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 September 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 Three Months Ended Nine Months Ended Nine Months Ended
September 30, 1996 September 30, 1995 September 30, 1996 September 30, 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Rental income $ 5,937,121 $ 5,634,470 $ 17,364,159 $ 16,833,351
Laundry income 78,490 78,576 261,632 235,728
Interest income 123,121 48,307 167,246 184,090
Other income 281,989 138,362 583,115 386,100
6,420,721 5,899,715 18,376,152 17,639,269
Expenses
Utilities 1,535,127 1,176,133 3,707,078 3,064,606
Repairs and maintenance 651,996 637,258 1,722,155 2,008,192
Real estate taxes 435,750 415,959 1,304,222 1,262,744
Salaries and benefits 710,933 592,224 1,965,465 1,742,386
Administrative expenses 360,642 226,687 1,008,394 687,311
Bad debt expense 189,281 188,016 567,776 364,312
Advertising and rental expense 75,940 56,489 206,575 210,581
Insurance 99,403 119,576 298,458 273,327
Asset and property management fees 206,132 194,660 597,177 725,249
Total operating expenses 4,265,204 3,607,002 11,377,300 10,338,708
Other expenses
Interest expense 1,399,411 1,428,680 4,218,614 4,297,127
Depreciation and amortization 881,153 982,380 2,841,677 2,947,140
Total expenses 6,545,768 6,018,062 18,437,591 17,582,975
Net income (loss) before minority interest (125,047) (118,347) (61,439) 56,294
Minority interest in net earnings of
the operating partnership (98,286) (81,408) (267,772) (273,638)
Net loss $ (223,333) $ (199,755) $ (329,211) $ (217,344)
Net loss allocated to general partners $ (11,167) $ (9,988) $ (16,461) $ (10,867)
Net loss allocated to investor
limited partners $ (212,166) $ (189,767) $ (312,750) (206,477)
Net loss per unit of limited
partnership interest $ (326) $ (292) $ (481) $ (318)
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>
September 30, 1996 December 31, 1995
(Unaudited) (Audited)
ASSETS
<S> <C> <C>
INVESTMENT IN REAL ESTATE - AT COST
Land $ 5,833,466 $ 5,833,466
Buildings and building improvements 89,328,681 87,415,477
Personal Property 95,162,147 93,248,943
Less Accumulated depreciation 40,264,174 37,586,954
54,897,973 55,661,989
OTHER ASSETS:
Cash and cash equivalents 747,592 1,561,098
Tenant accounts receivable 440,503 470,872
Tenant security deposits - funded 367,876 383,467
Escrows and reserves 3,191,530 3,392,301
Prepaid expenses and other assets 1,424,083 1,004,695
Deferred costs, less accumulated amortization
of $761,913 and $597,456 as of
September 30, 1996 and December 31, 1995 respectively 1,541,892 $1,706,349
TOTAL ASSETS $ 62,611,449 $ $64,180,771
LIABILITIES AND PARTNERS' EQUITY
MORTGAGES PAYABLE $ 59,989,896 $ 60,866,515
OTHER LIABILITIES
Accounts payable and accrued expenses 1,334,754 914,894
Tenant security deposits payable 334,543 272,120
61,659,193 62,053,529
MINORITY INTEREST (Note 1) 2,352,422 2,084,650
PARTNERS' EQUITY (DEFICIT):
Investor Limited Partners, Unit of Investor
Limited Partnership Interest, 649 units
authorized and out standing 1,529,256 2,899,876
General Partners (2,929,422) (2,857,284)
(1,400,166) 42,592
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 62,611,449 $ 64,180,771
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
STATEMENTS OF CASH FLOWS
<TABLE>
Nine Months Ended Nine Months Ended
September 30,1996 September 30, 1995
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flow from operating activities
Net income (loss) $ (329,211) $ (217,344)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Minority interest in net earnings of
operating partnerships 267,772 273,638
Depreciation 2,677,220 2,782,683
Amortization 164,457 164,457
Changes in assets and liabilities
Decrease (increase) in accounts receivable-tenants 30,369 (309,433)
Decrease (increase) in escrows and reserves 200,771 (113,763)
Increase prepaid expenses and other asset (419,388) (988,194)
Decrease in due to affiliates - (21,375)
Increase in accounts payable and accrued expenses 419,860 252,935
Net decrease (increase) in security deposits received 78,014 (59,674)
Net cash provided by operating activities 3,089,864 1,763,930
Cash flow from investing activities
Investment in rental property (1,913,204) (627,961)
Net cash used in investing activities (1,913,204) (627,961)
Cash flows from financing activities:
Principal payments on mortgage (876,619) (703,157)
Distributions to Partners (1,113,547) (1,366,316)
Net cash used in financing activities (1,990,166) (2,069,473)
Net decrease in cash and cash equivalents (813,506) (933,504)
Cash and cash equilavents, beginning 1,561,098 3,123,638
Cash and cash equilavents, ending 747,592 2,190,134
Supplemental disclosure of cash flow information
Cash paid during the year for interest $ 4,218,614 $ 4,297,127
</TABLE>
The accompanying notes are integral part of these consolidated
financial statements.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
<TABLE>
Units of
For the Nine Months Ended Limited General Limited Total
September 30, 1996 Partnership Partner's Partners' Capital
(Unaudited) Interest 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 loss (16,461) (312,750) (329,211)
Balance, September 30, 1996 649 $ (2,929,422) $ 1,529,256 (1,400,166)
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 (10,867) (206,477) (217,344)
Balance, September 30, 1995 649 $ (2,810,115) $ 3,796,079 $ 985,964
</TABLE>
The accompanying notes are integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
September 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. The balance sheet at 12/31/95 was derived from audited financial
statements at that same date.
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 Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---------- ----------- ----------- --------
Income:
<S> <C> <C> <C> <C>
Rental income $ 5,937,121 $ 5,634,470 $17,364,159 $16,833,351
Interest and other income 380,662 204,101 886,503 681,719
------------- ----------- ------------ ------------
6,317,783 5,838,571 18,250,662 17,515,070
------------ ----------- ---------- ----------
Expenses:
Depreciation and amortization 822,098 927,561 2,677,220 2,782,683
Operating expenses 3,813,738 3,015,753 9,544,326 8,353,046
Taxes and insurance 535,153 552,977 1,602,680 1,818,716
------------ ------------ ----------- -----------
5,170,989 4,496,291 13,824,226 12,954,445
------------ --------- ---------- ----------
Net income $ 1,146,794 $ 1,342,280 $ 4,426,436 $ 4,560,625
============= =========== =========== ===========
</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. RELATED PARTY TRANSACTIONS
Property Management and Asset Management fees paid or accrued by the
Partnership to an affiliate of the Managing General Partner totaled $597,177 and
$347,746 for the nine months ended September 30, 1996 and 1995 respectively.
6. 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 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 $813,506
decrease at September 30, 1996 from December 31, 1995. The decrease was due to
$3,089,864 provided by operating activities, which was offset by $1,913,204 used
in investing activities (capital improvements at the project), $876,619 used for
principal reduction to the mortgage payable, and a $1,113,547 distribution to
partners. At September 30, 1996, the Operating Partnerships' cash reserves were
$747,592. The Partnership also has a cash replacement reserve account held by
its lender. At September 30, 1996, the balance in account was approximately
$3,100,000. 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, based on
the performance of the Project, the distribution policy will continue to be
reviewed on a quarterly basis.
Results of Operations
The Partnership generated a net loss of $329,211 for the nine months ended
September 30, 1996, compared to a net loss of $217,344 for the nine months ended
September 30, 1995. The net loss for the three months ended September 30, 1996
was $223,333 as compared to net loss of $199,755 for the three months ended
September 30, 1995.
The Partnership's revenue remained relatively constant for the nine months of
1996 compared to the same period of 1995 increasing by 4.2% from $17,639,269 to
$18,376,152. The Project average occupancy increased from 92.6% for the nine
month period ended September 30, 1995 to 93.3% for the same period in 1996.
Revenues increased by 8.8% for the three month period September 30, 1996
compared to the same period in 1995. The increase was the result of increased
rental revenues of 5.4 % and increases in interest and other income. Average
occupancy increased to 96% for the quarter ended September 30, 1996 from 91%
during the comparable quarter in 1995.
The direct operating costs of the Project increased 18.2% and 9.5% for the three
and nine months ended September 30, 1996 compared to the same periods in 1995.
Increased rate charges accompanied by the extreme 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
$1,913,204 on capital improvements during the nine months of 1996 compared to
$627,961 in the first nine months of 1995. Improvements included replacing
appliances and bathroom tile in apartment units as well as upgrading heating
systems and water and sewer lines. 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 $3,100,000 at September 30, 1996.
The results of operations in future quarters may differ from the results of
operations for the quarter ended September 30, 1996, due to inflation and
changing economic conditions which could affect occupancy levels, rental rates
and operating expenses.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Theodore N. Lerner v. Three Winthrop Properties, Inc. (Case No. CCB94-3601,
filed in U.S. District Court for the District of Maryland, Southern Division, on
December 27, 1994).
Trial in this action commenced on November 4, 1996. After one day of trial, the
remainder of the case was continued until January, 1997. In his pretrial
statement, Lerner contends that he is entitled to more that $800,000, plus
interest. Three Winthrop has acknowledged that Lerner is entitled to
approximately $164,000 in distributions for calendar year 1995.
Three Winthrop believes that the allegations, except as indicated, are without
merit.
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
September 30, 1996.
<PAGE>
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: November 14, 1996 By: /s/ Michael L. Ashner
Michael L. Ashner
Chief Executive Officer
Date: November 14, 1996 By : /s/ Edward V. Williams
Edward V. Williams
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from unaudited financial statements for the
nine month period ending September 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 747,592
<SECURITIES> 0
<RECEIVABLES> 440,503
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,980,054
<PP&E> 95,162,147
<DEPRECIATION> (40,264,174)
<TOTAL-ASSETS> 62,611,449
<CURRENT-LIABILITIES> 1,669,297
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (1,400,166)
<TOTAL-LIABILITY-AND-EQUITY> 62,611,449
<SALES> 0
<TOTAL-REVENUES> 18,376,152
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 14,218,977
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,218,614
<INCOME-PRETAX> (329,211)
<INCOME-TAX> 0
<INCOME-CONTINUING> (329,211)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (329,211)
<EPS-PRIMARY> (507.26)
<EPS-DILUTED> (507.26)
</TABLE>
