the extent that such income and expense depend on floating interest rates.
Current Value Reporting
The Partnership believes that the historical cost basis financial statements prepared in accordance with generally accepted accounting
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Current Value Reporting (Continued)
principles are not representative of the economic value of the Partnership's real estate assets because most of the properties have appreciated in value over their historical cost basis. Nevertheless, generally accepted accounting principles require periodic depreciation charges.
In conjunction with the exchange transaction, by which the Partnership was formed, the Partnership retained independent appraisers to estimate the Current Appraised Value of the Partnership's properties as of March 31, 1987, based in part upon certain financial, lease and other information provided by the general partners of the exchange transaction partnerships. The Current Appraised Value of the Partnership's properties at March 31, 1987 was $758.0 million, and Revaluation Equity was $410.0 million at such date. Revaluation Equity is defined as the difference between the appraised value of the Partnership's real estate, adjusted to reflect the Partnership's estimate of disposition costs, and the face amount of the mortgage notes payable and accrued interest, if any, encumbering such real estate. The Current Appraised Value of the Partnership's properties at December 31, 1994, was $644.3 million, and Revaluation Equity was $301.3 million at such date.
In 1995, the Partnership retained an independent appraiser to determine the Current Appraised Value of the Partnership's properties as of December 31, 1995, in a manner consistent with the methodology used to determine Current Appraised Value as of December 31, 1994 and March 31, 1987. The Current Appraised Value of the Partnership's properties at December 31, 1995 was $654.1 million and Revaluation Equity was $310.0 million at such date.
Taxes
National Realty is a publicly traded limited partnership and, for federal income tax purposes, all income or loss generated by the Partnership is included in the income tax returns of the individual partners. In December 1987, Congress passed legislation requiring certain publicly traded partnerships to be taxed as corporations. National Realty qualifies for "grandfather" treatment and will be treated as a partnership until at least 1997, unless the Partnership adds a substantial new line of business, which would require approval of the Oversight Committee, and will continue to be so treated thereafter if 90% or more of its gross income consists of qualifying income from real estate activities. As presently operated, the Partnership meets these requirements. Under Internal Revenue Service guidelines generally applicable to publicly traded partnerships and thus to the Partnership, a limited partner's use of his or her share of partnership losses is subject to special limitations.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 121 - "Accounting for the
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Recent Accounting Pronouncements (Continued)
Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed Of". The statement requires that long-lived assets be considered impaired "...if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset." If impairment exists, an impairment loss shall be recognized, by a charge against earnings, equal to "...the amount by which the carrying amount of the asset exceeds the fair value of the asset." If impairment of a long-lived asset is recognized, the carrying amount of the asset shall be reduced by the amount of the impairment, shall be accounted for as the asset's "new cost" and such new cost shall be depreciated over the asset's remaining useful life.
SFAS No. 121 further requires that long-lived assets held for sale "be reported at the lower of carrying amount or fair value less cost to sell." If a reduction in a held for sale asset's carrying amount to fair value less cost to sell is required, a provision for loss shall be recognized by a charge against earnings. Subsequent revisions, either upward or downward, to a held for sale asset's fair value less cost to sell shall be recorded as an adjustment to the asset's carrying amount, but not in excess of the asset's carrying amount when originally classified as held for sale. A corresponding charge or credit to earnings is to be recognized. Long-lived assets held for sale are not to be depreciated. SFAS No. 121 is effective for fiscal years beginning after December 15, 1995.
The Managing General Partner estimates that if the Partnership had adopted SFAS No. 121 effective January 1, 1995 its depreciation and net income in the year ended December 31, 1995 would have been unchanged and that a provision for loss for impairment of its properties would not have been required.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
All other schedules are omitted because they are not required, are not applicable or the information required is included in the Consolidated Financial Statements or the notes thereto.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Partners National Realty, L.P.
We have audited the accompanying consolidated balance sheets of National Realty, L.P., a limited partnership, as of December 31, 1995 and 1994, and the related consolidated statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1995. We have also audited the schedules listed in the accompanying index. These financial statements and schedules are the responsibility of the Partnership's Managing General Partner. Our responsibility is to express an opinion on these financial statements and schedules 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 and schedules. 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 and schedules. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of National Realty, L.P. at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
As described in Note 14. "COMMITMENTS AND CONTINGENCIES - Moorman Settlement," the Moorman Settlement requires the Partnership to purchase the Redeemable General Partner Interest upon the election of a successor general partner. Although the parties have reached an agreement on the amount to be paid and the terms of payment, the agreement has not received the approval of the
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS - Continued
Supervising Judge or the unitholders. The outcome of this matter cannot presently be determined and the consolidated financial statements do not include any adjustments that might result from the outcome of this matter.
Also, in our opinion, the schedules present fairly, in all material respects, the information set forth therein.
BDO Seidman, LLP
Dallas, Texas March 21, 1996
NATIONAL REALTY, L.P. CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these Consolidated Financial Statements.
NATIONAL REALTY, L.P. CONSOLIDATED BALANCE SHEETS (Continued)
The accompanying notes are an integral part of these Consolidated Financial Statements.
NATIONAL REALTY, L.P. CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these Consolidated Financial Statements.
NATIONAL REALTY, L.P. CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
The accompanying notes are an integral part of these Consolidated Financial Statements.
NATIONAL REALTY, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these Consolidated Financial Statements.
NATIONAL REALTY, L.P. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
The accompanying notes are an integral part of these Consolidated Financial Statements.
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying Consolidated Financial Statements of National Realty, L.P. and consolidated subsidiaries and partnerships (the "Partnership") have been prepared in conformity with generally accepted accounting principles, the most significant of which are described in NOTE 2. "SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES." These, along with the remainder of the Notes to Consolidated Financial Statements, are an integral part of the Consolidated Financial Statements. The data presented in the Notes to Consolidated Financial Statements are as of December 31 of each year or for the year then ended, unless otherwise indicated. Dollar amounts in tables are in thousands, except per unit amounts.
Certain balances for 1994 and 1993 have been reclassified to conform to the 1995 presentation. Units and per unit data have been restated for the three for one forward unit split effected January 2, 1996.
NOTE 1. ORGANIZATION
General. National Realty, L.P. ("National Realty") is a Delaware limited partnership which commenced operations on September 18, 1987 when it acquired through National Operating, L.P. (the "Operating Partnership" or "NOLP") all of the assets, and assumed all of the liabilities, of 35 public and private limited partnerships.
National Realty is the sole limited partner of the Operating Partnership and owns 99% of the beneficial interest in the Operating Partnership. The general partner of, and owner of 1% of the beneficial interest in each of, National Realty and the Operating Partnership is Syntek Asset Management, L.P. (the "General Partner" or "SAMLP"). Gene E. Phillips is a general partner of SAMLP with a .95% general partner interest. Syntek Asset Management, Inc. ("SAMI") is the managing general partner of SAMLP, with a .10% general partner interest in SAMLP. SAMI, of which Mr. Phillips serves as a director, Chairman of the Board and Chief Executive Officer, is a company owned by Basic Capital Management, Inc. ("BCM"). American Realty Trust, Inc. ("ART"), a publicly held real estate investment company of which Mr. Phillips served as Chairman of the Board and director until November 16, 1992, owns a 76.8% limited partner interest in SAMLP. Southmark Corporation ("Southmark") owns a 19.2% limited partner interest in SAMLP. Mr. Phillips and William S. Friedman own the remaining 2.95% limited partner interest in SAMLP. Mr. Friedman was a general partner of SAMLP until March 4, 1994.
SAMI, as Managing General Partner of SAMLP, manages the affairs of the Partnership. The executive officers of SAMI also serve as executive officers of BCM. BCM is a company owned by a trust for the benefit of the children of Mr. Phillips. Messrs. Phillips and Friedman served as directors of BCM until December 22, 1989 and as officers of BCM until September 1, 1992 and May 1, 1993, respectively.
In November 1992, the Partnership refinanced 52 of its apartment complexes and a wraparound mortgage note receivable with a financial institution. To facilitate the refinancing, the Operating Partnership
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. ORGANIZATION (Continued)
transferred those assets to Garden Capital, L.P. ("GCLP"), a Delaware limited partnership. The Operating Partnership is the sole limited partner with a 99.3% limited partner interest in GCLP. The Operating Partnership received its limited partner interest in exchange for the transfer of the net assets of the 52 apartment complexes and the wraparound mortgage note receivable to GCLP. Garden Capital Management Incorporated ("GCMI"), a Nevada corporation, is the .7% managing general partner of GCLP. See NOTE 8. "ACCRUING MORTGAGE."
GCLP transferred the acquired net apartment assets, in exchange for a 99% limited partner interest in each of 52 single asset limited partnerships which were formed for the purpose of operating, refinancing and holding title to the apartment complexes. The transfer of the 52 apartment complexes and the wraparound mortgage note receivable were effective November 25, 1992.
Each of the single asset limited partnerships has no significant assets other than an apartment complex encumbered by mortgage debt. Garden Capital Incorporated ("GCI"), a Nevada corporation, is the 1% managing general partner in each of the single asset limited partnerships.
Except as described under NOTE 14. "COMMITMENTS AND CONTINGENCIES - Moorman Settlement," all decisions relating to the Partnership, including all decisions with respect to the acquisition, disposition, improvement, financing or refinancing of the Partnership's properties or other investments, are made by the Managing General Partner. However, all decisions with respect to the acquisition, disposition, improvement, financing or refinancing of the GCLP properties are made by GCMI or GCI as managing general partner of GCLP or the single asset partnerships, respectively.
BCM, SAMI's corporate parent, performs certain administrative functions for the Partnership, such as accounting services, mortgage servicing and portfolio review and analysis, on a cost reimbursement basis. Since February 1, 1990 BCM or affiliates of BCM have provided property management services for the Partnership. Currently, Carmel Realty Services, Ltd. ("Carmel, Ltd."), an affiliate of BCM, performs such property management services for the Partnership. BCM or affiliates of BCM also perform loan placement services, leasing services and real estate brokerage and acquisition services and other services for the Partnership for fees and commissions. See NOTE 11. "GENERAL PARTNER FEES AND COMPENSATION." GCMI performs administrative functions, similar to those performed for the Partnership by BCM, for GCLP on a cost reimbursement basis. The common stock of GCI and GCMI is owned by John A. Doyle (20%), Richard A. Green (40%) and Henry W. Simon (40%).
Participation in net income, net loss and distributions. The limited partners of National Realty have a 99% interest and the General Partner has 1% interest in the net income or net loss and distributions of National Realty. National Realty has a 99% and the General Partner has
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1. ORGANIZATION (Continued)
a 1% interest in the net income or net loss of the Operating Partnership. The 1% General Partner interest in each of National Realty and the Operating Partnership is equal to a 1.99% interest on a combined basis. The Operating Partnership has a 99.3% limited partner interest and GCMI has a .7% general partner interest in the net income or net loss and distributions of GCLP. GCLP has a 99% interest and GCI has a 1% interest in the net income or net loss and distributions of the 52 single asset partnerships that hold title to the apartment complexes. GCMI's .7% general partner interest in GCLP and GCI's 1% general partner interest in the single asset partnerships is equal to a 1.68% interest on a combined basis. For tax purposes limited partners are allocated their proportionate share of net income or net loss commencing with the calendar month subsequent to their entry into the Partnership. During the pendency of the Moorman Settlement Plan (as defined in NOTE 14. "COMMITMENTS AND CONTINGENCIES - Moorman Settlement"), the General Partner's base compensation, equal to 10% of the distributions to unitholders from the Partnership's cash from operations, is waived.
General Partner's capital contribution. In return for its 1% interest in National Realty, the General Partner was required to make aggregate capital contributions to the Partnership in an amount equal to 1.01% of the total initial capital contributions to the Partnership. The General Partner contributed $500,000 in cash with the remaining contribution evidenced by a promissory note bearing interest at the rate of 10% per annum compounded semi-annually payable on the earlier of September 18, 2007, liquidation of the Partnership or termination of the General Partner's interest in the Partnership. The principal balance of such promissory note was $4.2 million at December 31, 1995 and 1994.
In the accompanying Consolidated Balance Sheets, the note receivable from the General Partner is offset against the Redeemable General Partner Interest as described in NOTE 14. "COMMITMENTS AND CONTINGENCIES - Moorman Settlement." The General Partner received its 1% interest in the Operating Partnership in exchange for its agreement to serve as general partner of the Operating Partnership. If National Realty issues additional units of limited partner interest, the General Partner is entitled to maintain its aggregate 1% interest in each of National Realty and the Operating Partnership without payment of additional consideration.
GCMI contributed 100% of its economic interest in an apartment complex in Flagstaff, Arizona, to GCLP as its initial general partner capital contribution. In March 1993, GCMI contributed the Accruing Mortgage (as defined in NOTE 8. "ACCRUING MORTGAGE") as a substitute capital contri- bution for its .7% general partner interest in GCLP. National Realty subsequently purchased the Accruing Mortgage for a $900,000 note payable. GCI received its 1% general partner interest in the single asset partnerships in exchange for agreeing to manage the property owned by each such partnership.
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of consolidation. The Consolidated Financial Statements include the accounts of National Realty, the Operating Partnership, GCLP and consolidated entities. All significant intercompany balances and transactions have been eliminated. Minority interests (which are not significant) are included in other liabilities.
Accounting estimates. In the preparation of the Partnership's Consolidated Financial Statements in conformity with generally accepted accounting principles it was necessary for the Managing General Partner 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 Consolidated Financial Statements and the reported amounts of revenues and expenses for the year then ended. Actual results could differ from these estimates.
Revenue recognition on the sale of real estate. Sales of real estate are recognized when and to the extent permitted by Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate" ("SFAS No. 66"). Until the requirements of SFAS No. 66 for full profit recognition have been met, transactions are accounted for using either the deposit, the installment, the cost recovery or the financing method, whichever is appropriate.
Real estate and depreciation. Land, buildings and improvements are stated at the lower of cost or estimated net realizable value. Properties held for sale are depreciated in accordance with the Partnership's established depreciation policies. The subsequent classification of property previously held for sale to held for investment does not result in a restatement of previously reported revenues, expenses or net income .
Depreciation is provided on buildings and improvements using the straight-line method over estimated useful lives of 40 years for buildings and 7 to 25 years for improvements. Expenditures for renewals and betterments are capitalized and repairs and maintenance are charged against operations as incurred.
Allowance for estimated losses. A valuation allowance is provided for estimated losses on notes receivable to the extent that the Partnership's investment in the notes exceeds the Partnership's estimate of net realizable value of the collateral securing each such note, or fair value of the collateral if foreclosure is probable. In estimating net realizable value, consideration is given to the current estimated collateral value adjusted for costs to complete or improve, hold and dispose. The provision for losses on notes receivable is based on estimates, and actual losses may vary from current estimates. Such estimates are reviewed periodically and any additional provision determined to be necessary is charged against earnings in the period in which it becomes reasonably estimable.
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Interest recognition on notes receivable. It is the Partnership's policy to cease recognizing interest income on notes receivable that have been delinquent for 60 days or more. In addition, accrued but unpaid interest income is only recognized to the extent that the net realizable value of underlying collateral exceeds the carrying value of the receivable.
Deferred financing costs. Deferred financing costs are capitalized and amortized on the interest-rate method over the term of the related loans.
Present value discounts. The Partnership provides for present value discounts on notes receivable or payable that have interest rates that differ substantially from prevailing market rates and amortizes such discounts by the interest method over the lives of the related notes. The factors considered in determining a market rate for receivables include the borrower's credit standing, nature of the collateral and payment terms of the note.
Marketable equity securities of affiliate. Marketable equity securities are considered to be available-for-sale and are carried at fair value, defined as period end closing market value. Net unrealized holding gains are reported as a separate component of partners' equity until realized.
Fair value of financial instruments. The Partnership used the following assumptions in estimating the fair value of its notes receivable, marketable equity securities and notes payable. For performing notes receivable, the fair value was estimated by discounting future cash flows using current interest rates for similar loans. For nonperforming notes receivable, the estimated fair value of the Partnership's interest in the collateral property was used. For marketable equity securities, fair value was the year end closing market price of each security. The estimated fair values presented do not purport to represent amounts to be ultimately realized by the Partnership. The amounts ultimately realized may vary significantly from the estimated fair values presented. For notes payable, the fair value was estimated using current rates for mortgages with similar terms and maturities, which, at December 31, 1995 and 1994, approximated carrying value.
Cash equivalents. For purposes of the Consolidated Statements of Cash Flows, the Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.
Earnings per unit. Income per unit of limited partner interest is computed based upon the weighted average number of units outstanding during each year. Accordingly, net income per unit is derived by dividing 98.01% of the Partnership's net income by 6,418,104, 6,418,572 and 6,747,990 units for 1995, 1994 and 1993, respectively.
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3. REAL ESTATE AND DEPRECIATION
In 1991, the General Partner of the Partnership selected a group of assets which it offered for sale in accordance with the terms of the Moorman Settlement Agreement classifying those properties as held for sale. The Partnership, among others, has entered into an agreement which provides for the nomination of a successor general partner and for the resolution of all matters under the Moorman Settlement Agreement. In contemplation of the election of such successor general partner and termination of the Moorman Settlement Plan, the Partnership has classified all of the Partnership's properties as held for investment at December 31, 1995. See NOTE 14. "COMMITMENTS AND CONTINGENCIES - Moorman Settlement."
In March 1995, the Partnership purchased the Chalet II Apartments, a 72 unit apartment complex in Topeka, Kansas, for $1.6 million. The Partnership paid $439,000 in cash and obtained new mortgage financing of $1.2 million. The mortgage bears interest at a rate of prime plus 1% per annum (10% at December 31, 1995), requires monthly payments of principal and interest, currently $12,000, and matures in March 2002.
In December 1995, the Partnership sold the Harbour Pointe Apartments in Miami, Florida for $5.2 million. The Partnership received $2.1 million in cash after the payoff of $3.0 million in existing mortgage debt and the payment of various closing costs associated with the sale. The Partnership recognized a gain of $2.8 million on the sale.
Also in December 1995, the Partnership sold the Vineyards Apartments in Broadview Heights, Ohio for $10.7 million. The Partnership received net cash of $2.4 million after the payoff of $8.2 million in existing mortgage debt and the payment of various closing costs associated with the sale. The Partnership recognized a gain of $4.9 million on the sale.
In October 1994, the Partnership sold the Brandywine and Raintree Apartments, both located in Meridian Township, Michigan, to a single buyer for a total of $14.8 million. The Partnership received net cash of $4.5 million after the payoff of $9.4 million in existing mortgage debt, the payment of $82,000 in prepayment penalties and various closing costs associated with the sales. The Partnership recognized gains totaling $8.3 million on the sales.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4. NOTES RECEIVABLE
Notes and interest receivable consisted of the following:
The Partnership does not recognize interest income on nonperforming notes receivable. For 1995, 1994 and 1993, unrecognized interest income on nonperforming notes totaled $745,000, $372,000 and $924,000, respectively.
The notes receivable mature from 1996 through 2000 with interest rates ranging from 8.0% to 11.5% with a weighted average interest rate of 9.5%. Discounts were based on interest rates at the time of origination. Notes receivable are nonrecourse and are generally collateralized by real estate. The majority of the notes receivable require monthly payments of interest only with "balloon" principal payments at the end of their respective terms.
Deferred gains result from property sales where the buyer has either made an inadequate down payment or has not met the continuing investment test of SFAS No. 66.
In 1991, the Partnership and an insurance company entered into an Asset Sales Agreement to sell participations in certain of the Partnership's mortgage notes receivable in exchange for participations in other mortgage notes or assets and cash. The Partnership entered into the Asset Sales Agreement in an effort to develop a potential source for future financing and to generate cash from otherwise illiquid assets. The assets transferred by the Partnership pursuant to the Asset Sales Agreement included a $2.5 million senior participation in a wraparound mortgage note receivable secured by a shopping center in Las Vegas, Nevada, a $1.0 million senior participation in a wraparound mortgage note receivable secured by a shopping center in La Crosse, Wisconsin, and a first lien mortgage note with a carrying value of $1.2 million prior to transfer. In return, the Partnership received a $447,000 senior participation in a note secured by land in Granby, Colorado, a $1.5 million participation in a note secured by a country club in the Ka'u District of Hawaii, a 10% limited partner interest in the partnership owning the country club, valued at $1.5 million, a $213,000
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4. NOTES RECEIVABLE (Continued)
first lien mortgage note secured by land in Denver, Colorado and $1.0 million in cash. The Asset Sales Agreement included put and guaranty provisions.
In March 1992, the insurance company was placed in receivership. In June 1992, the Partnership provided notice to the insurance company, under the terms of the put and guaranty provisions, of its desire to divest itself of all the assets received. The Receiver refused to allow the enforcement of the terms of the Asset Sales Agreement. A settlement between the Partnership and the Receiver was approved by the court on February 15, 1995. Under the terms of the settlement, the insurance company returned to the Partnership the senior participations in the wraparound mortgage notes secured by the shopping centers in Las Vegas, Nevada and La Crosse, Wisconsin. In exchange, the Partnership returned all of the assets that it received from the insurance company other than the first lien mortgage note secured by the land in Denver, Colorado, which had been foreclosed and sold by the Partnership, and $657,000 in cash. The Partnership also purchased from the insurance company the first lien note secured by the land in Granby, Colorado and a second lien note secured by commercial condominiums also in Granby, Colorado for a total of $550,000. The Partnership incurred no loss on the settlement.
In October 1995, the Partnership accepted a $3.7 million discounted payoff of three wraparound mortgage loans secured by the Hurstbourne Business Park in Louisville, Kentucky. The Partnership received $1.5 million in cash after the payoff of $2.2 million in first mortgage debt. No loss was recorded as the discounted note payoff was equal to the Partnership's net carrying value of the loans.
NOTE 5. ALLOWANCE FOR ESTIMATED LOSSES
Activity in the allowance for estimated losses was as follows:
NOTE 6. INVESTMENTS IN MARKETABLE EQUITY SECURITIES OF AFFILIATE
The Partnership owns 97,866 shares of the common stock of ART, a publicly held real estate investment company, which the Partnership acquired in open market purchases in 1990 at an adjusted cost of $269,000. The Partnership considers the ART common stock to be available-for-sale and the shares are therefore carried at fair value (period end market value). The market value of the ART common stock was $722,000 at December 31, 1995 and $636,000 at December 31, 1994.
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7. NOTES PAYABLE
Notes payable at December 31, 1995 and 1994 are collateralized by land, buildings and improvements and are generally nonrecourse to the partnership. The GCLP mortgage debt, as discussed below, is cross-collateralized and cross- defaulted among the apartment complexes and wraparound note receivable that serve as collateral for such debt. The notes payable outstanding at December 31, 1995 bear interest at stated rates ranging from 5.0% to 11.5% with a weighted average rate of 8.9% and such notes have maturities or call dates ranging from one to 27 years.
In 1995, the Partnership refinanced the mortgage debt secured by the Mallard Lake Apartments in Greensboro, North Carolina in the amount of $8.2 million, the Four Seasons Apartments in Denver, Colorado in the amount of $9.9 million, the Nora Pines Apartments in Indianapolis, Indiana in the amount of $6.2 million, the Covered Bridge Apartments in Gainesville, Florida in the amount of $4.7 million, the Marina Playa Office Building in Santa Clara, California in the amount of $8.3 million and the Timbercreek Apartments in Omaha, Nebraska in the amount of $5.0 million. The Partnership received net cash of $10.7 million after the payoff of $27.8 million in existing mortgage debt including $315,000 in prepayment penalties. The remainder of the refinancing proceeds were used to fund escrows for replacements and repairs and to pay various closing costs associated with the refinancings. The new mortgages bear interest at the rates ranging from 7.75% to 8.75% per annum, require monthly payments of principal and interest and mature from June 2005 to January 2006.
In March 1994, the Partnership refinanced the mortgage debt secured by the Cross County Mall, a shopping center in Mattoon, Illinois. The Partnership borrowed $7.5 million under the loan to repay the then existing mortgage debt and to pay for the renovation of the shopping center as well as tenant improvements.
In September 1994, the Partnership sold the Creekwood Apartments in College Park, Georgia for $6.0 million. The Partnership has accounted for the sale as a financing transaction, due to the Partnership having provided financing of the purchaser's down payment. On the date of sale, the purchaser obtained new first mortgage financing from an independent lending institution in the amount of $3.0 million. The Partnership received $1.3 million in excess proceeds from the new financing, after the payoff of the existing mortgage in the amount of $1.1 million and the funding of required repair escrows and closing costs associated with the financing.
In November 1992, the Partnership transferred the net assets of 52 apartment complexes and a wraparound note receivable to GCLP, which then refinanced such assets with a financial institution through the issuance of a $223 million blanket mortgage. GCLP used the refinancing proceeds to pay off the mortgage debt of the 52 properties and the wraparound note receivable.
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7. NOTES PAYABLE (Continued)
In conjunction with the refinancing, four escrow accounts were established and GCLP made an initial deposit totaling $3.8 million from the refinancing proceeds. The recurring replacement escrow required monthly deposits of $232,000 to be used for capital repairs, replacements and improvements. The capital replacement escrow required monthly deposits which totaled $1.7 million in 1994. No capital replacement escrow deposits were required in 1995. The credit enhancement escrow requires monthly deposits totaling $3.5 million in 1996 ($3.3 million in 1995 and $3.0 million in each of 1993 and 1994) and $2.0 million in each of 1997, 1998 and 1999 up to an aggregate maximum amount of $18.5 million. These funds will be used to fund any operating shortfalls. A tax and insurance escrow was also established which requires monthly payments based on projections of real estate taxes and insurance.
Also in conjunction with the GCLP refinancing, a letter of credit was provided by a financial institution for a term of not less than five years and in the amount of $12.5 million. The letter of credit may be drawn upon by GCLP to pay any operating shortfalls, provided such funds are not on deposit in the credit enhancement escrow, described above, which is to be used, first, to fund operating shortfalls. The letter of credit will be reduced by the amount of (i) each draw on the letter of credit, (ii) each credit enhancement escrow deposit and (iii) any additional deposits made to the credit enhancement escrow account in excess of the requirement. No amounts have been drawn under the letter of credit.
Scheduled notes payable principal payments (including pension notes) are due as follows:
NOTE 8. ACCRUING MORTGAGE
In connection with its formation in January 1987, the Partnership restructured $12.7 million of obligations into an "Accruing Mortgage". The Accruing Mortgage had a maturity date of September 18, 1994 and was secured by Partnership properties. In November 1992, an affiliate of GCMI, the managing general partner of GCLP acquired the Accruing Mortgage. In connection with the GCLP refinancing, $8.5 million was paid against the principal balance and one of the Partnership's collateral apartment complexes was released and the recourse provisions of the Accruing Mortgage were canceled. In March 1993, the holder of the Accruing Mortgage merged into GCMI and GCMI contributed such
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8. ACCRUING MORTGAGE (Continued)
mortgage at an agreed value of $900,000 as a substitute capital contribution for its .7% general partner interest in GCLP. In March 1993, the Partnership acquired the Accruing Mortgage from GCLP in exchange for a $900,000 noninterest bearing unsecured demand note in full satisfaction of principal and accrued but unpaid interest. In 1993, the Partnership recognized an extraordinary gain of $9.0 million from the discounted acquisition of the Accruing Mortgage.
NOTE 9. PENSION NOTES
Also in connection with its formation, the Partnership issued $4.7 million of 8% subordinated Pension Notes to certain investors in exchange for their interest in the net assets of certain of the "rolled-up" partnerships. The Pension Notes are issued under an Indenture between the Partnership and Bank of America Texas as successor Trustee. The Pension Notes are unsecured, subordinated obligations of the Partnership and bear interest at the rate of 8% compounded annually. Principal and interest are to be paid upon maturity on September 18, 1997 or earlier redemption. At December 31, 1995, such redemption amount was $12.0 million, including accrued but unpaid interest.
The Pension Notes are redeemable at the option of the Partnership at any time, in whole or in part, at 100% of the principal amount plus accrued and unpaid interest to the date of redemption. The Pension Notes are also subject to mandatory redemption if the Partnership's current value net worth (as defined in such Indenture) on the last day of each of any two consecutive fiscal quarters is less than 175% of the aggregate redemption price of Pension Notes then outstanding.
The 8% stated interest rate on the Pension Notes is different than the assumed market rate at the time of issuance. Such discount is being amortized over the term of the Pension Notes using the interest method. Interest expense of $1,289,000, $1,151,000 and $1,028,000 was recognized on the Pension Notes for the years 1995, 1994 and 1993, respectively.
NOTE 10. WARRANTS
Pursuant to the Moorman Settlement Agreement, on February 14, 1992 the Partnership issued warrants to purchase an aggregate of 2,019,579 of its units of limited partner interest subject to adjustment. Each warrant initially entitled the holder thereof to purchase three quarters of one unit at the exercise price ($11.00 per warrant). The initial exercise price was equal to $14.67 per unit and increased to $16.00 per unit on February 14, 1993, subject to adjustment. The warrants are exercisable for five years from the February 14, 1992 date of issuance or until earlier redemption. See NOTE 14. "COMMITMENTS AND CONTINGENCIES - Moorman Settlement."
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11. GENERAL PARTNER FEES AND COMPENSATION
General. Gene E. Phillips is a general partner of SAMLP, the Partnership's General Partner. Mr. Phillips serves as a director, Chairman of the Board and Chief Executive Officer of SAMI, the Partnership's Managing General Partner. Mr. Phillips and the executive officers of SAMI also serve as officers or directors of various other real estate entities. These entities may have the same objectives and may be engaged in activities similar to those of the Partnership.
Property Management Fees. As compensation for providing property management services to the Partnership's properties, as provided in the Partnership Agreement, the General Partner or an affiliate of the General Partner is to receive a reasonable property management fee. Currently, Carmel Realty Services, Ltd. ("Carmel, Ltd."), an affiliate of the General Partner, provides such property management services for a fee of 5% of the monthly gross rents collected on the properties under its management. Carmel, Ltd. subcontracts with other entities for the property-level management services to the Partnership at various rates. The general partner of Carmel, Ltd. is BCM. The limited partners of Carmel, Ltd. are (i) Syntek West, Inc. ("SWI"), of which Mr. Phillips is the sole shareholder, (ii) Mr. Phillips and (iii) a trust for the benefit of the children of Mr. Phillips. Carmel, Ltd. subcontracts the property-level management and leasing of twelve of the Partnership's commercial properties to Carmel Realty, Inc. ("Carmel Realty") which is a company owned by SWI. Carmel Realty is entitled to receive property and construction management fees and leasing commissions in accordance with the terms of its property-level management agreement with Carmel, Ltd. Carmel, Ltd. does not perform property management services for GCLP.
Leasing Commissions. As compensation for providing leasing and rent-up services for a Partnership property, as provided in the Partnership Agreement, the General Partner or an affiliate of the General Partner shall be paid a reasonable leasing commission.
Reimbursement of Administrative Expenses. To the extent that officers or employees of the general partners or any of their affiliates participate in the operation or administration of the Partnership or GCLP, the general partners and their affiliates are to be reimbursed under the partnership agreements for salaries, travel, rent, depreciation, utilities and general overhead items incurred and properly allocable to such services. Such amounts are included in General and Administrative expense in the accompanying Consolidated Statements of Operations.
General Partner Compensation. As base compensation for providing administrative and management services under the Partnership Agreement, the General Partner is entitled to receive from the Partnership, an annual partnership management fee equal to 10% of distributions made in each calendar year of Cash from Operations, as defined in the Partnership Agreement, for the calendar year, payable within 90 days after the end of
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11. GENERAL PARTNER FEES AND COMPENSATION (Continued)
that calendar year. As additional incentive compensation, the General Partner is entitled to receive in each calendar year an amount equal to 1% of the Average Unit Market Price, as defined in the Partnership Agreement, for that calendar year. Provided, however, that no incentive compensation is payable unless distributions of cash from operations exceed 6% of the Exchange Value of the original assets, also as defined in the Partnership Agreement. The General Partner has waived its base compensation during the pendency of the Moorman Settlement Agreement.
Real Estate Brokerage Commissions. The General Partner or an affiliate of the General Partner may, pursuant to the Partnership Agreement, charge a reasonable real estate brokerage commission, payable at the time the Partnership acquires title to, or beneficial ownership in, an acquired property. Upon the sale of any Property by the Partnership, the General Partner or an affiliate of the General Partner may, pursuant to the Partnership Agreement, charge a reasonable real estate brokerage commission, payable at the time the Partnership transfers title to the property. In each case, such commissions are payable only if the General Partner or such affiliate actually performed brokerage services.
Incentive Disposition Fee. Under the Partnership Agreement, the General Partner or an affiliate of the General Partner is paid a fee equal to 10% of the amount, if any, by which the Gross Sales Price, as defined in the Partnership Agreement, of any property sold by the Partnership exceeds 110% of the Adjusted Cost, also as defined in the Partnership Agreement, of such property.
Acquisition Fees. As compensation under the Partnership Agreement for services rendered in structuring and negotiating the acquisition by the Partnership of any property, other than an Initial Property, as defined in the Partnership Agreement, the General Partner or an affiliate of the General Partner is paid a fee in an amount equal to 1% of the Original Cost, also as defined in the Partnership Agreement, of such property.
Fees For Additional Services. Under the Partnership Agreement the General Partner or an affiliate of the General Partner may provide services other than those set out above for the Partnership in return for reasonable compensation.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11. GENERAL PARTNER FEES AND COMPENSATION (Continued)
Fees and cost reimbursement to SAMLP, the General Partner of the Partnership and its affiliates:
- ---------------------
* Net of property management fees paid to subcontractors, other than Carmel Realty.
Cost reimbursements to GCMI, the general partner of GCLP:
NOTE 12. RENTS UNDER OPERATING LEASES
The Partnership's operations include the leasing of commercial properties (office buildings and shopping centers). The leases thereon expire at various dates through 2013. The following is a schedule of minimum future rents on non-cancelable operating leases as of December 31, 1995:
NOTE 13. INCOME TAXES
The Partnership's partners include their share of partnership income or loss in their respective tax returns and, accordingly, no income taxes have been provided in the accompanying Consolidated Statements of Operations.
In December 1987, Congress passed legislation requiring certain publicly traded partnerships to be taxed as corporations. National Realty qualifies for "grandfather" treatment and will be treated as a partnership for federal tax purposes until at least 1997, unless the Partnership adds a substantial new line of business, which would require
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13. INCOME TAXES (Continued)
approval of the Oversight Committee (see NOTE 14. "COMMITMENTS AND CONTINGENCIES - Moorman Settlement") and will continue to be so treated thereafter if 90% or more of its gross income consists of qualifying income from real estate activities. As presently operated, the Partnership meets this qualification.
Under the legislation, Partnership losses are suspended for limited partners and carried forward to offset future income or gain from the Partnership's operations or gain upon a limited partner's disposition of all units held. Any remaining income will be taxed as portfolio income.
NOTE 14. COMMITMENTS AND CONTINGENCIES
Moorman Settlement
The Partnership is party to a settlement agreement, dated as of May 9, 1990, between plaintiffs Joseph B. Moorman, et al. and defendants Robert A. McNeil, National Realty, the Operating Partnership, SAMLP, Messrs. Phillips and Friedman, and Shearson Lehman Hutton Inc., successor-in-interest to defendant E.F. Hutton & Company Inc., relating to the action entitled Moorman, et al. v. Southmark Corporation, et al. Such action was filed on September 2, 1987, in the Superior Court of the State of California, County of San Mateo. On May 9, 1990, the Partnership agreed to settle such action pursuant to the terms of a written agreement (the "Moorman Settlement Agreement"). On June 29, 1990, after a hearing as to its fairness, reasonableness and adequacy, the Moorman Settlement Agreement was granted final court approval.
The Moorman Settlement Agreement is complex and the following summary is qualified in its entirety by reference to the text thereof, which was previously included as an exhibit to the Partnership's Form 10-Q for the quarter ended March 31, 1990, as filed with the Securities and Exchange Commission. The Moorman Settlement Agreement provides for a plan (the "Moorman Settlement Plan") consisting of, among other things, the following: (i) the appointment and operation of a committee (the "Oversight Committee"), to oversee the implementation of the Moorman Settlement Plan, (ii) the appointment and operation of an audit committee having a majority of members unaffiliated with Messrs. Phillips and Friedman or SAMLP, (iii) the establishment of specified annually increasing targets described below (each a "Target") for each of the next five years through May 1995, relating to the price of the units of limited partner interest as decreased for certain distributions to unitholders, (iv) an agreement by SAMLP not to seek reimbursement of greater than $500,000 per year for Messrs. Phillips' and Friedman's salaries for serving as general partners of SAMLP, (Mr. Friedman resigned as general partner of SAMLP effective March 4, 1994) and a deferral of such payments until such time as a Target may be met, and, if SAMLP resigns as General Partner, a waiver of any compensation so deferred, (v) a deferral until such time as a Target may be met of certain future annual General Partner compensation payable, pursuant to the Partner-
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14. COMMITMENTS AND CONTINGENCIES (Continued)
Moorman Settlement (Continued)
ship's governing documents, to SAMLP or its affiliates, and, if SAMLP resigns as General Partner, a waiver of any compensation so deferred, (vi) the required distribution to unitholders of all the Partnership's operating cash flow in excess of certain renovation costs, unless the Oversight Committee approves alternative uses for such operating cash flow, (vii) the issuance of Warrants to purchase an aggregate of up to 2,019,579 units (the "Warrants") to Class Members, (viii) the contribution by certain co-defendants of cash and notes payable to the Partnership aggregating $5.5 million (including $2.5 million to be contributed by SAMLP and its general partners over a four- year period), (ix) the amendment of the Partnership Agreement to reduce the vote required to remove the General Partner from a two-thirds vote to a majority vote of the units, (x) the Partnership's redemption of its unit purchase rights and an agreement not to adopt a similar rights plan without Oversight Committee approval and (xi) the Partnership's payment of certain settlement costs, including plaintiffs' attorneys' fees in the amount of $3.4 million. The Moorman Settlement Plan will remain in effect until SAMLP has resigned as General Partner and a successor general partner is elected and takes office, and the Warrants will remain exercisable for five years from the February 14, 1992 date of issuance or until earlier redemption.
SAMLP, on behalf of itself and its general partners, has made the payments of $2.5 million (including accrued interest), to the Partnership, as required by the Moorman Settlement Agreement.
If Targets are not met for any two successive years of the Moorman Settlement Plan or for the final year of the Moorman Settlement Plan, SAMLP will be required to withdraw as General Partner effective at the time a successor general partner is elected. Upon, among other things, the withdrawal of SAMLP as General Partner and the due election and taking office of a successor, the Moorman Settlement Plan would terminate.
The Targets for the first and second anniversary dates were not met. Since the Targets were not met for two successive years, the Moorman Settlement Agreement requires that SAMLP resign as General Partner, effective upon the election and qualification of its successor. On July 8, 1992, SAMLP notified the Oversight Committee of the failure to meet the Target for two successive years.
Upon, among other things, the withdrawal of SAMLP as General Partner and the due election and taking office of a successor, the Moorman Settlement Plan will terminate. Withdrawal of SAMLP as General Partner pursuant to the Moorman Settlement Agreement requires unitholders to elect a successor general partner by majority vote. Upon the withdrawal or removal of the General Partner without the selection of a successor, the Partnership would be dissolved.
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14. COMMITMENTS AND CONTINGENCIES (Continued)
Moorman Settlement (Continued)
The Moorman Settlement Agreement provides that between the date of the certification causing the General Partner's resignation and the date a successor general partner takes office, the resigning General Partner shall limit its activities, as General Partner, to the conduct of the business of the Partnership in the ordinary course, shall not, without consent of the Oversight Committee, purchase or sell any real estate or other assets of the Partnership not in progress on said date, shall cooperate in the election of a successor general partner and shall cooperate with its successor to facilitate a change in the office of General Partner of the Partnership. The resigning General Partner will continue to receive fees, expenses and distributions, if any, while the solicitation is prepared.
The withdrawal of the General Partner would require the Partnership to acquire the General Partner's interest in the Partnership (the "Redeemable General Partner Interest") at its then fair value, and to pay certain fees and other compensation, as provided in the Partnership Agreement and the Moorman Settlement Agreement. Under the Moorman Settlement Agreement, payment for such Redeemable General Partner Interest, fees and other compensation may, at the Oversight Committee's option, be paid over a three year period pursuant to a secured promissory note bearing interest at the prime rate and containing commercially reasonable terms and collateral. Under the Moorman Settlement Plan, the purchase price for Redeemable General Partner Interest would be calculated, as of the time SAMLP withdraws as General Partner under the Partnership's governing documents. The Managing General Partner has calculated the Redeemable General Partner Interest at December 31, 1995 to be $36.2 million, and believes there has been no material change in such value since such date. The Partnership would be entitled to offset against any such payment the then outstanding principal balance ($4.2 million at December 31, 1995) plus all accrued but unpaid interest ($5.2 million at December 31, 1995) on the note receivable from SAMLP described in NOTE 1. "ORGANIZATION." In the accompanying Consolidated Financial Statements, the Redeemable General Partner Interest is shown as a reduction of Partners' Equity. The note receivable from the General Partner has been offset against the Redeemable General Partner Interest. The Oversight Committee previously has informed the Partnership that it calculated the amount of such Redeemable General Partner Interest to be less than the amount calculated by the Managing General Partner. When SAMLP withdraws as General Partner of the Partnership, the value of the Redeemable General Partner Interest would depend on the fair value of the Partnership's assets at the time of calculation and there can be no assurance that the Redeemable General Partner Interest, fees and other compensation payable on any such withdrawal will not be substantially higher or lower than any current estimate or calculation.
On January 27, 1995, National Realty, SAMLP and the Oversight Committee executed an Implementation Agreement which provides for the nomination of
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14. COMMITMENTS AND CONTINGENCIES (Continued)
Moorman Settlement (Continued)
a successor general partner and for the resolution of all related matters under the Moorman Settlement. On February 20, 1996, the parties to the Implementation Agreement executed an Amended and Restated Implementation Agreement.
Provided that the successor general partner is elected pursuant to the terms of the Amended and Restated Implementation Agreement, SAMLP shall receive $12,471,500 from the Partnership. This amount represents a compromise settlement of the net amounts owed by the Partnership to SAMLP upon SAMLP's withdrawal as General Partner and any amounts which SAMLP and its affiliates may owe to the Partnership. This amount shall be paid to SAMLP pursuant to a promissory note in accordance with the terms set forth in the Amended and Restated Implementation Agreement.
The Amended and Restated Implementation Agreement has been submitted to the Supervising Judge for tentative approval and approval of the notice to be sent to the original class members. Upon final approval by the Supervising Judge, the proposal to elect the successor general partner will be submitted to the unitholders of National Realty for a vote. In addition, the unitholders will vote upon amendments to the National Realty Partnership Agreement which relate to the proposed compensation of the successor general partner and other related matters.
Upon approval by the unitholders, SAMLP shall resign as General Partner and the successor general partner shall take office. If the required approvals are obtained, National Realty anticipates that the successor general partner may be elected and take office during the second or third quarter of 1996.
The Amended and Restated Implementation Agreement provides that SAMLP, and its affiliates owning units in National Realty, shall not vote to remove the successor general partner, except for removal with cause, for a period of 36 months from the date the successor general partner takes office.
Upon the election and taking office of the successor general partner, the Moorman Settlement Plan and the Oversight Committee shall terminate. If the successor general partner nominee does not stand for election or is not elected, the existing Moorman Settlement Agreement shall remain in full force and effect and all of the provisions of the Amended and Restated Implementation Agreement shall be voided.
Other Litigation
The Partnership is also involved in various other lawsuits arising in the ordinary course of business. In the opinion of the Managing General
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14. COMMITMENTS AND CONTINGENCIES (Continued)
Other Litigation (Continued)
Partner, the outcome of these lawsuits will not have a material effect on the Partnership's financial condition, results of operations or liquidity.
NOTE 15. QUARTERLY DATA
The following is a tabulation of the Partnership's quarterly results of operations for the years 1995 and 1994.
In fourth quarter 1995, the Partnership sold two of its apartment complexes for an aggregate gain of $7.7 million. See "NOTE 3. REAL ESTATE AND DEPRECIATION."
NATIONAL REALTY, L.P. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 15. QUARTERLY DATA (Continued)
In the third quarter of 1994, the Partnership sold two of its apartment complexes for an aggregate gain of $8.3 million. See "NOTE 3. REAL ESTATE AND DEPRECIATION."
SCHEDULE III
NATIONAL REALTY, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
SCHEDULE III (CONTINUED)
NATIONAL REALTY, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
SCHEDULE III (CONTINUED)
NATIONAL REALTY, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
SCHEDULE III (CONTINUED)
NATIONAL REALTY, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
- ---------------
(1) The aggregate cost for financial statement purposes approximates that for federal tax purposes.
(2) Does not include discounts and mortgages payable totaling $15,609 on real estate which has been sold but for which the Partnership remains liable on the underlying mortgage note.
(3) Write-down of property to estimated net realizable value.
SCHEDULE III (CONTINUED)
NATIONAL REALTY, L.P.
REAL ESTATE AND ACCUMULATED DEPRECIATION
SCHEDULE IV
NATIONAL REALTY, L.P.
MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1995
SCHEDULE IV (CONTINUED)
NATIONAL REALTY, L.P.
MORTGAGE LOANS ON REAL ESTATE
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
_________________________________
PART III
ITEM 10.

ITEM 10. GENERAL PARTNER OF THE REGISTRANT AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER
As partnerships, neither National Realty, L.P. ("National Realty" or the "Registrant") nor National Operating, L.P. (the "Operating Partnership" or "NOLP") (collectively the "Partnership") has officers or directors. The General Partner of the Partnership is Syntek Asset Management, L.P. ("SAMLP"), whose general partners are Gene E. Phillips and Syntek Asset Management, Inc. ("SAMI"). SAMI serves as Managing General Partner. Mr. Phillips is associated with a number of entities which have business objectives that are similar in certain respects to those of the Partnership. The Managing General Partner manages the day-to-day affairs of the Partnership which includes all decisions with respect to the acquisition, disposition, improvement, financing or refinancing of the Partnership's properties, subject to the limitations of the Moorman Settlement Agreement. See ITEM 3. "LEGAL PROCEEDINGS - Moorman Settlement." In addition, SAMI's corporate parent, Basic Capital Management, Inc. ("BCM"), performs certain administrative functions and other services for the Partnership for cost reimbursements and fees as described in ITEM 1. "BUSINESS - Management and Operations." The individual general partner of SAMLP and the executive officers of SAMI are listed below, together with their ages, terms of service, their principal occupations, business experience, and directorships with other companies during the last five years or more.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
ITEM 10. GENERAL PARTNER OF THE REGISTRANT AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER (Continued)
GENE E. PHILLIPS: Age 58, General Partner (since 1987) of SAMLP; and Chairman of the Board, Director and Chief Executive Officer (since March 1989) of SAMI, the Managing General Partner of SAMLP and a company owned by BCM.
Director and Secretary (since 1982) and the sole shareholder of Syntek West, Inc. ("SWI"); Chairman of the Board (since 1978) of Hungry Bull, Inc.; Limited Partner (since January 1991) of Carmel Realty Services, Ltd. ("Carmel, Ltd."); Chief Executive Officer (February 1989 to September 1992) and Chairman of the Board and Director (February 1989 to December 1989) of BCM; Director and President (November 1989 to September 1992) of Carmel Realty Services, Inc. ("CRSI"); Chairman of the Board (1984 to November 1992), Director (1981 to November 1992), Chief Executive Officer (1982 to July 1991) and President (February 1989 to July 1991) of American Realty Trust, Inc. ("ART"); Trustee or Director (January 1989 to December 1992) of Transcontinental Realty Investors, Inc. ("TCI"), Vinland Property Trust ("VPT"), National Income Realty Trust ("NIRT"), Continental Mortgage and Equity Trust ("CMET") and Income Opportunity Realty Investors, Inc., formerly Income Opportunity Realty Trust (collectively "IORI").
RANDALL M. PAULSON: Age 49, President and Director (since August 1995) and Executive Vice President (January 1995 to August 1995) of SAMI.
President (since August 1995) and Executive Vice President (January 1995 to August 1995) of CMET, IORI and TCI and (October 1994 to August 1995) of BCM; Executive Vice President (since January 1995) of ART; Vice President (1993 to 1994) of GSSW, LP, a joint venture of Great Southern Life and Southwestern Life; Vice President (1990 to 1993) of Property Company of America Realty, Inc.; President (1990) of Paulson Realty Group; President (1983 to 1989) of Johnstown Management Company; and Vice President (1979 to 1982) of Lexton-Ancira.
BRUCE A. ENDENDYK: Age 47, Executive Vice President (since January 1995) of SAMI.
President (since January 1995) of Carmel Realty; Executive Vice President (since January 1995) of BCM, ART, CMET, IORI and TCI; Management Consultant (November 1990 to December 1994); Executive Vice President (January 1989 to November 1990) of Southmark Corporation ("Southmark"); President and Chief Executive Officer (March 1988 to January 1989) of Southmark Equities Corporation; and Vice President/Resident Manager (December 1975 to March 1988) of Coldwell Banker Commercial/Real Estate Services in Houston, Texas.
ITEM 10. GENERAL PARTNER OF THE REGISTRANT AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER (Continued)
THOMAS A. HOLLAND: Age 53, Executive Vice President and Chief Financial Officer (since August 1995) and Senior Vice President and Chief Accounting Officer (July 1990 to August 1995) of SAMI.
Executive Vice President and Chief Financial Officer (since August 1995) and Senior Vice President (July 1990 to August 1995) of BCM, ART, CMET, IORI and TCI; Senior Vice President and Chief Accounting Officer (July 1990 to February 1994) of NIRT and VPT; Vice President and Controller (December 1986 to June 1990) of Southmark; Vice President-Finance (January 1986 to December 1986) of Diamond Shamrock Chemical Company; Assistant Controller (May 1976 to January 1986) of Maxus Energy Corporation (formerly Diamond Shamrock Corporation); Trustee (August 1989 to June 1990) of Arlington Realty Investors; and Certified Public Accountant (since 1970).
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Under the securities laws of the United States, the directors and executive officers of the Partnership's Managing General Partner, and any persons holding more than 10% of the Partnership's units of limited partner interest are required to report their ownership of the Partnership's units and any changes in that ownership to the Securities and Exchange Commission (the "Commission"). Specific due dates for these reports have been established and the Partnership is required to report any failure to file by these dates during 1995. All of these filing requirements were satisfied by the directors and executive officers of the Partnership's Managing General Partner and 10% holders. In making these statements, the Partnership has relied on the written representations of the directors and executive officers of the Partnership's Managing General Partner and its ten percent holders and copies of the reports that they have filed with the Commission.
Administrative Agent. BCM, of which Mr. Phillips served as Chief Executive Officer until September 1, 1992, and of which Mr. Paulson serves as President, performs certain administrative functions such as accounting services, mortgage servicing and real estate portfolio review and analysis for the Partnership on a cost reimbursement basis.
Affiliates of BCM perform property management, loan placement services, leasing services and real estate brokerage and acquisition services, and may perform other services, for the Partnership for fees and commissions. BCM's principal business activity is the providing of advisory services for real estate companies. See ITEM 13. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
The directors and principal officers of BCM are set forth below.
MICKEY N. PHILLIPS: Director
RYAN T. PHILLIPS: Director
ITEM 10. GENERAL PARTNER OF THE REGISTRANT AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER (Continued)
RANDALL M. PAULSON: President
MARK W. BRANIGAN: Executive Vice President
OSCAR W. CASHWELL: Executive Vice President
BRUCE A. ENDENDYK: Executive Vice President
THOMAS A. HOLLAND: Executive Vice President and Chief Financial Officer
COOPER B. STUART: Executive Vice President
CLIFFORD C. TOWNS, JR.: Executive Vice President, Finance
ROBERT A. WALDMAN: Senior Vice President, Secretary and General Counsel
DREW D. POTERA: Vice President, Treasurer and Securities Manager
Mickey N. Phillips is Gene E. Phillips' brother and Ryan T. Phillips is Gene E. Phillips' son.
Oversight Committee. As more fully described under ITEM 3. "LEGAL PROCEEDINGS - - Moorman Settlement," the Partnership is a party to the Moorman Settlement Agreement that, among other things, established an Oversight Committee which will exist only until termination of the Moorman Settlement Plan. The current members of the Oversight Committee are Kenneth R. Kelly, Ronald T. Baker and Joseph S. Radovsky. Mr. Kelly is the current Chairman and Secretary of the Oversight Committee.
Unanimous consent of the Oversight Committee is required, during the term of the Moorman Settlement Plan, for the Partnership to adopt a new unit purchase rights plan, or for SAMLP, on behalf of the Partnership, to enter into or modify any transaction (other than certain transactions expressly permitted by the Partnership Agreement) with an affiliate (as defined below) of the Partnership, SAMLP, or Mr. Phillips or William S. Friedman, a general partner of SAMLP until March 4, 1994. Majority consent of the Oversight Committee is required, during the term of the Moorman Settlement Plan, for SAMLP, on behalf of the Partnership, to purchase securities of other issuers other than certain money market instruments and mortgages in the ordinary course of the Partnership's business, or to enter any new line of business. For purposes of the Moorman Settlement Agreement, an "Affiliate" of the Partnership, SAMLP, or Messrs. Phillips and Friedman (each, a "Specified Party") is any person or entity that (i) directly or indirectly through one or more intermediaries controls or is controlled by or is under common control with the Specified Party, (ii) owns or controls 10% or more of the outstanding voting securities of the Specified Party, or (iii) is an officer or director of, general partner in, or serves in a similar
ITEM 10. GENERAL PARTNER OF THE REGISTRANT AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER (Continued)
capacity to the Specified Party or of which the Specified Party is an officer, director, or general partner or with respect to which the Specified Party serves in a similar capacity.
On July 8, 1992, SAMLP notified the Oversight Committee of the failure to meet the Targets (as defined in ITEM 3. "LEGAL PROCEEDINGS - Moorman Settlement") for two successive years. The Moorman Settlement Agreement provides that between the date of the certification causing the General Partner's resignation and the date a successor general partner takes office, the resigning General Partner shall limit its activities, as General Partner, to the conduct of the business of the Partnership in the ordinary course, shall not, without consent of the Oversight Committee, purchase or sell any real property or other assets of the Partnership not in progress on said date, shall cooperate in the election of a successor general partner and shall cooperate with its successor to facilitate a change in the office of General Partner of the Partnership. The resigning General Partner will continue to receive fees, expenses and distributions, if any, while the solicitation is prepared. See ITEM 8. "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."
Pursuant to the Moorman Settlement Agreement, the Partnership pays each member of the Oversight Committee $50,000 per year. The Partnership's obligation to pay such compensation ceased May 9, 1995. However, the Supervising Judge entered an order on May 19, 1995, providing that the obligation to pay such compensation shall continue until the Moorman Settlement Plan has been terminated and the Oversight Committee has been dissolved. The Partnership also pays the salary of an Oversight Committee employee, and reimburses certain of the Oversight Committee's expenses including legal fees.
The principal occupations and relevant affiliations of the Oversight Committee members, as furnished to the Partnership by such members, are as follows:
KENNETH R. KELLY: Age 49, member (since July 1990), Chairman (since January 1995) and Secretary (since July 1990) of the Oversight Committee.
President (since 1986) of Proximity Research Corporation, a real estate firm based in Auburn, California. Mr. Kelly has been involved in the real estate investment business throughout the United States for the past twenty years. Mr. Kelly is a member of the State Bar of California.
RONALD T. BAKER: Age 48, member (since July 1990) and Chairman (July 1990 to January 1995) of the Oversight Committee.
President of INVENEX (formerly known as Partnership Securities Exchange, Inc.) ("INVENEX") , a manufacturing company. INVENEX was one of the initial plaintiffs in the Moorman action discussed in ITEM 3. "LEGAL PROCEEDINGS - Moorman Settlement."
ITEM 10. GENERAL PARTNER OF THE REGISTRANT AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER (Continued)
JOSEPH S. RADOVSKY: Age 52, member (since July 1992) of the Oversight Committee.
Partner with Greene, Radovsky, Maloney and Share, a law firm in San Francisco, California.
Fairness Committee. National Realty's Fairness Committee periodically reviewed certain transactions between the Partnership and its affiliates. The Partnership Agreement requires Fairness Committee approval of the interest rate to be paid on loans from the General Partner or its affiliates, the terms of any property sales to or purchases from the General Partner or its affiliates, the purchase of securities from the General Partner or its affiliates and, upon any withdrawal of the General Partner, the purchase price of the General Partner's interest in the Partnership and in the fees and other compensation to be paid under the Partnership Agreement.
The Partnership Agreement provides that the Fairness Committee shall consist of two or more natural persons, none of whom shall be affiliates (as defined in the Partnership Agreement) of the General Partner except as directors of the Managing General Partner.
The Fairness Committee consisted of two members until February 1995, when Raymond V. J. Schrag resigned. The remaining member of the Fairness Committee, Willie K. Davis, resigned in August 1995.
Audit Committee. National Realty's Audit Committee, which reviews certain matters relating to the Partnership's auditors and annual and quarterly financial statements, was established effective August 3, 1990, pursuant to the Moorman Settlement Agreement. The chairman and only member of the Audit Committee is Harry J. Reidler, an attorney in private practice in Englewood, New Jersey.
Mr. Reidler has performed legal services for the Partnership.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
Neither National Realty nor the Operating Partnership has any employees, payroll or benefit plans and pays no salary or other cash compensation directly to any person other than (i) $50,000 per year to each member of the Oversight Committee plus $48,000 per year to an analyst engaged by the Oversight Committee, (ii) $4,000 per year to each member of the Fairness and Audit Committees and (iii) fees and expense reimbursements in accordance with the Partnership Agreement to the General Partner or its affiliates for services provided to the Partnership. See ITEM 8. "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA."
SAMI has no employees, payroll or benefit plans and pays no compensation to its officers or directors.
The Moorman Settlement Agreement provides that effective May 1, 1990 the Partnership's future reimbursement of any salaries which may be paid to Messrs. Phillips and Friedman shall be limited to an aggregate of
ITEM 11. EXECUTIVE COMPENSATION (Continued)
$500,000 per year, for any such reimbursement of salaries to be deferred until such time as a Target, as defined in the Moorman Settlement Agreement, may be met and, if SAMLP resigns as General Partner during the pendency of the Moorman Settlement Plan, for the waiver of any reimbursement of salary so deferred. Accordingly, no reimbursement for the salaries of Messrs. Phillips and Friedman was charged to or paid by the Partnership in the period January 1, 1991 through December 31, 1995. Mr. Friedman resigned as a general partner of SAMLP on March 4, 1994.
Mr. Phillips may indirectly benefit from other payments made by the Partnership to certain related parties.
Mr. Reidler received $4,000 in 1995 for serving on the Partnership's Audit Committee. Messrs. Kelly, Baker and Radovsky each received $50,000 in 1995 for serving on the Oversight Committee. See ITEM 10. "GENERAL PARTNER OF THE REGISTRANT AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER."
[THIS SPACE INTENTIONALLY LEFT BLANK.]
ITEM 11. EXECUTIVE COMPENSATION (Continued)
Performance Graph
The following performance graph compares the cumulative total unitholder return on the Partnership's units of limited partner interest with the Dow Jones Market Index ("DJ Market Index") and the Dow Jones Real Estate Index ("DJ Real Estate Index"). The comparison assumes that $100 was invested on December 31, 1990 in the Partnership's units of limited partner interest and in each of the indices and further assumes the reinvestment of all distributions. Past performance is not necessarily an indicator of future performance.
[GRAPH]
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners. The following table sets forth the ownership of National Realty's units of limited partner interest, both beneficially and of record, both individually and in the aggregate, for those persons known by National Realty to be beneficial owners of more than 5% of its units of limited partner interest, as of the close of business on March 15, 1996.
(1) Percentage is based upon 6,417,916 units of limited partner interest outstanding at March 15, 1996.
Security Ownership of Management. The following table sets forth the ownership of National Realty's units of limited partner interest, both beneficially and of record, both individually and in the aggregate, by SAMLP, the general partners of SAMLP, and the executive officers and directors of SAMI, as of the close of business on March 15, 1996.
(1) Percentage is based upon 6,417,916 units of limited partner interest outstanding as of March 15, 1996.
(2) Includes 3,340,522 units owned by ART and 286,175 units owned by BCM, of which the general partners of SAMLP and the directors and executive officers of SAMI, ART and BCM may be deemed to be the beneficial owners by virtue of their positions as general partners of SAMLP and executive officers of SAMI, ART and BCM. SAMLP's general partners and the directors and executive officers of SAMI, ART and BCM disclaim beneficial ownership of such units.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Business Relationships
National Realty is the sole limited partner of the Operating Partnership and owns 99% of the beneficial interest in the Operating Partnership. SAMLP is the general partner of, and owner of a 1% beneficial interest
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
Certain Business Relationships (Continued)
in, each of National Realty and the Operating Partnership. Southmark Asset Management, Inc., a wholly-owned subsidiary of Southmark, was the managing general partner of SAMLP until January 17, 1989, when it transferred its 96% limited partnership interest to ART, a real estate investment company of which Messrs. Phillips and Friedman served as officers and directors until November 16, 1992 and December 31, 1992, respectively. As a result, Messrs. Phillips and Friedman became the sole general partners of SAMLP, and each owned 2% of the beneficial interest in SAMLP. On February 25, 1992, ART transferred a 19.2% limited partner interest in SAMLP to Southmark pursuant to a litigation settlement.
On July 18, 1989, Messrs. Phillips and Friedman each assigned .05% of their general partner interest in SAMLP to SAMI, a company of which Mr. Phillips serves as a director, Chairman of the Board and Chief Executive Officer and of which BCM is the sole shareholder. On March 4, 1994, Mr. Friedman resigned as a general partner of SAMLP. As a result, Mr. Phillips and SAMI are the general partners of SAMLP, with 1.95% and .10%, respectively, of the beneficial interest in SAMLP. Mr. Friedman's 1.95% interest in SAMLP is now a limited partner interest. SAMI was appointed Managing General Partner of SAMLP on June 18, 1990. Bruce A. Endendyk, Executive Vice President of SAMI, was Executive Vice President from January 1989 to November 1990 of Southmark and President and Chief Executive Officer of Southmark Equities Corporation from March 1988 to January 1989. Thomas A. Holland, Executive Vice President and Chief Financial Officer of SAMI, was Vice President and Controller of Southmark from December 1986 to June 1990.
Since February 1, 1990, affiliates of the General Partner have provided property management services to the Partnership. Currently, Carmel, Ltd. provides property management services for a fee of 5% or less of the monthly gross rents collected on the properties under its management. Carmel, Ltd. subcontracts with other entities for the property-level management services to the Partnership at various rates. The general partner of Carmel, Ltd. is BCM. The limited partners of Carmel, Ltd. are (i) SWI, of which Mr. Phillips is the sole shareholder, (ii) Mr. Phillips and (iii) a trust for the benefit of Mr. Phillips' children. BCM is a company which is owned by a trust for the benefit of the children of Mr. Phillips. BCM performs certain administrative and other functions for the Partnership. See ITEM 1. "BUSINESS - Management and Operations" and ITEM 11. "EXECUTIVE COMPENSATION."
Messrs. Paulson, Endendyk and Holland serve as executive officers of BCM. Mr. Phillips served as a director until December 1989 and Chief Executive Officer until September 1, 1992, of BCM. Messrs. Paulson, Endendyk and Holland serve as executive officers of CMET, IORI, TCI and ART. BCM serves as advisor to CMET, IORI, TCI and ART.
Mr. Kelly, who serves as President of Proximity Research Corporation and who also serves as Chairman and Secretary of the Oversight Committee, has provided professional services to the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
Related Party Transactions
The Partnership has engaged in business transactions with certain related parties and may continue to do so, subject to unanimous approval of the Oversight Committee during the term of the Moorman Settlement Plan as discussed under ITEM 10. "GENERAL PARTNER OF THE REGISTRANT AND EXECUTIVE OFFICERS OF THE REGISTRANT'S GENERAL PARTNER - Oversight Committee." The Partnership believes that all of the related party transactions were at least as advantageous to the Partnership as could have been obtained from unrelated third parties.
The Partnership has paid and pays cost reimbursements, property management fees or other cash compensation to the General Partner and its affiliates and other related parties as described in ITEM 11. "EXECUTIVE COMPENSATION" and ITEM 1. "BUSINESS - Management and Operations." BCM, an affiliate of the General Partner, performs certain administrative functions for the Partnership on a cost reimbursement basis. The Fairness Committee has approved the formula for computing the Partnership's proportionate share of certain of BCM's reimbursable costs. GCMI performs administrative functions, similar to those performed for the Partnership by BCM, for GCLP on a cost reimbursement basis. Since February 1, 1990, affiliates of the General Partner have provided property management services to the Partnership. Currently, Carmel, Ltd., provides such property management services. Carmel, Ltd. subcontracts with other entities for the property-level management services to the Partnership. Carmel, Ltd. subcontracts the property-level management and leasing of twelve of the Partnership's commercial properties to Carmel Realty, which is a company owned by SWI. Carmel Realty is entitled to receive property and construction management fees and leasing commissions in accordance with the terms of its property-level management agreement with Carmel, Ltd. Carmel, Ltd. does not perform property management services to the properties of GCLP. Carmel, Ltd. and Carmel Realty also perform similar services for ART, CMET, IORI and TCI. See NOTE 11. "GENERAL PARTNER FEES AND COMPENSATION" included in Notes to Consolidated Financial Statements at ITEM 8. "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA," for a summary of fees paid and costs reimbursed by the Partnership.
The Partnership's Fairness Committee periodically reviewed certain transactions between the Partnership and its affiliates. See ITEM 1. "BUSINESS - Management and Operations." The Fairness Committee approved the terms of the Partnership's contracts and terms for services and reimbursements with affiliates. Messrs. Schrag and Davis, the members of the Fairness Committee, resigned from the committee in February and August 1995, respectively.
The Partnership's Oversight Committee must approve certain types of transactions between the Partnership and SAMLP or its affiliates, as defined in the Moorman Settlement Agreement. See ITEM 3. "LEGAL PROCEEDINGS - Moorman Settlement."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Continued)
Indebtedness of Management
In return for its 1% interest in National Realty, the General Partner was required to make aggregate capital contributions to National Realty in an amount equal to 1.01% of the total initial capital contributions to the Partnership. The General Partner contributed $500,000 cash with the remaining portion evidenced by a promissory note in the principal amount of $4.2 million, bearing interest at the rate of 10% per annum compounded semi-annually and payable on the earlier of September 18, 2007, liquidation of the Partnership or a termination of the General Partner's interest in the Partnership. As of December 31, 1995, no payments had been received on such note. At December 31, 1995, accrued and unpaid interest on the note totaled $5.2 million.
_____________________________
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Consolidated Financial Statements
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Operations - Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Changes in Partners' Equity (Deficit) - Years Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years Ended December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule III - Real Estate and Accumulated Depreciation
Schedule IV - Mortgage Loans on Real Estate
All other schedules are omitted because they are not applicable or because the required information is shown in the Consolidated Financial Statements or the Notes thereto.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K (Continued)
3. Exhibits
The following documents are filed as Exhibits to this Report:
Exhibit Number Description - ------- ---------------------------------------------------------------------
3.0 National Realty, L.P. Amended and Restated Certificate of Limited Partnership, dated March 4, 1987 (incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement No. 33-16215 on Form S- 4).
3.1 National Realty, L.P. First Amended and Restated Agreement of Limited Partnership, dated as of January 29, 1987 (incorporated by reference to Exhibit 4.1 to the Registrant's Registration Statement No. 33-16215 on Form S-4).
3.2 Certificate of Amendment of Limited Partnership Agreement of National Realty, L.P. dated as of May 14, 1990 (incorporated by reference to Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1990).
4.0 Indenture, dated as of September 18, 1987, by and between National Realty, L.P. and Mellon Bank, N.A. (incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement No. 33-16215 on Form S-4).
4.1 Amendment No. 1, dated as of December 28, 1987, to Trust Indenture between National Realty, L.P. and Mellon Bank, N.A. (incorporated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1988).
4.2 Form of Warrant Agreement between National Realty, L.P. and American Stock Transfer and Trust Company, as Warrant Agent (incorporated by reference to Exhibit 4.5 to the Registrant's Registration Statement No. 33- 38352 on Form S-11)
10.0 Loan Agreement dated as of November 24, 1992 by and among First Commonwealth Realty Credit Corporation as Lender, and Garden Kimberly Woods L.P. et. al., as Borrower. (incorporated by reference to Exhibit 10.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992).
11.0 Computation of Earnings Per Unit, filed herewith.
21.0 Subsidiaries of the Registrant, filed herewith.
27.0 Financial Data Schedule, filed herewith.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K (Continued)
Exhibit Number Description - ------- ---------------------------------------------------------------------
99.0 Agreement of Limited Partnership of National Operating, L.P. (incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement No. 33-16215 on Form S-4).
99.1 Limited Partnership Agreement of Garden Capital, L.P. between Garden Capital Management Incorporated and National Operating, L.P. (incorporated by reference to Exhibit 28.2 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992).
99.2 Settlement Agreement, dated as of May 9, 1990, relating to the action entitled Moorman et. al v. Southmark Corporation et al. (incorporated by reference to Exhibit 5.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1990).
99.3 Amended and Restated Implementation Agreement, dated February 20, 1996, among National Realty, L.P., Syntek Asset Management, L.P., National Realty, L.P. Oversight Committee and William H. Elliott (incorporated by reference to Exhibit 99.2 to the Registrant's Current Report on Form 8-K, dated February 27, 1996).
(b) Reports on Form 8-K
A Current Report on Form 8-K, dated February 27, 1996, was filed with respect to Item 5, "Other Events", which reports the execution of the Amended and Restated Implementation Agreement.
NATIONAL REALTY, L.P. Signature Page
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.
NATIONAL REALTY, L.P.
By its General Partner:
SYNTEK ASSET MANAGEMENT, L.P.
By its General Partners:
SYNTEK ASSET MANAGEMENT, INC.
By: /s/ Randall M. Paulson --------------------------------- Randall M. Paulson President
/s/ Gene E. Phillips --------------------------------- Gene E. Phillips
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Syntek Asset Management, L.P., as General Partner of the Registrant and in the capacities and on the dates indicated.
NATIONAL REALTY, L.P.
EXHIBITS TO ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 1995