SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1996 Commission File Number 0-14569
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
(Exact name of small business issuer as specified in its charter)
Maryland 04-2848939
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
One International Place, Boston, MA 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 330-8600
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
<TABLE>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues.............................................
Rental income.................................. $5,801,586 $5,481,307 $11,427,038 $11,188,751
Laundry income................................. 52,326 78,663 183,142 157,152
Interest income................................ 13,104 69,484 44,125 135,783
Other income................................... 168,806 214,141 301,126 257,868
----------- ---------- ------- -------
6,035,822 5,843,595 11,955,431 11,739,554
---------- ---------- ---------- ----------
Expenses
Utilities...................................... 844,669 678,835 2,171,951 1,888,473
Repairs and maintenance........................ 634,158 681,482 1,070,159 1,370,934
Real estate taxes.............................. 431,796 418,213 868,472 851,785
Salaries and benefits.......................... 639,640 481,958 1,254,532 1,150,162
Administrative expenses........................ 268,679 356,081 647,752 460,624
Bad debt expense............................... 116,904 6,464 378,495 176,296
Advertising and rental expense 57,307 71,881 130,635 154,092
Insurance...................................... 99,403 99,781 199,055 153,751
Asset and property management fees 199,324 222,614 391,045 530,589
---------- ---------- ---------- -----------
Total operating expenses.................... 3,291,880 3,017,309 7,112,096 6,736,706
--------- ---------- --------- -----------
Other expenses
Interest expense............................... 1,406,257 1,431,919 2,819,203 2,868,446
Depreciation and amortization 955,020 982,381 1,960,524 1,964,761
---------- ---------- --------- ------------
Total expenses.............................. 5,653,157 5,431,609 11,891,823 11,569,913
--------- ---------- ---------- ------------
Net income before minority interest 382,655 411,986 63,608 169,641
------- --------- ----------- -------------
Minority interest in net earnings (loss) of
the operating partnership ..................... (1,866) 174,012 20,737 192,230
---------- ---------- ----------- ------------
Net income (loss).................................... $ 384,531 $ 237,974 $ 42,871 $ (22,589)
========= ========= =========== =============
Net income (loss)allocated to general partners $ 19,227 $ 11,899 $ 2,144 $ (1,129)
======== ========= ============ =============
Net income(loss) allocated to investor
limited partners............................... $ 365,304 $ 226,075 $ 40,727 $ (21,460)
========== ========= =========== ============
Net income (loss) per unit of limited
partnership interest........................... $ 563 $ 348 $ 63 $ (33)
============ =========== ============== ==============
Weighted average number of units outstanding $ 649 $ 649 $ 649 $ 649
============= ============ ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
BALANCE SHEETS
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1996 1995
(Unaudited) (Audited)
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Investment in Real Estate - At Cost
Land............................................................. $ 5,833,466 $ 5,833,466
Buildings, improvements and personal property 88,438,539 87,415,477
------------ ------------
94,272,005 93,248,943
Less: accumulated depreciation.................................. 39,437,840 37,586,954
------------ ------------
54,834,165 55,661,989
Other Assets:
Cash and cash equivalents........................................ 622,055 1,561,098
Tenant accounts receivable....................................... 413,121 470,872
Tenant security deposits - funded................................ 409,909 383,467
Escrows and reserves............................................. 4,285,892 3,392,301
Prepaid expenses and other assets................................ 201,200 1,004,695
Deferred costs, less accumulated amortization
of $707,094 and $597,456 as of
June 30, 1996 and December 31, 1995 respectively 1,596,711 1,706,349
------------ ------------
TOTAL ASSETS..................................................... $ 62,363,053 $ 64,180,771
============ ============
LIABILITIES AND PARTNERS' EQUITY
Mortgage payable................................................. $ 60,288,896 $ 60,866,515
Other Liabilities:
Accounts payable and accrued expenses 630,633 914,894
Tenant security deposits payable.............................. 366,221 272,120
------------ ------------
61,285,750 62,053,529
MINORITY INTEREST (Note 1)............................................. 2,105,387 2,084,650
------------ ------------
PARTNERS' EQUITY:
Investor Limited Partners, Units of Investor
Limited Partnership Interest, 649 units
authorized and outstanding ................................... 1,882,733 2,899,876
General Partners................................................. (2,910,817) (2,857,284)
------------- ------------
(1,028,084) 42,592
--------------- ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY................................. $ 62,363,053 $ 64,180,771
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------------------
Six Months Ended
June 30,
1996 1995
Unaudited Unaudited
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ 42,871 $ (22,589)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Minority interest in net earnings of operating partnership 20,737 192,230
Depreciation 1,850,886 1,855,122
Amortization 109,638 109,638
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 57,751 (310,691)
Increase in escrows and reserves (893,591) (1,474,788)
Decrease in prepaid expenses and other assets 803,495 509,689
Increase in due from affiliates - (39,097)
Decrease in due to affiliates - (21,375)
(Decrease) increase in accounts payable and accrued expenses (284,261) 64,264
Net security deposits received 67,659 (12,121)
----------- -------------
Net cash provided by operating activities 1,775,185 850,282
----------- ------------
Cash flow from investing activities:
Investment in rental property (1,023,062) (375,665)
-------------- ------------
Net cash used in investing activities (1,023,062) (375,665)
-------------- ------------
Cash flow from financing activities:
Principal payments on mortgage (577,619) (430,613)
Distributions to Partners (1,113,547) (1,366,316)
------------- --------------
Net cash used in financing activities (1,691,166) (1,796,929)
------------ ------------
Net decrease in cash (939,043) (1,322,312)
Cash and cash equivalents, beginning 1,561,098 3,123,638
------------ ------------
Cash and cash equivalents, ending $ 622,055 $ 1,801,326
============= ============
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 2,819,203 $ 2,868,446
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
Units of
For the Six Months Ended Limited General Limited
June 30, 1996 and 1995 Partnership Partners' Partners' Total
(Unaudited) Interest Capital Capital Capital
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 649 $(2,857,284) $ 2,899,876 $ 42,592
Distributions (55,677) (1,057,870) (1,113,547)
Net income 2,144 40,727 42,871
--- -------------- ------------ ------------
Balance, June 30, 1996 649 $(2,910,817) $ 1,882,733 $ (1,028,084)
=== ============ =========== ===========
Balance, December 31, 1994 649 $(2,730,932) $ 5,300,556 $ 2,569,624
Distributions (68,316) (1,298,000) (1,366,316)
Net loss (1,129) (21,460) (22,589)
--------------- --------------- ------------- ------------
Balance, June 30, 1995 649 $(2,800,377) $ 3,981,096 $ 1,180,719
=========== ============= =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
1. ACCOUNTING AND FINANCIAL REPORTING POLICIES
The consolidated financial statements included herein have been
prepared by the Partnership, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The Partnership's
accounting and financing reporting policies are in conformity with generally
accepted accounting principles and include all adjustments in interim periods
considered necessary for a fair presentation of the results of operations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. It is
suggested that these consolidated financial statements be read in conjunction
with the financial statements and the notes thereto included in the
Partnership's latest annual report on Form 10-K.
The accompanying consolidated financial statements include the accounts
of the Partnership and the Operating Partnerships prepared on the accrual basis
of accounting. Theodore N. Lerner's ownership in the Operating Partnerships has
been reflected as a minority interest in the accompanying consolidated balance
sheets and statements of operations.
All significant intercompany accounts and transactions have been eliminated in
consolidation.
The accompanying consolidated financial statements reflect the
Partnership's results of operations for an interim period and are not
necessarily indicative of the results of operations for the year ending December
31, 1996.
2. TAXABLE LOSS
The Partnership's taxable loss for 1996 is expected to differ from that
for financial reporting purposes primarily due to accounting differences in the
recognition of depreciation incurred by the Operating Partnerships.
3. INVESTMENT IN OPERATING PARTNERSHIP
The following summarizes the results of operations for the Operating
Partnerships:
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Income
Rental income $ 5,801,586 $ 5,481,307 $11,427,038 $11,188,751
Interest and other income 231,422 318,496 505,841 464,896
--------- --------- ------------ ------------
$ 6,033,008 $ 5,799,803 $11,932,879 $11,653,647
----------- ----------- ----------- -----------
Expenses:
Depreciation and amortization $ 900,201 $ 927,561 $ 1,850,886 $ 1,855,122
Operating expenses 2,563,012 2,364,981 5,730,588 5,589,163
Taxes and insurance 531,199 517,994 1,067,527 1,005,536
----------- ----------- ----------- ------------
$ 3,994,412 $ 3,810,536 $ 8,649,001 $ 8,449,821
----------- ----------- ----------- -----------
Net income $ 2,038,596 $ 1,989,267 $ 3,283,878 $ 3,203,826
=========== =========== =========== ===========
</TABLE>
<PAGE>
4. ACCOUNTING CHANGE
On January 1, 1996 the Partnership adopted Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for the Long-Lived Assets to Be Disposed Of", which
requires impairment losses to be recognized for the long-live assets used in
operations when indicators of the impairment are present and the undiscounted
cash flows are not sufficient to cover the asset's carrying amount. The
impairment loss is measured by comparing the fair value of the asset to its
carrying amount. The adoption of the SFAS had no effect on the Partnership's
financial statements.
5. RECLASSIFICATION OF CERTAIN EXPENSES
Certain expenses on 1995 statement of operations were reclassified to conform to
the presentation in 1996.
<PAGE>
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Springhill Lake Investors Limited Partnership, (the "Partnership",) has invested
as a general partner in nine limited partnerships (collectively, the "Operating
Partnerships") and as such, receives distributions of cash flow from the
Operating Partnerships and is responsible for expenditures consisting of (i)
interest payable on the new mortgage loans (ii) administrative expenses and
(iii) fees payable to affiliates of the General Partners. Each Operating
Partnership owns a section of a garden apartment complex in Greenbelt, Maryland
(the "Project"). The General Partners believe that funds distributed by the
Operating Partnerships to the Partnership will be sufficient to pay such
expenditures. The Operating Partnerships' cash and cash equivalents experienced
a $939,043 decrease at June 30, 1996 from December 31, 1995. The decrease was
due to $1,775,185 provided by operating activities, which was offset by
$1,023,062 used in investing activities, $577,619 used for principal reduction
to the mortgage payable, and a $1,113,547 distribution to partners. At June 30,
1996, the Operating Partnerships' cash reserves were $622,055. The Partnership
also has a cash replacement reserve account held by its lender. At June 30,
1996, the balance in the account was $2,900,092. All other increases (decreases)
in certain assets and liabilities are the result of the timing of receipt and
payment of various operating activities.
The Partnership resumed making cash distributions to Limited Partners in 1995.
The Partnership intends to continue to limit cash distributions to fund the
capital improvements and reserves required for the Project. However, the
performance of the Partnership's interest in the Project and its distribution
policy will continue to be reviewed on a quarterly basis.
Results of Operations
The Partnership generated net income of $42,871 for the six months ended June
30, 1996, compared to a net loss of $22,589 for the six months ended June 30,
1995. The net income for the three months ended June 30, 1996 was $384,531 as
compared to net income of $237,974 for the three months ended June 30, 1995.
The Operating Partnerships' revenue remained relatively constant for the six
months of 1996 compared to the same period of 1995 increasing by 1.8% from
$11,739,554 to $11,955,431. The Project average occupancy remained stable at
approximately 92%. Revenues increased by 3.2% for the three month period June
30, 1996 compared to the same period in 1995. The increase was the result of
increased rental revenues of 5.8% offset by decreases in the laundry interest
and other income. Average occupancy increased to 93% for the quarter ended June
30, 1996 from 90% during the comparable quarter in 1995.
The direct operating costs of the Project increased 9.1% and 5.5% for the three
and six months ended June 30, 1996 compared to the same periods in 1995.
Increased rate charges accompanied by the extreme winter weather conditions
resulted in abnormally high utility costs. Also, increases in bad debt,
administration and insurance expenses were partially offset by reductions in
advertising, repairs and maintenance as well as asset and property management
fees. The Operating Partnerships' interest expense and depreciation and
amortization expense were consistent with the results for the same period in
1995.
The Washington, D.C., area apartment market is stable but remains competitive.
The Partnership continues to make capital improvements to the property to
enhance its competitiveness within the local market. The Partnership spent
$1,023,062 on capital improvements during the six months of 1996 compared to
$375,665 in the first six months of 1995.
Improvements included replacing appliances and bathroom tile in apartment
units. Most of the capital improvements are funded by replacement reserves held
by the mortgage lender, with the balance being funded from operations. The
balance of the replacement reserves was approximately $2,900,092 at June 30,
1996.
The results of operations in future quarters may differ from the results of
operations for the quarter ended June 30, 1996, due to inflation and changing
economic conditions which could affect occupancy levels, rental rates and
operating expenses.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Mitchel R. Montgomery, et al v. Three Winthrop Properties, Inc. (Case No.
132222, filed in the Circuit Court for Montgomery County, Maryland).
Mitchel R. Montgomery is no longer a plaintiff. The plaintiff's are therefore
one limited partner in Springhill Lake LP and the limited partner in the
Springhill Operating Partnership. Plaintiffs allege that Three Winthrop has
breached it fiduciary duty by attempting to discharge the current property
management agent for the Project and replace it with an affiliate of Three
Winthrop. Plaintiffs seek equitable relief and damages in an unspecified amount.
A trial was held in June, 1996, and the Judge entered a directed finding in
favor of Winthrop on all claims.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27, Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended June
30, 1996.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SPRINGHILL LAKE INVESTORS
LIMITED PARTNERSHIP
By: Three Winthrop Properties, Inc.
Managing General Partner
Date: August 14, 1996 By: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
Date: August 14, 1996 By : /s/ Edward V. Williams
Edward V. Williams
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
six month period ending June 30, 1996 and is
qualified in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000763399
<NAME> SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 622,055
<SECURITIES> 0
<RECEIVABLES> 413,121
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,932,177
<PP&E> 94,272,005
<DEPRECIATION> (39,437,840)
<TOTAL-ASSETS> 62,363,053
<CURRENT-LIABILITIES> 996,854
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (1,028,084)
<TOTAL-LIABILITY-AND-EQUITY> 62,363,053
<SALES> 0
<TOTAL-REVENUES> 11,955,431
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,072,620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,819,203
<INCOME-PRETAX> 42,871
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,871
<EPS-PRIMARY> 63.00
<EPS-DILUTED> 63.00
</TABLE>
