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 March 31, 2000
( ) 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)
(262) 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) - March 31, 2000
and December 31, 1999. . . . . . . . . . . . . . . . . . . . . . . . . 2
Statement of Operations (unaudited) -
Three months ended March 31, 2000 and 1999 . . . . . . . . . . . 3
Statement of Changes in Partners' Capital (Deficit)(unaudited) -
Three months ended March 31, 2000 and 1999. . . . . . . . . . . . 4
Statement of Cash Flows (unaudited) -
Three months ended March 31, 2000 and 1999 . . . . . . . . . . . 5
Notes to Financial Statements (unaudited). . . . . . . . . . . . . . . 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . . . . . .7
PART II. OTHER INFORMATION AND SIGNATURES . . . . . . . . . . . . . . . 8 - 9
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PART I. FINANCIAL INFORMATION
NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROPERTIES
(A Wisconsin Limited Partnership)
BALANCE SHEET
(Unaudited)
March 31, December 31,
2000 1999
ASSETS
Cash and Cash Equivalents $457,677 $806,382
Other Assets 15,828 16,034
Investment properties, at cost
Land 568,848 568,848
Buildings and improvements 4,324,905 4,324,905
---------- ---------
4,893,753 4,893,753
Less accumulated depreciation 2,030,422 1,993,965
---------- ---------
2,863,331 2,899,788
__________ _________
$3,336,836 $3,722,204
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Tenant security deposits $4,003 $4,003
Rents received in advance 41,285 38,299
Accrued interest payable to individual
General Partner 47,528 39,118
Accrued expenses and other liabilities
(RE Tax & Sales/Use Tax) 75,106 59,444
Note payable to Individual
General Partner (Note 5) 271,020 271,020
________ _______
438,942 411,884
PARTNERS' CAPITAL (deficiency)
General Partners (153,199) (140,824)
Limited Partners 3,072,764 3,472,815
(authorized - 10,000 interests;
outstanding - 9,034.01 interests)
Less 29.86 Interests held in Treasury (21,671) (21,671)
__________ _________
2,897,894 3,310,320
__________ _________
$3,336,836 $3,722,204
========== ==========
SEE NOTES TO FINANCIAL STATEMENTS.
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROPERTIES
(A WISCONSIN LIMITED PARTNERSHIP)
STATEMENT OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
2000 1999
---- ----
INCOME
Operating income $205,203 $248,844
_________ ________
Total Income 205,203 248,844
OPERATING EXPENSES
Operating expenses 76,013 113,063
Depreciation 36,458 52,659
Interest expense 8,410 23,597
Administrative expense 52,341 49,538
________ ________
Total Expenses 173,222 238,857
________ ________
INCOME FROM OPERATIONS 31,981 9,987
OTHER INCOME (EXPENSES)
Interest income 10,443 10,040
________ ________
NET INCOME $42,424 $20,027
======== ========
Net Income attributable to $1,272 $601
General Partners (3%)
Net Income attributable to $41,152 $19,426
Limited Partners (97%)
Per Limited Partnership Interest $4.71 $2.22
Outstanding 9,004.15
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SEE NOTES TO FINANCIAL STATEMENTS.
NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROPERTIES
(A WISCONSIN LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
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Limited General
Partners Partners Interests Total
QUARTER ENDED MARCH 31, 2000
Partners' Equity, beginning $3,472,815 ($140,824) ($21,671) $3,310,320
of quarter
Distributions (441,203) (13,647) --- (454,850)
Net Income 41,152 1,272 --- 42,424
---------------------------------------------
Partners' Equity, end of $3,072,764 ($153,199) ($21,671) $2,897,894
quarter =============================================
QUARTER ENDED MARCH 31, 1999
Partners' Equity, beginning $4,087,304 ($121,819) ($21,671) $3,943,814
of quarter
Distributions (90,042) (2,785) --- (92,827)
Net Income 19,426 601 --- 20,027
---------------------------------------------
Partners' Equity, end of $4,016,688 ($124,003) ($21,671) $3,871,014
=============================================
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SEE NOTES TO FINANCIAL STATEMENTS.
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NATIONAL REAL ESTATE LIMITED PARTNERSHIP
INCOME PROPERTIES
(A Wisconsin Limited Partnership)
Statement of Cash Flows
(Unaudited)
Three Months Ended
March 31,
---- ----
OPERATING ACTIVITIES
Net income for the period $42,424 $20,027
Adjustments to reconcile net income to
Net cash provided by operating activities:
Depreciation 36,458 52,659
Changes in operating assets and liabilities:
Other assets 206 17,914
Tenant security deposits 0 0
Rents received in advance 2,986 (11,235)
Accrued expenses and other liabilities 24,071 29,832
________ _______
NET CASH PROVIDED BY OPERATING ACTIVITIES 106,145 109,197
INVESTING ACTIVITIES: 0 0
FINANCING ACTIVITIES:
Distributions to partners (454,850) (92,827)
__________ _________
INCREASE (DECREASE) IN CASH (348,705) 16,370
Cash at beginning of period 806,382 838,841
--------- ---------
CASH AT END OF PERIOD $457,677 $855,211
========== ==========
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)
MARCH 31, 2000
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, 1999 (refer to the footnotes of those
statements for additional details on the Partnership's financial
condition). The operating results for the period ended March 31, 2000,
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 $8,409 under an agreement with NRMI for the
three month period ended March 31, 2000. The Partnership also paid
$8,291 in the first quarter of 2000 for the reimbursement of accounting
and administrative expenses incurred by NRMI on behalf of the
Partnership.
The Partnership subleases a portion of common area office space from
NRMI under terms of a lease which expires on August 31, 2002. During
the first quarter of 2000, lease payments totaled $2,998, which
represents the Partnership's prorate portion, based upon space
occupied, of NRMI's monthly rental obligation.
4. National Development and Investment, Inc. (NDII): The Partnership paid
NDII for the reimbursement of expenses totaling $35,542 for
administrative expenses incurred on behalf of the Partnership.
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 funds or 12%,
whichever is lower. As of March 31, 2000, interest totaling $47,528 has
accrued.
NATIONAL REAL ESTATE LIMITED PARTNERSHIP INCOME PROPERTIES
(A WISCONSIN LIMITED PARTNERSHIP)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MARCH 31, 2000
The Partnership currently owns and operates three investment properties;
Tucson Lock-It Lockers, a 49,865 net rentable square foot mini warehouse
complex in Tucson, Arizona; Phoenix Lock-It Lockers, a 62,016 net rentable
square foot mini warehouse complex in Phoenix, Arizona; and a portion of
Cave Creek Lock-It Lockers containing 8,200 of 46,000 net rentable square
feet in Phoenix, Arizona.
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 first quarter averaged
92.79% for Tucson Lock-It Lockers; 91.47% for Phoenix Lock-It Lockers; and
90.10% for Cave Creek Lock-It Lockers. This compares to an average of 91.53%
for Tucson Lock-It Lockers; 91.2% for Phoenix Lock-It Lockers; and 89.66%
for Cave Creek Lock-It Lockers during the same period of 1999.
Three Months Ended March 31, 2000, and 1999
Net income increased $22,397 from $20,027 for the quarter ended March 31,
1999, to $42,424 for the quarter ended March 31, 2000. This increase was due
to a decrease in operating expenses of $37,050, a decrease in interest
expense of $15,187, and a decrease of $16,201 in depreciation expense,
offset by reduced income of $43,641.
The decrease in operating expenses of $37,050 was primarily due to decreased
salaries, snow removal, pest control, and grounds upkeep, primarily due to
the sale of Northridge Commons. Interest decreased as a result of the 12-99
large pay down of interest on the General Partner note. The decreases in
depreciation expense and operating income are also a result of the December
1999 sale of Northridge Commons.
Net Cash used first quarter 2000 was $348,705, as compared to net cash
provided during first quarter 1999 of $15,370. This difference was due to,
in part, an increase in cash distributions of $362,023. Cash distributions
for the quarter ended March 31, 2000, and March 31, 1999, were $454,850 and
$92,827, respectively. These distributions were allocated, as required, 97%
to the Limited Partners and 3% to the General Partners.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 15, 1999 the general partners, the property management company (NRMI),
and other entities and individuals were named as defendants in a lawsuit.
The Partnership was not named in the original lawsuit but was later named as
a nominal defendant. The plaintiffs sought to have this action certified as
a class action lawsuit. In the complaint, the plaintiffs allege, among other
things, breach of contract, fraud, misrepresentation, breach of fiduciary
duty, negligence, excessive fee charges, and theft. Judgment is being sought
against the defendants to wind up and dissolve the partnership named as
nominal defendants, including the Partnership, suspend and replace the
existing general partners with a nonaffiliated receiver, and award
unspecified compensatory and punitive damages as well as reimbursement of
attorney fees. The defendants are vigorously defending themselves in this
case.
On April 27, 2000 the Circuit Court of Waukesha County held a hearing which
certified the case as a class action and approved terms of a settlement. The
Partnership was named as a party in the stipulation of settlement. The more
significant terms of the stipulation of settlement are as follows:
- --An independent marketing agent will be appointed to market and sell the
Partnership investment property. However, any offer to purchase the
property would not be accepted without first obtaining approval from a
majority interest of the limited partners. Final distributions of the net
proceeds received from a sale of the Partnership's investment property
would be made in accordance with the terms of the Partnership's limited
partnership agreement and prospectus, and upon providing 20-day notice to
the plaintiff's attorney. Net proceeds will first be applied to pay
plaintiffs counsel's legal fees, expenses and costs, with interest thereon.
- --Distributions to limited partners would continue to be made in accordance
with the limited partnership agreement. However, upon final settlement
of the lawsuit, distributions would be increased to the extent that
sufficient reserves have been established to support normal Partnership
operations and the wind-up of Partnership affairs upon the sale of the
investment property. Any such additional distributions would be made
within 30 days of the final settlement of the lawsuit.
- --NRMI and the general partners shall continue to provide property management
and consulting services to the Partnership under the same terms and
conditions currently provided under existing contracts, until the
investment property is sold and assets liquidated, and the Partnership
entity dissolved. NRMI will also be the listing broker for the sale of
the Partnership property.
- --The plaintiffs' claims made against NRMI, the general partners, and other
related parties for excessive charging of expenses to the defendant
partnerships, including the Parnership, would be settled through binding
arbitration. Any such expenses disallowed through arbitration shall be
reimbursed to the defendant partnerships.
At the April 27, 2000 hearing the lawsuit was certified as a "non-opt out"
class-action lawsuit, in which all limited partners of the Partnership are
required to be included in the settlement class of this litigation.
At the April 27, 2000 hearing, the court ruled that plaintiff's counsel's
attorney fees would be one third of the difference between the "secondary
market value" of the Partnership interests and the total funds available
for distribution to the limited partners after payment of all Partnership
obligation. The General Partners may decide to appeal this ruling on
attorney fees. Based on events to date, it is not possible to determine
the final outcome of the litigation, or the amount of any potential monetary
impact to the Partnership. Therefore, no provision for any such financial
impact arising from the lawsuit has been made in these financial statements.
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6(B). REPORTS ON FORM 8-K
During the first quarter, 2000, the Partnership changed its independent
certified public accounting firm from Wolf & Company to Kerber, Eck &
Braeckel LLP.
A form 8-K was submitted 1-18-2000.
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/May 15, 2000 /S/ John Vishnevsky
John Vishnevsky
President and
Chief Operating and
Executive Officer
National Development and
Investment, Inc.
Corporate General Partner
Date /S/May 15, 2000 /S/ John Vishnevsky
John Vishnevsky
Chief Financial and
Accounting Officer
Date /S/May 15, 2000 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 May 15, 2000
John Vishnevsky
President and Chief Operating and
Executive Officer
National Development and Investment, Inc.
Corporate General Partner
Date May 15, 2000
John Vishnevsky
Chief Financial and Accounting Officer
Date May 15, 2000
Stephen P. Kotecki
President
EC Corp
Corporate General Partner
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