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 September 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) - September 30, 1999
and December 31, 1998 . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Operations (unaudited) -
Three and Nine months ended September 30, 1999, and 1998. . . . 3
Statements of Cash Flows (unaudited) -
Nine months ended September 30, 1999, and 1998 . . . . . . . . . 4
Statement of Changes in Partners' Equity (unaudited) -
Nine months ended September 30, 1999 and 1998 . . . . . . . . . . 5
Notes to Financial Statements (unaudited). . . . . . . . . . . . . . 6-7
Item 2. Management's Discussion and Analysis or Plan of Operation . . 8-9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . .10
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . .10
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . .10
Item 4. Submission of Matters to a Vote of Security Holders . . . . .10
Item 5. Other information . . . . . . . . . . . . . . . . . . . . . .10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 10-11
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NATIONAL REAL ESTATE LIMITED PARTNERSHIP-IP
(A Wisconsin Limited Partnership)
BALANCE SHEET
(Unaudited)
September 30, December 31,
1999 1998
ASSETS
Current Assets
Cash $794,459 $838,841
Other Assets 15,521 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 2,720,074 2,561,582
_________ _________
4,036,393 4,168,436
_________ _________
4,846,373 $5,040,335
========= ==========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Tenant security deposits 7,291 $6,875
Rents received in advance 38,280 49,033
Accrued interest payable to Individual
General Partner 751,152 689,228
Accrued expenses and other liabilities 80,639 80,365
Note payable to Individual General Partner 271,020 271,020
________ ________
1,148,382 1,096,521
Partners' Capital (deficiency):
General Partners ($129,194) ($121,819)
Limited Partners 3,848,856 4,087,304
(authorized-10,000 interests; outstanding-
9,034.01 interests)
Less 29.86 Interests held in Treasury (21,671) (21,671)
__________ __________
3,697,991 3,943,814
__________ __________
SEE NOTES TO FINANCIAL STATEMENTS. $4,846,373 $5,040,335
========== ==========
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP-IP
(A WISCONSIN LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30,
1999 1998 1999 1998
INCOME ____ ____ ____ ____
Operating income $228,645 $225,120 $671,322 $681,713
Other income 33,716 30,330 74,430 78,799
________ ________ ________ ________
Total Income 262,361 255,450 745,752 760,512
OPERATING EXPENSES
Property operating expenses 113,397 131,215 339,650 342,688
Depreciation 52,659 52,094 158,492 156,283
Interest expense 14,566 24,163 61,923 70,634
Administrative expense 59,905 44,723 166,872 145,185
_______ _______ _______ _______
Total Expenses 240,527 252,195 726,937 714,790
_______ _______ _______ _______
INCOME (LOSS) FROM OPERATIONS 21,834 3,255 18,815 45,722
OTHER INCOME (EXPENSES)
Interest income 11,230 12,291 32,407 31,071
_______ _______ _______ _______
NET INCOME (LOSS) $33,064 $15,546 $51,222 $76,793
======= ======= ======= =======
Net Income (Loss) attribut-
able to General Partners (3%) $992 $466 $1,537 $2,304
Net Income (Loss) attribut-
able to Limited Partners (97%) $32,072 $15,080 $49,685 $74,489
Per Limited Partnership Interest
Outstanding-9,004.15 Interests $3.56 $1.67 $5.52 $8.27
===== ===== ===== =====
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SEE NOTES TO FINANCIAL STATEMENTS.
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP-IP
(A Wisconsin Limited Partnership)
Statement of Cash Flows
(Unaudited)
Nine Months Ended
September 30,
1999 1998
____ ____
OPERATING ACTIVITIES
Net income (loss) for the period $51,222
Adjustments to reconcile net income (loss) to
Net cash used in operating activities:
Depreciation 158,491 156,283
Changes in operating assets and liabilities:
Escrow deposits & other assets 17,538 (3,759)
Tenant security deposits 416 1,345
Rents received in advance (10,753) 6,269
Accrued expenses and other liabilities 62,197 72,997
_______ _______
NET CASH PROVIDED BY OPERATING ACTIVITIES 279,111 309,928
INVESTING ACTIVITIES:
Additions to investment property (26,449) 0
FINANCING ACTIVITIES:
Distributions to partners (297,044) (232,066)
________ ________
INCREASE (DECREASE) IN CASH (44,382) 77,862
CASH AT BEGINNING OF PERIOD 838,841 790,168
________ ________
CASH AT END OF PERIOD $794,459 $868,030
======== ========
SEE NOTES TO FINANCIAL STATEMENTS.
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES
(A WISCONSIN LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' EQUITY:
(UNAUDITED)
SEPTEMBER 30, 1999
Limited General
Partners Partners Total
________ ________ _____
Nine Months Ended September 30, 1999
____________________________________
Partner's Equity, beginning of year $4,065,633 ($121,819) $3,943,814
Distributions (288,133) (8,911) (297,043)
Net Income (Loss) 49,685 1,537 51,222
__________ _________ __________
Partners' Equity, ending $3,827,185 ($129,193) $3,697,991
========== ========== ==========
Limited Partner's equity is net of 29.86 interests held in treasury ($21,671)
____________________________________________________________________________
Nine Months Ended September 30, 1998
____________________________________
Partner's Equity, beginning of year $4,291,914 ($114,820) $4,177,094
Distributions (225,104) (6,962) (232,066)
Net Income (Loss) 74,489 2,304 76,793
___________ __________ ___________
Partners' Equity, ending $4,141,299 ($119,478) $4,021,821
========== ========== ==========
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)
SEPTEMBER 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
September 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 $40,219.46 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,
$2,229, $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 September 30 1999, interest totaling
$762,626 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 NINE MONTHS ENDED SEPTEMBER 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 nine months ended
September 30, 1999 averaged 94.62% for Tucson Lock-It Lockers; 91.8% for
Phoenix Lock-It Lockers; 87.92% for Northridge Commons; and 91.76% 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 third
quarter of 1999. Since the 3rd quarter of 1997, rental incentives are
offered on selected locker sizes.
Current rental rates for the third 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
Nine Months Ended September 30, 1999 and September 30, 1998
Net income decreased $25,571 from $76,793 for the nine months ended
September 30, 1998, to $51,222 for the nine months ended September 30, 1999,
due to a decrease in operating income of $10,391, a decrease in other income
of $4,369, an increase in total expenses of $12,147, offset by an increase
of $1,336 in interest income.
A $10,391 decrease in operating income was due to increased vacancies.
A $12,147 increase in total expenses was due to a $5,000 appraisal fee,
increased audit fees of
$6,500, and a $6,000 legal settlement, offset by a decrease in interest
expense of $5,400.
A $4,369 decrease in other income was due to lower 1999 late fee charges and
transfer fees.
A $1,336 increase in interest income was due to increased interest income on
money market funds.
Three Months Ended September 30, 1999 and September 30, 1998
Net income increased $17,518 from $15,546 for the quarter ended September
30, 1998, to $33,064 for the quarter ended September 30, 1999, due to an
increase in operating income of $3,525, an increase in other income of
$3,386, a decrease in total expenses of $11,668, and an offset by a decrease
in interest income of $1,061.
A $3,525 increase in operating income was due to rent increases, which went
into effect in the 3rd quarter.
A $3,386 increase in other income due to increased income from late fees.
A $11,668 decrease in total expenses was due to an approximate $4,000
decrease in building renovations, i.e. painting costs, and an approximate
$7,500 decrease in property management salaries and wages.
A $1,061 decrease in interest income was due to, in part, timing of
Certificate of Deposit interest payments received.
CASH FLOW
Nine Months Ended September 30, 1999 and September 30, 1998
Cash flow decreased $122,244 from $77,862 in 1998 to ($44,382) in 1999 due
to, in part, $64,978 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 $25,571
decrease net of income and expense items explained previously, and an
approximate $5,195 net increase in tenant and escrow deposits, advanced rent
receipts, and other accrued items.
The cash balance on September 30, 1999, was $794,459, which is a ratio of
6.3:1 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 September 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 resulted in favor of the sale.
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 September 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/November 11, 1999 /S/ John Vishnevsky
__________________________ ________________________________
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and
Investment, Inc.
Corporate General Partner
Date /S/November 11, 1999 /S/ John Vishnevsky
_________________________ ________________________________
John Vishnevsky
Chief Financial and
Accounting Officer
Date /S/November 11, 1999 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 November 11, 1999
_________________________ _______________________________
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and
Investment, Inc.
Corporate General Partner
Date November 11, 1999
_________________________ _______________________________
John Vishnevsky
Chief Financial and
Accounting Officer
Date November 11, 1999
_________________________ _______________________________
Stephen P. Kotecki
President
E.C. Corp
Corporate General Partner
J:\Wpdocs\REPORTS\10Q-NIP-3rd qtr.dos
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<PERIOD-END> SEP-30-1999
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<RECEIVABLES> 15521
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<CURRENT-ASSETS> 809980
<PP&E> 6756467
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0
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<OTHER-SE> 3697991<F1>
<TOTAL-LIABILITY-AND-EQUITY> 4846373
<SALES> 778159
<TOTAL-REVENUES> 778159
<CGS> 0
<TOTAL-COSTS> 665014
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 61923
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<F1>REFERS TO GENERAL PARTNERS AND LIMITED PARTNERS CAPITAL.
<F2>97%LIMITED PARTNERS-INTEREST OUTSTANDING= 9004.15.
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