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 September 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___
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 2000
<TABLE>
<CAPTION>
Assets
<S> <C>
Cash and cash equivalents $ 3,286
Receivables and deposits (net of $133 allowance for
doubtful accounts) 3,021
Restricted escrows 2,161
Other assets 570
Investment property:
Land $ 5,833
Buildings and related personal property 108,973
114,806
Less accumulated depreciation (57,726) 57,080
$ 66,118
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 2,781
Due to affiliate 1,777
Tenant security deposit liabilities 569
Accrued property taxes 451
Other liabilities 947
Mortgage note payable 54,268
Minority interest 4,285
Partners' (Deficit) Capital
General partners $ (2,808)
Investor limited partners (649 units issued and
outstanding) 3,848 1,040
$ 66,118
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
b)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
Revenues:
<S> <C> <C> <C> <C>
Rental income $ 6,836 $ 6,322 $ 18,718 $ 18,760
Other income 393 219 1,027 1,127
Total revenues 7,229 6,541 19,745 19,887
Expenses:
Operating 2,516 2,834 7,723 8,348
General and administrative 293 143 563 482
Depreciation 1,462 1,257 4,137 3,249
Interest 1,326 1,335 3,929 4,034
Property taxes 438 465 1,330 1,348
Bad debt expense 133 358 364 826
Total expenses 6,168 6,392 18,046 18,287
Income before minority interest 1,061 149 1,699 1,600
Minority interest in net earnings
of operating partnerships (298) (142) (554) (492)
Net income $ 763 $ 7 $ 1,145 $ 1,108
Net income allocated to general
partners (5%) $ 38 $ -- $ 57 $ 55
Net income allocated to investor
limited partners (95%) 725 7 1,088 1,053
$ 763 $ 7 $ 1,145 $ 1,108
Net income per limited partnership
unit $ 1,117 $ 10 $ 1,676 $ 1,622
</TABLE>
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 nine months
ended September 30, 2000 -- 57 1,088 1,145
Partners' (deficit) capital at
September 30, 2000 649 $(2,808) $ 3,848 $ 1,040
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
d)
SPRINGHILL LAKE INVESTORS LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,145 $ 1,108
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest in net earnings of operating
partnerships 554 492
Depreciation 4,137 3,249
Amortization of loan costs 83 93
Bad debt expense 364 826
Change in accounts:
Receivables and deposits (2,048) (2,205)
Other assets 826 735
Accounts payable 165 (63)
Tenant security deposit liabilities 63 103
Accrued property taxes 451 465
Other liabilities 271 (164)
Net cash provided by operating activities 6,011 4,639
Cash flows from investing activities:
Property improvements and replacements (5,606) (3,437)
Net (deposits to) receipts from restricted escrows (105) 473
Net cash used in investing activities (5,711) (2,964)
Cash flows used in financing activities:
Proceeds from loans from affiliates 1,777 --
Payments on mortgage note payable (1,134) (1,155)
Net cash provided by (used in) investing
activities 643 (1,155)
Net increase in cash and cash equivalents 943 520
Cash and cash equivalents at beginning of period 2,343 3,328
Cash and cash equivalents at end of period $ 3,286 $ 3,848
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,417 $ 3,941
Supplemental disclosure of non-cash activity:
Property improvements and replacements included in
accounts payable $ 1,213 $ --
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<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 and nine month periods ended
September 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 nine months ended September 30, 2000 and 1999:
2000 1999
(in thousands)
Property management fees (included in operating expenses) $570 $562
Reimbursement for services of affiliates (included in general
administrative expense and investment properties) 415 285
Asset management fee (included in general and administrative
expense) 78 78
Annual administration fee (included in general and
administrative expense) 5 5
During the nine months ended September 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 $570,000 and $562,000 for the nine months ended September 30, 2000
and 1999, respectively.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $415,000 and
$285,000 for the nine months ended September 30, 2000 and 1999, respectively. At
September 30, 2000, approximately $148,000 of the current year expense was
accrued and included in "Due to affiliate" in the accompanying consolidated
balance sheet.
In accordance with the Partnership Agreement, the Managing General Partner
earned approximately $78,000 in asset management fees and approximately $5,000
in administrative fees for both the nine months ended September 30, 2000 and
1999.
During the nine months ended September 30, 2000, an affiliate of the Managing
General Partner loaned the Partnership approximately $1,629,000 for budgeted
capital improvements. This balance is included in "Due to affiliate" in the
accompanying consolidated balance sheet. In accordance with the Partnership
Agreement, interest is to be charged at prime plus 2% and accrued interest is
approximately $37,000 at September 30, 2000.
In addition to its indirect ownership of the general partner interest in the
Partnership, AIMCO and its affiliates currently own 444.15 limited partnership
units in the Partnership representing 68.436% of the outstanding units. A number
of these units were acquired pursuant to tender offers made by AIMCO, 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, which would include without limitation, voting on certain
amendments to the Partnership Agreement and voting to remove the Managing
General Partner. As a result of its ownership of 68.436% 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 nine month periods ended September 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.
<TABLE>
<CAPTION>
Three Months Ended September 30, 2000 Property Other Totals
<S> <C> <C> <C>
Rental income $ 6,836 $ -- $ 6,836
Other income 391 2 393
Interest expense 1,326 -- 1,326
Depreciation 1,462 -- 1,462
General and administrative expense -- 293 293
Bad debt expense 133 -- 133
Minority interest in net earnings
of operating partnerships -- (298) (298)
Segment income (loss) 1,352 (589) 763
Nine Months Ended September 30, 2000 Property Other Totals
Rental income $18,718 $ -- $18,718
Other income 1,006 21 1,027
Interest expense 3,929 -- 3,929
Depreciation 4,137 -- 4,137
General and administrative expense -- 563 563
Bad debt expense 364 -- 364
Minority interest in net earnings
of operating partnerships -- (554) (554)
Segment income (loss) 2,241 (1,096) 1,145
Total assets 65,810 308 66,118
Capital expenditures for investment
property 6,819 -- 6,819
Three Months Ended September 30, 1999 Property Other Totals
Rental income $ 6,322 $ -- $ 6,322
Other income 210 9 219
Interest expense 1,335 -- 1,335
Depreciation 1,257 -- 1,257
General and administrative expense -- 143 143
Bad debt expense 358 -- 358
Minority interest in net earnings
of operating partnerships -- (142) (142)
Segment income (loss) 283 (276) 7
Nine Months Ended September 30, 1999 Property Other Totals
Rental income $18,760 $ -- $18,760
Other income 778 349 1,127
Interest expense 4,034 -- 4,034
Depreciation 3,249 -- 3,249
General and administrative expense -- 482 482
Bad debt expense 826 -- 826
Minority interest in net earnings
of operating partnerships -- (492) (492)
Segment income (loss) 1,733 (625) 1,108
Total assets 61,423 1,716 63,139
Capital expenditures for investment
property 3,437 -- 3,437
</TABLE>
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.
<PAGE>
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 nine months ended
September 30, 2000 and 1999:
Average
Occupancy
2000 1999
Springhill Lake Apartments
Greenbelt, Maryland 88% 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 nine months ended September 30, 2000 was
approximately $1,145,000 as compared to approximately $1,108,000 for the
corresponding period in 1999. The Registrant's net income for the three months
ended September 30, 2000 was approximately $763,000 as compared to approximately
$7,000 for the corresponding period in 1999. Income before minority interest for
the nine months ended September 30, 2000 was approximately $1,699,000 as
compared to approximately $1,600,000 for the corresponding period in 1999.
Income before minority interest for the three months ended September 30, 2000
was approximately $1,061,000 as compared to approximately $149,000 for the
corresponding period in 1999. The increase in income before minority interest
for the nine months ended September 30, 2000 is the result of a decrease in
total expenses which more than offset the decrease in total revenues. The
increase in income before minority interest for the three months ended September
30, 2000 is primarily attributable to an increase in total revenues and decrease
in total expenses. The decrease in total revenues for the nine months ended
September 30, 2000 is attributable to a decrease in both rental and other
income. Rental income decreased due to a decrease in average occupancy over the
previous twelve months 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
judgment granted in favor of the Partnership. The increase in total revenues for
the three months ended September 30, 2000 is attributable to an increase in both
rental and other income. Rental income increased due to an increase in occupancy
at the property for the three months ended September 30, 2000 as discussed above
and increased rental rates. Other income increased due to increased charges for
tenant auxiliary services also due to the increased occupancy for the three
months ended September 30, 2000.
Total expenses for the three and nine months ended September 30, 2000 from the
comparable prior year period decreased primarily due to a reduction in
operating, bad debt, and interest expenses which more than offset the increase
in depreciation and general and administrative expense. 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 an
increase in salaries and related benefits. 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.
Depreciation expense increased due to the completion of capital improvements and
replacements at the property during the prior twelve months.
General and administrative expense increased for the three and nine months ended
September 30, 2000 compared to the same periods in 1999 primarily due to an
increase in the cost of services included in the management reimbursements to
the Managing General Partner as allowed under the Partnership Agreement. In
addition, 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 in general and administrative expense.
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 September 30, 2000, the Registrant had cash and cash equivalents of
approximately $3,286,000 as compared to approximately $3,848,000 at September
30, 1999. Cash and cash equivalents increased approximately $943,000 for the
nine months ended September 30, 2000, from the Partnership's fiscal year end.
The increase in cash and cash equivalents is the result of approximately
$6,011,000 of cash provided by operating activities and approximately $643,000
of cash provided by financing activities which was partially offset by
approximately $5,711,000 of cash used in investing activities. Cash provided by
financing activities consisted of proceeds from loans from affiliates and was
largely offset by payments of principal made on the mortgage encumbering the
Registrant's property. Cash used in investing activities consisted of property
improvements and replacements and net deposits to escrow accounts maintained by
the mortgage lender. 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
and local legal and regulatory requirements. 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 nine months
ended September 30, 2000, the property has incurred approximately $6,819,000 on
capital expenditures, consisting primarily of appliances, recreational
facilities, 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 and loans from affiliates of the Managing General Partner. 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 $54,268,000 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 nine
months ended September 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.
<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 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 September 30, 2000.
<PAGE>
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:
