FORM 10-QSB--Quarterly or Transitional Report Under Section
13 or 15 (d) OF The Securities Exchange Act of 1934
Quarterly or Transitional Report
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
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
incorporation or organization) Identification No.)
55 Beattie Place, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
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___
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 1,797
Receivables and deposits (net of $106 allowance for
doubtful accounts) 2,280
Restricted escrows 2,630
Other assets 590
Investment property:
Land $ 5,833
Buildings and related personal property 105,862
111,695
Less accumulated depreciation (56,264) 55,431
$ 62,728
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 2,252
Tenant security deposit liabilities 527
Other liabilities 1,017
Mortgage note payable 54,668
Minority interest 3,987
Partners' (Deficit) Capital
General partners $ (2,846)
Investor limited partners (649 units issued and
outstanding) 3,123 277
$ 62,728
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
b)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 6,192 $ 6,355 $11,882 $12,438
Other income 326 554 634 908
Total revenues 6,518 6,909 12,516 13,346
Expenses:
Operating 2,772 2,796 5,207 5,514
General and administrative 145 233 270 339
Depreciation 1,386 996 2,675 1,992
Interest 1,294 1,343 2,603 2,699
Property taxes 452 419 892 883
Bad debt expense 63 191 231 468
Total expenses 6,112 5,978 11,878 11,895
Income before minority interest 406 931 638 1,451
Minority interest in net earnings
of operating partnerships (173) (228) (256) (350)
Net income $ 233 $ 703 $ 382 $ 1,101
Net income allocated to
general partners (5%) $ 12 $ 35 $ 19 $ 55
Net income allocated to investor
limited partners (95%) 221 668 363 1,046
$ 233 $ 703 $ 382 $ 1,101
Net income per limited
partnership unit $ 340 $ 1,030 $ 559 $ 1,612
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited Investor
Partnership General Limited
Units Partners Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 649 $ -- $40,563 $40,563
Partners' (deficit) capital at
December 31, 1999 649 $(2,865) $ 2,760 $ (105)
Net income for the six months
ended June 30, 2000 -- 19 363 382
Partners' (deficit) capital at
June 30, 2000 649 $(2,846) $ 3,123 $ 277
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 382 $ 1,101
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest in net earnings of operating
partnerships 256 350
Depreciation 2,675 1,992
Amortization of loan costs 62 62
Bad debt expense 231 468
Change in accounts:
Receivables and deposits (1,174) (1,433)
Other assets 827 706
Accounts payable 849 (1,142)
Tenant security deposit liabilities 21 62
Other liabilities 341 (106)
Due to affiliates -- 92
Net cash provided by operating activities 4,470 2,152
Cash flows from investing activities:
Property improvements and replacements (3,708) (1,315)
Net (deposits to) receipts from restricted escrows (574) 727
Net cash used in investing activities (4,282) (588)
Cash flows used in financing activities:
Payments on mortgage note payable (734) (760)
Net (decrease) increase in cash and cash equivalents (546) 804
Cash and cash equivalents at beginning of period 2,343 3,328
Cash and cash equivalents at end of period $ 1,797 $ 4,132
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,118 $ 2,637
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
e)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements of Springhill Lake
Investors Limited Partnership (the "Partnership" or "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310 (b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Three Winthrop Properties, Inc. (the
"Managing General Partner" or "Three Winthrop"), all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six month periods ended June
30, 2000, are not necessarily indicative of the results that may be expected for
the year ending December 31, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1999.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Partnership and its 90% general partnership interest in Springhill Lake Limited
Partnerships I though IX and Springhill Commercial Limited Partnership (the
"Operating Partnerships"). Theodore N. Lerner's ownership in the Operating
Partnerships has been reflected as a minority interest in the accompanying
consolidated financial statements. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Note B - Transfer of Control
On October 28, 1997, Insignia Financial Group, Inc. ("Insignia") acquired 100%
of the Class B stock of First Winthrop Corporation, the sole shareholder of the
Managing General Partner as well as a 20.7% limited partnership interest in the
Partnership. Pursuant to this transaction, the by-laws of the Managing General
Partner were amended to provide for the creation of a Residential Committee.
Pursuant to the amended and restated by-laws, Insignia had the right to elect
one director to the Managing General Partner's Board of Directors and to cause
the Managing General Partner to take such actions as it deemed necessary and
advisable in connection with the activities of the Partnership.
Pursuant to a series of transactions which closed on October 1, 1998 and
February 26, 1999, Insignia and Insignia Properties Trust merged into Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust, with AIMCO being the surviving corporation. As a result, AIMCO
acquired all of the rights of Insignia in and to the limited partnership
interest and the rights granted to Insignia pursuant to the First Winthrop
Corporation transaction. The Managing General Partner does not believe that this
transaction has had or will have a material effect on the affairs and operations
of the Partnership.
Note C - Transactions with Affiliated Parties
The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
Partnership activities. The Limited Partnership Agreement provides for (i)
certain payments to affiliates for services (ii) reimbursements of certain
expenses incurred by affiliates on behalf of the Partnership (iii) an annual
asset management fee of $100,000 and (iv) an annual administration fee of
$10,000.
The following transactions with affiliates of the Managing General Partner were
charged to expense for the six months ended June 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $ 367 $ 374
Reimbursement for services of affiliates
(included in general and administrative
expense and investment properties) 171 156
Asset management fee (included in
general and administrative expense) 50 50
Annual administration fee (included in
general and administrative expense) 5 5
During the six months ended June 30, 2000 and 1999, affiliates of the Managing
General Partner were entitled to receive 3% of tenant rent collections and 5% of
store commercial income from the Registrant's property for providing property
management services. The Registrant paid to such affiliates approximately
$367,000 and $374,000 for the six months ended June 30, 2000 and 1999,
respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $171,000 and
$156,000 for the six months ended June 30, 2000 and 1999, respectively.
Subsequent to June 30, 2000, an affiliate of the Managing General Partner loaned
the Partnership approximately $1,325,000 for budgeted capital improvements.
AIMCO and its affiliates currently own 324.82 limited partnership units in the
Partnership representing 50.05% of the outstanding units. A number of these
units were acquired pursuant to tender offers made by AIMCO or its affiliates or
Three Winthrop's affiliates. It is possible that AIMCO or its affiliates will
make one or more additional offers to acquire additional limited partnership
interests in the Partnership for cash or in exchange for units in the operating
partnership of AIMCO. Under the Partnership Agreement, unitholders holding a
majority of the Units are entitled to take action with respect to a variety of
matters. As a result of its ownership of 50.05% of the outstanding units, AIMCO
is in a position to influence all voting decisions with respect to the
Registrant. When voting on matters, AIMCO would in all likelihood vote the Units
it acquired in a manner favorable to the interest of the Managing General
Partner because of their affiliation with the Managing General Partner.
Note D - Segment Reporting
Description of the types of products and services from which the reportable
segment derives its revenues:
The Partnership has one reportable segment: consisting of apartment and
townhouse units and an eight store shopping center complex located in Greenbelt,
Maryland. The Partnership rents apartment units and townhouse units to tenants
for terms that are typically twelve months or less. The space at the shopping
center is rented on a month to month basis or for terms of 3 to 10 years.
Measurement of segment profit or loss:
The Partnership evaluates performance based on segment profit (loss) before
depreciation. The accounting policies of the reportable segment are the same as
those of the Partnership as described in the Partnership's Annual Report on Form
10-KSB for the year ended December 31, 1999.
Segment information for the three and six month periods ended June 30, 2000 and
1999 is shown in the tables below (in thousands). The "Other" column includes
partnership administration related items and income and expense not allocated to
the reportable segment.
Three Months Ended June 30, 2000
Property Other Totals
Rental income $ 6,192 $ -- $ 6,192
Other income 318 8 326
Interest expense 1,294 -- 1,294
Depreciation 1,386 -- 1,386
General and administrative expense -- 145 145
Minority interest in net earnings
of operating partnerships -- (173) (173)
Segment income (loss) 543 (310) 233
Six Months Ended June 30, 2000
Property Other Totals
Rental income $ 11,882 $ -- $11,882
Other income 615 19 634
Interest expense 2,603 -- 2,603
Depreciation 2,675 -- 2,675
General and administrative expense -- 270 270
Minority interest in net earnings
of operating partnerships -- (256) (256)
Segment income (loss) 889 (507) 382
Total assets 62,288 440 62,728
Capital expenditures for investment
property 3,708 -- 3,708
Three Months Ended June 30, 1999
Property Other Totals
Rental income $ 6,355 $ -- $ 6,355
Other income 233 321 554
Interest expense 1,343 -- 1,343
Depreciation 996 -- 996
General and administrative expense -- 233 233
Minority interest in net earnings
of operating partnerships -- (228) (228)
Segment income (loss) 843 (140) 703
Six Months Ended June 30, 1999
Property Other Totals
Rental income $ 12,438 $ -- $ 12,438
Other income 568 340 908
Interest expense 2,699 -- 2,699
Depreciation 1,992 -- 1,992
General and administrative expense -- 339 339
Minority interest in net earnings
of operating partnerships -- (350) (350)
Segment income (loss) 1,450 (349) 1,101
Total assets 60,011 1,939 61,950
Capital expenditures for investment
property 1,315 -- 1,315
Note E - Legal Proceedings
Grady v. Springhill Lake Apartments (Pending before the Prince George's County
Human Relations Commission, case no. AP94-1233). This public accommodation
discrimination claim was filed on December 16, 1994, however, the Commission
failed to notify the Registrant of the charge until September 8, 1996. On
December 26, 1996, the Registrant filed its position statement in this matter.
In his charge, the Complainant claims that he was denied information regarding
the rental of an apartment for commercial use because of his race. In fact, the
Property does not lease apartments for commercial use, and, at the time, the
Property had no commercial space available for lease. In addition, the
Registrant believes that the almost two year delay in notifying the Registrant
of the charge is so prejudicial that the charge should be dismissed. The
Registrant is vigorously defending this matter.
The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature arising in the ordinary course of business.
Item 2. Management's Discussion and Analysis or Plan of Operations
The matters discussed in this Form 10-QSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the
disclosures contained in this Form 10-QSB and the other filings with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the Registrant's business and results of operations, including
forward-looking statements pertaining to such matters, does not take into
account the effects of any changes to the Registrant's business and results of
operations. Accordingly, actual results could differ materially from those
projected in the forward-looking statements as a result of a number of factors,
including those identified herein.
The Operating Partnerships' investment property is a complex which consists of
apartment and townhouse units and an eight store shopping center. The following
table sets forth the average occupancy of the property for the six months ended
June 30, 2000 and 1999:
Average
Occupancy
2000 1999
Springhill Lake Apartments
Greenbelt, Maryland 85% 92%
The decrease in occupancy is due to the eviction of a number of tenants at the
property. Due to the lengthy eviction procedures required within the state of
Maryland, a number of evictions were finalized during the first quarter of 2000.
The occupancy has increased 3% over the last three months and the Managing
General Partner anticipates occupancy to continue to increase.
Results of Operations
The Registrant's net income for the six months ended June 30, 2000 was
approximately $382,000 as compared to approximately $1,101,000 for the
corresponding period in 1999. The Registrant's net income for the three months
ended June 30, 2000 was approximately $233,000 as compared to approximately
$703,000 for the corresponding period in 1999. Income before minority interest
for the six months ended June 30, 2000 was approximately $638,000 as compared to
approximately $1,451,000 for the corresponding period in 1999. Income before
minority interest for the three months ended June 30, 2000 was approximately
$406,000 as compared to approximately $931,000 for the corresponding period in
1999. The decrease in income before minority interest for the three and six
months ended June 30, 2000 is primarily the result of a decrease in total
revenues. The decrease in total revenues is attributable to a decrease in both
rental and other income. Rental income decreased due to a decrease in occupancy
at the property as discussed above and an increase in concessions offered to
tenants. Other income decreased primarily due to the receipt in May 1999 of
attorney fees and costs received as a result of a summary judgement granted in
favor of the Partnership.
Total expenses remained relatively constant but there were reductions in general
and administrative, bad debt, interest and operating expenses which more than
offset the increase in depreciation expense. Bad debt expense decreased due to a
decrease in write-offs of tenant receivables and charges that were deemed to be
uncollectible. Interest expense decreased due to scheduled principal payments
which reduced the carrying balance of the debt encumbering the property.
Operating expenses decreased primarily due to decreases in referral fees and
completion of exterior building projects in 1999. These decreases were partially
offset by increases in fuel oil, due to the change to a more reliable but
expensive supplier, and insurance expense, due to an increase in policy
premiums. Depreciation expense increased due to the completion of capital
improvements and replacements at the property. During the three months ended
June 30, 2000, the increase in total expenses was primarily attributable to an
increase in property tax and depreciation expense which more than offset the
decrease in general and administrative, bad debt and interest expense. The
increase in property tax expense is primarily due to the timing of the receipt
of tax bills which effected the recording of the accruals during the comparable
periods.
General and administrative expense decreased for the six months ended June 30,
2000 compared to the same period in 1999 primarily due to a decrease in legal
expense and was partially offset by an increase in reimbursements to the
Managing General Partner. Included in general and administrative expenses for
the six months ended June 30, 2000 and 1999 are reimbursements to the Managing
General Partner allowed under the Partnership Agreement associated with its
management of the Partnership. Costs associated with the quarterly and annual
communications with investors and regulatory agencies and the annual audit
required by the Partnership Agreement are also included.
As part of the ongoing business plan of the Registrant, the Managing General
Partner monitors the rental market environment of its investment property to
assess the feasibility of increasing rents, maintaining or increasing occupancy
levels, and protecting the Registrant from increases in expenses. As part of
this plan, the Managing General Partner attempts to protect the Registrant from
the burden of inflation-related increases in expenses by increasing rents and
maintaining a high overall occupancy level. However, due to changing market
conditions, which can result in the use of rental concessions and rental
reductions to offset softening market conditions, there is no guarantee that the
Managing General Partner will be able to sustain such a plan.
Liquidity and Capital Resources
At June 30, 2000, the Registrant had cash and cash equivalents of approximately
$1,797,000 as compared to approximately $4,132,000 at June 30, 1999. Cash and
cash equivalents decreased approximately $546,000 for the six months ended June
30, 2000, from the Partnership's fiscal year end. The decrease in cash and cash
equivalents is the result of approximately $4,282,000 of cash used in investing
activities and approximately $734,000 of cash used in financing activities which
was partially offset by approximately $4,470,000 of cash provided by operating
activities. Cash used in investing activities consisted of property improvements
and replacements and net deposits to escrow accounts maintained by the mortgage
lender. Cash used in financing activities consisted of payments of principal
made on the mortgage encumbering the Registrant's property. The Registrant
invests its working capital reserves in a money market account.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Registrant and to comply with Federal, state,
local, legal and regulatory requirements. Capital improvements planned for the
Registrant's property is detailed below.
Springhill Lake: For 2000, the Partnership budgeted approximately $7,231,000 for
capital improvements at Springhill Lake consisting primarily of appliances, air
conditioning units, water heaters, plumbing and flooring replacements, major
landscaping, exterior painting, pool upgrades, parking lot resurfacing, roof and
structural improvements. For the six months ended June 30, 2000, the property
has spent approximately $3,708,000 on capital expenditures, consisting primarily
of appliances, ground lighting, electrical, cabinet and counter top replacement,
fencing, window coverings, air conditioning units, water heaters, plumbing
upgrades, flooring replacements, major landscaping, interior decoration,
exterior painting, and roof, pool and structural improvements. These
improvements were funded from cash flow. Additional improvements may be
considered and will depend on the physical condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.
The Registrant's current assets are thought to be sufficient for any near term
needs (exclusive of capital improvements) of the Registrant. The mortgage
indebtedness of approximately $54,668,000 is amortized over 120 months with a
balloon payment of approximately $49,017,000 due May 2003. The Managing General
Partner will attempt to refinance such indebtedness and/or sell the property
prior to such maturity date. If the property cannot be refinanced or sold for a
sufficient amount, the Registrant will risk losing the property through
foreclosure.
The Partnership did not make any distributions to its partners during the six
months ended June 30, 2000 or 1999. Future cash distributions will depend on the
levels of net cash generated from operations, the availability of cash reserves,
and the timing of the debt maturity, refinancing, and/or sale of the property.
The Partnership's distribution policy is reviewed on a semi-annual basis. There
can be no assurance, however, that the Partnership will generate sufficient
funds from operations, after planned capital expenditures, to permit
distributions to its partners during 2000 or subsequent periods.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Grady v. Springhill Lake Apartments (Pending before the Prince George's County
Human Relations Commission, case no. AP94-1233). This public accommodation
discrimination claim was filed on December 16, 1994, however, the Commission
failed to notify the Registrant of the charge until September 8, 1996. On
December 26, 1996, the Registrant filed its position statement in this matter.
In his charge, the Complainant claims that he was denied information regarding
the rental of an apartment for commercial use because of his race. In fact, the
Property does not lease apartments for commercial use, and, at the time, the
Property had no commercial space available for lease. In addition, the
Registrant believes that the almost two year delay in notifying the Registrant
of the charge is so prejudicial that the charge should be dismissed. The
Registrant is vigorously defending this matter.
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: None filed during the quarter ended June
30, 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant 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
By: /s/Patrick J. Foye
Patrick J. Foye
Vice President - Residential
By: /s/Martha L. Long
Martha L. Long
Vice President - Residential
Accounting
Date: August 14, 2000
