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, 1999
( ) 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) (Zip Code)
(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
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . .2
Balance Sheet (unaudited) - June 30, 1999
and December 31, 1998 . . . . . . . . . . . . . . . . . .2
Statement of Operations (unaudited) -
Three and Six months ended June 30, 1999, and 1998. . .3
Statements of Cash Flows (unaudited) -
Six months ended June 30, 1999, and 1998 . . . . . . . .4
Statement of Changes in Partners' Equity (unaudited) -
Six months ended June 30, 1999 and 1998 . . . . . . . . .5
Notes to Financial Statements (unaudited). . . . . . . . . . .6
Item 2. Management's Discussion and Analysis or Plan of Operation .8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 11
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . 11
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders . . . 11
Item 5. Other information . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . 11
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NATIONAL REAL ESTATE LIMITED PARTNERSHIP-IP
(A Wisconsin Limited Partnership)
BALANCE SHEET
(Unaudited)
June 30, December 31,
1999 1998
ASSETS
Current Assets
Cash $802,294 $838,841
Other Assets 15,350 33,058
Other Assets
Investment properties, at cost
Land 1,047,695 1,047,695
Buildings and improvements 5,708,772 5,682,323
___________ __________
6,756,467 6,730,018
Less accumulated depreciation 2,667,415 2,561,582
__________ _________
4,089,052 4,168,436
__________ __________
$4,906,696 $5,040,335
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Tenant security deposits $6,895 $6,875
Rents received in advance 40,101 49,033
Accrued interest payable to Individual 736,585 689,228
General Partner
Accrued expenses and other liabilities 75,776 80,365
Note payable to Individual General Partner 271,020 271,020
_________ _________
1,130,377 1,096,521
Partners' Capital (deficiency):
General Partners ($126,844) ($121,819)
Limited Partners 3,924,834 4,087,304
(authorized
Less 29.86 Interests held in Treasury (21,671) (21,671)
_________ _________
3,776,319 3,943,814
__________ ________
SEE NOTES TO FINANCIAL STATEMENTS. $4,906,696 $5,040,335
NATIONAL REAL ESTATE LIMITED PARTNERSHIP-IP
(A WISCONSIN LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
1999 1998 1999 1998
INCOME
Operating income $219,199 $224,770 $442,677 $456,593
Other income 15,348 21,790 40,714 48,468
________ _______ _______ _______
Total Income 234,547 246,560 483,391 505,061
OPERATING EXPENSES
Property operating expenses 113,190 113,114 226,253 211,473
Depreciation 53,174 52,095 105,833 104,189
Interest expense 23,760 23,539 47,357 46,471
Administrative expense 57,429 55,715 106,967 100,464
_______ ______ _______ _______
Total Expenses 247,553 244,463 486,410 462,597
_______ _______ ________ _______
INCOME (LOSS) FROM OPERATIONS (13,006) 2,097 (3,019) 42,464
_______ _____ ________ _______
OTHER INCOME (EXPENSES)
Interest income 11,137 13,323 21,177 18,780
______ ______ _______ _______
NET INCOME (LOSS) ($1,869) $15,420 $18,158 $61,244
======== ======= ====== ======
Net Income (Loss) ($56) $463 $545 $1,837
attributable to
General Partners (3%)
Net Income (Loss) ($1,813) $14,957 $17,613 $59,407
attributable to
Limited Partners (97%)
Per Limited Partnership Interest($0.20) $1.66 $1.96 $6.60
Outstanding -9,004.15 Interest
SEE NOTES TO FINANCIAL STATEMENTS.
NATIONAL REAL ESTATE LIMITED PARTNERSHIP-IP
(A Wisconsin Limited Partnership)
Statement of Cash Flows
(Unaudited)
Six Months Ended
June 30,
1999 1998
OPERATING ACTIVITIES
Net income (loss) for the period $18,158 $61,244
Adjustments to reconcile net income (loss) to
Net cash used in operating activities:
Depreciation 105,833 104,189
Changes in operating assets and liabilities:
Escrow deposits & other assets 17,708 (7,118)
Tenant security deposits 20 1,259
Rents received in advance (8,932) 6,780
Accrued expenses and other liabilities 42,768 43,609
________________________
NET CASH PROVIDED BY OPERATING ACTIVITIES 175,555 209,963
INVESTING ACTIVITIES:
Additions to investment property (26,449) 0
FINANCING ACTIVITIES:
Distributions to partners (185,653) (139,239)
________________________
INCREASE (DECREASE) IN CASH (36,547) 70,724
CASH AT BEGINNING OF PERIOD 838,841 790,168
________________________
CASH AT END OF PERIOD $802,294 $860,892
========================
SEE NOTES TO FINANCIAL STATEMENTS.
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES
(A WISCONSIN LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' EQUITY:
(UNAUDITED)
JUNE 30, 1999
Limited General
Partners Partners Total
Six Months Ended June 30, 1999
Partner's Equity, beginning of year $4,065,633 ($121,819) $3,943,814
Distributions (180,083) (5,570) (185,653)
Net Income (Loss) 17,613 545 18,158
--------- -------- --------
Partners' Equity, ending $3,903,163 ($126,844) $3,776,319
========= ========= =========
Limited Partner's equity is net of 29.86 interests held in treasury of
($21,671).
Six Months Ended June 30, 1998
Partner's Equity, beginning of year $4,291,914 $(114,820) $4,177,094
Distributions (135,062) (4,177) (139,239)
Net Income (Loss) 59,407 1,837 61,244
--------- -------- ----------
Partners' Equity, ending $4,216,259 $(117,160) $4,099,099
========= ========= ==========
Limited Partner's equity is net of 29.86 interests held in treasury of
($21,671).
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES
(A WISCONSIN LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1999
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, 1998. 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,
1999, 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 authorized 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 $26,560 under an agreement with NRMI, affiliated
with the General Partners, for the period represented.
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 $5,635, $2,293, $525,
and $2,157, respectively.
5. 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 1999, interest totaling $736,585 has accrued.
6. 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.
7. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES
(A WISCONSIN LIMITED PARTNERSHIP)
FOR THE SIX MONTHS ENDED JUNE 30, 1999
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 six months ended June
30, 1999 averaged 92.10% for Tucson Lock-It Lockers; 90.76% for Phoenix
Lock-It Lockers; 88.41% forNorthridge Commons;and 89.49% for Cave Creek
Lock-It Lockers. This compares to an average of 96.55% for Tucson Lock-
It Lockers; 95.45% for Phoenix Lock-It Lockers; 88.32% for Northridge
Commons; and 93.86% for Cave Creek Lock-It Lockers during the same period
of 1998.
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 1999 for Phoenix Lock-It Lockers ranged from $35.00 to
$235.00. The market rental rates have remained the same since the third
quarter of 1997. Rental incentives are offered on selected locker sizes.
Cave Creek rental rates currently range from $10.00 to $165.00 for the second
quarter of 1999. Since the 3rd quarter of 1997, rental incentives are
offered on selected locker sizes.
Current rental rates for the second quarter of 1999 for Tucson Lock-It
Lockers range from $25.00 to $160.00.
Northridge Commons is being marketed at $10.00 per square foot compared to
the range of $6.00 to $15.00 in the marketplace. Northridge Commons
currently has 2,500 square feet of vacant space. This increased from 1,750
sq. ft. at December 31, 1998, due to a tenant occupying 750 sq. ft. that
moved during the first quarter of 1999.
INCOME STATEMENT
Six Months Ended June 30, 1999 and June 30, 1998
Net income decreased $43,086 from $61,244 for the six months ended June 30,
1998, to $18,158 for the six months ended June 30, 1999, due to a decrease
in operating income of $13,916, a decrease in other income of $7,754, an
increase in total expenses of $23,813, offset by an increase of $2,397 in
interest income.
A $13,916 decrease in operating income was due to, in part, to increased
vacancies and delinquent write-off's of approximately $5,000 and $26,000
for Tucson and Phoenix Lockers, respectively.
A $23,813 increase in total expenses was due to, in part, to increased
partnership legal fees in 1999 ofapproximately $6,500, approximately $3,800
and $4,000 increases in Cave Creek and Tucson building renovations in 1999,
respectively, and a total increase of property management and partnership
personnel expenses of approximately $10,000 in 1999.
A $7,754 decrease in other income was due to, in part, lower 1999 late fee
charges for Tucson and Phoenix of $5,000 and $3000, respectively, in the
second quarter 1999.
A $2,397 increase in interest income was due to, in part, timing of
Certificate of Deposit interest payments received.
Three Months Ended June 30, 1999 and June 30, 1998
Net income decreased $17,289 from $15,420 for the quarter ended June 30,
1998,to ($1,869) for the quarter ended June 30, 1999, due to a decrease in
operating income of $5,571, a decrease in other income of $6,442, an
increase in total expenses of $3,090, and a decrease in interest income of
$2,186.
A $5,571 decrease in operating income was due to a vacancy increase at the
Tucson and Phoenix Lockers of approximately $6,000 each, offset by an
increase in revenue due to a rent increase which went into effect the 3rd
quarter of 1998.
A $6,442 decrease in other income was due to, in part, lower late fee income
charges for the Tucson and Phoenix Lockers of approximately $5,000 and
$3,000, respectively in the second quarter of 1999.
A $3,090 increase in total expenses was due to, in part, an increase of
approximately $3,000 in partnership legal fees.
A $2,186 decrease in interest income was due to, in part, timing of
Certificate of Deposit interest payments received.
CASH FLOW
Six Months Ended June 30, 1999 and June 30, 1998
Cash flow decreased $107,271 from $70,724 in 1998 to ($36,547) in 1999 due to,
in part, $46,414 increase in distributions from 1998 to 1999, allocated, as
required, 97% to limited partners and 3% to general partners, a $26,500
fixed asset purchase in 1999 (Phoenix Lockers roof repairs), a $43,086
decrease net of income and expense items explained previously, and an
approximate $8,000 net increase in tenant deposits and advanced rent
receipts.
The cash balance on June 30, 1999, was $802,294, which is a ratio of 6.5:1 to
current liabilities. As noted by this ratio, the partnership has a strong
liquidity position.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 25, 1999, a limited partner who owns interests in four partnerships,
the general partners of which are John Vishnevsky, National Development and
Investment, Inc., and E.C. Corp. (The same general partners as in this
partnership), filed a complaint in the Waukesha County Circuit Court of
the State of Wisconsin on behalf of a putative class of all of the limited
partners in the defendant partnerships. The complaint was filed against
Mr. Vishnevsky, National Development and Investment, Inc., many partnerships
for which those general partners serve as general partners, and various
individuals and entities who are alleged to exercise control over the
partnerships and/or perform services for the partnerships. The complaint
asserts putative class claims and derivative claims under the Wisconsin
Uniform Limited Partnership Act alleging, among other things, that the
general partners wasted partnership assets and breached their fiduciary
duties to the partnerships and their limited partners by charging excessive
fees and expenses in managing the affairs of the partnerships. In addition
to money damages, the plaintiff is seeking to wind up the affairs of the
partnerships and an accounting of the partnerships to be supervised by a
receiver to be appointed by the court. The case has not been certified
to proceed as a class action. Defendants have filed motions to dismiss
plaintiff's claims; those matters have not been decided. This partnership,
National Real Estate Limited Partnership Income Properties,
was not named in the complaint. The general partners representing the limited
partnerships named in the complaint believe the allegations are without
merit and are vigorously defending the lawsuit.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 30, 1999, a ballot was sent to all limited partners in this
partnership requesting their consent to approve the sale of Northridge
Commons, a retail strip center owned by the partnership, located in
Milwaukee, Wisconsin. The voting results are still pending.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K for the quarter ended June 30, 1999.
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/August 11, 1999 /S/John Vishnevsky
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date /S/August 11, 1999 /S/ John Vishnevsky
John Vishnevsky
Chief Financial and Accounting Officer
Date /S/August 11, 1999 /S/ Stephen P. Kotecki
Stephen P. Kotecki
President E.C. 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 August 11, 1999 ____________________________
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date August 11, 1999 _______________________________
John Vishnevsky
Chief Financial and Accounting Officer
Date August 11, 1999 _________________________________
Stephen P. Kotecki
President
E.C. Corp
Corporate General Partner
J:\WPDOCS\REPORTS\10Q-NIP-2nd qtr.dos
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 802,294
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15,350
<PP&E> 6,756,467
<DEPRECIATION> (2,667,415)
<TOTAL-ASSETS> 4,906,696
<CURRENT-LIABILITIES> 859,357
<BONDS> 271,020
0
0
<COMMON> 0
<OTHER-SE> 3,776,319
<TOTAL-LIABILITY-AND-EQUITY> 4,906,696
<SALES> 504,568
<TOTAL-REVENUES> 504,568
<CGS> 439,053
<TOTAL-COSTS> 439,053
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,357
<INCOME-PRETAX> 18,158
<INCOME-TAX> 0
<INCOME-CONTINUING> 18,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,158
<EPS-BASIC> 1.96<F1>
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<FN>
<F1>97% Limited Partners interest outstanding - 9004.15
</FN>
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