UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1995
OR
[ ] 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 33-00086
Decade Companies Income Properties - A Limited Partnership
(Exact name of registrant as specified in its charter)
State of Wisconsin 39-1518732
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 Patrick Blvd., Suite 140 Brookfield, Wisconsin 53045-5864
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: 414-792-9200
Former name, former address and former fiscal year, if changed
since last report: Not Applicable.
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
YES NO
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each issuer's
classes of common stock, as of the latest practicable date.
Decade Companies Income Properties - A Limited Partnership
INDEX
September 30, 1995
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited as to
September 30, 1995 and the three month and
nine month periods then ended).
Condensed Balance Sheets at September 30, 1995,
and December 31, 1994. 3
Condensed Statements of Operations for the three
month and nine month periods ended September 30,
1995 and 1994. 4
Statements of Changes in Partners' Capital
for the nine months ended September 30, 1995 and
the year ended December 31, 1994. 5
Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994. 6
Notes to Financial Statements (Unaudited as to
information pertaining to the financial statements
as of and for the three month and nine month
periods ended September 30, 1995 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 13
SIGNATURES 14
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED BALANCE SHEETS
September 30 December 31
1995 1994
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 292,951 $ 16,415
Restricted cash 490,623 1,117,531
Escrow deposits 448,698 178,881
Prepaid expenses and other assets 32,677 37,805
Total Current Assets 1,264,949 1,350,632
INVESTMENT PROPERTIES, AT COST: 30,877,606 30,749,902
Less: accumulated depreciation (5,112,273) (4,282,571)
Net Investment Property 25,765,333 26,467,331
OTHER ASSETS:
Utility deposits 43,415 43,415
Debt issue costs, net of accumulated
amortization 40,524 52,797
Total Other Assets 83,939 96,212
Total Assets $27,114,221 $27,914,175
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Line of credit mortgage note
payable $ 0 $ 100,000
Accounts payable and
accrued taxes 697,755 314,388
Tenant security deposits 169,178 166,677
Distributions payable 221,330 220,264
Accrued interest payable 37,435 37,872
Payables to affiliates 3,427,153 3,386,016
Mortgage notes payable 19,244,838 19,300,793
Total Liabilities 23,797,689 23,526,010
PARTNERS' CAPITAL:
General Partner Capital (68,790) (60,621)
Limited Partners
(authorized--18,000 Interests;
outstanding--17,466.31 Interests 3,385,322 4,448,786
Total Partners' Capital 3,316,532 4,388,165
Total Liabilities and
Partners' Capital $27,114,221 $27,914,175
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date.
See Notes to Financial Statements.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
9/30/95 9/30/94 9/30/95 9/30/94
Operating revenue:
Rental income $1,421,601 $1,442,112 $4,205,644 $4,700,083
Operating expenses (849,024) (835,764) (2,539,067) (2,664,648)
Net operating income 572,577 606,348 1,666,577 2,035,435
Interest expense (378,312) (434,893) (1,121,532) (1,312,240)
Depreciation (279,400) (283,900) (829,700) (956,281)
Amortization (4,091) (4,076) (12,273) (12,228)
Net income (loss) from
investment property (89,226) (116,521) (296,928) (245,314)
Other income (expenses):
Forfeiture Fee 100,000 100,000
Interest income 4,776 31,260 40,061 126,029
Partnership management (36,993) (46,440) (155,733) (176,298)
(32,217) 84,820 (115,672) 49,731
NET (LOSS) $ (121,443) $ (31,701) (412,600) (195,583)
Net Income (loss)
attributable to
General Partner (1%) $ (1,214) $ (317) $ (4,126) $ (1,956)
Net Income (loss)
attributable to
Limited Partners (99%) (120,229) (31,384) $ (408,474) $ (193,627)
$ (121,443) $ (31,701) $ (412,600) $ (195,583)
Net (loss) per Limited
Partner Interest $ (6.88) $ (1.80) $ (23.39) $ (11.09)
See Notes to Financial Statements <PAGE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited as to the Nine Months Ended September 30, 1995)
General Limited
Partner Partners'
Capital Capital Total
BALANCES AT 12/31/93 $(41,343) $ 6,623,372 $ 6,582,029
Distributions declared to Partners (6,134) (873,321) (879,455)
Net (loss) for the year (13,144) (1,301,265) (1,314,409)
BALANCES AT 12/31/94 $(60,621) $ 4,448,786 $ 4,388,165
Distributions declared to Partners (4,043) (654,990) (659,033)
Net (loss) for the period (4,126) (408,474) (412,600)
BALANCES AT 9/30/95 $(68,790) $ 3,385,322 $ 3,316,532
See Notes to Financial Statements. <PAGE>
STATEMENTS OF CASH FLOWS - (UNAUDITED)
For The Nine Months Ended September 30,
1995 1994
CASH PROVIDED FROM OPERATIONS $ 589,320 $ 925,350
INVESTING ACTIVITIES:
Additions to investment property (127,704) (118,134)
Proceeds from Ashley Pointe transaction 0 2,981,166
Net proceeds paid to exchange facilitator 0 (1,094,531)
Transfer from restricted cash account 626,908 0
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES 499,204 1,768,501
FINANCING ACTIVITIES:
Principal payments on mortgage notes (55,955) (1,996,742)
Proceeds from line of credit note 120,000 100,000
Payment on line of credit note (220,000) 0
Distributions paid to partners (656,033) (654,990)
Payment of loan fees 0 (1,107)
NET CASH (USED IN) FINANCING ACTIVITIES (811,988) (2,552,839)
INCREASE (DECREASE) IN CASH & CASH
EQUIVALENTS 276,536 141,012
CASH & CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 16,415 212,257
CASH & CASH EQUIVALENTS
AT THE END OF PERIOD $ 292,951 $ 353,269
Supplementary disclosure of cash flow information:
Interest paid $1,099,106 $ 1,303,951
Income taxes paid 0 0
See Notes to Financial Statements
<PAGE>
Note A--Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. 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
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three month and nine month periods ended
September 30, 1995 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1995. For further
information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1994.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Operating revenue from rental income was $1,421,601 in the quarter
ended September 30, 1995, compared to $1,442,112 for the same period of
1994. For the nine month period ended September 30, 1995 rental income
decreased 10.5% from the comparable 1994 period.
The comparative presentation of operations reflects the operation of a
different number of apartment units during the respective periods. The
prior year period includes a full three months plus a partial month
operations for Ashley Pointe Apartments which was exchanged in April
1994 and therefore is not included in the current period operations.
The three other properties (Pelican Sound, The Meadows II and Town
Place) were owned and operated in both periods. For comparative
purposes, the following table presents the operating figures for the
nine month periods to give recognition to this change in units:<PAGE>
Nine Months Ended September 30
1995 1994
Three Three Ashley
Properties Properties Pointe Total
(in thousands)
Rental Income $4,206 $4,379 $ 321 $4,700
Operating Expense:
Operating 2,539 2,437 228 2,665
Interest 1,122 1,257 55 1,312
Depreciation 830 846 110 956
Amortization 12 9 3 12
Total 4,503 4,549 396 4,945
(Loss) from
investment
properties $ (297) $ (170) $ (75) $ (245)
For the three properties owned in each period, a decline in rental income
is the most significant change in operations. Interest expense decreased
due to reduced mortgage debt. The following table shows the amount of
rental income for each of the properties for the three and nine month
periods of 1995, and the dollar amount of change and percent of change
from the comparative period.
<PAGE>
Three Months Ended Nine Months Ended
September 30, 1995 September 30, 1995
Increase (decrease) Increase (decrease)
Revenue from prior year Revenue from prior year
Amount Amount Percent Amount Amount Percent
(in thousands) (in thousands)
Pelican Sound $ 601 $ (15) (2.4%) $1,825 $ 45 2.5%
Meadows II 443 (46) (9.2%) 1,236 (222) (15.2%)
Town Place 377 40 11.8% 1,145 4 0.3%
Ashley Pointe 0 0 0 (321) (100.0%)
Total $1,422 $ (21) (1.4%) $4,206 $ (494) (10.5%)
The cumulative increase at Pelican Sound is attributable to increased
gross potential rent and increased occupancy. The decrease at The Meadows
II is primarily attributable to a significant decrease in occupancy caused
by competition in the area from new residential construction offering
rental incentives. Occupancy at The Meadows II increased from 71.4% in
July to 87.8% in September. Occupancy at Town Place has improved from
90.6% in July to 94.7% in September to show a slight cumulative increase
in rental income.
The average monthly gross potential rent per unit for the three and nine
month periods ended September 30, 1995, and the comparable periods in 1994
are set forth below:
Number Three Months Ended Nine Months Ended
of Units 9/30/95 9/30/94 9/30/95 9/30/94
Pelican Sound 379 $559 $541 $555 $536
The Meadows II 316 $567 $562 $569 $558
Town Place 240 $563 $550 $559 $548
Ashley Pointe 200 N/A N/A N/A $485
All Rental Units $563 $550 $561 $541
"Gross potential rent" represents the asking rent established by the
Partnership for a vacant apartment plus the rent in effect for occupied
apartments.
The average occupancy level at the Apartments for the three and nine month
periods ended September 30, 1995, and the comparable periods in 1994 are
set forth below:
Three Months Ended Nine Months Ended
9/30/95 9/30/94 9/30/95 9/30/94
Pelican Sound 92.8% 94.4% 93.9% 93.1%
The Meadows II 81.1% 90.5% 76.2% 91.7%
Town Place 92.3% 90.6% 93.7% 93.6%
Ashley Pointe N/A N/A N/A 85.7%
All rental units 88.7% 92.1% 87.8% 92.2%
The range of occupancy levels at the Apartments for the three and nine
month periods ended September 30, 1995, and the comparable periods in 1994
are set forth below:
Three Months Ended Nine Months Ended
9/30/95 9/30/94 9/30/95 9/30/94
Pelican Sound 91.8-93.6% 92.9-95.3% 90.0-96.9% 91.1-95.3%
The Meadows II 71.4-87.8% 89.8-91.7% 69.8-87.8% 88.8-94.5%
Town Place 90.6-94.7% 88.8-92.8% 90.6-97.0% 88.8-97.9%
Ashley Pointe N/A N/A N/A 80.7-87.8%
All rental units 84.5-91.9% 90.8-92.7% 83.4-91.9% 90.8-93.0%
Total rental expenses before depreciation and debt service in the three
month period ended September 30, 1995 increased by $13,000, from $836,000
to $849,000, over the same period of 1994. The increase was comprised of
increases from Town Place ($31,000), The Meadows II ($5,000), and Ashley
Pointe ($3,000), offset by a decrease for Pelican Sound of $26,000. For
the nine month period the total rental expense decreased $126,000 from the
prior period. This was comprised of a decrease of $228,000 for Ashley
Pointe, offset by increases at Town Place of $55,000, at Pelican Sound of
$42,000, and at The Meadows II of $5,000.
Net operating income from rental property operations was approximately
$572,000 for the third quarter of 1995, compared to $606,000 for the
comparative period, a decrease of approximately $34,000. The decrease was
comprised of decreases from The Meadows II ($50,000), and Ashley Pointe
($4,000), offset by increases from and Pelican Sound of $11,000, and Town
Place of $9,000.
For the nine month period the net operating income from rental property
operations decreased $369,000 compared to the prior comparative period.
The decrease was comprised of decreases for The Meadows II of $227,000,
for Town Place of $52,000 and for Ashley Pointe of $93,000, offset by an
increase for Pelcian Sound of $3,000.
For the third quarter, Pelican Sound contributed $254,000 (44%) of net
operating income; The Meadows II contributed $172,000 (30%); and Town
Place contributed $146,000 (26%) for a total of $572,000. For the nine
month period Pelican Sound contributed $748,000 (45%); The Meadows II
contributed $439,000 (26%); and Town Place contributed $479,000 (29%) for
a total of $1,666,000.
Interest expense decreased $57,000 from the comparative third quarter
period in 1994, from $435,000 to $378,000. For the nine month period
interest decreased $191,000 from $1,312,000 to $1,121,000.
The net income before debt service from real estate activities is
partially sheltered by deductions for depreciation which do not affect
cash flow. Depreciation decreased $4,500 from 1995 compared to 1994 for
the third quarter periods. For the nine month period depreciation
decreased $127,000 from 1995 compared to 1994 and included $110,000 for
Ashley Pointe in the prior year with none in the current year.
For the third quarter interest income decreased $26,000 and Partnership
management expenses decreased $9,000. For the nine month period interest
income decreased $86,000 and Partnership management expenses decreased
$21,000. The decrease in interest earned is primarily attributable to a
smaller investment portfolio, which in 1994 included the $4 million of
bank certificates of deposit pledged against the Town Place mortgage loan
of $4 million. The 1994 periods include a forfeiture fee income of
$100,000 from the proposed sale of Town Place.
As a result of the foregoing, the Partnership's net loss for the quarter
ended September 30, 1995 was $121,000, compared to a loss of $32,000 in
the same period of 1994. Exclusive of depreciation and amortization, the
Partnership's net income for the quarters ended September 30, 1995 and
1994 was $162,000 and $256,000, respectively. For the nine month period
the net income exclusive of depreciation and amortization was $429,000 for
the current year and $773,000 for the prior year of which $37,000 could be
attributed to Ashley Pointe.
Liquidity and Financial Condition
At September 30, 1995 there was $741,600 of unrestricted cash and cash
equivalents and escrow deposits available to pay liabilities compared to
$195,300 available at December 31, 1994.
During the first nine months of 1995, cash and cash equivalents increased
by $276,000. During the period $589,000 was generated by operating
activities, while approximately $499,000 was provided by investing
activities, and approximately $812,000 was used in financing activities as
shown herein on the Statements of Cash Flows.
During the first nine months of 1995 total liabilities increased by
$272,000. The increase in liabilities is attributable primarily to an
increase in accounts payable and accrued taxes of $383,000, an increase in
tenant security deposits of $3,000, an increase in payables to affiliates
of $41,000, an increase in distributions payable of $1,000, offset by a
decrease in mortgage notes payable of $56,000, and a net decrease in the
line of credit loan of $100,000.
Partners' Capital decreased by $1,071,600 during the first nine months of
1995 due to the net loss for financial reporting purposes of
approximately $412,600 and cash distributions declared payable to the
partners of $659,000.
During the nine months ended September 30, 1995, operations provided cash
flow which was used to partially fund the cash distributions paid to the
partners of $656,000. The restricted cash account was reduced by $627,000
to provide additional liquidity. The Partnership borrowed an additional
$120,000 on its line of credit but repaid the total loan of $220,000 in
the second quarter using funds from the restricted cash account because
the interest earned on the funds was less than the interest due on the
line of credit loan. Mortgage note principal reductions of $56,000 and
capitalized improvements to investment properties of $128,000 were made in
1995.
On a short term basis day-to-day operating expenses are presently being
funded from operations and do not require the use of cash reserves. All
cash generated by operations is distributed to the partners. However,
other sources of funds are required for capital improvements and loan
principal reductions.
The Agreement of Limited Partnership provides that the Partnership will
make distributions for each calendar quarter of Cash Flow less amounts set
aside for Reserves. In July the Partnership paid to the Limited Partners
the June declaration of $218,330 ($12.50 per Interest) and declared a
similar amount payable for the third quarter of 1995 to be paid in October
1995. The Partnership intends, but is not required, to continue to make
cash distributions to the Limited Partners each quarter in the same
amount.
The outstanding principal balance on mortgage notes was reduced by $56,000
during the first nine months. Scheduled mortgage debt principal
reductions are approximately $2,516,000 over the balance of the year,
including the balloon payment of $2.5 million on the Town Place mortgage
note due December 1995. The Partnership intends to satisfy the $2.5
mortgage loan on Town Place prior to the December due date by refinancing
the debt. The $10 million note on Pelican Sound requires payments of
interest only until January 1, 1996, at which time payments of principal
will also be required.
The restricted funds of $490,623 are held in escrow by the qualified
intermediary of the Ashley Pointe exchange. The funds are to be used to
acquire a replacement property and complete the like-kind exchange.
However, they may also be used to provide additional liquidity, if
necessary, until a replacement property is acquired.
The Partnership also has a $4,250,000 line of credit from a bank available
to provide liquidity.
There are no long-term material capital expenditures, obligations, or
other demands or commitments that might impair the liquidity of the
Partnership. However, the General Partner believes that it is in the best
interest of the Partnership to acquire and operate additional residential
apartment complexes in order to achieve the principal investment
objectives of the Partnership. The Partnership intends to continue to
trade one or more of the Apartments if such transaction would inprove net
operating income, as originally contemplated in the Prospectus.
PART II.
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The Company did not file a report on Form 8-K during the three months
ended September 30, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DECADE COMPANIES INCOME PROPERTIES -
A LIMITED PARTNERSHIP
(Registrant)
By: DECADE COMPANIES
(General Partner)
Date: November 6, 1995 By:/s/ Jeffrey Keierleber
Jeffrey Keierleber
General Partner and Principal
Financial and Accounting
Officer of Registrant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,232,272
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,264,949
<PP&E> 30,877,606
<DEPRECIATION> 5,112,273
<TOTAL-ASSETS> 27,114,221
<CURRENT-LIABILITIES> 4,552,857
<BONDS> 19,244,838
<COMMON> 0
0
0
<OTHER-SE> 3,316,532
<TOTAL-LIABILITY-AND-EQUITY> 27,114,221
<SALES> 1,421,601
<TOTAL-REVENUES> 1,426,377
<CGS> 0
<TOTAL-COSTS> 1,132,515
<OTHER-EXPENSES> 36,993
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378,312
<INCOME-PRETAX> (121,443)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (121,443)
<EPS-PRIMARY> (6.88)
<EPS-DILUTED> (6.88)
</TABLE>
