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 March 31, 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)
March 31, 2000
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Cash and cash equivalents $ 2,464
Receivables and deposits (net of $176 allowance for
doubtful accounts) 1,685
Restricted escrows 2,349
Other assets 1,067
Investment properties:
Land $ 5,833
Buildings and related personal property 103,705
109,538
Less accumulated depreciation (54,878) 54,660
$ 62,225
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 1,613
Tenant security deposit liabilities 498
Other liabilities 1,158
Mortgage notes payable 55,098
Minority interest 3,814
Partners' (Deficit) Capital
General partners $ (2,858)
Investor limited partners (649 units issued and
outstanding) 2,902 44
$ 62,225
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
b)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended
March 31,
2000 1999
Revenues:
Rental income $5,690 $6,083
Other income 308 354
Total revenues 5,998 6,437
Expenses:
Operating 2,435 2,718
General and administrative 125 106
Depreciation 1,289 996
Interest 1,309 1,356
Property taxes 440 464
Bad debt expense 168 277
Total expenses 5,766 5,917
Income before minority interest 232 520
Minority interest in net earnings of operating
partnerships (83) (122)
Net income $ 149 $ 398
Net income allocated to general partners (5%) $ 7 $ 20
Net income allocated to investor
limited partners (95%) 142 378
$ 149 $ 398
Net income per limited partnership unit $ 219 $ 582
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
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 three months
ended March 31, 2000 -- 7 142 149
Partners' (deficit) capital at
March 31, 2000 649 $(2,858) $ 2,902 $ 44
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
d)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 149 $ 398
Adjustments to reconcile net income to net
cash provided by operating activities:
Minority interest in net earnings of operating
partnerships 83 122
Depreciation 1,289 996
Amortization of loan costs 31 31
Bad debt expense 168 277
Change in accounts:
Receivables and deposits (516) (696)
Other assets 381 322
Accounts payable 210 (658)
Tenant security deposit liabilities (8) 2
Other liabilities 482 (40)
Net cash provided by operating activities 2,269 754
Cash flows from investing activities:
Property improvements and replacements (1,551) (692)
Net (deposits to) receipts from restricted escrows (293) 289
Net cash used in investing activities (1,844) (403)
Cash flows used in financing activities:
Payments on mortgage notes payable (304) (374)
Net increase (decrease) in cash and cash equivalents 121 (23)
Cash and cash equivalents at beginning of period 2,343 3,328
Cash and cash equivalents at end of period $ 2,464 $ 3,305
Supplemental disclosure of cash flow information:
Cash paid for interest $ 850 $ 1,332
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<PAGE>
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 month period ended March 31,
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.
Reclassifications:
Certain reclassifications have been made to the 1999 information to conform to
the 2000 presentation.
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 three months ended March 31, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in
operating expenses) $ 179 $ 183
Reimbursement for services of affiliates
(included in general and administrative
expense and investment properties) 78 37
Asset management fee (included in
general and administrative expense) 25 25
Annual administration fee (included in
general and administrative expense) 3 3
During the three months ended March 31, 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 $179,000 and $183,000 for the three months ended March 31, 2000
and 1999, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $78,000 and
$37,000 for the three months ended March 31, 2000 and 1999, respectively.
AIMCO and its affiliates currently own 316.65 limited partnership units in the
Partnership representing 48.79% 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 48.79% of the outstanding units, AIMCO
is in a position to significantly 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 month periods ended March 31, 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.
2000
Property Other Totals
Rental income $ 5,690 $ -- $ 5,690
Other income 297 11 308
Interest expense 1,309 -- 1,309
Depreciation 1,289 -- 1,289
General and administrative expense -- 125 125
Minority interest in net earnings
of operating partnerships -- (83) (83)
Segment income (loss) 346 (197) 149
Total assets 60,775 1,450 62,225
Capital expenditures for investment
property 1,551 -- 1,551
1999
Property Other Totals
Rental income $ 6,083 $ -- $ 6,083
Other income 335 19 354
Interest expense 1,356 -- 1,356
Depreciation 996 -- 996
General and administrative expense -- 106 106
Minority interest in net earnings
of operating partnerships -- (122) (122)
Segment income (loss) 607 (209) 398
Total assets 60,059 1,744 61,803
Capital expenditures for investment
property 692 -- 692
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 Complaintant 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 three months
ended March 31, 2000 and 1999:
Average
Occupancy
2000 1999
Springhill Lake Apartments
Greenbelt, Maryland 82% 91%
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.
At present the property has a waiting list for tenants but due to the high
number of evictions, leases with new tenants have not yet been entered into for
all of the vacated units. The Managing General Partner anticipates occupancy
increasing during the next several months.
Results of Operations
The Registrant's net income for the three months ended March 31, 2000 was
approximately $149,000 as compared to approximately $398,000 for the
corresponding period in 1999. Income before minority interest for the three
months ended March 31, 2000 was approximately $232,000 as compared to
approximately $520,000 for the corresponding period in 1999. The decrease in
income before minority interest for the three months ended March 31, 2000 is
primarily the result of a decrease in total revenues which was partially offset
by a decrease in total expenses. The decrease in total revenues is attributable
to a decrease in 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
decreases in laundry, late charges, lease cancellation fees and application fees
due to the decrease in occupancy.
Total expenses decreased primarily due to a reduction in operating, bad debt and
interest expenses which more than offset the increases in depreciation expense
and general and administrative expense. Operating expenses decreased primarily
due to a decrease in referral fees and the completion of exterior building
projects in 1999. 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 Project. Depreciation expense
increased due to the completion of capital improvements and replacements at the
Project.
General and administrative expense increased for the three months ended March
31, 2000 compared to the same period in 1999 primarily due to an increase in
reimbursements to the Managing General Partner. Included in general and
administrative expenses for the three months ended March 31, 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 March 31, 2000, the Registrant had cash and cash equivalents of approximately
$2,464,000 as compared to approximately $3,305,000 at March 31, 1999. Cash and
cash equivalents increased approximately $121,000 for the three months ended
March 31, 2000 from the Partnership's year ended December 31, 1999. The increase
in cash and cash equivalents is the result of approximately $2,269,000 of cash
provided by operating activities which was partially offset by approximately
$1,844,000 of cash used in investing activities and approximately $304,000 of
cash used in financing 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 three months ended March 31, 2000 the property
has spent approximately $1,551,000 on capital expenditures, consisting primarily
of appliances, air conditioning units, water heaters, plumbing upgrades,
flooring replacements, major landscaping, exterior painting, roof 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 $55,098,000 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 three
months ended March 31, 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 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.
<PAGE>
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 Complaintant 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 March
31, 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: May 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Springhill
Lake Investors LP 2000 First Quarter 10-QSB and is qualified in its entirety by
reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000763399
<NAME> SPRINGHILL LAKE INVESTORS LP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,464
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0 <F1>
<PP&E> 109,538
<DEPRECIATION> 54,878
<TOTAL-ASSETS> 62,225
<CURRENT-LIABILITIES> 0 <F1>
<BONDS> 55,098
0
0
<COMMON> 0
<OTHER-SE> 44
<TOTAL-LIABILITY-AND-EQUITY> 62,225
<SALES> 0
<TOTAL-REVENUES> 5,998
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,766
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,309
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 149
<EPS-BASIC> 219.00 <F2>
<EPS-DILUTED> 0
<FN>
<F1> Registrant has an unclassified balance sheet.
<F2> Multiplier is 1.
</FN>
</TABLE>
