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 June 30, 1996
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
June 30, 1996
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (unaudited as to
June 30, 1996 and the three month and six month
periods then ended).
Condensed Balance Sheets at June 30, 1996, and
December 31, 1995. 3
Condensed Statements of Operations for the three
month and six month periods ended June 30, 1996
and 1995. 4
Statements of Changes in Partners' Capital
for the six months ended June 30, 1996 and the year
ended December 31, 1995. 5
Statements of Cash Flows for the six months
ended June 30, 1996 and 1995. 6
Notes to Financial Statements (Unaudited as to
information pertaining to the financial statements
as of and for the three month and six month periods
ended June 30, 1996. 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. 14
SIGNATURES 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONDENSED BALANCE SHEETS
June 30 December 31
1996 1995
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,316,763 $ 56,316
Restricted cash 230,103 497,390
Escrow deposits 340,953 186,703
Prepaid expenses and other assets 48,142 94,405
Total Current Assets 4,935,961 834,814
INVESTMENT PROPERTIES, AT COST: 31,007,546 30,927,237
Less: accumulated depreciation (5,935,839) (5,393,539)
Net Investment Property 25,071,707 25,533,698
OTHER ASSETS:
Utility deposits 43,415 43,415
Debt issue costs, net of accumulated
amortization 248,654 46,440
Total Other Assets 292,069 89,855
Total Assets $30,299,737 $26,458,367
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and
accrued taxes $ 607,366 $ 350,722
Tenant security deposits 168,448 169,369
Distributions payable 223,154 221,154
Accrued interest payable 45,123 37,971
Payables to affiliates 3,508,511 3,409,338
Mortgage notes payable 23,319,498 19,228,533
Total Liabilities 27,872,100 23,417,087
PARTNERS' CAPITAL:
General Partner Capital (72,935) (69,185)
Limited Partners
(authorized--18,000 Interests;
outstanding--17,466.31 Interests) 2,500,572 3,110,465
Total Partners' Capital 2,427,637 3,041,280
Total Liabilities and
Partners' Capital $30,299,737 $26,458,367
Note: The balance sheet at December 31, 1995 has been derived from the
audited financial statements at that date.
See Notes to Financial Statements.
CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended
6/30/96 6/30/95 6/30/96 6/30/95
Operating revenue:
Rental income $1,495,409 $1,369,522 $2,973,288 $2,784,043
Operating expenses (738,612) (652,143) (1,403,002) (1,321,364)
Real estate taxes (181,040) (181,127) (364,580) (368,679)
Total operating
expenses (919,652) (833,270) (1,767,582) (1,690,043)
Net operating income 575,757 536,252 1,205,706 1,094,000
Interest expense (373,829) (374,250) (776,989) (743,220)
Depreciation (272,500) (275,300) (542,300) (550,300)
Amortization (2,948) (4,091) (3,897) (8,182)
Net income (loss) from
investment property (73,520) (117,389) (117,480) (207,702)
Other income (expenses):
Interest income 40,368 14,251 46,395 35,285
Partnership management (53,540) (46,507) (103,898) (118,740)
(13,172) (32,256) (57,503) (83,455)
NET (LOSS) $ (86,692) $ (149,645) $ (174,983) $ (291,157)
Net Income (loss)
attributable to
General Partner (1%) $ (867) $ (1,496) $ (1,750) $ (2,912)
Net Income (loss)
attributable to
Limited Partners (99%) (85,825) (148,149) $ (173,233) $ (288,245)
$ (86,692) $ (149,645) $ 174,983 $ (291,157)
Net (loss) per Limited
Partner Interest $ (4.91) $ (8.48) $ (9.92) $ (16.50)
See Notes to Financial Statements
<PAGE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
(Unaudited as to the Six Months Ended June 30, 1996)
General Limited
Partner Partners'
Capital Capital Total
BALANCES AT 12/31/94 $ (60,621) $ 4,448,786 $ 4,388,165
Distributions declared to Partners (3,867) (873,320) (877,187)
Net (loss) for the year (4,697) (465,001) (469,698)
BALANCES AT 12/31/95 $(69,185) $ 3,110,465 $ 3,041,280
Distributions declared to Partners (2,000) (436,660) (438,660)
Net (loss) for the period (1,750) (173,233) (174,983)
BALANCES AT 6/30/96 $(72,935) $ 2,500,572 $ 2,427,637
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF CASH FLOWS - (UNAUDITED)
For The Six Months Ended June 30,
1996 1995
CASH PROVIDED FROM OPERATIONS $ 560,173 $ 410,720
INVESTING ACTIVITIES:
Proceeds from exchange escrow account 267,287 485,135
Additions to investment property (80,309) (60,088)
Net cash provided by investing
activities 186,978 425,047
FINANCING ACTIVITIES:
Proceeds from new mortgage loan 6,700,000 ---
Principal payments on mortgage notes (2,609,035) (39,939)
Proceeds from line of credit note 0 120,000
Payment on line of credit note 0 (220,000)
Payment of debt issue costs (141,009) 0
Distributions paid to limited partners (436,660) (437,703)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 3,513,296 (577,642)
INCREASE IN CASH & CASH
EQUIVALENTS 4,260,447 258,125
CASH & CASH EQUIVALENTS AT THE BEGINNING
OF PERIOD 56,316 16,415
CASH & CASH EQUIVALENTS
AT THE END OF PERIOD $4,316,763 $ 274,540
Supplementary disclosure of cash flow information:
Interest paid $ 755,404 $ 729,209
Income taxes paid 0 0
See Notes to Financial Statements
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 six
month period ended June 30, 1996 are not necessarily indicative of
the results that may be expected for the year ended December 31,
1996. 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, 1995.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations
Operating revenue from rental income was $1,495,400 in the quarter
ended June 30, 1996, compared to $1,369,500 for the same period of
1995, an increase of 9.2%. For the six month period ended June 30,
1996 rental income was $2,973,300 compared to $2,784,000 for the
same period in 1995, an increase of 6.8%. Rental income was
provided by the three sites per the following for the three and six
month periods:
Amount Percent
For Three Months Ended Increase Increase
6/30/96 6/30/95 (Decrease) (Decrease)
Pelican Sound $ 629,600 $ 608,500 $ 21,100 3.5%
Meadows II 489,400 379,600 109,800 28.9%
Town Place 376,400 381,400 (5,000) (1.3%)
Total $1,495,400 $1,369,500 $ 125,900 9.2%
Amount Percent
For Six Months Ended Increase Increase
6/30/96 6/30/95 (Decrease) (Decrease)
Pelican Sound $1,228,400 $1,223,800 $ 4,600 .4%
Meadows II 970,800 792,200 178,600 22.5%
Town Place 774,100 768,000 6,100 .8%
Total $2,973,300 $2,784,000 $ 189,300 6.8%
The average monthly gross potential rent per unit at the Apartments
for the first quarter of 1996 and for the six month period of 1996,
and the comparative periods in 1995 is set forth below:
Number Three Months Ended Six Months Ended
of Units 6/30/96 6/30/95 6/30/96 6/30/95
Pelican Sound 379 $566 $555 $565 $553
The Meadows II 316 $560 $571 $560 $570
Town Place 240 $574 $559 $572 $557
All Rental Units 935 $566 $562 $565 $560
"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 second
quarter ended June 30, 1996 and for the six month period of 1996
and the comparable periods in 1995, is set forth below:
Three Months Ended Six Months Ended
6/30/96 6/30/95 6/30/96 6/30/95
Pelican Sound 95.5% 92.4% 95.0% 94.4%
The Meadows II 90.6% 71.0% 90.9% 73.8%
Town Place 89.7% 92.4% 91.5% 94.4%
All Rental Units 92.3% 85.1% 92.7% 87.3%
The range of occupancy levels at the Apartments for the second
quarter period ended June, 1996 and for the six month period of
1996, and the comparable periods in 1995, is set forth below:
Three Months Ended Six Months Ended
6/30/96 6/30/95 6/30/96 6/30/95
Pelican Sound 95.0-96.4% 90.0-94.4% 91.5-99.0% 90.0-96.9%
The Meadows II 86.9-92.4% 69.8-72.5% 86.9-92.4% 69.8-80.0%
Town Place 86.5-91.3% 91.2-93.5% 91.2-93.7% 91.3-97.0%
All Rental Units 91.9-93.2% 83.3-86.4% 91.9-94.7% 83.4-91.1%
Total rental expenses before depreciation and debt service in the
three month period ended June 30, 1996 increased by $86,000, from
$833,000 to $919,000, compared to the same period of 1995. The
increase was comprised of increases from The Meadows II ($46,000),
Town Place ($19,000) and from Pelican Sound ($21,000).
For the six month period total rental expense increased in the 1996
period by $77,000 from $1,690,000 to $1,767,000. This increase was
comprised of increases from The Meadows II of $34,000, from Town
Place of $17,000 and from Pelican Sound of $26,000.
Net income from rental property operations before debt service and
depreciation was approximately $576,000 for the second quarter of
1996, compared to $536,000 for the comparative 1995 period, an
increase of approximately $40,000. The increase was comprised of
increases from The Meadows II ($61,000), and Pelican Sound
($2,000), offset by a decrease at Town Place of $23,000.
For the six month period net income from rental operations before
depreciation and debt service was approximately $1,206,000 for the
1996 period compared to $1,094,000 for the comparable 1995 period,
an increase of $112,000. The increase was comprised of an increase
from The Meadows II of $142,000 offset by decreases from Town Place
of $10,000 and Pelican Sound of $20,000. The big increase in The
Meadows II was due to the improved occupancy in 1996 as compared to
the very low occupancy in 1995 due to competition from new
apartment construction in that area for all six months of 1995.
As a result of the foregoing, net operating income before
depreciation and debt service was $576,000 for the quarter compared
to $536,000 for the comparative quarter. For the quarter, Pelican
Sound contributed $255,000 (44%) of net operating income before
depreciation and debt service; The Meadows contributed $175,000
(31%); and Town Place contributed $146,000 (25%).
For the six month period, the operating income was $1,206,000 for
the current year compared to $1,094,000 for the period year.
Pelican Sound contributed $474,000 (39%), The Meadows II
contributed $409,000 (34%) and Town Place contributed $323,000
(27%).
Interest expense for the second quarter of 1996 decreased $421 from
the comparative period but increased $33,700 for the six month
period.
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 $2,800 for the second
quarter of 1996 compared to 1995, and by $8,000 for the six month
period.
The Partnership's net other expenses decreased in 1996 by
approximately $19,000 for the second quarter and by $26,000 for the
six month period compared to the respective prior year periods.
Interest income increased $26,000, offset by an increase in
partnership management expenses of $7,000 for the second quarter.
For the comparative six month periods interest income increased
$11,000 and partnership management expenses decreased by $15,000
compared to the prior year periods The increase in interest earned
is primarily attributable to a larger investment portfolio.
As a result of the foregoing, the Partnership's net loss for the
quarter ended June 30, 1996 was $87,000, compared to a loss of
$150,000 in the same period of 1995. For the six month period the
net loss decreased from $291,000 to $175,000. Exclusive of
depreciation and amortization, the Partnership's net income for the
second quarters ended June 30, 1996 and 1995 was $189,000 and
$129,000 and for the comparative six month periods $371,000 and
$267,000.
Liquidity and Financial Condition
At June 30, 1996 there was $4,658,000 of cash and cash equivalents
and escrow deposits available to pay liabilities compared to
$243,000 available at December 31, 1995.
During the first six months of 1996, escrow deposits increased by
$155,000 and cash and cash equivalents increased by $4,260,000.
During the period $560,000 was generated by operating activities,
$187,000 was from investing activities and $3,513,000 from
financing activities as shown herein on the Statements of Cash
Flows.
During the first six months of 1995 cash flow from operations of
$560,000, plus $267,000 from the Ashley Pointe Exchange Escrow,
provided funds to make the cash distributions paid to the Limited
Partners of $437,000, to make capitalized improvements of $80,000,
and to increase cash reserves. Day-to-day operating expenses are
presently being funded from operations and do not require the use
of cash reserves.
On May 16, 1996 the partnership refinanced the $2.5 million
mortgage loan on Town Place with a new mortgage loan of $6.7
million. The loan is for seven years at an interest rate fixed at
8.25% for the first five years and then subject to periodic changes
based on a "Treasury Rate". Monthly payments of principal and
interest are to be made in amount of $52,286. Debt issue cost of
$218,009 are being amortized over the seven year period of the
loan. The additional funds were borrowed to provide short-term
liquidity and in the long-term to either acquire an additional
investment property or to repurchase Limited Partner Interests.
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 April the Partnership paid to
the Limited Partners the March declaration of $218,330 ($12.50 per
Interest) and declared a similar amount payable for the second
quarter of 1996 to be paid in July 1996. The distribution payable
to the General Partner of $2,000 was accrued and payment will be
made subsequently. The Partnership intends, but is not required,
to continue to make cash distributions to the Limited Partners each
quarter in the same amount.
During the first six months of 1996 total liabilities increased by
$4,455,000. The increase in liabilities is primarily attributable
to a net increase in mortgage loans of $4,091,000. Accounts
payable and accrued taxes increased $257,000. Accrued interest of
$7,000. Distributions payable increased $2,000. Payables to
affiliates increased $99,000. The increases were offset by a
decrease in tenant security deposits of $1,000.
The outstanding principal balance on mortgage notes was increased
by $4,090,965 during the six month period. The Town Place
refinancing transaction increased the mortgage debt by $4.2
million. This was offset by mortgage payments of $109,000.
Scheduled mortgage debt principal reductions are approximately
$140,000 over the balance of the year.
Partners' Capital decreased by $614,000 during the six months of
1996 due to the net loss for financial reporting purposes of
approximately $175,000 and cash distributions declared payable to
the partners of $439,000.
Restricted funds of $230,103 are held in the exchange escrow. The
funds were to be used to acquire a replacement property and
complete the like-kind exchange. However, they may also and have
been used to provide additional liquidity, if necessary.
The refinancing of the Town Place mortgage creates an opportunity
for the Partnership to better meet its investment objectives. The
General Partner believes that continued ownership by the
Partnership of its properties is in the long-term best interests of
the Limited Partners. Accordingly, the General Partner believes
that the Partnership should continue to operate its properties and
acquire and operate additional residential apartment complexes in
order to achieve the principal investment objectives of the
Partnership. An affiliate of the General Partner has recently made
offers to purchase apartment complexes located in Florida and
Wisconsin. If either of the offers are accepted, the contracts
could be assigned to the Partnership.
In order for the Partnership to meet its stated investment
objectives, the General Partner believes that an additional
investment property should be acquired. The General Partner
believes that a sale of any of the properties at this time and a
distribution of the proceeds to the Partners would dramatically
reduce the chances of the Partnership meeting its investment
objectives. While there can be no assurance that the Partnership's
properties will appreciate in value from their present level, the
General Partner, based on its experience in the real estate
industry, believes that such appreciation will occur over time and
that continued ownership by the Partnership of its properties is in
the long-term best interests of the Partners. There can, of
course, be no assurance that such appreciation will occur, or if it
does occur, that it will result in any specific level of return to
the Partners. The General Partner believes that the Partnership
may be required to retain the properties for a substantial
additional period in order to maximize the potential profit on
sale. Therefore, the Partnership may continue to operate its
existing three apartment properties and possibly trade for another
property. The term of the partnership expires in December 2005.
Although the General Partner strongly favors the alternative of
continuing and possibly expanding real estate operations, it is
evaluating whether the Partnership should use the net proceeds from
refinancing the Town Place mortgage and the balance of the Ashley
Pointe Exchange Escrow to repurchase Interests from the Limited
Partners who desire to sell those Interests, while offering other
Limited Partners the option of holding their Interests subject to
the potential of future gain or loss. The General Partner is aware
of 23 "secondary market" sales of Limited Partner Interests during
the past two years at prices averaging $363 per Interest. Based
upon these transactions and based upon conversations with Limited
Partners from time to time, and their representatives, the General
Partner believes that there are certain Limited Partners who desire
to sell their Interests immediately for cash in order to obtain
liquidity and other Limited Partners who do not need or desire the
liquidity and would prefer the opportunity to retain their
Interests in order to benefit from any potential future capital
appreciation that may be realized from continued operation and
eventual sale of the Partnership's properties or other properties
to be acquired. The General Partner believes that the Limited
Partners should be entitled to make a choice between immediate
liquidity and continued ownership and, thus, believes that an offer
by the Partnership to repurchase its Interests may accommodate the
differing goals of both groups of Limited Partners. If this course
of action is pursued, it would permit the Limited Partners either
to sell their Interests, or to continue holding their Interests
subject to the potential of future gain or loss. Accordingly, the
General Partner intends to appraise the properties owned by the
Partnership to estimate their value and to determine a fair price
for the Partnership to offer to repurchase Limited Partner
Interests. The General Partner expects to complete this process
before year end.
PART II.
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The Company did not filed a report on Form 8-K during the six
months ended June 30, 1996.
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: August 12, 1996 By:/s/ Jeffrey Keierleber
Jeffrey Keierleber
General Partner and Principal
Financial and Accounting Officer
of Registrant
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4,887,819
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,935,961
<PP&E> 31,007,546
<DEPRECIATION> 5,935,839
<TOTAL-ASSETS> 30,299,737
<CURRENT-LIABILITIES> 4,552,602
<BONDS> 23,319,498
<COMMON> 0
0
0
<OTHER-SE> 2,427,637
<TOTAL-LIABILITY-AND-EQUITY> 30,299,737
<SALES> 1,495,409
<TOTAL-REVENUES> 1,535,777
<CGS> 0
<TOTAL-COSTS> 1,195,100
<OTHER-EXPENSES> 53,540
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 373,829
<INCOME-PRETAX> (86,692)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86,692)
<EPS-PRIMARY> (4.91)
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