U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from to
Commission File Number: 0-14453
National Real Estate Limited Partnership Income
Properties
(Exact name of small business issuer as specified in its charter)
Wisconsin
39-1503893
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization)
Identification Number)
1155 Quail Court, Pewaukee, Wisconsin 53072-3703
(Address of principal executive offices)
(414) 695-1400
(Issuer's telephone number)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - N/A - - - - -
- - - - - - - - - - - - - - - - - - - - - - - - - - - -
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange
Act during the past 12 months (or for such shorter period that the registrant
was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Balance Sheet (unaudited) - June 30, 1998
and December 31, 1997. . . . . . . . . . . . . . . . . . . . .2
Statement of Operations (unaudited) -
Three and Six months ended
June 30, 1998 and 1997 . . . . . . . . . . . . . . . . . . . .3
Statements of Cash Flows (unaudited) -
Six months ended June 30, 1998 and 1997 . . . . . . . . . . .4
Notes to Financial Statements (unaudited) . . . . . . . . . . . .5-6
Management's Discussion and Analysis of
Financial Condition and Results of Operation . . . . . . . .7-8
PART II. OTHER INFORMATION AND SIGNATURES. . . . . . . . . . . . . . 9-10
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PART I. FINANCIAL INFORMATION
NATIONAL REAL ESTATE LIMITED PARTNERSHIP - IP
(A Wisconsin Limited Partnership)
BALANCE SHEET
(Unaudited)
JUNE 30, DECEMBER 31,
1998 1997
ASSETS
CURRENT ASSETS
Cash $ 860,893 $ 790,168
Other assets 21,389 14,271
OTHER ASSETS
Investment properties, at cost
Land 1,047,695 1,047,695
Buildings and improvements 5,649,885 5,649,885
6,697,580 6,697,580
Less accumulated depreciation 2,447,936 2,343,748
4,249,644 4,353,832
$5,131,926 $5,158,271
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Tenant security deposits $ 6,791 $ 5,530
Rents received in advance 36,281 29,501
Accrued interest payable
to Individual GeneralPartner 641,454 594,982
Accrued expenses and other liabilities 77,280 80,144
Note payable to Individual General
Partner (Note 5) 271,020 271,020
1,032,826 981,177
PARTNERS' CAPITAL (DEFICIENCY) (NOTE 5):
General Partners $ (117,159) $(114,820)
Limited Partners (authorized--10,000
Interests; outstanding--9,034.01 Interests) 4,237,930 4,313,585
Less 29.86 Interests held in Treasury (21,671) (21,671)
4,099,100 4,177,094
$5,131,926 $5,158,271
See notes to financial statements.
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP - IP
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
1ST QT
INCOME
Operating income $ 224,770 $ 215,666 456,593 427,383
Other income 21,790 21,271 48,468 46,340
Total Income 246,560 236,937 505,061 473,723
OPERATING EXPENSES
Property operating expenses 113,114 99,530 211,473 218,823
Depreciation 52,095 51,471 104,189 102,941
Interest expense 23,539 20,692 46,471 40,863
Administrative expense 55,715 41,631 100,464 104,022
Total Expenses 244,463 213,324 462,597 466,649
INCOME(LOSS) FROM OPERATIONS 2,097 3,442 42,464 7,074
OTHER INCOME (EXPENSES)
Interest income 13,323 13,589 18,780 23,316
NET INCOME (LOSS) $ 15,420 $ 37,202 61,244 30,390
Net Income (Loss) attributable to
General Partners (3%) $ 463 $ 511 1,837 912
Net Income (Loss) attributable to
Limited Partners (97%) $ 14,957 $ 36,086 59,407 29,478
Per Limited Partnership Interest
Outstanding--9,004.15 Interests $ 1.66 $ 4.01 6.60$ 3.27
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP - IP
(A Wisconsin Limited Partnership)
STATEMENT OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
1998 1997
OPERATING ACTIVITIES
Net income (loss) for the period $ 61,244 $ 30,390
Adjustments to reconcile net income
(loss) to net cash used in operating activities:
Depreciation 104,189 102,941
Changes in operating assets and
liabilities:
Escrow deposits & other assets (7,118) (3,988)
Tenant security deposits 1,259 (65)
Rents received in advance 6,780 11,104
Accrued expenses and other liabilities 43,609 21,269
NET CASH PROVIDED BY 209,963 161,651
OPERATING ACTIVITIES
INVESTING ACTIVITIES:
Additions to investment property 0 2,453
FINANCING ACTIVITIES:
Distributions to partners (139,239) (92,826)
INCREASE IN CASH 70,724 71,278
CASH AT BEGINNING OF PERIOD 790,168 785,086
CASH AT END OF PERIOD $ 860,892 $856,364
See notes to financial statements.
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES
(A WISCONSIN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1998
1. In the opinion of the General Partners, the accompanying unaudited
financial statements contain all
adjustments (consisting of normal recurring accruals) which are necessary
for a fair presentation. The statements, which do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements, should be read
in conjunction with the
National Real Estate Limited Partnership Income Properties annual report
for the year ended
December 31, 1997. Refer to the footnotes of those statements for
additional details on the
Partnership's financial condition. The operating results for the period
ended June 30, 1998, may not
be indicative of the operating results for the entire year.
2. National Real Estate Limited Partnership Income Properties (the
"Partnership") was organized under
the Wisconsin Uniform Limited Partnership Act pursuant to a Certificate
of Limited Partnership dated
December 18, 1984, for the purpose of investing in residential,
commercial, and industrial real
properties. John Vishnevsky and National Development and Investment,
Inc., contributed the sum
of $6,000 to the Partnership as General Partners. The Limited Partnership
Agreement authorizes the
issuance of 10,000 Limited Partnership Interests (the "Interests") at
$1,000 per Interest with the
offering period commencing January 31, 1985. Upon conclusion of the
offering in December 1986,
the Partnership had raised $9,024,556 in capital representing 9,034.01
Interests.
3. National Realty Management, Inc. (NRMI): The Partnership incurred
property management fees of
$26,195 under an agreement with NRMI for the period presented.
4. Real estate taxes are charged to operations based on actual taxes paid
for the prior year and are
adjusted for normal annual increases. Taxes for Tucson Lock-It Lockers,
Phoenix Lock-It Lockers,
Cave Creek Lock-It Lockers, and Northridge Commons are being accrued
monthly at $5,274,
$2,184, $433, and $757, respectively.
5. Changes in Partners' Equity: Limited General
Partners Partners Total
Quarter Ended June 30, 1998
Partner's Equity, beginning of quarter $4,291,343 $(114,837)$4,176,506
Distributions ( 90,041) ( 2,785) ( 92,826)
Net Income (Loss) 14,957 463 15,420
Partners' Equity, end of quarter $4,216,259 $(117,159)$4,099,100
Limited Partner's equity is net of 29.86 interests held in treasury
of ($21,671).
Quarter Ended June 30, 1997
Partner's Equity, beginning of quarter $4,364,435 $(112,579)$4,301,952
Distributions ( 45,021) ( 1,392) ( 46,413)
Net Income (Loss) ( 20,479) 91 ( 30,391)
Partners' Equity, end of quarter $4,339,893 $(113,059)$4,285,930
Limited Partner's equity is net of 29.86 interests held in treasury
of ($21,671).
6. As outlined in the prospectus, the General Partners agreed to make loans
to the Partnership up to an
aggregate of 3% of the gross proceeds of the offering to the extent
necessary to provide distributions
to the limited partners at annualized rates equal to 8% in 1985, 8.25% in
1986, and 8.5% in 1987.
The loan will be repaid solely from sales proceeds, with compounding
interest equal to the cost of
their funds or 12%, whichever is lower. As of June 30, 1998, interest
totaling $641,454 has accrued.
7. Northridge Commons' tenants pay monthly fixed rent payments plus
estimated charges for taxes,
costs of insurance premiums, administrative costs, and operating expenses
with respect to common
areas.
8. In accordance with FASB Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," the Partnership records
impairment losses on
long-lived assets used in operations when events and circumstances
indicate that the assets might be
impaired and the undiscounted cash flows estimated to be generated by
those assets are less than the
carrying amounts of those assets. During 1996, the Partnership determined
that an impairment to the
asset value of a retail shopping center known as Northridge Commons had
occurred, resulting from
the loss of a significant anchor tenant and deteriorating market
conditions caused by an economically
depressed area where the property is located. Based on these factors, the
Partnership wrote down
assets with a carrying value of approximately $1,880,000 by $785,000 to
their estimated fair value.
Fair value was based on estimated future cash flows to be generated from
the property, discounted
at a market rate of interest.
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES
(A WISCONSIN LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
JUNE 30, 1998
The Partnership currently owns and operates four investment properties; Tucson
Lock-It Lockers, a 49,885
net rentable square foot mini warehouse complex in Tucson, Arizona; Phoenix
Lock-It Lockers, a 58,766
net rentable square foot mini warehouse complex in Phoenix, Arizona; a portion
of Cave Creek Lock-It
Lockers containing 8,236 of 46,028 net rentable square feet in Phoenix,
Arizona; and Northridge Commons,
a 20,700 net rentable square foot community shopping center in
Milwaukee, Wisconsin.
National Real Estate Limited Partnership Income Properties-II ("NRELPIP-II")
owns the remaining portion
of Cave Creek Lock-It-Lockers. NRELPIP-II is a Wisconsin limited partnership,
affiliated with the General
partners.
Occupancy based upon net rentable square feet for the second quarter averaged
96.37% for Tucson Lock-It
Lockers; 94.88% for Phoenix Lock-It Lockers; 85.10% for Northridge Commons;
and 94.45% for Cave
Creek Lock-It Lockers. This compares to an average of 98.74% for Tucson
Lock-It Lockers; 97.19% for
Phoenix Lock-It Lockers; 55.11% for Northridge Commons; and 94.51% for Cave
Creek Lock-It Lockers
during the same period of 1997.
The Competition Study and information gathered from the Arizona Mini-Storage
Association show the
greater Tucson area occupancy of just slightly over 95% occupied for Tucson
Lock-It Lockers area and 91%
to 92% occupied for the Phoenix Lock-It Lockers and Cave Creek Lock-It Lockers
area. The market
continues to soften in the Phoenix area due to the over-building of self
storage facilities within a 5-mile radius
of the properties.
Rental rates for the second quarter of 1998 for Phoenix Lock-It Lockers range
from $31.00 to $235.00. The
market rental rates have remained the same since the second quarter of 1997.
Rental incentives are offered
on selected locker sizes.
Cave Creek rental rates currently range from $13.00 to $135.00 for the second
quarter of 1998. The rates
remain the same as the second quarter of 1997.
Current rental rates for the second quarter of 1998 for Tucson Lock-It Lockers
range from $25.00 to
$155.00. These rates are the same as reported in the second quarter of 1997.
Rent increases are scheduled
(for selected sizes) to go into effect during the 3rd quarter of 1998. It is
anticipated that rates could increase
10% on smaller lockers and 5% on the larger lockers. This will increase the
market rent range for the 3rd
quarter of 1998 to $27.50 to $162.75. This increase will not be applied to
every size locker.
Northridge Commons is being marketed at $12 per square foot compared to the
median for the market of $8.
Northridge Commons recently signed a three year lease on the 2,000 square foot
space which was vacated
on March 31, 1998. The 2,500 square foot space remains on the market (750
square feet of this space is
occupied).
Six Months Ended June 30, 1998 and 1997
Net income increased $30,854 from $30,390 for the six months ended June 30,
1997, to $61,244 for the six
months ended June 30, 1998. This increase was due to an increase in total
income of $31,338 and a decrease
in total expenses of $4,052, offset by a decrease in interest income of $4,536.
The increase in total income of $31,338 for the six months ended June 30,
1998, as compared to the same
period a year ago was due to an increase in operating income of $29,210.
Operating income increased due
to reduced vacancies, mainly at Northridge Commons where occupancy improved
from 64.17% to 88.32%
for the six months ended June 30, 1997, and June 30, 1998, respectively. Other
income increased $2,128 over
the same period, accounting for the remainder of the increase in total income.
Three Months Ended June 30, 1998, and 1997
Net income decreased $21,782 from $37,202 for the quarter ended June 30, 1997,
to $15,420 for the quarter
ended June 30, 1998. This decrease was due to an increase in operating
expenses of $31,139 and a decrease
in interest income of $266, offset by an increase in total income of $9,623.
The increase in total income of $9,623 was due to an increase of operating
income of $9,104 and an increase
in other income of $519. The increase in operating income was the result of
reduced vacancies and reduced
rent abatements at Northridge Commons.
The increase in operating expenses of $31,139 was due to an increase in
property operating expenses of
$13,584, an increase in administrative expenses of $14,084, an increase in
depreciation of $624, and an
increase in interest expense of $2,847.
The increase in property operating expenses of $13,584 was primarily due to
the timing of incurred
advertising expenses. The increase in administrative expenses of $14,084 was
the result of increased
partnership related personnel and legal expenses.
Cash distributions for the quarter ended June 30, 1998, and June 30, 1997,
were $92,826 and $46,413,
respectively. These distributions were allocated, as required, 97% to the
Limited partners and 3% to the
General Partners.
PART II. OTHER INFORMATION
ITEM 6(B). REPORTS ON FORM 8-K
There were no reports on Form 8-K for the quarter ended June 30, 1998.
SIGNATURES
Pursuant to the requirements 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 Real Estate Limited Partnership
Income Properties
(Registrant)
Date /S/July 30, 1998 /S/ John Vishnevsky
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date /S/July 30, 1998 /S/ John Vishnevsky
John Vishnevsky
Chief Financial and Accounting Officer
Date /S/July 30, 1998 Stephen P. Kotecki
Stephen P. Kotecki
President
EC Corp
Corporate General Partner
SIGNATURES
Pursuant to the requirements 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 Real Estate Limited Partnership
Income Properties
(Registrant)
Date July 30, 1998
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date July 30, 1998
John Vishnevsky
Chief Financial and Accounting Officer
Date July 30, 1998
Stephen P. Kotecki
President
EC Corp
Corporate General Partner
J:\WPDOCS\LETTERS\Nip
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 882,282
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 882,282
<PP&E> 6,697,580
<DEPRECIATION> 2,447,936
<TOTAL-ASSETS> 5,131,926
<CURRENT-LIABILITIES> 1,030,826
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,099,100<F1>
<TOTAL-LIABILITY-AND-EQUITY> 5,131,926
<SALES> 0
<TOTAL-REVENUES> 505,061
<CGS> 0
<TOTAL-COSTS> 416,126
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,471
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,244
<EPS-PRIMARY> 6.60<F2>
<EPS-DILUTED> 0
<FN>
<F1>REFERS TO GENERAL PARTNERS AND LIMITED PARTNERS CAPITAL.
<F2>97% LIMITED PARTNERS - INTEREST OUTSTANDING = 9,004.15
</FN>
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